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AUGMENTUM FINTECH PLC
ANNUAL REPORT
FOR THE YEAR ENDED 31 MARCH 2020
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 certi昀cate 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
If you would like to view video updates
about the company, please visit:
www.augmentum.vc
ABOUT AUGMENTUM FINTECH PLC
Augmentum Fintech plc (the “Company”) invests in fast growing
fintech businesses that are disrupting the financial services sector.
The Company is the UK’s only publicly listed investment company
focusing on the fintech sector in the UK and wider Europe, having
launched on the main market of the London Stock Exchange in
2018, giving businesses access to patient capital and support,
unrestricted by conventional fund timelines and giving public
markets investors access to a largely privately held investment
sector during its main period of growth.
The Company is an investment trust listed on the London Stock
Exchange. The Company has an independent Board of Directors.
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”.
As a subsidiary of the Company AFML, the Portfolio Manager, is
focused on the Company and aligned with the interests of
shareholders.
Governance
The Company is directed by the Board, which consists of three
non-executive directors who have the requisite balance of skills
required to manage an investment company. In accordance with
AIFM Regulations, Frostrow Capital LLP (“Frostrow”) acts as the
Alternative Investment Fund Manager.
UNSOLICITED APPROACHES FOR SHARES: WARNING TO SHAREHOLDERS
Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell them what often turn
out to be worthless or high-risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders
are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Link Asset Services, would make unsolicited
telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders
and never in respect of investment ‘advice’.
Shareholders who suspect they may have been approached by fraudsters should advise the Financial Conduct Authority (‘FCA’) using
the share fraud report form at www.fca.org.uk/scams or call the FCA Customer Helpline on 0800 111 6768. You may also wish to call
either the Company Secretary or the Registrar whose contact details can be found on page 79.
Perivan 258713
CONTENTS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
1
Strategic Report and Business Review
Financial Statements
Chairman’s Statement
53 Consolidated Income Statement
Investment Objective and Policy
54 Consolidated and Company Statements of
2
4
5
6
Portfolio Review
Key Investments
14 Other Investments
15 Portfolio Manager’s Review
17
Strategic Report
21 Viability Statement
Corporate Governance
29 Board of Directors
30 Management Team
31 Directors’ Report
Changes in Equity
55 Consolidated Balance Sheet
56 Company Balance Sheet
57 Consolidated Cash Flow Statement
58 Company Cash Flow Statement
59 Notes to the Financial Statements
70 Independent Auditors’ Report to the Members of
Augmentum Fintech plc
Further Information
76 Alternative Investment Fund Managers Directive
77 Information for Shareholders
78 Glossary and Alternative Performance Measures
35 Corporate Governance Report
79 Contact Details
41 Directors’ Remuneration Report
44 Directors’ Remuneration Policy
49 Report of the Audit Committee
52 Statement of Directors’ Responsibilities
From left to right: David Haysey, Chairman of the Management Engagement & Remuneration Committee and Valuations Committee, Tim Levene and
Richard Matthews of Augmentum Fintech Management Limited, Karen Brade, Chairman of the Audit Committee and Neil England, Chairman of the
Board and Nominations Committee.
2
AUGMENTUM FINTECH PLC
CHAIRMAN’S STATEMENT
Financial Highlights
31 March
2020
31 March
2019**
5.9%
10.7%
(41.6%)
9.4%
2.1%
2.1%
NAV per Share
Total Return*
Total Shareholder
Return*
Ongoing
Charges*
* These are all considered to be Alternative Performance Measures. Please see the Glossary and
Alternative Performance Measures on page 78.
** for the period from incorporation on 19 December 2017 to 31 March 2019.
I am pleased to present our second annual report since the launch
of the Company in March 2018. This report covers the year ended
31 March 2020.
help ensure that they have adapted to weather this difficult period,
not least to ensure that they have sufficient balance sheet reserves
to be able to continue to grow.
Investment Policy
Valuations
Your Company is set up to invest in early stage (post-seed capital)
European Fintech businesses which have disruptive technologies
and offer the prospect of high growth with scalable opportunities.
All of this is consistent with our objective to provide long term
capital growth to shareholders.
Together with our advisors, we have carefully reviewed the status
of all of our portfolio companies in light of recent events. This is
reflected in the revised valuations in this report. The Board have
looked at different methodologies and outcomes to validate our
conclusions.
Performance
Our diverse portfolio of investments, which we have added to in the
year, have performed largely to expectations in the run up to the
Covid-19 crisis. I am pleased to report that all of these companies
have grown their revenues, in several cases substantially, and a
number are building a strong market position in their respective
sectors. The Portfolio Review on pages 15 to 16 gives a
comprehensive analysis of all the factors contributing to the
Company’s performance during the year.
Our level of investment is on plan and we have the cash reserves in
place for the follow on investments that we expect to make.
The Covid-19 crisis was clearly not part of these forecasts. This
crisis has provided opportunities, and in some instances
challenges, for your portfolio companies.
It is clear that the shared experience of work and life generally
under lockdown combined with social distancing are accelerating
the trend towards a digital economy, not least in financial services
where many products are already virtual or digitally based. This is
an unequivocal boost to the fintech sector. Indeed, some of our
portfolio companies saw an increased demand for their services as
a result of the crisis. Farewill, BullionVault and Onfido are examples
of these.
Equally, for some of our investments, especially those involved in
the provision of credit, there has been a significant impact on their
business as economies decelerated rapidly and some sectors
ceased activity altogether. The team at Augmentum have worked
closely with management at portfolio companies in these cases to
For several of our portfolio companies the crisis has had a positive
impact with record levels of trading. Where the impact has been
negative, our stake is often protected by the structure of the deal. In
many of our investments we benefit from a senior position in the
capital structures, providing downside protection. Further details on
our investments in individual companies are set out in the Portfolio
Manager’s Review.
I am pleased to confirm, that despite the impact of the crisis and
the general fall in public market indices, we are reporting an
increase in the Company’s NAV* per share of 5.9%.
Auditor
Your Board is conscious of its role to keep costs as low as possible
while maintaining high standards of governance. During the year,
we undertook a review of the Company’s auditor by way of a
competitive tender process. The result of the review was the
appointment of a new external auditor, BDO LLP. Further details
can be found in the Report of the Audit Committee beginning on
page 49.
Dividend
No dividend is declared for the year. Your Company is focused on
providing capital growth and will only pay an ordinary dividend in
order to maintain the Company’s investment trust status.
Share Capital and Discount
As I reported at the half year, in July 2019 the Company issued
23,051,911 shares and raised £25.8 million for new investments and
to support the existing portfolio.
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CHAIRMAN’S STATEMENT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
3
Towards the end of the year under review, in common with many
other listed private equity vehicles, the Company’s share price
discount widened to a significant discount to NAV per share. Your
Board monitor discounts closely and during March 2020 when the
discount was wide, took the opportunity to buy back 120,000
shares, at an average discount to the historic NAV per share of
50.1%, to the benefit of shareholders. A further 75,000 shares
were bought back in April at a similar discount level. The shares
bought back are held in Treasury and are available for reissue at a
premium to net asset value per share in the future.
As at 31 March 2020 the share price stood at a deep discount of
41.6% to NAV per share. Since then the share price has recovered
well and currently stands at a discount of 7.8%, as at the close of
business on 14 July 2020. Your Board believes that this level of
discount undervalues the Company given its potential.
The Board strongly encourages all shareholders to exercise their
votes in advance, or by proxy to the Chairman if preferred, to
ensure your vote is counted. We have not included paper forms of
proxy to accompany the Notice of Annual General Meeting.
Shareholders can vote online in advance by visiting
www.signalshares.com and following instructions. If you require
assistance with this or a hard copy form of proxy please refer to
the Notice of Annual General Meeting or contact our registrar, Link
Asset Services, whose contact details are set out on page 79.
The Directors consider that all the resolutions detailed in the
formal notice are in the best interests of the Company and the
shareholders taken as a whole and therefore unanimously
recommend to shareholders that they vote in favour of each
resolution, as the Directors intend to do in respect of their
own holdings.
Non material change to the investment policy
Outlook
Under the Company’s previous investment policy, no single
investment may represent more than 15% of NAV, with the
exception that one single investment may represent up to 20% of
NAV, measured at the time of investment. With the development of
the Company since its initial public offering and the Company now
holding investments in 17 fintech companies, the Board has
concluded it is now appropriate to remove the exception that one
single investment may represent up to 20% of NAV, and
accordingly has made a non material change to the investment
policy. Under the revised policy no single investment may represent
more than 15% of NAV, measured at the time of investment. The
amended investment policy is set out on page 4 of the Annual
Report and is also available on the Company’s website.
Annual General Meeting
The second Annual General Meeting of the Company will be held on
Tuesday, 29 September 2020 at 11.00 a.m. The Notice of Annual
General Meeting is in a separate document.
Your Board is keen to allow as many shareholders as possible to
participate in the proceedings and have the opportunity to and to ask
any questions you may have of our Portfolio Manager or the Board.
We do recognise however that some shareholders may be reticent to
travel and attend public meetings; for the near future at least.
We have therefore decided to take advantage of recent legislation
which allows us to webcast the meeting in place of a physical
meeting and provide a live link for any shareholder questions or
comments. We will attempt to answer questions received remotely
during the meeting itself but if that is not possible then they will be
answered later that day. It would be appreciated if any questions or
comments are tabled in advance of the meeting via the Company
Secretary. Details for joining the Annual General Meeting will be
posted on the Company's website on Friday, 25 September 2020.
As I write, it appears that Europe is slowly emerging from the worst
of the crisis, markets are cautiously positive and consumer
spending is starting to increase. Much has been written about the
‘new normal’ and how this might impact businesses. What we do
know is that much of our portfolio was more resilient during this
crisis than many other companies in financial services but clearly
any outlook needs to take account of the macro-economic position.
Your Board believe that there is likely to be further market
volatility but the overall portfolio will continue to be resilient to the
short and medium term impact of the current crisis. We believe
there are compelling reasons to be confident in our long term
prospects. Carefully selected European fintech businesses should
provide a platform for the Company to experience substantial long-
term growth and value accretion. Combined with the industry
leading expertise that exists in our Portfolio Manager and advisory
group, we remain positive about our future.
Neil England
Chairman
15 July 2020
4
AUGMENTUM FINTECH PLC
INVESTMENT OBJECTIVE AND POLICY
Investment objective
centre of business in the UK or wider Europe.
The Company’s investment objective is to generate capital growth
over the long term through investment in a focused portfolio of
fast growing and/or high potential private financial services
technology (“fintech”) businesses based predominantly in the UK
and wider Europe.
Investment policy
In order to achieve its investment objective, the Company invests in
early (but not seed) or later stage investments in unquoted fintech
businesses. The Company intends to realise value through exiting
the investments over time.
The Company will seek exposure to early stage businesses which
are high growth, with scalable opportunities, and have disruptive
technologies in the banking, insurance and asset management
sectors as well as those that provide services to underpin the
financial sector and other cross-industry propositions.
Investments are expected to be mainly in the form of equity and
equity-related instruments issued by portfolio companies, although
investments may be made by way of convertible debt instruments.
The Company intends to invest in unquoted companies and will
ensure that the Company has suitable investor protection rights
where appropriate. The Company may also invest in partnerships,
limited liability partnerships and other legal forms of entity. The
Company will not invest in publicly traded companies. However,
portfolio companies may seek initial public offerings from time to
time, in which case the Company may continue to hold such
investments without restriction.
The Company may acquire investments directly or by way of
holdings in special purpose vehicles or intermediate holding
entities (such as the Partnership)*.
The Management Team has historically taken a board or board
observer position on investee companies and, where in the best
interests of the Company, will do so in relation to future
investee companies.
The Company’s portfolio is expected to be diversified across a
number of geographical areas predominantly within the UK and
wider Europe, and the Company will at all times invest and manage
the portfolio in a manner consistent with spreading investment risk.
The Management Team will actively manage the portfolio to
maximise returns, including helping to scale the team, refining and
driving key performance indicators, stimulating growth, and
positively influencing future financing and exits.
Investment restrictions
The Company will invest and manage its assets with the object of
spreading risk through the following investment restrictions:
•
•
the value of no single investment (including related
investments in group entities or related parties) will represent
more than 15 per cent. of Net Asset Value; and
at least 80 per cent. of Net Asset Value will be invested in
businesses which are headquartered in or have their main
* Please refer to the Glossary on page 78.
In addition, the Company will itself not invest more than 15 per
cent. of its gross assets in other investment companies or
investment trusts which are listed on the Official List.
Each of the restrictions above will be calculated at the time of
investment and disregard the effect of the receipt of rights,
bonuses, benefits in the nature of capital or by reason of any other
action affecting every holder of that investment. The Company will
not be required to dispose of any investment or to rebalance the
portfolio as a result of a change in the respective valuations of its
assets.
Hedging and derivatives
Save for investments made using equity-related instruments as
described above, the Company will not employ derivatives of any
kind for investment purposes. Derivatives may be used for currency
hedging purposes.
Borrowing policy
The Company may, from time to time, use borrowings to manage
its working capital requirements but shall not borrow for
investment purposes. Borrowings will not exceed 10 per cent. of the
Company’s Net Asset Value, calculated at the time of borrowing.
Cash management
The Company may hold cash on deposit and may invest in cash
equivalent investments, which may include short-term investments
in money market type funds and tradeable debt securities.
There is no restriction on the amount of cash or cash equivalent
investments that the Company may hold or where it is held. The
Board has agreed prudent cash management guidelines with the
AIFM to ensure an appropriate risk/return profile is maintained.
Cash and cash equivalents are held with approved counterparties,
and in line with prudent cash management guidelines, agreed with
the Board, AIFM and Portfolio Manager.
It is expected that the Company will hold between 10 and
20 per cent. of its Gross Assets in cash or cash equivalent
investments, for the purpose of making follow-on investments in
accordance with the Company’s investment policy and to manage
the working capital requirements of the Company.
Changes to the investment policy
No material change will be made to the investment policy without
the approval of Shareholders by ordinary resolution. Non-material
changes to the investment policy may be approved by the Board. In
the event of a breach of the investment policy set out above and
the investment and gearing restrictions set out therein, the
Management Team shall inform the AIFM and the Board upon
becoming aware of the same and if the AIFM and/or the Board
considers the breach to be material, notification will be made to a
Regulatory Information Service.
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PORTFOLIO REVIEW
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
5
Fair value of Fair value of
holding at Net holding at
31 March investments/ Gain/(loss) on 31 March
2019 (realisations) investments 2020 % of
£’000 £’000 £’000 £’000 portfolio
interactive investor^ 10,060 49 11,698 21,807 17.7%
Tide 4,975 5,000 4,246 14,221 11.5%
BullionVault*^ 7,621 (360)1 3,930 11,191 9.1%
Onfido 3,972 3,750 3,145 10,867 8.8%
Monese 6,524 4,000 (365) 10,159 8.3%
Zopa^ 21,954 – (14,024) 7,930 6.4%
Iwoca 7,500 100 – 7,600 6.2%
Receipt Bank – 7,500 – 7,500 6.1%
Farewill 4,000 – 3,216 7,216 5.9%
Grover – 5,347 920 6,267 5.1%
Top 10 Investments 66,606 25,386 12,766 104,758 85.1%
Other Investments 10,994 7,463 (83) 18,374 14.9%
Total Investments 77,600 32,849 12,683 123,132 100.0%
* includes WhiskyInvestDirect
^ Held via Augmentum I LP
1 Dividend paid
6
AUGMENTUM FINTECH PLC
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KEY INVESTMENTS continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
7
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Source: Cambridge Associates; State of European Tech 2019
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8
AUGMENTUM FINTECH PLC
KEY INVESTMENTS continued
interactive investor is the No.1 UK direct-to-consumer fixed fee
investment platform, with over £30 billion of assets under
administration and over 300,000 customers across its general
trading, ISA and SIPP account. It has a 14% share of UK retail
equity trading. The company offers execution-only trading and
investing services in shares, funds, ETFs and investment trusts, all
for a market-leading monthly subscription fee.
interactive investor completed a £40 million acquisition of Alliance
Trust Savings in 2019, bringing together the two largest UK fixed
price platforms, and in February 2020 reached an agreement to
acquire Share PLC.
Source: ii 31 March 31 March
2020 2019
£’000 £’000
Cost: 3,175 3,175
Value: 21,807 10,060
% ownership (fully diluted) 3.7% 3.7%
Turnover1: 72,956 47,901
Pre tax profits1: 8,925 10,198
Net assets1: 116,624 95,386
1 As per last filed audited accounts of the investee company for the year to
31 December 2018.
Tide’s mission is to help SMEs save time and money in the running
of their businesses. Customers are set up with an account number
and sort code in as little as 5 minutes, and the company is building
a comprehensive suite of digital banking services for businesses,
including automated accounting, instant access to credit, card
control and quick, mobile invoicing. Tide is the fifth largest
business banking challenger in the UK (by volume of customers),
and the largest digital challenger. Tide has 2% market penetration
and is estimated to have a share of 12-15% of new-to-market
business current accounts.
In September 2019 Augmentum led Tide’s £44.1m first round of
Series B funding, alongside Japanese investment firm The SBI Group.
Source: Tide 31 March 31 March
2020 2019
£’000 £’000
Cost: 9,261 5,261
Value: 14,221 6,524
% ownership (fully diluted) 5.9% 5.9%
Turnover1: 5,485 1,662
Pre tax losses1: (12,663) (7,261)
Net assets1: 18,101 385
1 As per last audited accounts of the investee company for the year to
31 December 2018.
KEY INVESTMENTS continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
9
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BullionVault is a physical gold and silver market for private
investors online. It enables people across 175 countries to buy and
sell professional-grade bullion at the very best prices online, with
$2 billion of assets under administration and over $100 million
worth of gold and silver traded monthly.
Each user’s property is stored at an unbeaten low cost in secure,
specialist vaults in London, New York, Toronto, Singapore and
Zurich. BullionVault’s unique Daily Audit then proves 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 cracks in the wider financial markets.
Founded in 2015, WhiskyInvestDirect, a subsidiary of BullionVault, is
the online market for buying and selling Scotch whisky as it
matures in barrel. This is an asset class that has a long track record
of growth, yet has previously been opaque and inaccessible.
The Company has over 2,500 bulk-stockholding clients, the
equivalent of 25 million bottles of whisky stored in barrels and
7 million litres of Pure Alcohol under Management. The business
seeks to change the way some of the three billion litres of maturing
Scottish whisky is owned, stored and financed, giving self-directed
investors an opportunity to profit from whisky ownership, with the
ability to trade 24/7.
Source: BullionVault
Source: BullionVault 31 March 31 March
2020 2019
£’000 £’000
Cost: 8,424 8,424
Value: 11,191 7,621
% ownership (fully diluted) 11.1% 11.1%
Dividends paid1: 360 448
Turnover2: 9,341 6,668
Pre tax profits2: 5,198 3,129
Net assets2: 35,712 33,569
1 In the year to 31 March 2020 and the period from 13 March 2018 to
31 March 2019.
2 As per last filed audited accounts of the investee company for the year to
31 October 2019.
10
AUGMENTUM FINTECH PLC
KEY INVESTMENTS continued
Onfido is building the new identity standard for the internet. Its
AI-based technology assesses whether a user’s government-issued
ID is genuine or fraudulent, and then compares it against their
facial biometrics. Using computer vision and a number of other AI
technologies, Onfido can verify against 4,500 different types of
identity documents across 195 countries, using techniques like
“facial liveness’’ to see patterns invisible to the human eye.
Onfido was founded in 2012 and has offices in London, San
Francisco, New York, Lisbon, Paris, New Delhi and Singapore. The
company has attracted over 1,500 customers in 60 countries
worldwide, including industry leaders such as GoCardless, Nutmeg,
Bitstamp and Revolut. These customers are choosing Onfido over
others because of its ability to scale, speed in on-boarding new
customers (15 seconds for flash verification), preventing fraud, and
its advanced biometric technology.
Augmentum invested an additional £3.7 million in a convertible
loan note (“CLN”) in December 2019 as part of a £4.7 million round.
This converted into equity when Onfido raised an additional
£64.7 million in April 2020.
Source: Onfido 31 March 31 March
2020 2019
£’000 £’000
Cost: 7,750 3,972
Value: 10,867 3,972
% ownership (fully diluted) 1.7% 1.5%*
Turnover1: 18,591 7,927
Pre tax losses1: (17,265) (8,827)
Net assets1: 12,776 15,460
With Monese you can open a UK or European current account in
minutes from your mobile, with a photo ID and a video selfie. Their
core customers are amongst the hundreds of millions of people
who live some part of their life in another country - whether it’s for
travel, work, business, study, family, or retirement.
With its mobile-only dual UK and Euro IBAN current account, its
portability across 30 countries, and both the app and its customer
service available in 14 languages, Monese allows people and
businesses to bank like a local across the UK and Europe. Launched
in 2015 Monese already has more than 2 million registered users.
70% of incoming funds are from salary payments, indicating that
customers are using Monese as their primary account. Monese has
become one of the most popular and trusted banking services in
the UK and Europe. Customers move over £5 billion annually
through their Monese accounts.
Augmentum is invested alongside Kinnevik, PayPal and
International Airlines Group.
Source: Monese 31 March 31 March
2020 2019
£’000 £’000
Cost: 9,261 5,261
Value: 10,159 6,524
% ownership (fully diluted) 5.4%* 5.4%
Turnover1: 5,485 1,662
Pre tax losses1: (12,663) (7,261)
Net assets1: 18,101 385
1 As per last audited accounts of the investee company for the year to
1 As per last filed audited accounts of the investee company for the year to
31 December 2018.
31 December 2018.
* £5.7m (2019: £2.0m) is in a convertible loan note.
* £4m of investment in a convertible loan note.
KEY INVESTMENTS continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
11
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Zopa built the first peer-to-peer (P2P) lending company to give
people access to simpler, better-value loans and investments.
Silverstripe invested £140m in April 2020 following which Zopa
have now been granted their full UK banking license.
Zopa’s proprietary technology has contributed to their leading
digital acquisition position. The company has lent over £5 billion in
personal loans since inception and generated positive returns
every year through the cycle. New products include a fixed term
savings product protected by the Financial Services Compensation
Scheme (FSCS), a credit card and a money management product.
Founded in 2011, iwoca uses award-winning technology to disrupt
small business lending across Europe. They offer short-term loans
of up to £200,000 to SMEs across the UK, Germany and Poland.
iwoca leverage online integrations with high-street banks, payment
processors and sector-specific providers to look at thousands of
data points for each business. These feed into a risk engine that
enables the company to make a fair assessment of any business –
from a retailer to a restaurant, a factory to a farm – and approve a
credit facility within hours. The company has issued over £1 billion
in funding to over 50,000 SMEs in total and was awarded £10m
from the Banking Competition Remedies' Capability and Innovation
Fund (CIF) in 2019.
Source: Zopa 31 March 31 March
2020 2019
£’000 £’000
Source: iwoca 31 March 31 March
2020 2019
£’000 £’000
Cost: 18,500 18,500
Cost: 7,600 7,500
Value: 7,930 21,954
Value: 7,600 7,500
% ownership (fully diluted) 6.1% 6.1%
% ownership (fully diluted) 2.5% 2.8%
Turnover1: 38,550 43,980
Turnover1: 47,534 25,274
Pre tax losses1: (18,295) (556)
Pre tax (losses)/profits1: 506 (3,131)
Net assets1: 48,903 66,295
Net assets1: 28,957 22,376
1 As per last filed audited accounts of the investee company for the year
1 As per last filed audited accounts of the investee company for the year
to 31 December 2018.
to 31 December 2018.
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AUGMENTUM FINTECH PLC
KEY INVESTMENTS continued
Receipt Bank was founded in 2010 out of frustration from the
amount of time and money lost in forgotten expenses, lost receipts
and weekends spent sorting through paperwork. The founders
decided there must be a better way to track business expenses and
share them with accountants.
With over 400,000 businesses using the platform, Receipt Bank
has processed over 250 million receipts, bills and bank statements.
It uses powerful machine learning technology to connect
accountants, bookkeepers and businesses to unlock the value of
accounting data. It employs 450 people in offices across
4 continents.
Augmentum’s £7.5 million investment in January 2020 was part of
Receipt Bank’s £55m Series C round led by US based Inside
Partners.
Source: ReceiptBank 31 March
2020
£’000
Cost: 7,500
Value: 7,500
% ownership 3.7%
Turnover1: 18,619
In the next 10 years, £1 trillion of inheritance will pass between
generations in the UK. Farewill is a digital, all-in-one financial and
legal services platform for dealing with death and after-death
services, including wills, probate and cremation. “The nation’s
favourite will writer” according to Trustpilot reviews, Farewill aims
to be the first major consumer brand in death services.
Farewill writes 1 in 25 UK wills and has raised £125m for charity in
pledged income.
Augmentum led Farewill’s £7.5 million Series A fundraise, with a
£4 million investment.
Source: Farewill 31 March 31 March
2020 2019
£’000 £’000
Cost: 4,000 4,000
Value 7,216 4,000
% ownership (fully diluted) 13.4% 13.4%
Turnover: N/A^ N/A^
Pre tax profits: N/A^ N/A^
Net assets: N/A^ N/A^
Pre tax losses1: (17,619)
^ No audited accounts filed.
Net assets1: 3,601
1 As per last filed audited accounts for the year to 31 December 2018.
KEY INVESTMENTS continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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Grover brings the access economy to the consumer electronics
market by offering a simple, monthly subscription model for
technology products. Private and business customers have access
to over 2,000 products including smartphones, laptops, virtual
reality technology and wearables. The Grover service allows users
to keep, switch, buy, or return products depending on their
individual needs. With a total financing volume of €103m, the
company has over 300,000 registered users.
In September 2019 Augmentum led a €11 million funding round with
a €6 million investment. This coincided with Grover signing a new
€30 million debt facility with Varengold Bank, one of Germany’s
major fintech banking partners.
Source: Grover 31 March
2020
£’000
Cost: 5,347
Value: 6,267
% ownership (fully diluted) N/A*
Turnover: ^
Pre tax profits: ^
Net assets: ^
*
^
Investment via a convertible loan note.
As an unquoted German company, Grover is not required to publicly file
audited accounts.
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AUGMENTUM FINTECH PLC
OTHER INVESTMENTS
DueDil is a predictive company intelligence platform whose mission
is to inform and connect the economy by telling the story behind
every business. DueDil's purpose-built matching technology links
together data from authoritative sources, helping its clients find,
verify and monitor opportunities and risks. More than four hundred
B2B financial services and technology companies rely on DueDil's
web platform and API as an end-to-end solution for go to market
execution, compliant on-boarding and lifecycle risk assessment.
DueDil has over 20 years’ worth of financial data, 57 million pieces
of company information and indexes 680 million news articles
every day. Alongside Augmentum, major investors include Notion
Capital and Oak Investment Partners.
Habito is transforming the United Kingdom’s £1.3 trillion mortgage
market by taking the stress, arduous paperwork, hidden costs and
confusing process out of financing a home.
Since launching in April 2016, Habito has helped over 200,000
people better understand their mortgage needs and completed
£2.4 billion in mortgage submissions. Habito launched their own
buy-to-let mortgages in July 2019 and 'Habito Go' cash advances in
October 2019.
Augmentum invested £5 million in August 2019.
Previse allows suppliers to be paid instantly. Previse's artificial
intelligence (“AI”) analyses the data from the invoices that sellers
send to their large corporate customers. Predictive analytics
identify the few problematic invoices, enabling the rest to be paid
instantly. Previse charges the suppliers a small fee for the
convenience, and shares the profit with the corporate buyer and
the funder. Previse precisely quantifies dilution risk so that funders
can underwrite pre-approval payables at scale. The company has
analysed over 3 million invoices and processed £160 billion spend
to date.
Augmentum invested £250,000 in a convertible loan note in
August 2019. This converted into equity as part of the company’s
$11 million funding round in March 2020, alongside Reefknot
Investments and Mastercard, as well as existing investors Bessemer
Venture Partners and Hambro Perks.
SRL Global focuses on assisting owners and operators of private
wealth with the problems of financial data management, portfolio
valuation and reporting by combining cutting-edge technology with
back-office and middle-office operations. SRL Global’s Nexus
Platform provides access to an entire wealth picture on demand by
creating an encompassing relationship between every part of the
investment process.
Serving as an enterprise business intelligence platform, the
solution provides clients with a single investment repository and
reporting platform that helps enforce consistency and accuracy by
standardising the way information is accessed, analysed and
shared. SRL Global is profitable, has served family offices in
14 countries worldwide and offers 24/7 online access.
Seedrs is the leading online platform for investing in the equity of
startups and other growth companies in Europe, and has been
named the most active investor in private companies in the UK.
Seedrs allows all types of investors to invest in businesses they
believe in and share in their success, and allows all types of growth-
focused businesses to raise capital and business community in the
process. The Seedrs Secondary Market (launched in June 2017)
enables investors to buy and sell shares from each other, and has
delivered over 10,000+ exits to investors to date. £700 million has
been invested into pitches to date (£280 million in 2019) from
investors from over 70 countries, with 110 successful fundraises of
over £1 million.
Wayhome (previously Unmortgage) offers a unique part-own part-
rent model of home ownership, requiring as little as 5% deposit
with customers paying a market rent on the portion of the home
that Wayhome owns, with the ability to increase the equity in the
property as their financial circumstances allow.
Wayhome opens up owner-occupied residential property as an
asset class for pension funds, who will earn inflation-linked rent on
the portion the occupier doesn't own.
Intellis(cid:3)
Intellis is an automated forex trading platform governed by AI.
Augmentum exercised its option to invest a further €1m in
March 2020.
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PORTFOLIO MANAGER’S REVIEW
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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Habito is transforming the £1.3 trillion UK mortgage market. Our
£5.0 million investment in Habito will further their efforts to shake
up the archaic process of purchasing property. They have built a
platform that aims to take the stress out of home buying. Since
launch, they have become the UK’s most recognised digital broker
with a market share of almost 2%.
Grover is bringing the access economy to the consumer electronics
market by offering a simple, monthly subscription model for
technology products. We have invested €6 million in Grover who
have benefitted significantly from the shift to homeworking. The
company has more than doubled its monthly revenue since our
investment in September to over €40 million on an annualised basis.
We invested £7.5 million in Receipt Bank as part of their
£55 million Series C round alongside Insight Venture Partners.
Receipt Bank is a productivity software business that deploys
machine learning and computer vision techniques to automate
data entry for small businesses, accountants and bookkeepers,
thereby removing time-consuming manual process. It has
processed over 250 million receipts, bills, and bank statements
since inception with 50,000 accountant clients and over 400,000
small businesses operating in six markets. Our investment in
Receipt Bank illustrates our desire to invest across a spectrum of
growth maturities in our portfolio.
The Existing Portfolio
We are a team that works actively across our companies typically
having oversight at board level and supporting management. Our
priority in recent months has been to focus heavily on our existing
portfolio, ensuring they have sufficient cash runway to focus on
efficient growth, and to ensure their cost base is appropriate to the
economic environment. Many of our companies are growing at a
rapid rate, and although they are run by talented and dynamic
management, there are often elements of inefficiency and we have
been impressed by how quickly our portfolio companies have
reacted to the changing market by becoming leaner and nimbler.
Over the reporting period we have made £15.0 million of additional
investments across the existing portfolio. The bulk of which was
deployed into three companies.
In December, we added £3.8 million to our existing investment in
Onfido as part of an $80 million round that completed in April
2020. Our earlier convertible note also converted into equity in
that round at a 46% uplift in valuation, valuing our total holding at
£10.9 million. This is one of five investments now in our portfolio
valued at more than £10 million and represents the diversification
of value that is a key part of our portfolio strategy.
We have continued to support the growth of Monese with a further
£4.0 million of investment alongside co-investors PayPal and
Kinnevik. It is differentiated from many of the other more capital
intensive neobanks, as it focuses on an underserved segment many
of whom are using Monese as their primary account. Nevertheless,
the current environment necessitates that the business manages
ongoing growth in a more capital efficient manner. Monese have
therefore implemented a significant cost reduction program that
will give them a longer cash runway and moderate the double-digit
Overview
It has been another year of significant progress for the Group
despite the market highs and lows in the year under review – from
a stable and reasonably predictable macro-economic environment
to the uncertainty and disruption created by Covid-19.
Covid-19 has fundamentally changed behaviours. This has
accelerated the digitisation of financial services which has created
significant opportunity for disruption. Fintech per se finds itself at
the centre of this change and we hope to capitalise on a once in a
generation transformation in digital adoption.
Fundamental attributes of successful fintech companies are world
class technology, data driven processes, operational efficiency, and
customer centricity, but the attributes that are particularly
advantageous in these challenging and fast changing times are
responsiveness and agility; these attributes define fintech and are
often hard to find in traditional institutions.
Both fintechs and incumbent financial services providers will be
tested by the Coronavirus pandemic. Within our portfolio there will
be stresses and challenges but also significant opportunities for
companies who are able to effortlessly adapt their product, make
difficult decisions quickly and to execute on them.
Performance
Performance overall has been sustained despite Covid-19 with the
portfolio showing an unrealised IRR of 18% on invested capital. In
the latter part of the reporting period some portfolio companies
have benefitted from the new circumstances, whilst others have
faced challenges. Our reported increase in fair value of £12.7 million
(period ended 31 March 2019: £12.2 million) over the year is set
against the backdrop of falls of almost 20% in major public equity
indices. This reflects the longer-term horizons of private venture
capital and some of the downside protection mechanisms we have
built into our investments.
During the year, we have invested £32.8 million in both new and
existing portfolio companies.
New Investments
Since April 2019 we have invested £17.8 million in three innovative
businesses that are becoming the leading digital disrupters in
their fields.
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AUGMENTUM FINTECH PLC
PORTFOLIO MANAGER’S REVIEW continued
was in significant demand. Since 31 March 2020 the company has
closed a £20 million funding round, led by Highland Europe. We
invested a further £2.6 million in this round and have benefited
from a £4 million uplift in valuation in relation to our initial
£4 million investment.
Outlook
Although it is likely that retrospective figures will show a decline in
overall venture capital investment activity during 2020, funding
and valuations will remain competitive for those companies
thriving under the new normal. Nevertheless, this will be a more
challenging period to navigate for businesses and some may
require short term support as they feel the impact of a changing
macro environment.
The opportunity to capitalise on the shifts in consumer and
business behaviour in regard to digital financial services is greater
than ever. Incumbent players still control more than 90% of the
global market, and many of the financial services giants of
tomorrow are yet to emerge.
Our focus remains on investing in excellent companies where we
have high conviction, and which are priced fairly. We anticipate that
over the coming 12 months there is potential for M&A,
consolidation, and some keenly priced investment opportunities.
As the UK’s only publicly listed fintech focused investment fund, we
are uniquely positioned to capitalise on these opportunities. With
private companies staying private for longer, a trend that is likely to
persist, we expect to deliver compelling venture returns over time.
Tim Levene
Augmentum Fintech Management Limited
15 July 2020
monthly growth the company was experiencing until the beginning
of 2020.
We invested a further £5.0 million in Tide as part of a £60 million
Series B investment round. They have become one of the UK’s
leading SME digital challenger banking platforms with 3% market
share having launched just over three years ago. Demand for the
product remains strong with more new customers signing up to the
service in May than in any previous month.
Significant progress has also been made elsewhere across other
key companies within the portfolio.
Zopa has been granted a full UK banking licence by the PRA
following the £140 million funding round led by IAG Silverstripe,
the private investment group specialising in digital and technology
led businesses. Despite a write down in value over the past year
driven by challenging fundraising conditions and regulatory
deadlines, we see a bright future for Zopa with strong potential
upside from our current valuation. The process to acquire a bank
licence has become exceptionally rigorous and this licence will, we
believe, become an incredibly valuable asset over time. Zopa Bank
will launch with a clean balance sheet and start by offering a fixed
term saving account followed by an innovative credit card later in
the year.
Market uncertainty affected the SME lending sector and iwoca
moved quickly to adapt its credit scoring and processes
accordingly. Accreditation to issue loans under the Government
CBILs scheme was welcome news, and the company has seen a
marked improvement in loan performance since May both in
Germany and UK where the business operates. The business
remains well capitalised and well positioned to operate within the
new normal with the launch of an innovative set of new products
including iwocaPay, which allows small businesses to offer flexible
payment terms to their B2B customers without taking credit or
liquidity risk.
interactive Investor (ii) now has over £36 billion of assets under
administration and successfully integrated the acquisition of
Alliance Trust Savings. In February, ii announced the intended
acquisition of Share PLC which closed in July. The deal valued ii at
over £675 million which now makes the company our most
significant holding by value. In Q1 2020 ii achieved record trading
numbers in terms of revenue, new customers, and accounts.
Trading levels and account openings have been robust since the
pandemic and the outlook remains very positive for the company.
BullionVault has seen strong growth as a result of these uncertain
times. They offer customers direct, digital access to physical bullion
and have seen trading volumes increase 400% from the previous
52-week average. With over $3 billion of physical gold, silver, and
platinum in client assets, they have consolidated their position as
the largest retail investment platform for precious metals globally.
Farewill, the digital leader in death services has seen impressive
uptake in its wills service alongside promising early growth across
new product verticals. The business has seen significant revenue
growth of 859.1% in the first half of 2020 compared to the same
period last year. Its compelling story has resonated with the
investment community where access to its latest investment round
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STRATEGIC REPORT
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
17
Business Review
The Board
The Strategic Report, set out on pages 17 to 28 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.
Details of the Board of Directors of the Company are set out on
page 29. All Directors will seek re-election by shareholders at the
Company’s Annual General Meeting to be held on Tuesday,
29 September 2020.
The Strategic Report has been prepared solely to provide
information to shareholders to assess how the Directors have
performed their duty to promote the success of the Company.
Further information on how the Directors have discharged their
duty under Section 172 of the Companies Act 2006 can be found on
pages 24 and 25.
The Strategic Report contains certain forward-looking statements.
These statements are made by the Directors in good faith based on
the information available to them up to the date of this report and
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
Strategy and Strategic Review
Throughout the year under review, the Company continued to
operate as an approved investment trust, following its investment
objectives and policy which is to generate capital growth over the
long term through investment in a focused portfolio of fast growing
and/or high potential private financial services technology
(“fintech”) businesses based predominantly in the UK and wider
Europe.
The Company is an alternative investment fund (“AIF”) under the
European Union’s (“EU”) alternative investment fund managers’
directive (“AIFMD”) and has appointed Frostrow Capital LLP as its
alternative investment fund manager (“AIFM”).
During the year, the Board, Frostrow Capital LLP, as AIFM and the
Portfolio Manager undertook all strategic and administrative
activities.
The Board is responsible for all aspects of the Company’s affairs,
including setting the parameters for monitoring the investment
strategy and the review of investment performance and policy. It
also has responsibility for all strategic policy issues, including share
issuance and buy backs, share price and discount/premium
monitoring, corporate governance matters, dividends and gearing.
Further information on the Board’s role and the topics it discusses
with the AIFM and the Portfolio Manager is provided in the
Corporate Governance Report beginning on page 35.
Principal Risks and Risk Management
The Board considers that the risks detailed overleaf are the
principal risks currently facing the Company. These are the risks
that could affect the ability of the Company to deliver its strategy.
The Board is responsible for the ongoing identification, evaluation
and management of the principal risks faced by the Company and
has established a process for the regular review of these risks and
their mitigation. This process accords with the UK Corporate
Governance Code and the FRCS Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting.
The Board has carried out a robust assessment of the emerging
and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency and
liquidity. Further details of the risk management processes that are
in place can be found in the Corporate Governance Statement.
As a result of the COVID-19 pandemic, the economic risk of a global
recession has risen sharply. Despite the mitigants of monetary and
fiscal stimulus, the Directors believe that the duration of the
pandemic and its effects will be a source of uncertainty for some
time to come and may increase some of the risks set out on the
following pages.
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AUGMENTUM FINTECH PLC
STRATEGIC REPORT continued
Principal Risks and Uncertainties
Mitigation
Macroeconomic Risks
The performance of the Group’s investment portfolio is materially
influenced by economic conditions. These may affect demand for
services supplied by investee companies, foreign exchange rates,
input costs, interest rates, debt and equity capital markets and
the number of active trade and financial buyers.
All of these factors could be influenced by the current pandemic
and the Brexit negotiations. They may have an impact on the
Group’s ability to realise a return from its investments and cannot
be directly controlled by the Group.
The Company has a portfolio diversified across a range of
sectors, has no leverage and a net cash balance, and as set out
below the Portfolio Manager structures investments to provide
downside protection, where possible.
The Board, AIFM and Portfolio Manager monitor the
macroeconomic environment and this is discussed at each Board
meeting, along with the potential impact. The Portfolio Manager
also provides a detailed update on the investments at each
meeting, including, inter alia, developments at each investment
in relation to the macro environment and trends.
Strategy Implementation Risks
The Group is subject to the risk that its long term strategy and
its level of performance fail to meet the expectations of its
shareholders.
A robust and sustainable corporate governance structure has
been implemented with the Board responsible for continuing to
act in the best interests of shareholders.
Experienced fintech Portfolio Managers have been retained in
order to deliver the strategy.
Investment Risks
The performance of the Group’s portfolio is influenced by a
number of factors. These include, but are not limited to:
(i) the quality of the initial investment decision;
(ii) reliance on co-investment parties;
(iii) the quality of the management team of each underlying
portfolio company and the ability of that team to
successfully implement its business strategy;
(iv) the success of the Portfolio Manager in building an effective
working relationship with each team in order to agree and
implement value-creation strategies;
(v) changes in the market or competitive environment in which
each portfolio company operates; and
(vi) the macroeconomic risks described above. Any one of these
factors could have an impact on the valuation of an
investment and on the Group’s ability to realise the
investment in a profitable and timely manner.
The Company also invests in early-stage companies which, by
their nature, may be smaller capitalisation companies. Such
companies may not have the financial strength, diversity and the
resources of larger and more established companies, and may
find it more difficult to operate, especially in periods of low
economic growth.
The Portfolio Manager has put in place a rigorous investment
process which ensures disciplined investment selection and
portfolio management. This includes detailed due diligence,
regular portfolio reviews and in many cases an active
engagement with portfolio companies, by way of board
representation or observer status.
Investing in young businesses that may be cash consuming for a
number of years is inherently risky. In order to reduce the risks
of permanent capital loss the Portfolio Manager will, where
possible, structure investments so that they enjoy a senior
position in the capital structure in order to provide downside
protection.
As noted above the Portfolio Manager provides a detailed
update at each Board meeting, including, inter alia,
developments at each investment, funding requirements and the
pipeline of potential new investments.
Portfolio Diversification Risk
The Group is subject to the risk that its portfolio may not be
diversified, being heavily concentrated in the fintech sector, on
the UK economy where the investments are primarily located
and that the portfolio value may be dominated by a single or
limited number of companies.
The Group attempts to mitigate this risk by making investments
across a range of companies and fintech companies/subsectors
and in companies at different stages of their lifecycle in
accordance with the Investment Objective and Investment Policy.
Given the nature of the Company’s Investment Objective this
remains a significant risk.
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STRATEGIC REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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Principal Risks and Uncertainties
Mitigation
Cash Risk
Returns to the Company through holding cash and cash
equivalents are currently low. The Company may hold significant
cash balances, particularly when a fundraising has taken place,
this may have a drag on the Company’s performance.
The Company may require cash to fund potential follow-on
investments in existing investee companies. If the Company does
not hold sufficient cash to participate in subsequent funding
rounds carried out by portfolio companies, this could result in
the interest which the Company holds in such businesses being
diluted. This may have a material adverse effect on the
Company’s financial position and returns for shareholders.
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
IPEV Valuation Guidelines requires considerable judgement and
is explained in Note 20.17.
The Company’s investments may be illiquid and a sale may
require consent of other interested parties. Such investments
may therefore be difficult to value and realise. Such realisations
may involve significant time and cost and/or result in
realisations at levels below the value of such investments as
estimated by the Company.
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.
Set limits are agreed on the maximum exposure to any one
counterparty and require all counterparties to have a high credit
rating and financial strength. Compliance with these guidelines
is monitored regularly and reported to the Board on a quarterly
basis.
The Company has a rigorous valuation policy and process as set
out Notes 20.4 and 20.17. This process is led by the Board and
involves benchmarking valuations against actual prices received
when a sale of shares is made, as well as taking account of
liquidity issues and/or any restrictions over investments.
Operational Risk
To manage these risks the Board:
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.
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 the Group and
Company are exposed to, the controls relied on to manage
those risks and the frequency of the controls operation; 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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AUGMENTUM FINTECH PLC
STRATEGIC REPORT continued
Principal Risks and Uncertainties
Mitigation
Key person risk
The Board manage this risk by:
There is a risk that the individuals responsible for managing the
portfolio may leave their employment or may be prevented from
undertaking their duties.
Emerging Risks
The Company has carried out a robust assessment of the
Company’s emerging and principal risks and the procedures in
place to identify emerging risks are described below. The
International Risk Governance Council definition of an ‘emerging’
risk is one that is new, or is a familiar risk in a new or unfamiliar
context or under new context conditions (reemerging). Failure to
identify emerging risks may cause reactive actions rather than
being proactive and, in worse case, could cause the Company to
become unviable or otherwise fail or force the Company to change
its structure, objective or strategy.
The Audit Committee reviews a risk map at its half-yearly meetings.
Emerging risks are discussed in detail as part of this process and
also throughout the year to try to ensure that emerging (as well as
known) risks are identified and, so far as practicable, mitigated.
The experience and knowledge of the Directors is useful in these
discussions, as are update papers and advice received from the
Board’s key service providers such as the Portfolio Manager, the
AIFM and the Company’s Brokers. In addition, the Company is a
member of the AIC, which provides regular technical updates as
well as drawing members’ attention to forthcoming industry and/or
regulatory issues and advising on compliance obligations.
COVID-19
The market and operational risks and financial impact as a result of
the COVID-19 pandemic, and the measures introduced to combat its
spread, have been discussed by the Board, with updates on
operational resilience being received from the Company’s principal
services providers.
The Company’s Portfolio Manager continues to provide regular
updates to the Board on the financial impacts of the pandemic on
portfolio performance and investee companies as well as the effect
on the fintech sector.
Brexit
The Board has considered whether the UK’s exit from the EU
(“Brexit”) poses a unique threat to the Company. At the date of this
report, the UK had entered into a “transition period” while it
negotiates new arrangements with the EU. There is, therefore, still
considerable uncertainty about the effects of Brexit.
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 meeting the wider team, outside the designated lead
managers, at the Portfolio Manager’s offices and
encouraging the participation of the wider AFML team in
investor updates; and
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.
Due to the nature of the investee companies the effects of Brexit
are likely to be limited.
Furthermore, whilst the Company’s current shareholders are
predominantly UK based holders, sharp or unexpected changes in
investor sentiment, or tax or regulatory changes, could lead to
short term selling pressure on the Company’s shares which
potentially could lead to the share price discount widening.
Overall, however, the Board believes that over the longer term,
Brexit is unlikely to affect the Company’s business model or
whether the shares trade at a premium or discount to the net asset
value per share. The Board will continue to monitor developments
as they occur.
Performance and Prospects
Performance
As set out in the Chairman’s Statement on page 2, considering the
opportunities and challenges faced during the year, relative to the
wider market, the Board is satisfied with the Company’s
performance and believes it to be a good result when considering
its Key Performance Indicators (“KPIs”).
The Board assesses the Company’s performance in meeting its
objective against the following KPIs. Information on the Company’s
performance is provided in the Chairman’s Statement and the
Portfolio Manager’s Review. The KPIs have not changed from the
prior year:
l
The Net Asset Value (“NAV”) per share total return^
The Directors regard the Company’s net asset value per share
total return as being the critical measure of value delivered to
shareholders over the long term.
This is expressed as a percentage and is calculated by dividing
the closing NAV per share, adjusting for dividends paid in the
year, if any, by the opening NAV per share. Please see the
Chairman’s Statement (beginning on page 2) and the Portfolio
Manager’s Review (beginning on page 15) for further
information.
The Group’s Net Asset Value per share total return for the year
was 5.9% (period ended 31 March 2019: 10.7%).
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
21
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The Total Shareholder Return (“TSR”)^
Viability Statement
The Directors also regard the Company’s TSR to be a key
indicator of performance. Share price performance is
monitored closely by the Board.
This is expressed as a percentage and is calculated by dividing
the closing share price, adjusting for dividends paid in the year,
if any, by the opening share price. Please see the Chairman’s
Statement (beginning on page 2) and the Portfolio Manager’s
Review (beginning on page 15) for further information.
The Group’s TSR for the year was (41.6%) (period ended
31 March 2019: 9.4%).
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 reasons for the continued appointment of the Company's
AIFM and the Portfolio Manager, together with their terms are
set out on page 22. In reaching this decision, the Board took
into account the ongoing charges ratio of other investment
companies with specialist mandates, in line with that of the
Company.
The Group’s OCR for the year was 2.1% (period ended 31 March
2019: 2.1%). It is the Board’s objective to reduce this ratio over
time.
^ Alternative Performance Measure (see glossary on page 78).
Due to the unique nature and investment policy of the Company,
with no direct listed competitors or comparable indices, the Board
consider that there is no relevant comparison against which to
assess the KPIs and as such performance against the KPIs is
considered on an absolute basis.
Prospects
The Company’s current position and prospects are described in the
Chairman’s Statement and Portfolio Review sections of this Annual
Report and Financial Statements.
Performance and Future developments
The Board’s primary focus is on the Portfolio Managers’ investment
approach and performance. The subject is thoroughly discussed at
every Board meeting.
In addition, the AIFM updates the Board on company
communications, promotions and investor feedback, as well as
wider investment issues.
An outline of performance, investment activity and strategy, and
market background during the year, as well as the outlook, is
provided in the Chairman’s Statement on pages 2 and 3 and the
Portfolio Manager’s Review on pages 15 and 16.
It is expected that the Company’s overall corporate and investment
strategies will remain unchanged in the coming year.
In accordance with the AIC Code of Corporate Governance and the
Listing Rules, the Directors have carefully assessed the Company’s
current position and prospects as well as the principal risks stated
on pages 17 to 20 over a longer period than the 12 months required
by the ‘Going Concern’ provision and have formed a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next five financial
years.
The particular factors the Directors have considered in assessing
the prospects of the Company and in selecting a suitable period in
making this assessment are as follows:
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The Company is presently invested primarily in long-term
illiquid investments which are not publicly traded;
The Board reviews the liquidity of the Company and regularly
considers any commitments it has, cash flow projections and
the use of gearing; and
The Board, AIFM and Portfolio Manager will continue to adopt
a long term view when making investments and anticipated
holding periods will be at least five years;
As detailed in the Directors’ Report, the Valuations Committee
oversees the valuation process.
The Board, as well as considering the principal risks on pages 17 to
20 and the financial position of the Company, has also considered
the following assumptions in considering the Company’s longer-
term viability:
l
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There will continue to be demand for investment trusts;
The Board and the Portfolio Manager will continue to adopt a
long-term view when making investments;
Regulation will not increase to a level that makes running the
Company uneconomical; and
The performance of the Company will continue to be
satisfactory.
Management Arrangements
Principal Service Providers
The Company is structured as an internally managed closed-ended
investment company. Augmentum Fintech Management Limited
(“Portfolio Manager”) (a wholly owned subsidiary of the Company)
is the operating subsidiary of the Company that manages the
investment portfolio of the Company, as a delegate of the AIFM.
The other principal service providers to the Company are Frostrow
Capital LLP (“Frostrow” or the “AIFM”) and IQ EQ Depositary Company
(UK) Limited (the “Depositary”). Details of their key responsibilities
and their contractual 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:
l
oversight of the portfolio management function delegated to
Augmentum Fintech Management Limited;
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STRATEGIC REPORT continued
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l
promotion of the Company;
investment portfolio administration and valuation;
risk management services;
share price discount and premium management;
administrative and company secretarial services;
advice and guidance in respect of corporate governance
requirements;
l maintenance of the Company’s accounting records;
l
l
l
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:
l
l
l
on NAV up to £150 million: 0.225% per annum;
on that part of NAV in excess of £150 million and up to
£500 million: 0.2% per annum; and
on that part or NAV in excess of £500 million: 0.175% per
annum, calculated on the last working day of each month and
payable monthly in arrears.
The AIFM Agreement may be terminated by either party on giving
notice of not less than 12 months.
Portfolio Manager
Augmentum Fintech Management Limited, as delegate of the AIFM,
is responsible for the management of the Company’s portfolio of
investments under an agreement between it, the Company and
Frostrow (the “Portfolio Management Agreement”).
Under the terms of its Portfolio Management Agreement,
Augmentum Fintech Management Limited provides, inter alia, the
following services:
seeking out and evaluating investment opportunities;
recommending the manner by which monies should be
invested, disinvested, retained or realised;
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made for a further 36 month period save that the first carried
interest fee shall be in respect of investments acquired using 80%
of the net proceeds of the IPO* (including the Initial Portfolio), and
related follow-on investments.
Subject to certain exceptions, the Portfolio Manager receives, in
aggregate, 15% of the net realised cash profits from the
investments and follow-on investments made over the relevant
period once the Company has received an aggregate annualised
10% realised return on investments (the ‘hurdle’) and follow-on
investments made during the relevant period. The Portfolio
Manager’s return is subject to a ‘’catch-up’’ provision in its favour.
The carried interest fee will be paid in cash as soon as practicable
after the end of each relevant period, save that at the discretion of
the Board payments of the carried interest fee may be made in
circumstances where the relevant basket of investments has been
realised in part, subject to claw-back arrangements in the event
that payments have been made in excess of the Portfolio
Manager’s entitlement to any carried interest fees as calculated
following the relevant period.
Based on the investment valuations as at 31 March 2020 the hurdle
has been met, on an unrealised basis, as such a carried interest fee
has been provided for as set out in Note 4 and 13. This will only be
payable if the hurdle is met on a realised basis.
The Portfolio Management Agreement may be terminated by either
party giving notice of not less than 12 months.
AIFM and Portfolio Manager Evaluation and Re-Appointment
The performance of Frostrow as AIFM and Augmentum Fintech
Manager Limited as Portfolio Manager is regularly monitored by the
Board with a formal evaluation being undertaken each year. As part
of this process the Board monitors the services provided by the AIFM
and the Portfolio Manager and receives regular reports and views
from them.
Following a review at a Management Engagement & Remuneration
Committee meeting in March 2020 the Board believes that the
continuing appointment of the AIFM and the Portfolio Manager,
under the terms described within this Strategic Report, is in the
best interests of the Company’s shareholders. In coming to this
decision it took into consideration the following additional reasons:
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.
l
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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, the clarity and
rigour of the investment process.
Portfolio Manager Fees
Depositary
Under the terms of the Portfolio Management Agreement
Augmentum Fintech Management Limited (the “Portfolio Manager”)
receives an annual fee of 1.5% of the Net Asset Value per annum,
falling to 1.0% of any Net Asset Value in excess of £250 million.
The Portfolio Manager is entitled to a carried interest fee in respect
of the performance of any investments and follow-on investments.
Each carried interest fee will operate in respect of investments
made during a 24 month period and related follow-on investments
The Company has appointed IQ EQ Depositary (UK) Limited
(formerly Augentius Depositary Company Limited) as its
Depositary in accordance with the AIFMD on the terms and subject
to the conditions of an agreement between the Company, Frostrow
and the Depositary (the “Depositary Agreement”).
* See Glossary on page 78
STRATEGIC REPORT continued
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23
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The Depositary provides the following services, inter alia, under its
agreement with the Company:
platform providers around the UK and hold regular seminars and
other investor events;
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verification of non-custodial investments;
cash monitoring;
l processing of transactions; and
l
foreign exchange services.
The Depositary must take reasonable care to ensure that the
Company is managed in accordance with the Financial Conduct
Authority’s Investment Funds Sourcebook, the AIFMD and the
Company’s Articles of Association.
Under the terms of the Depositary Agreement, the Depositary is
entitled to receive an annual fee of £25,000 plus certain event
driven fees.
Making Company information more accessible:
Frostrow manages the investor database and produces all key
corporate documents, distributes monthly factsheets, annual
reports and updates from the Portfolio Manager on portfolio and
market developments; and
Monitoring market activity, acting as a link between the Company,
shareholders and other stakeholders:
The Company’s brokers and Frostrow maintain regular contact with
sector broker analysts and other research and data providers, and
provides the Board with up-to-date information on the latest
shareholder and market developments.
The notice period on the Depositary Agreement is not less than
six months.
Community, Social, Employee, Human Rights, Environmental
Issues, Anti-bribery and Anti-corruption
The Company is committed to carrying out business in an honest
and fair manner with a zero-tolerance approach to bribery, tax
evasion and corruption. As such, policies and procedures are in
place to prevent bribery and corruption. In carrying out its
activities, the Company aims to conduct itself responsibly, ethically
and fairly, including in relation to social and human rights issues.
As an investment trust with limited internal resource, the Company
has little impact on the environment. The Company believes that
high standards of corporate social responsibility (“CSR”) make
good business sense and have the potential to protect and enhance
investment returns. Consequently, the Group’s investment process
ensures that social, environmental and ethical issues are taken into
account and best practice is encouraged.
Diversity
There are currently two male Directors and one female Director on
the Board. The Company aims to have a balance of relevant skills,
experience and background amongst the Directors on the Board
and believes that all Board appointments should be made on merit
and with due regard to the benefits of diversity, including gender.
Dividend Policy
The Company invests with the objective of achieving capital growth
over the long term and it is not expected that a revenue dividend
will be paid in the foreseeable future. The Board intends only to pay
dividends out of revenue to the extent required in order to
maintain the Company’s investment trust status.
Potential returns of capital
It is expected that the Company will realise investments from time
to time. The proceeds of these disposals may be re-invested, used
for working capital purposes or, at the discretion of the Board
returned to shareholders.
The Company committed in its Prospectus to return to
shareholders up to 50 per cent. of the gains realised by the
disposal of investments each year. However, shareholders should
note that the return of capital by the Company is at the discretion
of the Directors and such returns would only be made where
considered to be in the best interests of shareholders as a whole.
Company Promotion
In February 2020, the Company appointed N+1 Singer as joint
corporate broker, to work alongside Peel Hunt LLP, the existing
corporate broker, to encourage demand for the Company’s shares.
In addition to AIFM services, Frostrow also provides marketing and
distribution services.
Engaging regularly with investors:
The Company's brokers and Frostrow meet with institutional
investors, discretionary wealth managers and execution-only
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STRATEGIC REPORT continued
Engaging with our stakeholders
The following ‘Section 172’ disclosure, is required by the Companies Act 2006 and the AIC Code, as explained on pages 36 and 37, describes
how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.
Who?
Why?
How?
STAKEHOLDER GROUP
THE BENEFITS OF ENGAGEMENT WITH
OUR STAKEHOLDERS
Investors
Clear communication of the Company’s
strategy and the performance against our
objective can help the share price trade at a
narrower discount or a wider premium to its
net asset value which benefits shareholders.
New shares may be issued to meet demand
without dilution to existing shareholders.
Increasing the size of the Company can
benefit liquidity as well as spread costs.
Portfolio Manager
Service Providers
Engagement with our managers is necessary
to evaluate their performance against their
stated strategy and to understand any risks or
opportunities this may present to the
Company.
This also helps ensure that Portfolio
Management costs are closely monitored and
remain competitive.
The Company contracts with third parties for
other services including: depositary,
investment accounting & administration and
company secretarial and registrars. To ensure
the third parties to whom we have outsourced
services complete their roles diligently and
correctly is necessary for the Company’s
success.
The Company ensures all service providers
are paid in accordance with their terms of
business.
The Board closely monitors the Company's
Ongoing Charges Ratio.
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 has continued to engage regularly
with the Company’s larger shareholders.
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.
The Board meet regularly with the Company’s
Portfolio Managers throughout the year both
formally at the quarterly Board meetings and
more regularly on an informal basis. The
Board also receive quarterly performance and
compliance reporting at each Board meeting.
The Portfolio Manager’s attendance at each
Board meeting provides the opportunity for
the Portfolio Manager and Board to further
reinforce their mutual understanding of what
is expected from all parties.
The Board and Frostrow engage regularly
with all service providers both in one-to-one
meetings and via regular written reporting.
This regular interaction provides an
environment where topics, issues and
business development needs can be dealt
with efficiently and collegiately.
During the year, the Audit Committee led a
competitive tender process for the external
audit, resulting in the appointment of a new
external auditor, BDO LLP. Further details can
be found in the Report of the Audit
Committee beginning on page 49.
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Who?
Why?
How?
STAKEHOLDER GROUP
THE BENEFITS OF ENGAGEMENT WITH
OUR STAKEHOLDERS
HOW THE BOARD THE AIFM AND THE
PORTFOLIO MANAGER HAS ENGAGED
WITH OUR STAKEHOLDERS
Employees of AFML
COVID-19/well being of
employees
Portfolio companies
Attract and retain talent to ensure the Group
has the resources to successfully implement
its strategy and manage third-party
relationships.
All employees of AFML sit in one open plan
office, facilitating interaction and
engagement. The senior team report to the
Board at each meeting.
Incorporating consideration of ESG factors
into the investment process assists in
understanding and mitigating risks of an
investment and potentially identifying future
opportunities.
Given the small number of employees,
engagement is at an individual level rather
than as a group.
The Board encourages the Company’s
Portfolio Managers to engage with companies
and in doing so expects ESG issues to be a key
consideration. The Portfolio Manager seeks to
take a board seat, or have board observer
status, on all investments. See pages 26 to 28.
for further detail on AFML’s ESG approach to
investing.
What?
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?
Key topics of engagement with investors
Ongoing dialogue with shareholders concerning the strategy
of the Company, performance and the portfolio.
Key topics of engagement with the external managers on an
ongoing basis are portfolio composition, performance,
outlook and business updates.
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING PRINCIPAL
DECISIONS?
l
The Portfolio Manager, Frostrow and the joint brokers meet
regularly with shareholders and potential investors to discuss
the Company’s strategy, performance and portfolio. These
meetings take place with and without the Portfolio Manager.
l The impact of Brexit upon their business and the portfolio.
l No specific action required.
l The impact of COVID-19 upon their business and the portfolio.
l The integration of environmental, social and governance
(‘ESG’) into the Portfolio Managers investment processes.
l Performance and compensation of Group employees is
decided by the Management Engagement & Remuneration
Committee with the Directors of AFML.
l Change in regulatory requirements in response to Senior
Manager and Certification Regime.
l Regular Board calls with representatives of the Portfolio
Manager and AIFM.
l The portfolio manager to report regularly any ESG issues in
the portfolio companies to the Board. Please see pages 26 to
28 for further details of AFML’s ESG policies.
l See the Remuneration Policy on pages 44 to 48.
l Training was provided to all affected Group employees and
Directors.
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Augmentum Fintech Management Limited
Committed to Responsible Investing
Five-Stage Approach to Future-Proofing the Portfolio
Augmentum Fintech Management Limited (“AFML”) believes that
the integration of Environmental, Social and Governance (“ESG”)
factors within the investment analysis, diligence and operating
practices is pivotal in mitigating risk and creating sustainable,
profitable investments.
ESG principles adapted from the UN PRI (Principles of Responsible
Investment) are integrated throughout business operations; in
investment decisions, at the screening stage through an exclusion
list and due diligence, ongoing monitoring and engaging with
portfolio companies post-investment and when making follow-on
investment decisions, as well as within the fund operations itself.
1.
Screening
4. Follow On Investments
We use an Exclusion List to screen out companies incompatible
with our corporate values (sub-sectors and types of business). We
also commit to being satisfied that the investors we invest
alongside are of good standing.
ESG risks and opportunities are assessed when making follow-on
investment decisions, with an ESG scorecard completed and co-
investors taken into consideration. We only make follow on
investments into companies that continue to meet our ESG criteria.
2. Due Diligence
5.
Internally at Augmentum
An ESG Due Diligence (DD) survey is completed on behalf of all
companies in the later stages of the investment process. An ESG
scorecard is completed for each potential investment, in which
potential ESG risks and opportunities are identified, and discussed
with the investment committee. Where necessary, we agree an
action plan with the management team on areas for improvement
and incorporate commitments into the Term Sheet.
3. Post-Investment Monitoring and Engagement
An annual survey is completed by portfolio companies and areas
for improvement are discussed with management teams, with
commitments agreed and revisited as appropriate.
We identify key areas and set goals for ESG advancement annually.
The Investment Team has completed ESG training.
ESG Focus Areas
We have identified eight key areas for consideration, across the
three ESG categories, which best align with their values and are
most relevant for companies operating in the fintech industry.
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The key environmental consideration as identified by the AFML is
the potential impact of business operations on the global issue of
climate change. Social factors include the risks and opportunities
associated with data security, privacy and ethical use, consumer
protection, diversity and financial inclusion. Governance
considerations include anti-bribery and corruption, board structure
and independence and compliance.
AFML is committed to:
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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.
ESG in Action
Strong ESG practices can be found across our portfolio, in
business models and operating procedures. Below we highlight
some examples.
Grover
Grover is built on a circular economy business model, in which
products are rented rather than owned, extending the life of the
product and reducing waste. Through partnering with Grover, large
retailers and OEMs can incorporate the beneficial elements of a
circular economy model without the need to redesign their entire
internal operations.
Farewill
Farewill has raised over £125m to date for their charity partners
including Cancer Research UK and Save the Children, through
customers leaving a gift in their will. They also offered NHS
workers discounts on wills during COVID-19.
interactive investor
interactive investor launched their Ethical Growth portfolio and ii
ACE30, the UK’s first rated list of ethical investments, helping
customers to build their own balanced ethical portfolio. Their free
“Knowledge Centre” and podcast serve to educate customers on
the multiple facets of investing.
Onfido
At Onfido security and compliance are essential to their mission of
creating a more open world, where identity is the key to access.
The company has implemented robust, industry-leading data
security and compliance measures and accreditation, including
SOC 2 Type II and ISO 27001.
Tide
Tide has made a commitment to support 100,000 female founders
by the end of 2023 in response to the Alison Rose Review of
Female Entrepreneurship, which found that only 32% of UK
entrepreneurs are women and revealed significant untapped
potential for the UK economy.
Focusing on Diversity and Inclusion to Drive Better Business
Outcomes
AFML believes that diversity and inclusion are crucial both in
scaling and supporting successful technology businesses shaping
the future. Companies in the top quartile of gender diversity on
executive teams are 25% more likely to experience above-average
profitability (McKinsey Report: Diversity Wins, May 2020). AFML
has worked hard to build a diverse and inclusive team and company
culture in which diversity of thought is encouraged and has a
designated Diversity and Inclusion Lead.
The Investment Team takes a proactive approach to diversity when
sourcing deals, through continuously diversifying their networks,
being mindful of unconscious bias and building fair assessment into
the investing process, as well as working with and supporting third
parties making great strides in these areas. We have made a good
start but there is a lot more we would like to do. The next phase
involves using more data to drive our approach.
Progress Highlights
AFML selected gender diversity in dealflow and hiring as their
diversity and inclusion focuses for the past twelve months, and
identified a number of impactful initiatives through which to
support these, across both the fintech and investment ecosystems:
Encouraging a Diverse Fintech Industry
We hosted and supported numerous events for women running
and working in fintech businesses, including Female Founder
Office Hours and speed mentoring, in partnership with industry
body Innovate Finance and portfolio companies including Tide
and Seedrs.
We also worked with female fintech Founders from across Europe
during a trade mission coordinated by the UK Government’s
Department for International Trade.
Supporting an Inclusive Investment Ecosystem
We evolved our hiring processes to ensure inclusive practices are
ingrained. The team was joined by its first female associate and
hosted a female intern over the Summer.
We have engaged with numerous diversity-focused communities
and charities, including hosting virtual education sessions with
students via The Sutton Trust, a charity for social mobility, as part
of their ‘Pathways to Banking and Finance’ initiative.
We hosted numerous networking events for women working across
the VC industry and the team worked closely with Diversity VC on
their “Venturing into Diversity and Inclusion” report and Future VC
internship application screening.
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STRATEGIC REPORT continued
TeenVC
In March 2020 we launched TeenVC, a free online education
platform for students from all backgrounds to learn about venture
capital, technology and entrepreneurship, culminating in The
TeenVC Challenge, a deal-sourcing exercise in which students could
secure work experience with us. The initiative reached over 10,000
students around the world and The TeenVC Challenge saw entries
being submitted from as far as San Francisco, South Africa,
Bangladesh and Scotland. Of the TeenVC Challenge applicants,
over 50% were female, 50% were from state schools and 70%
were BAME (Black, Asian and minority ethnic).
This strategic report was approved by the Board of Directors and
signed on its behalf by:
Neil England
Chairman
15 July 2020
BOARD OF DIRECTORS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
29
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.
His career started in manufacturing and he
has held leadership roles in sales,
marketing and general management across
sectors including food, FMCG, distribution
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.
Neil has been Chairman of a number of
companies, most recently ITE Group plc,
Blackrock Emerging Europe plc and three
private businesses. He now holds one
Chairman position in addition to
Augmentum.
Karen Brade
(Chairman of the Audit Committee)
Karen has extensive experience in project
finance and private equity. She started her
career at Citibank where she worked on
various multi-national project finance
transactions.
Karen worked at CDC (Commonwealth
Development Corporation), the UK’s
development finance institution, where she
held a variety of positions in equity and
debt investing, portfolio management, fund
raising and investor development.
Karen has been an adviser to hedge funds,
family offices and private equity houses for a
number of years. She is currently Chairman
of Aberdeen Japan Investment Trust PLC
and Keystone Investment Trust plc.
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David Haysey
(Chairman of the Management &
Remuneration Committee and Valuations
Committee)
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. Since his retirement he has
been a non-executive partner and member
of the firm’s investment committee.
Remuneration: £35,000 pa
Remuneration: £30,000 pa
Remuneration: £30,000 pa
Shareholding in the Company: 100,000
Shareholding in the Company: 32,234
Shareholding in the Company: 85,983
Standing for re-election: yes
Standing for re-election: yes
Standing for re-election: yes
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AUGMENTUM FINTECH PLC
MANAGEMENT TEAM
The Management Team currently comprises co-founders and
principals of the Portfolio Manager. 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. The Portfolio Manager is
based in London and is authorised and regulated in the UK by
the FCA.
The Company leverages the Management Team’s years of
experience, expertise and networks in the fintech sector to drive
value creation in its investee companies.
The key individuals who are responsible for the Company’s
portfolio are listed below.
Tim Levene
Richard Matthews
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 of the business 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. Tim was also elected as a
Common Councillor (Independent) for the Ward of Bridge in the
City of London in 2017.
Richard qualified as a chartered accountant with Coopers &
Lybrand/PricewaterhouseCoopers LLP before leaving in 1999 to
join Tim as an early employee and chief financial officer of
Flutter.com. In 2001, upon the merger with Betfair, he left to
become chief financial officer of Benchmark Europe (now
Balderton Capital, a venture capital investor in Betfair). In 2005 he
became a partner at Manzanita Capital a large US family office and
in 2010 he co-founded Augmentum.
Perry Blacher
Martyn Holman
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 has nearly 20 years of experience as an operator, adviser
and investor in tech and growth spaces. Martyn’s early career was
spent as a strategy consultant with the Boston Consulting Group,
consulting to FTSE 100 clients across consumer, energy, financial
services and heavy industry sectors. Since then he has accrued
15 years of experience as both an operator and investor in the
tech/VC space. He was a key member of the early Betfair team and
later co-founded LMAX Exchange which has since featured as the
number 1 Times Tech Track Growth Company and a Fintech Future
50 member. Most recently Martyn spent nearly 5 years as an
investor and partner in UK venture capital where he helped raise a
£60 million early seed fund.
DIRECTORS’ REPORT
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
31
The Directors present the audited Financial Statements of the
Group and the Company for the year ended 31 March 2020 and
their Report on its affairs.
In accordance with the requirement for the Directors to prepare a
Strategic Report and an enhanced Directors’ Remuneration Report
for the year ended 31 March 2020, the following information is set out
in the Strategic Report: 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 regarding community, social,
employee, human rights and environmental issues and the Company’s
policy regarding Board diversity. Information about Directors’
interests in the Company’s ordinary shares is included within the
Directors’ Remuneration Report.
The Corporate Governance Statement 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 4.
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
investment manager of the Company.
The Partnership, Augmentum I LP, a limited partnership registered in
Jersey 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
The current Directors of the Company are listed on page 29. They all
served as Directors from appointment on 12 February 2018 to
31 March 2020.
All Directors seek re-election by shareholders at each Annual
General Meeting.
No other person was a Director of the Company during any part of
the period up to the approval of this Report on 15 July 2020.
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 was maintained by
the Company during the period from incorporation on 19 December
2017 to 31 March 2020. It is intended that this policy will continue
for the year ending 31 March 2021 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
Directors’ Fees
The Directors’ Remuneration Report and the Directors’
Remuneration Policy are set out on pages 41 to 48.
Appointment and Replacement of Directors
Unless otherwise determined by the Company by ordinary
resolution, the number of Directors shall not be less than two.
Portfolio Managers
It is the opinion of the Directors that the continuing appointment of
the Portfolio Manager detailed on page 22 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.
Capital Structure
At 31 March 2020 there were 117,051,911 shares of 1p each in issue.
During the year 120,000 shares were bought back and are held in
treasury. These shares do not carry any voting rights or the right to
receive any dividends and thus the number of voting rights was
116,931,911. Since the year end, 75,000 shares have been bought
back. At the date of this report there were 117,051,911 shares in issue
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DIRECTORS’ REPORT continued
of which 195,000 were held in treasury. As at 14 July 2020 the
number of voting rights was 116,856,911. The voting rights of the
shares on a poll are one vote for every share held.
At the end of the year under review, the Directors had shareholder
authority to issue a further 126,948,089 shares which expires on
31 December 2020 and to repurchase 17,351,081 shares, which will
expire at the forthcoming Annual General Meeting.
The Company’s capital structure is summarised in Note 16 on
page 65.
Substantial Interests
The Company was aware of the following substantial interests in
the voting rights of the Company as at 31 March 2020 and 30 June
2020, being the latest practicable date before publication of the
Annual Report.
30 June 2020 31 March 2020
Number % of Number % of
of Issued of Issued
Ordinary Share Ordinary Share
Shareholder Shares Capital Shares Capital
Canaccord Genuity Wealth 11,500,000 9.84 11,000,000 9.39
Management – institutional
EFG Harris Allday, stockbrokers 6,056,089 5.18 4,873,802 4.16
South Yorkshire 6,000,000 5.13 6,000,000 5.12
Pension Authority
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 2020
At the date of this report, the Group has a staff of seven
individuals, operating from small office premises and we believe
that the Group consumed less than 40,000 kWh of energy during
the year in respect of which the Directors’ Report is prepared.
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.
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. Accordingly, the Directors consider that the Company is
not required to make any anti-slavery or human trafficking
statement under the Modern Slavery Act 2015.
Hargreaves Lansdown, 5,308,477 4.54 4,663,736 3.98
Political Donations
stockbrokers
Wellian Investment 5,306,762 4.54 5,056,762 4.32
Solutions
interactive investor (EO) 5,173,745 4.43 5,035,293 4.30
Rathbones 4,971,934 4.25 4,721,114 4.03
Charles Stanley 4,886,418 4.18 4,546,564 3.88
Close Brothers 4,601,921 3.94 4,516,284 3.86
Asset Management
Brewin Dolphin, stockbrokers 4,445,608 3.80 4,035,148 3.45
Smith & Williamson 3,826,881 3.27 4,125,731 3.52
Wealth Management
The Company has not in the past and does not intend in the future
to make political donations.
Common Reporting Standard (‘CRS’)
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 will be an
annual requirement going forward. The Registrars, Link Asset
Services, have been engaged to collate such information and file
the reports with HMRC on behalf of the Company.
IPS Capital 3,733,439 3.19 3,733,439 3.19
Listing Rule 9.8.4
Canaccord Genuity 3,578,882 3.06 3,028,339 2.59
Wealth (Retail)
Mr D Cater & Mrs A Carter 1,675,012 1.43 4,615,012 3.94
Percentage shown as a percentage of 117,051,911 ordinary shares, being the
number of shares in issue at 31 March 2020 and to the date of this report.
Key management personnel of the Company’s subsidiary interests in
the shares of the Company as at 31 March 2020 are shown below:
Tim Levene 2,567,303 2.2%
Richard Matthews 575,000 0.5%
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 following disclosure is made in accordance with this
requirement:
(i) details of the Company’s Carried Interest Plan are set out in
the Directors’ Remuneration Policy.
The Directors confirm that there are no further disclosures to be
made in this regard.
Securities Financial Transactions Regulation (‘SFTR’)
Disclosure (unaudited)
The Company does not engage in Securities Financing Transactions
(as defined in Article 3 of Regulation (EU) 2015/2365, securities
DIRECTORS’ REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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financing transactions include 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. Accordingly, disclosures
required by Article 13 of the Regulation are not applicable for the
year ended 31 March 2020.
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 system of the Company’s risk management
and internal control arrangements are contained in the Corporate
Governance Statement.
Alternative Performance Measures
Annual General Meeting
The Financial Statements (on pages 53 to 69) set out the required
statutory reporting measures of the Company’s financial
performance. In addition, the Board assesses the Company’s
performance against criteria which are viewed as particularly
relevant for investment trusts, which are summarised on page 78
and explained in greater detail in the Strategic Report, under the
heading “Key Performance Indicators” on pages 20 and 21.
Definitions of the terms used and the basis of calculation adopted
are set out in the Glossary and Alternative Performance Measures
on page 78.
Statement of Disclosure of Information to Auditors
Each of the Directors confirms that so far as they are aware, there
is no relevant audit information of which the Company’s auditors
are 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 are aware of that information.
This information is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.
Independent Auditors
Following an audit tender in February 2020, a resolution to appoint
BDO LLP as the Company’s auditors and authorise the Audit
Committee to determine their remuneration will be proposed at the
forthcoming Annual General Meeting. Further details of the audit
tender are included in the Chairman's Statement and the Report of
the Audit Committee.
Going Concern
The Company’s portfolio, investment activity, the Company’s cash
balances and revenue forecasts, and the trends and factors likely to
affect the Company’s performance are reviewed and discussed at
each Board meeting. The Board has considered a detailed
assessment of the Company’s ability to meet its liabilities as they
fall due, including stress tests which modelled the effects of
substantial falls in portfolio valuations and liquidity constraints, on
the Company’s NAV, cash flows and expenses. Further information is
provided in the Report of the Audit Committee beginning on page 49.
Based on the information available to the Directors at the date of
this report, including the results of these stress tests, the
conclusions drawn in the Viability Statement on page 21 and the
Company’s cash balances, the Directors are satisfied that the
Company has adequate financial resources to continue in operation
for at least the next 12 months and that, accordingly, it is
appropriate to continue to adopt the going concern basis in
preparing the financial statements.
The Viability Statement of the Company is included in the
Strategic Report.
The Annual General Meeting will be webcast on Tuesday,
29 September 2020. The formal notice of the Annual General
Meeting is set out in a separate circular, which will be posted to
shareholders with the Annual Report for the year ended
31 March 2020.
Explanatory notes to the proposed resolutions can be found in the
Notice of Meeting.
The Board considers that the proposed resolutions are in the best
interests of the shareholders as a whole. Accordingly, the Board
unanimously recommends to the 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
It is intended that a special resolution will be proposed to grant the
Board authority to purchase its own shares, so as to permit the
purchase of up to 17,516,850 of the Company’s ordinary shares (or
such other number of shares as is equal to 14.99% of the total
number of ordinary shares in issue at the date of the passing of the
resolution) subject to the constraints set out in the special
resolution. The Directors would intend to use this authority to
purchase shares only if this would result in an increase in net asset
value per share and would 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 shareholders to vote in favour
of this resolution.
Voting Rights
As permitted by applicable law, some of these rights are varied in
respect of the upcoming Annual General Meeting of the Company
due to the present circumstances regarding the Coronavirus
pandemic.
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) he 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
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DIRECTORS’ REPORT continued
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 he
is the holder or in respect of which his appointment as proxy or
corporate representative has been made.
A member, proxy or corporate representative entitled to more than
one vote need not, if he/she votes, use all his/her votes or cast all
the votes he/she uses 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 his proxy to
exercise all or any of his 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 held by him.
Other Statutory Information
The following information is disclosed in accordance with the
Companies Act 2006:
•
•
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 would be 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.
•
there are no agreements:
(i)
to which the Company is a party that might affect its
control following a takeover bid; and/or
(ii) between the Company and its Directors concerning
compensation for loss of office.
By order of the Board
Frostrow Capital LLP
Company Secretary
15 July 2020
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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Corporate Governance Statement
The Board has considered the principles and recommendations of
the AIC Code of Corporate Governance (the “published in February
2019 AIC Code”) by reference to the AIC Corporate Governance
Guide for Investment Companies (the “AIC Guide”). The AIC Code,
as explained by the AIC Guide, addresses all the principles 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 the Company.
The Board considers that reporting against the principles and
recommendations of the AIC Code will provide the best information
to shareholders and the Financial Reporting Council has confirmed
that by following the AIC Code and the AIC Guide, boards of
investment companies will meet their obligations in relation to the
UK Corporate Governance Code and paragraph 9.8.6 of the UK
Listing Rules.
The AIC Code and the AIC Guide 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 recommendations of the AIC
Code and the relevant provisions of the UK Code, except the need
for an internal audit function.
For the reasons set out in the AIC Code, and as explained in the UK
Code, the Board considers this provision is not relevant to the
position of the Company. In particular, all of the Company’s day-to-
day management and administrative functions are outsourced to
third parties. Therefore the Company has not reported further in
respect of this provision.
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 as an
investment company it 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 role of the Board is to promote the long-term sustainable
success of the Company, generating value for shareholders and
contributing to wider society.
Company’s purpose, values and strategy
The Board assesses the basis on which the Company generates and
preserves value over the long term. 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 4.
The Board’s key responsibilities are to set the strategy, values and
standards; to provide leadership within a controls framework which
enable risks to be assessed and managed; to challenge
constructively and scrutinise 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 greater 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 38 under
Board evaluation.
Audit Committee
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 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 2020, at which time it was
agreed that no amendments to the agreements were required.
The Committee’s duties also include determining and agreeing with
the Board the policy for remuneration of the Directors and key
management personnel. Where appropriate, the Committee will
consider both the need to judge the position of the Company
relative to other companies regarding the remuneration of
Directors and the need to appoint external remuneration
consultants. The Committee met three times in the year, including
meetings to determine the Director’s Remuneration Policy, AFML
remuneration matters and the Carried Interest Plan. A report on its
activities is contained in the Directors’ Remuneration Report.
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CORPORATE GOVERNANCE REPORT continued
Nominations Committee
The Nominations Committee considers annually the skills
possessed by the Board and identifies any skill shortages to be
filled by new directors. 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.
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. 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 below sets out the number of formal Board and
Committee meetings held during the year ended 31 March 2020
and the number of meetings attended by each Director.
In addition to the scheduled Board and Committee meetings,
Directors attend ad-hoc Board meetings to consider matters such
as the approval of regulatory announcements.
Audit ME&R Valuations Nomination
Board Committee Committee Committee Committee
Neil England 6 2 4 2 3
Karen Brade 6 2 4 2 3
David Haysey 6 2 4 2 3
All the Directors attended the Annual General Meeting in September 2019.
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. 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 expects to be available to meet
the larger shareholders and the Chairman of the Management
Engagement & Remuneration Committee is available to discuss
remuneration matters.
The Company encourages shareholders to attend this year’s virtual
Annual General Meeting as a forum for communication with
individual shareholders. 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 virtual Annual
General Meeting and encourage shareholders to submit questions
ahead of the Meeting. Details of the proxy votes received in respect
of each resolution are made available to shareholders. In the event
of a significant (defined as 20% or more) vote against any
resolution proposed at the Annual General Meeting, the Board
would consult 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 79.
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, prepared in accordance with EU rules, is also published
on the Company’s website. The Company belongs to the
Association of Investment Companies which publishes information
to increase investors’ understanding of the sector.
Stakeholders
The new AIC Code requires Directors to explain their statutory
duties as stated in sections 171–177 of the Companies Act 2006.
Under section 172, directors have a duty to promote the success of
the Company for the benefit of its members as a whole and in
doing so have regard to the consequences of any decisions in the
long term, as well as having regard to the Company’s stakeholders
amongst other considerations.
The Board’s report on its compliance with Section 172 of the
Companies Act 2006 is contained within the Strategic Report on
pages 24 and 25.
The Board is responsible for ensuring that workforce policies and
practices are in line with the Company’s purpose and values and
support its culture. The Management Engagement & Remuneration
and Nomination Committees advise the Board in respect of policies
on remuneration-related matters.
Since the subsidiary company has only seven employees, 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.
CORPORATE GOVERNANCE REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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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 requirements and registration services. Each of
these contracts was 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 21 to 23.
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.
The Board’s assessment of the Company’s longer-term viability is
set out in the Strategic Report on page 21.
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 the Company’s shares are held via a nominee company
name, 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.
Stewardship and the Exercise of Voting Powers
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 Corporate
Governance Code.
The Board has delegated authority to the Portfolio Manager to vote
the shares owned by the Company.
The Portfolio Managers commitment to responsible investing is set
out on pages 26 to 28.
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The Board has instructed that the Portfolio Manager submit votes
for such shares wherever possible, in the best long-term interest of
shareholders and in accordance with their own investment
philosophies. Where applicable, it monitors the policies of the
Portfolio Manager in respect of the UK Stewardship Code.
The Company 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 which they invest on the
Company’s behalf. Whilst the Company’s Portfolio Manager is
apprised of the Company’s approach to the stewardship of its
assets and the importance of sound corporate governance, they
use their discretion according to their knowledge of the relevant
circumstances. The Portfolio Manager reports its compliance with
the UK Stewardship Code, or equivalent legislation, to the Audit
Committee each year.
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
engaging with shareholders to ensure that the Board has a
clear understanding of shareholder views
Given the small size of the Company, the Board and the Company’s
shareholder register, the Board has not appointed a senior
independent director.
Directors’ Interests
The beneficial interests of the Directors in the Company are set out
on page 43 of this annual report.
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CORPORATE GOVERNANCE REPORT continued
CORPORATE GOVERNANCE REPORT continued
Directors’ Independence
The Board consists of three 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
During the year, none of the Directors took on an increase in total
commitments. Each of the Directors assessed the overall time
commitment of their external appointments and it was concluded
that they have sufficient time to discharge their duties.
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 involved the
circulation of a Board effectiveness checklist, tailored to suit the
nature of the Company, followed by discussions between the AIFM
and each of the Directors. The performance of the Chairman
was evaluated by the other Directors under the leadership of
David Haysey.
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 to propose
them for re-election.
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 the final dividend (if any), the appointment
or removal of the Company Secretary, and determining the
policy on share issuance and buybacks.
Matters relating to certain Stock Exchange requirements and
announcements, the Company’s internal controls, and the
Company’s corporate governance structure, policy and
procedures.
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.
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.
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, even if Frostrow or AFML act as
spokesmen. The Board is kept informed of relevant promotional
material that is issued by Frostrow.
Composition, Succession and Evaluation
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.
During the year, the Board reviewed the policy on Directors’ tenure
and considered the overall length of service of the Board as a
whole. As all of the Directors have been appointed since the launch
of the Company, the Board has committed to review the long-term
succession plan, to ensure that there is an orderly succession when
the time comes for the Directors to retire from the Board.
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.
Appointments to the Board
The rules governing the appointment and replacement of Directors
are set out in the Company’s Articles of Association and the
aforementioned succession planning policy. 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 candidates for the appointment of new Directors
and on the recommendation for shareholders’ approval for the
Directors seeking re-election at the Annual General Meeting. When
considering new appointments, the Board endeavours to ensure
that it has the capabilities required 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. No new appointments
were made during the year.
Diversity Policy
The Board supports the principle of boardroom diversity, of which
gender is one important aspect. 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.
CORPORATE GOVERNANCE REPORT continued
CORPORATE GOVERNANCE REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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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
will be a key consideration in any Director search process.
The gender balance of two men and one woman meets the original
recommendation of Lord Davies’ report on Women on Boards. The
Board is aware that new gender representation objectives have
been set for FTSE 350 companies and that targets concerning
ethnic diversity have been recommended for FTSE 250 companies.
While the Company is not a FTSE 350 constituent the Board will
continue to monitor developments in this area and will consider
diversity during any director search process.
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
annually 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.
Directors’ and Officers’ Liability Insurance
The Company has arranged Directors’ and Officers’ Liability
Insurance which provides cover for legal expenses under certain
circumstances. This was in force for the entire year under review
and up to the date of this report.
Conflicts of Interest
Company Secretary
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 will be sought prior to the appointment of any new
Director or if any new conflicts or potential conflicts arise.
Exercise of Voting Powers
The Board has delegated authority to AFML (as Portfolio Manager)
to vote the shares owned by the Company.
The Board has instructed that the Portfolio Manager submit votes
for such shares wherever possible and practicable. The Portfolio
Manager may refer to the Board on any matters of a contentious
nature.
Further details of the Portfolio Mangers approach to responsible
ownership can be found on pages 26 to 28.
Anti-Bribery and Corruption Policy
The Board has adopted a zero-tolerance approach to instances of
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 from
themselves or for the Company.
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.
The Directors have access to the advice and services of a Company
Secretary through its appointed representative which is
responsible to the Board for ensuring 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 21 and 22. 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 page 22.
Audit, Risk and Internal Control
The Statement of Directors’ Responsibilities on page 52 describes
the Directors’ responsibility for preparing this report.
The Report of the Audit Committee, beginning on page 49, 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 17 to 20.
40
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CORPORATE GOVERNANCE REPORT continued
Annual General Meeting
THE FOLLOWING INFORMATION TO BE CONSIDERED AT THE
FORTHCOMING ANNUAL GENERAL MEETING IS IMPORTANT
AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt about the action you should take, you
should seek advice from your stockbroker, bank manager,
solicitor, accountant or other financial adviser authorised under
the Financial Services and Markets Act 2000 (as amended).
If you have sold or transferred all of your ordinary shares in the
Company, you should pass this document, together with any
other accompanying documents, including the form of proxy,
at once to the purchaser or transferee, or to the stockbroker,
bank or other agent through whom the sale or transfer was
effected, for onward transmission to the purchaser or
transferee.
Resolutions relating to the following items of special business will
be proposed at the forthcoming Annual General Meeting.
Resolution 7 Authority to allot shares
Resolution 8 Authority to disapply pre-emption rights
Resolution 9 Authority to sell shares held in Treasury on a non
pre-emptive basis
Resolution 10 Authority to buy back shares
Resolution 11 Authority to hold General Meetings (other than the
Annual General Meeting) on at least 14 clear days’ notice.
The full text of the resolutions to be proposed at the Annual
General Meeting are contained in the separate Notice of Meeting
being sent to Shareholders with this Report and will be available on
the Company’s website www.augmentum.vc.
By order of the Board
Frostrow Capital LLP
Company Secretary
15 July 2020
DIRECTORS’ REMUNERATION REPORT
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
41
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Accordingly, the Committee’s aim is to provide a framework for
remuneration which creates an appropriate balance between fixed
and performance-related elements.
It is the Committee’s intention that performance-related
remuneration is linked to the achievement of objectives which are
aligned with shareholders’ interests over the medium term.
The main elements of the remuneration package for key personnel
of AFML are:
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Base salary.
Performance-related annual bonus.
Other benefits (including life and health insurance).
Participation in AFML’s carried interest plan.
The Company’s existing remuneration policy was subject to a
binding shareholder vote at the Annual General Meeting in 2019.
No changes were made to the existing remuneration policy. The
Committee is required to submit its remuneration policy to a
shareholder vote every three years and accordingly will next be
putting a resolution to approve the remuneration policy to
shareholders at the Annual General Meeting to be held in 2022.
Annual Discretionary Bonus
Key personnel of AFML may be awarded a discretionary bonus of
up to 50% of base salary in such amount and on such terms as
may be decided from time to time by the Committee. Any bonus
payment made shall be purely discretionary in all respects and
shall not form part of contractual remuneration. There is no
obligation on the Group to award a bonus and any bonus awarded
in one year shall not give rise to any expectation of or right to any
bonus in the following or subsequent years.
There are no provisions for the annual discretionary bonus to be
clawbacked from key personnel.
Carried Interest Plan (“CIP”)
The Company’s subsidiary, AFML, has established a carried interest
plan for its employees (together, the “Plan Participants”) in respect
of any investments and follow-on investments made from
Admission. Each carried interest plan 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
carried interest plan shall be in respect of investments acquired
using 80% of the net proceeds of the IPO (including the Initial
Portfolio), and related follow-on investments.
Subject to certain exceptions, Plan Participants will receive, 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 and follow-on investments
made during the relevant period. The participant’s return are
subject to a “catch-up” provision in their favour. Plan Participants’
carried interests vest over a maximum of three years for each
carried interest plan and are subject to good and bad leaver
provisions. Any unvested carried interest resulting from a Plan
Participant becoming a leaver can be reallocated by the
Committee.
Statement by 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 2020. It sets out the remuneration policy and
remuneration details for the non-executive Directors and the
directors of AFML.
Role of the Management Engagement & Remuneration
Committee
The other members of the Committee are Karen Brade and Neil
England, who are both 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 Directors of the Company, and key personnel of
Augmentum Fintech Management Limited (“AFML”) and
recommending the total remuneration packages (including
bonuses, incentive payments or other awards) for those key
personnel; and
reviewing management engagement terms in place with the
Company’s AIFM and Portfolio Manager.
The Committee met on three occasions during the year under
review. The Committee will meet at least once per year.
The activity of the Committee during the year was focused on
remuneration matters. The Committee also approved the salary of
the directors 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.
Remuneration Policy Overview
The objective of the Group’s remuneration policy is to attract,
motivate and retain high calibre, qualified, executives with the
necessary skills and experience in order for the Company to
achieve its strategic objectives. The Directors also recognise the
importance of ensuring that employees are incentivised and
identify closely with the success of the Company.
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DIRECTORS’ REMUNERATION REPORT continued
Consideration by Directors of Matters Relating to Directors’
Remuneration
Each of the Directors is appointed under a letter of appointment with
the Company. Subject to their re-election by shareholders, the initial
term of appointment for each Director is three years from Admission,
and their appointments are terminable upon three months’ notice by
either party.
The Committee assesses the workload and responsibilities of the non-
executive directors and reviews, annually, the fees paid to the non-
executive Directors.
The Directors’ fees are determined by the Board, subject to the
limit set out in the Company’s Articles of Association. There have
been no changes to Directors’ fees during the year.
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. The Company does not have share options or a share
scheme.
The Committee was not provided with any external advice or
services during the financial year ending 31 March 2020 in respect
of the fees payable to the non-executive Directors.
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 were no substantial shareholder
votes against the resolutions at the Annual General meeting held
in 2019.
At the Annual General Meeting held on 11 September 2019, ordinary
resolutions to approve the Directors’ Remuneration Report for the
year ending 31 March 2019 and to approve the remuneration policy
were passed on a show of hands. The proxy votes in each case were
as follows:
Votes Total Votes Votes
Resolution Votes For % Against % Cast Withheld
Approval of the Directors’ Remuneration Report 21,645,277 99.85% 31,819 0.15% 21,677,096 32,305
for the period ended 31 March 2019
Approval of the Directors’ Renumeration Policy 21,638,197 99.82% 38,899 0.18% 21,677,096 32,305
All Directors are entitled to the reimbursement of reasonable out
of pocket expenses incurred by them in order to perform their
duties as Directors of 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 2020.
Directors’ Fee
Directors’ annual fees are currently as follows and will remain at
this level for the financial year ending 31 March 2021.
Fee
Role £’000s
Neil England Chairman of the Board 35
and Nominations Committee
Karen Brade Chairman of the Audit Committee 30
Single total figure of remuneration (Audited)
The following table shows the single figure of remuneration of the
non-executive directors' remuneration for the year ended
31 March 2020, together with the comparative figures for 2019:
Year Period
ended ended
31 March 31 March
2020 2019
Total Total
fees fees
Role £’000s £’000s**
Neil England* Chairman of the 35 40
Board and Nominations
Committee
Karen Brade* Chairman of the Audit 30 34
Committee
David Haysey* Chairman of the Management 30 34
Engagement & Remuneration
Committee and Valuations
Committee
David Haysey Chairman of the Management 30
Total 95 108
Engagement & Remuneration
Committee and Valuations
Committee
None of the Directors participate in the carried interest plan.
* Appointed on 12 February 2018.
** The Directors’ fees paid in the period ended 31 March 2019 relate to a period of
15 months.
DIRECTORS’ REMUNERATION REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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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.
Directors’ share interests (Audited)
The interests of the Directors who served in the year and who held
an interest in the ordinary shares of the Company were as follows:
Number of Number of
ordinary ordinary
shares shares
as at as at
31 March 31 March
Role 2020 2019
Neil England Chairman of the Board and 100,000 20,000
Nominations Committee
Karen Brade Chairman of Audit 32,234 18,842
Committee
David Haysey Chairman of Management 85,983 70,805
Engagement & Remuneration
Committee and Valuations
Committee
None of the Directors are required to own shares in the Company.
There are no changes to Directors share interests from 31 March
2020 to the date of this report.
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Total Shareholder Return
The graph below shows the total return for the period from
13 March 2018 to 31 March 2020 against the FTSE 250
Ex Investment Trust Index.
%
120.0
110.0
100.0
90.0
80.0
70.0
60.0
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Jun
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Dec
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Mar
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Jun
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Dec
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Mar
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Augmentum Fintech Ord (Share price total return)
FTSE 250 Ex Investment Trust
Relative importance of spend on pay
Year Period
ended ended
31 March 31 March
2020 2019 Difference
Spend £’000 £’000 £’000
Fees of non-executive Directors 95 108 (13)
Remuneration paid to or 1,081 278* 803
receivable by all employees of
the Group in respect of the year**
Total Expenses** 2,622 2,376 246
* Employee costs were only incurred in the prior period from 1 November 2018
when Augmentum Fintech Management Limited, a subsidiary of the Company,
became the Company’s delegated Portfolio Manager upon receiving FCA
authorisation.
** excludes carried interest provision
Conclusion
I believe that our policy on pages 44 to 48 creates a strong
alignment between the key personnel of AFML, Non Executive
Directors and shareholders and is relevant and aligned with our
expectations for the Company.
David Haysey
Chairman of the Management Engagement & Remuneration
Committee
15 July 2020
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DIRECTORS’ REMUNERATION POLICY
REMUNERATION POLICY
Consideration of Shareholder Views
The Company reports on its remuneration policy in accordance
with the Regulations each year and is required to submit its
remuneration policy to a shareholder vote every three years. An
ordinary resolution for the approval of the current policy was put
to members at the Annual General Meeting on 11 September 2019
and passed by the members. No changes were made to the policy.
The policy will apply for a further three years until the Annual
General Meeting in 2022, when it will next be voted on by
shareholders.
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.
2. Remuneration Policy for the Chairman of the Board and
Non-Executive Directors
The Group’s policy on Director remuneration is to set both the
structure and level of fees to reflect the need to attract high-
calibre Board members, and the scope of the responsibilities, time
commitment, and market practice.
Terms of appointment
The appointment of both the Chairman and Directors are subject to
letters of appointment. Service contracts are not used for Board
members. The letters of appointment 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.
The policy is set out below.
1. Key objectives of the Augmentum Fintech plc Directors’
Remuneration Policy
The Directors’ Remuneration Policy aims to deliver three core
objectives:
•
•
•
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.
Enable the Company’s subsidiary Augmentum Fintech
Management Limited (“AFML”) to attract, retain, and
incentivise the best talent for its business; and
Create alignment with shareholders’ interests.
To deliver these objectives the Directors’ Remuneration Policy
seeks to reward the achievement of Augmentum’s strategic
objectives.
Pay and Employment Conditions Across the Group
While the Group does not formally consult employees in
determining the Directors’ Remuneration Policy, structures, and
practices, the Management Engagement & Remuneration
Committee takes into consideration the pay and employment
conditions applied across the organisation to ensure that pay
structures are suitably aligned and that absolute remuneration
levels remain appropriate. The Committee reviews the pay ratios
between the Directors and the broader workforce, and also takes
into account the general basic salary increases for employees
across the organisation when determining Director salary
increases.
DIRECTORS’ REMUNERATION POLICY continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
45
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Director Remuneration Policy
The table below sets out the Group’s policy for Director 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’ fee are
determined by the 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 for their Chairmanship of a Board
Committee
See table on page 42
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
To date no such costs have been reimbursed
3. Key management personnel for AFML (‘KMP’) Remuneration Policy table
Salary
Purpose and link to strategy • To provide competitive fixed remuneration that will attract, retain and motivate high
calibre executives and reflect their experience, duties and location
Operation • Salaries are reviewed annually, and any increases take account of a broad range of factors
including:
– The salary increases awarded across the organisation
– Economic conditions
– Inflation/cost of living
– Individual performance, skills and experience
– Financial performance of the Group
– Pay levels in comparative companies
Maximum opportunity • The maximum salary under this policy is £200,000 and the Committee retains discretion
to increase salaries for the duration of this policy. However, increases will normally be in
line with salary increases to the broader workforce
• Increases beyond those linked to the workforce (in percentage of salary terms) may be
awarded in certain circumstances at the Board’s discretion (based on the recommendation
of the Committee) such as where there is a change in responsibility, experience or a
significant increase in the scale of the role and/or size, value and/or complexity of the
Group. Any increases beyond the increments awarded across the broader workforce will be
explained in the relevant year’s Directors’ Remuneration Report
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DIRECTORS’ REMUNERATION POLICY continued
Benefits
Purpose and link to strategy • To provide competitive benefits in line with market practice
Operation • The Benefits provision will be reviewed annually
• The Group typically provides the following benefits:
– Private health insurance
– Death in service cover
• The Committee has the ability to reimburse reasonable business-related expenses and any
tax thereon
Maximum opportunity • The cost of some of these benefits is not pre-determined and may vary from year to year
based on the overall cost to the Group in securing these benefits for a population of
employees (particularly health insurance and death-in-service cover)
• The Committee has discretion to approve an additional allowance in exceptional
circumstances (such as relocation), or where factors outside the Committee’s control have
changed materially (such as increases in insurance premiums)
Pension
Purpose and link to strategy To provide a competitive, yet cost-effective, appropriate long-term retirement benefit
Operation KMP may receive a company contribution to a defined contribution scheme
Maximum opportunity Company contributions of up to 15% of base salary
Discretionary Bonus
Purpose and link to strategy To incentivise annual delivery of performance objectives relating to the short-term goals of
the Company, driving strong financial performance for investors balanced with effective long-
term decision making and prudence
Operation • KMP may be awarded an annual discretionary bonus of up to 50% of base salary and on
such terms as may be decided from time to time by the Management Engagement and
Remuneration Committee of Augmentum Fintech plc. Any bonus payment made to KMP
shall be purely discretionary in all respects and shall not form part of contractual
remuneration.
• There is no obligation on the Company to award a bonus and any bonus awarded in one
year shall not give rise to any expectation of or right to any bonus in the following or
subsequent years.
Maximum opportunity • 50% of base salary
Carried Interest Plan (“CIP”)
Purpose and link to strategy To align performance related remuneration with shareholders interests over the medium to
longer term.
Operation • KMP participate in the CIP. The allocations between Plan Participants are set by the
Management Engagement and Remuneration Committee at the start of each plan. See the
‘Carried interest plan’ section of the Directors Remuneration Report for further details.
• Where the performance conditions of the CIP are met the Group is contractually obliged to
pay the CIP fee.
Maximum opportunity • There is no maximum payout to Plan Participants under the CIP and it is the Group’s policy
not to cap individual variable pay. The maximum amount payable is dependent on the
timing and amount of future investment realisations.
DIRECTORS’ REMUNERATION POLICY continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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Illustration of the remuneration packages for key management
personnel of AFML under different performance scenarios
The chart below illustrates the minimum fixed remuneration and
provides a good indication of the total remuneration for a year of
good performance using the base salary and maximum
discretionary bonus effective 1 April 2019 and shows potential pay-
outs at different levels of performance. The value of each element
has been included.
CEO Remuneration £m
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
Notes
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Minimum
Target
Fixed Pay
Discretionary Bonus
Carried Interest Plan
•
•
Under the Target scenario a fifth of the anticipated pay-out is attributed to each year. The carried interest plan is projected to last five years for the purposes of
this illustration. The anticipated pay-out assumes that a target IRR of 20% is met with all investment realisations occurring at the end of the five year period.
No maximum payment scenario has been shown as there is no maximum payment specified under the carried interest plans and the Group’s policy is to not cap
individual variable pay. The maximum amount payable is dependent on the timing and amount of future investment realisations.
Approach to Recruitment Remuneration
The Committee is responsible for setting the package for any new
KMP. On appointment of new KMP, the Committee would seek to
offer a remuneration package which can secure an individual of the
calibre and skillset required to fulfil the role successfully to help
drive long-term value for shareholders.
In determining the appropriate remuneration package for new KMP,
the Committee will consider the calibre of the candidate, the level
of their existing remuneration, the jurisdiction from which the
candidate is recruited from and their skills and experience.
Additionally, decisions will be informed by consideration of market
data for companies of a similar size and complexity and contextual
information regarding remuneration paid to employees elsewhere
in the organisation.
Any remuneration package would be in line with the parameters set
out in the Directors’ Remuneration Policy. In the event of
recruitment of new KMP, the rationale behind the package offered
will be explained in the subsequent Annual Report.
Where an individual forfeits outstanding incentive awards with a
previous employer as a result of accepting an appointment from
the Group, the Committee may offer compensatory awards to
facilitate recruitment in the form of a ‘buy-out’ award. These
awards would be in such form as the Committee considers
appropriate taking into account all relevant factors including the
form, expected value, performance conditions, anticipated vesting
and timing of the forfeited awards. The expected value of any
compensatory awards would be no higher than the value forfeited,
and, where possible, the Committee would aim to reflect the
nature, timing, and value of awards forgone in any replacement,
compensatory awards.
While cash may be included to reflect the forfeiture of cash-based
incentive awards, the Committee does not envisage that ‘golden
hello’ cash payments would be offered.
For internal promotions, any commitments made prior to
appointment may continue to be honoured as the KMP is
transitioned to the new remuneration arrangements.
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DIRECTORS’ REMUNERATION POLICY continued
KMP service contracts
It is the Group’s policy to enter into contracts of employment with
KMP which may be terminated at any time by either the Group or
the KMP upon six months’ notice. A summary of the way in which
each element of remuneration is treated on loss of office is
included in the table below.
Loss of office policy
In the event that the employment of KMP is terminated, any
compensation payable will be determined in accordance with the
terms of the employment contract as well as the rules of any
relevant incentive plans. The Committee carefully considers
compensation commitments in the event of a KMP’s termination.
The aim is to avoid rewarding poor performance and to reduce
compensation to reflect the departing executive’s obligations and
to mitigate losses.
The main elements of remuneration would typically be treated in
the following ways:
Element “Good leaver”* All other leavers
Fixed pay during the
notice period
Save for summary dismissal, KMP will receive base pay and other benefits
over their notice period including any period where they are not required to
work. Alternatively, the Committee may elect to make a payment in lieu of
notice; typically amounts will be paid in monthly instalments and reduce, or
cease, in the event that remuneration from new employment is received.
Bonus for final year of
service
The Committee may award KMP an annual bonus payment in respect of their
final year of service (while they are under notice).
This payment will usually be pro-rated to reflect the portion of the financial
year for which they were in active employment. Pay-outs will be calculated with
reference to individual and financial performance measures in the usual way.
The Committee may determine that a portion of such a bonus must be deferred.
No bonus payment will be
made if the KMP is under
notice
* The Committee may determine that the KMP is a good leaver if they leave the Company as a result of either death, retirement (with the agreement of the
Committee), injury, disability or for any other reason as determined by the Committee.
Other payments may be made to compensate KMP for the loss of
employment rights on termination. Payments may include amounts
for agreeing to non-solicitation and confidentiality clauses,
reimbursement of legal fees and/or for settlement of any claim
arising in connection with the termination of the KMP’s
employment.
In the event of a change of control, the Carried Interest Plan would
continue in accordance with their terms, subject to the
Committee’s discretion to determine otherwise.
External Appointments of KMP
It is the Company’s policy to allow KMP to accept and fulfil non-
executive directorships of another company, although the Board
retains the discretion to adjust this policy on a needs-basis. KMP
are permitted to retain any fees received in respect of any such
external appointment, the details of which will be set out in the
Directors’ Remuneration Report each year.
David Haysey
Chairman of the Management Engagement & Remuneration
Committee
15 July 2020
REPORT OF THE AUDIT COMMITTEE
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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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
Meeting and Business
I report to the Board after each Audit Committee meeting on the
main matters discussed at this meeting.
The Audit Committee met three times during the year under review
and to the date of this report. The main matters discussed at those
meetings were:
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Review and approval of the annual plan of the external auditor
To oversee the audit tender
Discussion and approval of the fee for the external audit
Implementation of Audit Committee terms of reference and
the audit policies
Review of the Company’s key risks and internal controls
Consideration of the 2019 UK Corporate Governance Code and
2019 AIC Code of Corporate Governance
Review of the Annual and Interim Report including
consideration of the significant accounting issues relating to
the financial statements
l Meeting with the external auditors without management present
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Assessment of the need for an internal audit function
Review of whistleblowing arrangements
To consider the Valuation 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 auditors.
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. 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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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 from the Chairman
On behalf of the Board, I am pleased to present my report as
Chairman of the Audit Committee. The members of the Committee
are Neil England and David Haysey. 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 Directors 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.
Composition and 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
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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
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Advising the Board on the Company’s overall risk appetite,
tolerance and strategy
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
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, and
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REPORT OF THE AUDIT COMMITTEE continued
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 each time it meets, 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 have considered the
work of the Valuation Committee and the results of their
discussions with both the AIFM, Portfolio Manager and the external
auditors. 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 Valuation
Committee.
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
page 21. The Committee reviewed the Company’s financial position
expected future cash flows and position, together with, the principal
risks and uncertainties, including those experienced recently in
connection with the coronavirus pandemic. 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.
Appointment of New Auditor
During the year, as part of the Board’s review of costs (see
Chairman’s Statement on page 2 for further information) and as
notified in the Company’s half yearly report for the six months
ended 30 September 2019, the Audit Committee led a competitive
audit tender process. A selection of audit firms were invited to
participate, and three firms submitted proposals and were
interviewed by the Audit Committee. In line with the requirements
of the EU Audit Regulation, the Committee submitted two audit
firm candidates for the engagement to the Board, together with a
justified preference for one of them.
Following due consideration, the Board resolved to appoint the
Committee’s preferred candidate, BDO LLP. Accordingly,
PricewaterhouseCoopers LLP resigned as the Company’s auditor
and provided a statement explaining the reasons for its resignation
which was posted to shareholders in accordance with the
Companies Act 2006. The statement is available on the Company’s
website and the National Storage Mechanism. The Directors wish to
thank PricewaterhouseCoopers LLP for its service as auditor since
the Company’s inception.
Peter Smith was the audit partner for the financial year under
review and he has confirmed BDO LLP’s’ willingness to continue to
act as Auditor to the Company for the forthcoming financial year.
BDO LLPs’ appointment is subject to shareholder approval at the
next Annual General Meeting to be held in September 2020. Details
can be found in the Notice of Annual General Meeting.
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.
External Auditor
In addition to the reviews undertaken at Committee meetings, I
communicated with BDO LLP on 10 June 2020 to discuss the
progress of the audit and the draft Annual Report. The Committee
also communicated with BDO LLP without Frostrow or the Portfolio
Manager being present to discuss the outcome of the audit on
13 July 2020.
In order to fulfil the Committee’s responsibility regarding the
independence of the Auditor, the Committee reviewed:
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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
the extent of any non-audit services provided by the Auditor
(there were none during the year under review).
REPORT OF THE AUDIT COMMITTEE continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
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Evaluation
The Committee’s evaluation of its own performance has been
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
15 July 2020
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reviewed:
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including their ability to communicate with management and
to resolve any issues promptly and satisfactorily, and the audit
partner’s leadership of the audit team;
the quality of the report arising from the audit itself; and
feedback from Frostrow as the AIFM on the conduct of the
audit and their working relationship.
The Committee is satisfied with the Auditor’s independence and
the effectiveness of the audit process, together with the degree of
diligence and professional scepticism brought to bear.
Non-Audit Services
EU Audit Regulation reforms in relation to non-audit services has
become effective and applies to the Company under these
regulations as a Public Interest Entity for the preparation of the
Company’s 2019 Report and Financial Statements. 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. The
Audit Committee confirms that the Company expects to comply
with these requirements in future.
The Audit Committee has considered whether there is a need for
the Company to have its own internal audit function but continues
to believe that the Company’s internal control systems in place give
sufficient assurance, given the size of the Company, that a sound
system of internal control, which safeguards shareholders’
investment and the Company’s assets is maintained. This view is
supported by the review of the effectiveness of internal controls
referred to above. The Audit Committee considers, therefore, that
an internal audit function specific to the Company is unnecessary.
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STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT,
THE DIRECTORS’ REMUNERATION REPORT AND
THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial period. Under that law the Directors
have prepared the group and company financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union (“EU”) and Article 4 of
the EU IAS Regulation and have also chosen to prepare the parent
company financial statements under IFRSs as adopted by the EU.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of the
return or loss of the group and company for that period. In
preparing the financial statements, the Directors are required to:
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select suitable accounting policies and then apply them
consistently;
state whether applicable IFRSs as adopted by the EU have
been followed for the group financial statements and IFRSs as
adopted by the EU have been followed for the company
financial statements, subject to any material departures
disclosed and explained in the financial statements;
present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and
understandable information;
l make judgements and accounting estimates that are
reasonable and prudent; and
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prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and
company will continue in business.
The Directors are also responsible for safeguarding the assets of
the group and company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group and
company's transactions and disclose with reasonable accuracy at
any time the financial position of the group and company and
enable them to ensure that the financial statements and the
Directors’ Remuneration Report comply with the Companies Act
2006 and, as regards the group financial statements, Article 4 of
the IAS Regulation.
The Directors are responsible for the maintenance and integrity of
the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility Statement
The Directors consider that the annual report and accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group and
company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed in the
‘Board of Directors’ on page 29 confirm that, to the best of their
knowledge:
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the company financial statements, which have been prepared
in accordance with IFRSs as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit of
the company;
the group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
the Strategic Report includes a fair review of the development
and performance of the business and the position of the group
and company, together with a description of the principal risks
and uncertainties that it faces.
The Directors also confirm that the group financial statements, are
taken as a whole, are fair, balanced and understandable, and
provide the information necessary for shareholders to assess the
Company’s position, performance, business model and strategy.
Approved by the Board of Directors and signed on its behalf by
Neil England
Chairman
15 July 2020
Note to those who access this document by electronic means:
The annual report for the year ended 31 March 2020 has been
approved by the Board of Augmentum Fintech plc. Copies of the
annual report are circulated to shareholders and, where possible to
investors. It is also made available in electronic format for the
convenience of readers. Printed copies are available from the
Company's Registered Office in London.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
53
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2020
Year ended 31 March 2020 Period ended 31 March 2019
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on Investments 8 – 12,683 12,683 – 12,183 12,183
Interest Income 106 – 106 222 – 222
Expenses 2 (2,579) (2,410) (4,989) (2,248) (128) (2,376)
(Loss)/Return before Taxation (2,473) 10,273 7,800 (2,026) 12,055 10,029
Taxation 6 – – – – – –
(Loss)/Return for the year/period (2,473) 10,273 7,800 (2,026) 12,055 10,029
(Loss)/Return per Share (pence)* 7 (2.2)p 9.2p 7.0p (2.6)p 15.6p 13.0p
(Loss)/Return per Share since IPO (pence)** 7 (2.2)p 12.8p 10.6p
The total column of this statement represents the Group’s Consolidated Income Statement, prepared in accordance with IFRS as adopted by the EU.
The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total return, as disclosed above, is the same as the Group’s total comprehensive income.
All items in the above statement derive from continuing operations.
All returns are attributable to the equity holders of Augmentum Fintech plc, the parent company. There are no non-controlling interests.
*The return per share is the figure calculated in accordance with IAS 33 ‘Earnings per share’.
**The return per share since IPO figure has been disclosed for 2019 as all earnings were earned subsequently to the IPO, and the issue of the 93,999,999 shares. The
Directors consider this to reflect the actual return generated for shareholders for that period.
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AUGMENTUM FINTECH PLC
CONSOLIDATED AND COMPANY STATEMENTS
OF CHANGES IN EQUITY
for the year ended 31 March 2020
Year ended 31 March 2020
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders funds 940 – 92,101 12,055 (2,026) 103,070
Issue of shares following placing and offer for subscription 231 25,587 – – – 25,818
Costs of placing and offer for subscription – (827) – – – (827)
Purchase of own shares into Treasury – – (68) – – (68)
Return/(loss) for the year – – – 10,273 (2,473) 7,800
At 31 March 2020 1,171 24,760 92,033 22,328 (4,499) 135,793
Period ended 31 March 2019
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £’000 £’000 £’000 £’000 £’000 £’000
Issue of shares following placing and offer for subscription 940 93,060 – – – 94,000
Costs of placing and offer
for subscription – (959) – – – (959)
Conversion of share premium account – (92,101) 92,101 – – –
Return/(loss) for the period – – – 12,055 (2,026) 10,029
At 31 March 2019 940 – 92,101 12,055 (2,026) 103,070
Year ended 31 March 2020
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders funds 940 – 92,101 12,055 (2,053) 103,043
Issue of shares following placing and offer for subscription 231 25,587 – – – 25,818
Costs of placing and offer for subscription – (827) – – – (827)
Purchase of own shares into Treasury – – (68) – – (68)
Return/(loss) for the year – – – 10,273 (2,637) 7,636
At 31 March 2020 1,171 24,760 92,033 22,328 (4,690) 135,602
Period ended 31 March 2019
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £’000 £’000 £’000 £’000 £’000 £’000
Issue of shares following placing and offer for subscription 940 93,060 – – – 94,000
Costs of placing and offer
for subscription – (959) – – – (959)
Conversion of share premium account – (92,101) 92,101 – – –
Return/(loss) for the period – – – 12,055 (2,053) 10,002
At 31 March 2019 940 – 92,101 12,055 (2,053) 103,043
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
55
CONSOLIDATED BALANCE SHEET
as at 31 March 2020
2020 2019
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 123,132 77,600
Fixed Assets 17 39
Current Assets
Right of use asset 5 333 –
Other receivables 11 112 56
Cash and cash equivalents 15,111 25,592
Total Assets 138,705 103,287
Current Liabilities
Other payables 12 (212) (217)
Lease liability 5 (333) –
Provisions 13 (2,367) –
Total Assets less Current Liabilities 135,793 103,070
Net Assets 135,793 103,070
Capital and Reserves
Called up share capital 16 1,171 940
Share premium 24,760 –
Special reserve 92,033 92,101
Retained earnings:
Capital reserves 22,328 12,055
Revenue reserve (4,499) (2,026)
Total Equity 135,793 103,070
Net Asset Value per share (pence) 17 116.1p 109.6p
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The accompanying notes are an integral part of these Financial Statements.
The Financial Statements on pages 53 to 58 were approved by the Board of Directors on 15 July 2020 and signed on its behalf by:
Neil England
Chairman
The notes on pages 59 to 69 form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
56
AUGMENTUM FINTECH PLC
COMPANY BALANCE SHEET
as at 31 March 2020
2020 2019
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 123,132 77,600
Investment in subsidiary undertakings 10 500 500
Current Assets
Other receivables 11 83 34
Cash and cash equivalents 14,387 25,046
Total Assets 138,102 103,180
Current Liabilities
Other payables 12 (133) (137)
Provisions 13 (2,367) –
Total Assets less Current Liabilities 135,602 103,043
Net Assets 135,602 103,043
Capital and Reserves
Called up share capital 16 1,171 940
Share premium 24,760 –
Special reserve 92,033 92,101
Retained earnings:
Capital reserves 22,328 12,055
Revenue reserve (4,690) (2,053)
Total Equity 135,602 103,043
The accompanying notes are an integral part of these Financial Statements.
The Company profit for the year was £7,636,000 (period ended 31 March 2019: £10,002,000). The Directors have taken advantage of the
exemption under s408 of the Companies Act and not presented an income statement or a statement of comprehensive income for the
Company alone.
The Financial Statements on pages 53 to 58 were approved by the Board of Directors on 15 July 2020 and signed on its behalf by:
Neil England
Chairman
The notes on pages 59 to 69 form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
57
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2020
Year Period
ended ended
31 March 31 March
2020 2019
£’000 £’000
Operating activities
Purchases of investments (32,849) (43,967)
Acquisition of fixed assets (13) (52)
Interest income received 70 199
Expenses paid (2,454) (2,113)
Lease payments (158) (66)
Net cash outflow from operating activities (35,404) (45,999)
Issue of shares following placing and offer for subscription 25,818 72,550
Costs of placing and offer for subscription (827) (959)
Purchase of own shares into Treasury (68) –
Net cash generated from financing activities 24,923 71,591
Net increase in cash and cash equivalents (10,481) 25,592
Cash and cash equivalents at start of year/period 25,592 –
Cash and cash equivalents at end of year/period 15,111 25,592
The accompanying notes are an integral part of these Financial Statements.
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AUGMENTUM FINTECH PLC
COMPANY CASH FLOW STATEMENT
for the year ended 31 March 2020
Year Period
ended ended
31 March 31 March
2020 2019
£’000 £’000
Operating activities
Purchases of investments (32,849) (43,967)
Investment in subsidiary – (500)
Interest income received 70 199
Expenses paid (2,803) (2,277)
Net cash outflow from operating activities (35,582) (46,545)
Issue of shares following placing and offer for subscription 25,818 72,550
Costs of placing and offer for subscription (827) (959)
Purchase of own shares into Treasury (68) –
Net cash generated from financing activities 24,923 71,591
Net increase in cash and cash equivalents (10,659) 25,046
Cash and cash equivalents at start of year/period 25,046 –
Cash and cash equivalents at end of year/period 14,387 25,046
The accompanying notes are an integral part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
59
1
Segmental Analysis
The Group operates a single business segment for reporting purposes and is managed as a single investment company. Reporting is
provided to the Board of Directors on an aggregated basis. The investments are all located in the UK and continental Europe.
2 Expenses
Year ended 31 March 2020 Period ended 31 March 2019
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fees 278 – 278 225 – 225
Administrative expenses 1,016 43 1,059 649 128 777
Directors fees* 95 – 95 108 – 108
Investment Advisory fee** – – – 891 – 891
Carried Interest (see Note 4)^ – 2,367 2,367 – – –
Staff costs (see Note 4) 1,081 – 1,081 278 – 278
Auditors’ remuneration 109 – 109 97 – 97
Total expenses 2,579 2,410 4,989 2,248 128 2,376
£158,000 of interest and amortisation relating to a lease (2019: £66,000 operating lease expenses) were included in administrative
expenses. See note 5 for further details.
* Details of the amounts paid to Directors are included in the Directors Remuneration Report on page 42.
** For the period from 13 March 2018 to 31 October 2018, Augmentum Capital LLP was employed as the Company’s Investment Advisor. With effect from 1 November
2018 Augmentum Fintech Management Limited, a subsidiary of the Company, became the Company’s delegated Portfolio Manager and the Investment Advisory
Agreement with Augmentum Capital LLP was terminated.
^ Carried Interest is calculated based on the valuation of the Company’s investments as at the year end, assuming all the investments were converted to cash at that
point, less estimated selling costs. The actual amount payable will be dependent on the amount and timing of the actual realisations of the portfolio investments. See
page 22 and Notes 4 and 20.9 for further details.
Auditors’ Remuneration
Year ended Period ended
31 March 2020 31 March 2019
Group Company Group Company
£’000 £’000 £’000 £’000
Audit of Group accounts pursuant to legislation* 641 641 61 61
Audit of subsidiaries accounts pursuant to legislation* 12 – 15 –
Audit related assurance services* 332 302 21 16
Total auditors’ remuneration 109 94 97 77
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* 2019 figures refer to amounts paid to PWC.
1 Includes £4,000 payable to PWC relating to overruns on the 2019 audit.
2 Includes £30,000 payable to PWC in relation to the review of the Interim Report to 30 September 2019.
Non-audit services
It is the Group’s practice to employ BDO LLP on assignments additional to their statutory audit duties only when their expertise and
experience with the Group are important. Details of the Group’s process for safeguarding and supporting the independence and objectivity
of the external auditors are given in the Report of the Audit Committee beginning on page 49. BDO LLP were paid £25,000 (period ending
31 March 2019: £77,000) for reporting accountant services. These expenses are included within the costs of placing and offer for
subscription in the Statement of Changes in Equity. BDO LLP were not the Group or Company’s auditor at the time of their engagement as
reporting accountants.
60
AUGMENTUM FINTECH PLC
3 Key Management Personnel Remuneration
The Directors of the Company are considered to be the Key Management Personnel (KMP) along with the directors of the Company’s subsidiary.
Year ended 31 March 2020 Period ended 31 March 2019
Other Other
Salary/Fees benefits Total Salary/Fees benefits Total
£’000 £’000 £’000 £’000 £’000 £’000
Key management personnel remuneration 495 73 568 391 25 416
Carried Interest Allocation* 1,656 – 1,656 – – –
2,151 73 2,224 391 25 416
Other benefits include pension contributions relating to the directors of the Company’s subsidiary.
* Allocation of the carried interest provision to the directors of the Company’ subsidiary. See Note 4 for further details of the carried interest arrangements.
4 Staff Costs
The monthly average number of employees for the Group during the year was seven (2019: three). All employees are within the investment
and administration function and employed by the Company's subsidiary. Employee costs were only incurred in the prior period from
1 November 2018 when Augmentum Fintech Management Limited, a subsidiary of the Company, became the Company’s delegated portfolio
manager upon receiving FCA authorisation, as set out in Note 2.
Year ended Period ended
31 March 31 March
2020 2019
£’000 £’000
Wages and salaries 876 224
Social security costs 114 28
Other pension costs 68 26
Other staff benefits 23 –
Staff costs 1,081 278
Carried Interest (charged to capital)* 2,367 –
Total 3,448 278
* Carried interest is only payable once the Group has received an aggregate annualised 10% realised return on investments (the ‘hurdle’). Based on the investment
valuations as at 31 March 2020 the hurdle has been met, on an unrealised basis, as such carried interest has been provided for. This will only be payable if the hurdle is
met on a realised basis and a carried interest fee is paid by the Company to AFML, it’s subsidiary. See page 22 and Note 20.9 for further details.
The carried interest arrangements have been set up with aim of incentivising employees of AFML and aligning them with shareholders through participation in the
realised investment profits of the Group. The Management Engagement & Remuneration Committee determine the allocation of the carried interest amongst employees
of AFML and any unallocated carried interest on receipt of a carried interest fee from the company, or unvested carried interest resulting from a participant becoming a
leaver, is expected to be allocated to remaining participants. Non-executive Directors of the Company are not eligible to participate in the carried interest arrangements.
5 Leases
Leasing activities
The Group, through its subsidiary AFML, has leased an office, in both 2020 and 2019, in the UK from which it operates for a fixed fee. The
Group had no other leases in 2020 and 2019. When measuring lease liabilities for leases that were classified as operating leases, the Group
discounts lease payments at a rate of 5%.
Right of Use Asset
Group
Office Premises
£’000
Addition – Recognised on initial adoption of IFRS 16 on 1 April 2019 164
Addition 320
Amortisation (151)
At 31 March 2020 333
Lease Liability
Group
Office Premises
£’000
Addition – Recognised on initial adoption of IFRS 16 on 1 April 2019 164
Addition 320
Interest Expense 7
Lease Payments (158)
At 31 March 2020 333
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
61
5 Leases (continued)
Maturity Analysis
Group
Between Between
At 31 March 2020 Up to 3 months 3 – 12 months 1 – 2 years 2 – 5 years
£’000 £’000 £’000 £’000
41 126 168 14
The aggregate lease liability recognised in the statement of financial position at 1 April 2019 and the Group’s operating lease commitment
at 31 March 2019 can be reconciled as follows:
Group
£’000
Operating lease commitment at 31 March 2019 172
Effect of discounting those lease commitments (8)
Lease liability recognised on initial adoption of IFRS 16 on 1 April 2019 164
6
Taxation Expense
Year ended 31 March 2020 Period ended 31 March 2019
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £’000 £’000 £’000 £’000 £’000 £’000
Current tax:
UK corporate tax on profits for the year/period – – – – – –
The difference between the income tax expense shown above and the amount calculated by applying the effective rate of UK corporation
tax of 19% (2019: 19%) to the (loss)/return before tax is as follows:
Year ended 31 March 2020 Period ended 31 March 2019
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £’000 £’000 £’000 £’000 £’000 £’000
(Loss)/return before taxation (2,473) 10,273 7,800 (2,026) 12,055 10,029
(Loss)/return before tax multiplied by the effective rate of:
UK corporation tax of 19% (2019: 19%) (470) 1,952 1,482 (385) 2,290 1,905
Effects of:
Non-taxable capital returns – (2,410) (2,410) – (2,290) (2,290)
Excess management expenses 470 458 928 385 – 385
Total tax expense – – – – – –
No provision for deferred taxation has been made in the current year. The Group has not provided for deferred tax on capital profits arising
on the revaluation of investments, as it is exempt from tax on these items because of its status as an investment trust company.
The Company has not recognised a deferred tax asset on the excess management expenses of £7,089,000 (2019: £2,154,000). It is not
anticipated that these excess expenses will be utilised in the foreseeable future.
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AUGMENTUM FINTECH PLC
7
(Loss)/Return per Share
The (loss)/return per share figures are based on the following figures:
Year Period
ended ended
31 March 31 March
2020 2019
£’000 £’000
Net revenue loss (2,473) (2,026)
Net capital return 10,273 12,055
Net total return 7,800 10,029
Weighted average number of ordinary shares in issue 111,066,278 77,092,0771
1 From the incorporation of the Company on 19 December 2017 to 31 March 2019
Pence Pence
Revenue loss per share (2.2) (2.6)
Capital return per share 9.2 15.6
Total return per share 7.0 13.0
The return per share is the figure calculated in accordance with IAS 33 ‘Earnings per share’.
Returns in the period since IPO to 31 March 2019
Weighted average number of ordinary shares in issue 94,000,0002
2 From the IPO of the Company on 13 March 2018 to 31 March 2019
Pence
Revenue loss per share since IPO (2.2)
Capital return per share since IPO 12.8
Total return per share since IPO 10.6
The return per share since IPO figure has been disclosed as all returns were earned subsequently to the IPO, and the issue of the
94,000,000 shares. The Directors decided to disclose this as it better reflects the return generated for Shareholders.
8 Investments Held at Fair Value
Non-current Investments Held at Fair Value
2020 2019
Group and Group and
Company Company
As at 31 March £’000 £’000
Unlisted at fair value 123,132 77,600
Reconciliation of movements on investments held at fair value are as follows:
Group and Group and
Company Company
£’000 £’000
As at 1 April 77,600 –
Purchases at cost 32,849 65,417
Gains on investments 12,683 12,183
As at 31 March 123,132 77,600
9 Acquisition of Augmentum I LP
Immediately following the Company’s successful IPO, on 13 March 2018, the Company acquired 100% of the interests in Augmentum I LP
(the LP) for consideration of £33,308,473. The consideration for the LP was made up of 21,450,303 ordinary shares, worth £21,450,303
based on their issue price of £1, and cash of £11,858,170.
The acquisition provided the Company with the portfolio of investments held by the LP. The initial fair value of the LP’s net assets was
£33,308,473. The fair value of the LP’s net assets equalled the consideration paid. Augmentum I LP is registered in England and Wales. The
LP's principal activity is that of a holding company and it's registered office is IFC 5, St Helier, Jersey, JE1 1ST. The net assets of the LP as at
31 March 2020 were £44,510,000 (2019: £43,280,000).
10 Subsidiary undertakings
The Company has an investment in the issued ordinary share capital of its wholly owned subsidiary undertaking, Augmentum Fintech
Management Limited (“AFML”), which is registered in England and Wales, operates in the United Kingdom and is regulated by the Financial
Conduct Authority as of 1 November 2018. AFML’s principal activity is the provision of portfolio management services to the Company.
AFML’s registered office is 5-23 Old Street, London EC1V 9HL.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
63
11 Other Receivables
2020 2020 2019 2019
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Other receivables 112 83 56 34
Right of use asset* 333 – – –
445 83 56 34
* See note 5.
12 Other Payables
2020 2020 2019 2019
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Other payables 212 133 217 137
Lease liability* 333 – – –
545 133 217 137
* See note 5.
13 Provisions
2020 2020 2019 2019
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Carried Interest provision* 2,367 2,367 – –
* See page 22 and Notes 4 and 22.9 for further details.
14 Financial Instruments
(i)
Management of Risk
As an investment trust, the Group’s investment objective is to seek capital growth from a portfolio of securities. The holding of these
financial instruments to meet this objective results in certain risks.
The Group’s financial instruments comprise securities in unlisted companies, partnership interests, trade receivables, trade payables, and
cash and cash equivalents.
The main risks arising from the Group’s financial instruments are fluctuations in market price, and credit and liquidity risk. The policies for
managing each of these risks are summarised below. These policies have remained constant throughout the year under review. The
financial risks of the Company are aligned to the Group’s financial risks.
Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments in the Group’s portfolio. It represents the
potential loss the Group might suffer through holding market positions in the face of price movements, mitigated by stock diversification.
The Group is exposed to the risk of the change in value of its unlisted equity and non-equity investments. For unlisted equity and non-
equity investments the market risk is principally deemed to be the assumptions used in the valuation methodology as set out in the
accounting policies.
Liquidity Risk
The Group’s assets comprise unlisted equity and non-equity investments. Whilst unlisted equity is illiquid, short-term flexibility is achieved
through cash and cash equivalents.
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Credit Risk
The Group’s exposure to credit risk principally arises from cash and cash equivalents. Only highly rated banks (with credit ratings above A3,
based on Moodys ratings or the equivalent from another ratings agency) are used for cash deposits and the level of cash is reviewed on a
regular basis. Cash was held with the following banks (see table below) and totalled £15.1 million (2019: £25.6 million).
2020 2019
Bank Credit Ratings at 31 March 2020 £’000 £’000 Moody’s
Barclays Bank plc 4,096 2,953 A1
Santander International* 11,016 10,021 Aa3
Lloyds Bank plc – 12,618 Aa3
15,112 25,592
*Rating is for parent company
64
AUGMENTUM FINTECH PLC
14 Financial Instruments (continued)
Financial Assets and Liabilities
(ii)
Group Company Group Company
Fair value Fair value Fair value Fair value
2020 2020 2019 2019
As at 31 March £’000 £’000 £’000 £’000
Financial Assets
Unlisted equity shares 103,991 103,991 70,625 71,125
Unlisted convertible loan notes 19,141 19,141 6,975 6,975
Cash and cash equivalents 15,111 14,387 25,592 25,046
Other assets 112 83 56 34
Financial Liabilities
Other payables (212) (133) (217) (137)
Cash and other receivables and payables are measured at amortised cost and the rest of the financial assets in the table above are held at
fair value through profit or loss. The carrying values of the financial assets and liabilities measured at amortised cost are equal to the
fair value.
The unlisted financial assets held at fair value are valued in accordance with the IPEV Guidelines as detailed within Note 20.4.
(iii)
Fair Value Hierarchy
Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s
length transaction.
The Group complies with IFRS 13 in respect of disclosures about the degree of reliability of fair value measurements. This requires the
Group to classify, for disclosure purposes, fair value measurements using a fair value hierarchy that reflects the significance of the inputs
used in making the measurements.
The levels of fair value measurement bases are defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: fair values measured using valuation techniques for all inputs significant to the measurement other than quoted prices included
within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: fair values measured using valuation techniques for which any significant input to the valuation is not based on observable market
data (unobservable inputs).
The determination of what constitutes ‘observable’ requires significant judgement by the Directors.
The Group considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable,
not proprietary and provided by independent sources that are actively involved in the relevant market.
All investments were classified as Level 3 investments as at, and throughout the year to, 31 March 2020. Note 8 on page 62 presents the
movements on investments measured at fair value.
When using the price of a recent transaction in the valuations the Company looks to ‘re-calibrate’ this price at each valuation point by
reviewing progress within the investment, comparing against the initial investment thesis, assessing if there are any significant events or
milestones that would indicate the value of the investment has changed and considering whether a market-based methodology (ie. using
multiples from comparable public companies) or a discounted cashflow forecast would be more appropriate.
The main inputs into the calibration exercise, and for the valuation models using multiples, are revenue, EBITDA and P/E multiples (based
on the most recent revenue, EBITDA or earnings achieved and equivalent corresponding revenue, EBITDA or earnings multiples of
comparable public companies), quality of earnings assessments and comparability difference adjustments. Revenue multiples are often
used, rather than EBITDA or earnings, due to the nature of the Group’s investments, being in fast-growing, small financial services
companies which are not normally expected to achieve profitability or scale for a number of years. Where an investment has achieved scale
and profitability the Group would normally then expect to switch to using an EBITDA or earnings multiple methodology.
In the calibration exercise and in determining the valuation for the Group’s equity instruments, comparable trading multiples are used. In
accordance with the Group’s policy, appropriate comparable public companies based on industry, size, developmental stage, revenue
generation and strategy are determined and a trading multiple for each comparable company identified is then calculated. The multiple is
calculated by dividing the enterprise value of the comparable group by its revenue, EBITDA or earnings. The trading multiple is then
adjusted for considerations such as illiquidity, marketability and other differences, advantages and disadvantages between the Group’s
portfolio company and the comparable public companies based on company specific facts and circumstances.
The main input into the PWERM (‘Probability Weighed Expected Return Methodology’) was the probability of conversion.This method was
used for the convertible loan notes held by the Company.
Total gains and losses on assets measured at Level 3 are recognised as part of Gains on Investments in the Consolidated Income
Statement, and no other comprehensive income has been recognised on these assets. The total unrealised return for the year was
£12,683,000 (period ended 31 March 2019 £12,183,000).
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
65
14 Financial Instruments (continued)
The table below presents those investments in portfolio companies whose fair values are recognised in whole or in part using valuation
techniques based on assumptions that are not supported by prices or other inputs from observable current market transactions in the
same instrument and the effect of changing one or more of those assumptions behind the valuation techniques adopted based on
reasonable possible alternative assumptions.
Fair Value Fair Value Reasonably Change in
2020 2019 possible shift valuation
Valuation Technique £’000 £’000 Unobservable Inputs in input +/- +/(-) £’000
Multiple methodology 34,554 21,081 Multiple 10% 1,422/(1,854)
Illiquidity adjustment 30% (3,087)/2,364
CPORT* 69,437 51,544 Transaction price 10% 6,428/(4,416)
PWERM** 19,141 4,975 Probability of conversion 25% 468/(821)
* Calibrated price of recent transaction.
** Probability weighted expected return methodology.
15 Substantial holdings in Investments
The table below shows substantial holdings in investments where the Company owns more than 3% of the fully diluted capital of the
investee company, and the investment value is more than 5% of the Company’s non-current investments.
2020 2019
% ownership % of % ownership % of
(fully diluted) portfolio (fully diluted) portfolio
Interactive Investor* 3.7 17.7 3.7 13.0
BullionVault* 11.1 9.1 11.0 9.8
Zopa* 6.1 6.4 6.1 28.3
Augmentum I LP ** 100.0 36.1 100.0 55.7
Tide 5.9 11.5 – –
Monese 5.4 8.3 5.4 8.4
Receipt Bank 3.7 6.1 – –
Farewill 13.4 5.9 13.6 5.2
* indirect ownership via Augmentum I LP.
** Augmentum I LP’s registered office is IFC 5, St Helier, Jersey JE1 1ST and it is registered in Jersey.
16 Called up Share Capital
2020 2019
Ordinary Shares Ordinary Shares
No. £’000 No. £’000
Opening issued and fully paid shares of 1p each 94,000,000 940 – –
Issue of share on incorporation – – 1 –
Issue of shares from public offering 23,051,911 231 93,999,999 940
Ordinary shares purchased into treasury (120,000) – – –
Closing issued and fully paid shares of 1p each 116,931,911 1,171 94,000,000 940
On 13 March 2018, 93,999,999 ordinary shares were issued, with 1 share issued on incorporation.
The nominal value of the shares issued was £940,000 and the total consideration received was £94,000,000. 72,549,697 shares were
issued in exchange for gross cash proceeds of £72,549,697. 21,450,303 shares were issued to the Limited Partners of Augmentum I LP
(the ‘LP’) in exchange for their interests in the LP totalling £21,450,303.
The balance of the Limited Partners interests in the LP was acquired for £11,858,170 in cash. The amount paid to one of the Limited
Partners was reduced by £930,299 to reflect their contribution to the costs of the issue. This contribution has been offset against the costs
of the issue, which totalled £1,889,000, in the Consolidated Statement of Changes in Equity. The net costs of the issue were £959,000.
On 4 July 2019 23,051,911 ordinary shares were issued. The nominal value of the shares issued was £231,000 and the total gross cash
consideration received was £25,818,000. This consideration has been offset against costs of issue, which totalled £827,000.
At 31 March 2020 there were 120,000 (2019: nil) shares held in treasury. Since the year end date a further 75,000 shares have been bought
back and are also held in treasury.
17 Net Asset Value per Share
The Net Asset Value (“NAV”) per share is calculated by dividing the NAV of £135,793,000 (2019: £103,070,000) by the number of ordinary
shares in issue at the year end amounting to 116,931,911 (31 March 2019: 94,000,000).
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18 Related Party Transactions
Balances and transactions between the Company and its subsidiaries are eliminated on consolidation. Details of transactions between the
Group and Company and other related parties are disclosed below.
The following are considered to be related parties:
•
•
•
Frostrow Capital LLP (under the Listing Rules only)
The Directors of the Company and the Company’s subsidiary, Augmentum Fintech Management Limited
Augmentum Fintech Management Limited
Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, are disclosed on pages 21 and 22. Details
of fees paid to Frostrow by the Company and Group can be found in Note 2 on page 59.
Details of the remuneration of all Directors can be found on page 42. Details of the Directors’ interests in the capital of the Company can be
found on page 43.
Augmentum Fintech Management Limited was appointed as the Company’s delegated Portfolio Manager with effect from 1 November 2018.
Following its appointment the Portfolio Manager earned a portfolio management fee of 1.5% of NAV up to £250 million and 1.0% of NAV
for any excess over £250 million and is entitled to a carried interest fee of 15% of net realised cash profits once the Company has received
an annual compounded 10% realised return on its investments. Further details of this arrangement are set out on page 22 in the Strategic
Report. During the year the Portfolio Manager received a portfolio management fee of £1,861,000 (period ended 31 March 2019: £613,000),
which has been eliminated on consolidation and therefore does not appear in these accounts. A carried interest provision of £2,367,000
(2019: nil) has been accrued. No carried interest fee is payable or has been paid. There were no outstanding balances due to the Portfolio
Manager at the year end (period ended 31 March 2019: nil).
19 Capital Risk Management
Group Group
2020 2019
£’000 £’000
Equity
Equity share capital 1,171 940
Retained earnings and other reserves 134,622 102,130
Total capital and reserves 135,793 103,070
The Group’s objective in the management of capital risk is to safeguard its liquidity in order to provide returns for shareholders and to
maintain an optimal capital structure. In doing so the Group may adjust the amount of dividends paid to shareholders (whilst remaining
within the restrictions imposed by its investment trust status) or issue new shares or debt.
The Group manages the levels of cash deposits held whilst maintaining sufficient liquidity for investments and operating expenses.
There are no externally imposed restrictions on the Company’s capital.
20 Basis of Accounting and Significant Accounting Policies
20.1
Basis of preparation
The Group and Company Financial Statements for the year ended 31 March 2020 have been prepared in accordance with the Companies
Act 2006 and International Financial Reporting Standards (“IFRS”), as adopted in the EU and interpretations issued by the IFRS
Interpretations Committee.
The Financial Statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to
include the revaluation of certain assets at fair value, as disclosed in Note 20.4. The Board has considered a detailed assessment of the
Group and Company’s ability to meet their liabilities as they fall due, including stress tests which modelled the effects of a fall in portfolio
valuations and liquidity constraints on the Group and Company’s financial position and cash flows. Further information on the stress tests
are provided in the Report of the Audit Committee on page 50. The results of the tests showed that the Group and Company would have
sufficient cash to meet their liabilities as they fall due. Based on the information available to the Directors at the time of this report,
including the results of the stress tests, and the Group and Company’s cash balances, the Directors are satisfied that the Group and
Company have adequate financial resources to continue in operation for at least the next 12 months and that, accordingly, it is appropriate
to adopt the going concern basis in preparing these financial statements.
In order to reflect the activities of an investment trust company, supplementary information which analyses the Consolidated Income
Statement between items of a revenue and capital nature has been presented alongside the Consolidated Income Statement. In analysing
total income between capital and revenue returns, the Directors have followed the guidance contained in the Statement of Recommended
Practice for investment companies issued by the Association of Investment Companies issued in October 2019 (the “SORP”).
The recommendations of the SORP which have been followed include:
•
•
Realised and unrealised profits or losses arising on the revaluation or disposal of investments classified as held at fair value through
profit or loss should be shown in the capital column of the Consolidated Income Statement. Realised gains are taken to the realised
reserves in equity and unrealised gains are transferred to the unrealised reserves in equity.
Other returns on any investment (whether in respect of dividends, interest or otherwise) should be shown in the revenue column of the
Consolidated Income Statement. The total of the revenue column of the Consolidated Income Statement is taken to the revenue
reserve in equity.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
67
20 Basis of Accounting and Significant Accounting Policies (continued)
•
The Board should determine whether the indirect costs of generating capital returns should be allocated to capital as well as the direct
costs incurred in generating capital profits. In this regard the Board has decided to follow a non-allocation approach to indirect costs,
which will therefore be charged in full to the revenue column of the Consolidated Income Statement.
20.2 Basis of Consolidation
The Consolidated Financial Statements include the Company and certain subsidiary undertakings.
IFRS 10 and 12 define an investment entity and include an exception from the consolidation requirements for investment entities.
The Company has been deemed to meet the definition of an investment entity per IFRS 10 as the following conditions exist:
•
•
•
•
•
The Company has multiple unrelated investors which are not related parties, and holds multiple investments
Ownership interests in the Company are exposed to variable returns from changes in the fair value of the Company’s net assets
The Company has obtained funds for the purpose of providing investors with investment management services
The Company’s business purpose is investing solely for returns from capital appreciation and investment income
The performance of investments is measured and evaluated on a fair value basis
The Company will not consolidate the portfolio companies or other investment entities it controls. The principal subsidiary Augmentum
Fintech Management Limited as set out in Note 10 is wholly owned. It provides investment related services through the provision of
investment management. As the primary purpose of this subsidiary is to provide investment related services that relate to the Company’s
investment activities it is not held for investment purposes. This subsidiary has been consolidated.
As set out in Note 9 the Company also owns 100% of the interests in Augmentum I LP (the ‘LP’). As this LP is itself an investment entity
and is held as part of the Company’s investment portfolio it has not been consolidated.
20.3 Application of New Standards
(i) New standards, interpretations and amendments effective from 1 April 2019
IFRS 16: Leases was applied for the first time by the Group in these financial statements. The impact of IFRS 16’s adoption is set out in
Note 5 and the accounting policy for leases is set out in 20.10. The Group has adopted the modified retrospective approach when adopting
IFRS 16 and as such the 2019 comparatives have not been restated. A reconciliation between the operating lease commitment disclosed in
the 31 March 2019 financial statements and the aggregate lease liability recognised in the statement of financial position at 1 April 2019 on
adoption of IFRS 16 is shown in Note 5.
There were no other new standards or interpretations effective for the first time for periods beginning on or after 1 April 2019 that had a
significant effect on the Group’s financial statements,
(ii) New standards, interpretations and amendments not yet effective
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board (‘IASB’) that
are effective in future accounting periods. The Group does not expect any of the standards issued by the IASB, but not yet effective, to
have a material impact on the Group or Company.
20.4 Investments
All investments are defined by IFRS as fair value through profit or loss (described in the Financial Statements as Investments held at fair
value) and are subsequently measured at reporting dates at fair value. The fair value of direct unquoted investments is calculated in
accordance with the Principles of Valuation of Investments below. Purchases and sales of unlisted investments are recognised when the
contract for acquisition or sale becomes unconditional.
Increases or decreases in valuation are recognised as part of gains on investments at fair value in the Consolidated Income Statement.
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Principles of Valuation of Investments
(i) General
The Group estimates the fair value of each investment at the reporting date in accordance with IFRS 13 and the International Private Equity
and Venture Capital Valuation (“IPEV”) Guidelines.
Fair value is the price for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. In
estimating fair value, the AIFM and Board apply valuation techniques which are appropriate in light of the nature, facts and circumstances
of the investment and use reasonable current market data and inputs combined with judgement and assumptions. Valuation techniques
are applied consistently from one reporting date to another except where a change in technique results in a better estimate of fair value.
In general, the enterprise value of the investee company in question will be determined using one of a range of valuation techniques; adjust
the enterprise value for factors that would normally be taken into account such as surplus assets, excess liabilities or other contingencies
or relevant factors; and apportion the resulting amount between the investee company’s relevant financial instruments according to their
ranking and taking into account the effect of any instrument that may dilute the economic entitlement of a given instrument.
(ii) Unlisted Equity Investments
In respect of each unlisted investment one or more of the following valuation techniques is used:
•
•
A market approach, based on the price of the recent investment, market multiples or industry valuation benchmarks
A probability-weighted expected returns methodology (“PWERM”). Under the PWERM fair value is based on consideration of values for
the investment under different scenarios. This will primarily be used where there is a convertible element to the investment.
In assessing whether a methodology is appropriate techniques that use observable market data are preferred.
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AUGMENTUM FINTECH PLC
20 Basis of Accounting and Significant Accounting Policies (continued)
Price of Recent Investment/Transaction
Where the investment being valued was itself made recently, or there has been a third party transaction in the investment, the price of the
transaction may provide a good indication of fair value. Using the Price of Recent Investment technique is not a default and at each
reporting date the fair value of investments is estimated to assess whether changes or events subsequent to the relevant transaction
would imply a material change in the investment’s fair value.
Multiple
Under the multiple methodology an earnings or revenue multiple technique is used. This involves the application of an appropriate and
reasonable multiple to the maintainable earnings of an investee company.
Multiples used are usually taken from current market-based multiples, reflected in the market valuations of quoted comparable companies
or the price at which comparable companies have changed ownership. Differences between these market-based multiples and the investee
company being valued are reflected by adjusting the multiple for points of difference which might affect the risk and growth prospects
which underpin the multiple. Such points of difference might include the relative size and diversity of the entities, rate of revenue/earnings
growth, reliance on a small number of key employees, diversity of product ranges, diversity and quality of customer base, level of
borrowing, and any other reason the quality of revenue or earnings may differ.
In respect of maintainable revenue/earnings, the most recent 12 month period, adjusted if necessary to represent a reasonable estimate of
the maintainable amount, is used. Such adjustments might include exceptional or non-recurring items, the impact of discontinued activities
and acquisitions, or forecast material changes.
PWERM
Under the PWERM potential scenarios are identified. Under each scenario the value of the investment is estimated and a probability for
each scenario was selected. The fair value is then calculated as the sum of the value under each scenario multiplied by its probability.
20.5 Cash and Cash Equivalents
Cash comprises cash at bank and short-term deposits with an original maturity of less than 3 months.
20.6 Presentation and Functional Currency
The Group’s and Company’s presentation and functional currency is Pounds Sterling (“Sterling”), since that is the currency of the primary
economic environment in which the Group operates.
20.7 Other income
Interest income received from cash equivalents is accounted for on an accruals basis.
20.8 Expenses
Expenses are accounted for on an accruals basis, and are charged through the revenue column of the Consolidated Income Statement
except for transaction costs and the carried interest fee as noted below.
Transaction costs are legal and professional fees incurred when undertaking due diligence on investment transactions. Transaction costs,
when incurred, are recognised in the Income Statement. If a transaction successfully completes, as a direct cost of an investment, the
related transaction cost is charged to the capital column of the Income Statement. If the transaction falls through the related cost is
charged to the revenue column of the Income Statement.
20.9 Carried Interest Fee
The Group offers certain employees the opportunity to participate in the returns from successful investments. “Carried Interest Fee” is the
term used for amounts accruing to or payable to employees on investment-related transactions. Dependent on the timing of the
investment, investments will be allocated to a basket and each basket will be subject to its own carried interest fee as set out on page 22.
Carried interest is accrued 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. Carried interest is equal to the share of profits in excess of the performance conditions
in the basket.
The Group accounts for the carried interest fee as an other long term employment benefit and the cost, or reversal, of the employment
benefit is recognised as an expense over the relevant vesting period with a corresponding liability.
The Company accrues for the Carried Interest Fee in full.
Carried Interest Fees will be charged to the capital column of the Income Statement and taken to the Capital Reserve.
20.10 Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount
rate determined by reference to the rate inherent in the lease. Right-of-use assets are measured at the amount of the lease liability less
provisions for dilapidations, where applicable.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding
and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
69
20 Basis of Accounting and Significant Accounting Policies (continued)
The Group has adopted the modified retrospective approach when adopting IFRS 16. A reconciliation between the operating lease
commitment disclosed in the 31 March 2019 financial statements and the aggregate lease liability recognised in the statement of financial
position at 1 April 2019 on adoption of IFRS 16 is shown in note 5.
20.11 Taxation
The tax effect of different items of income/gain and expense/loss is allocated between capital and revenue on the same basis as the
particular item to which it relates.
20.12 Deferred Tax
Deferred taxation is provided on all timing differences other than those differences regarded as permanent. Deferred tax assets are only
recognised to the extent that it is probable that taxable profits will be available from which the reversal of timing differences can be
utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax is provided at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised based on
tax laws and rates that have been enacted or substantively enacted at the Statement of Financial Position date.
20.13 Receivables and Payables
Receivables and payables are typically settled in a short time frame and are carried at amortised cost. As a result, the fair value of these
balances is considered to be materially equal to the carrying value, after taking into account potential impairment losses.
20.14 Share Capital
Ordinary shares issued by the Group are recognised at the proceeds or fair value received with the excess of the amount received over
nominal value being credited to the share premium account. Direct issue costs are deducted from equity.
20.15 Share Premium and Special Reserve
The share premium account arose following the Company’s Admission and represented the difference between the proceeds raised and the
par value of the shares issued. Costs of the share issuance were offset against the proceeds of the relevant share issue and also taken to
the share premium account.
Subsequent to admission and following the approval of the Court, the initial share premium account was cancelled and the balance of the
account was transferred to the Special Reserve. The purpose of this was to enable the Company to increase the distributable reserves
available to facilitate the payment of future dividends or with which to make share repurchases.
20.16 Revenue and Capital Reserves
Net capital return is added to the Capital Reserve in the Consolidated Statement of Financial Position, while the net revenue return is
added to the Revenue Reserve. The revenue reserve is distributable by way of dividend, as is any realised portion of the capital reserve.
The realised portion of the capital reserve is £(171,000) (2019: £(128,000)) representing transaction costs charged to capital.
20.17 Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Critical accounting judgements and key sources of estimation uncertainty used in preparing the financial information are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable. The resulting judgements and estimates will, by definition, seldom equal the related actual results.
There is one significant judgement included in the presentation of the Consolidated Financial Statements, that the Company has
determined it is an investment company as set out in Note 20.2.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty in the reporting year, that may have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below.
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Fair value measurements and valuation processes
Unquoted assets are measured at fair value in accordance with IFRS 13 and the IPEV Valuation Guidelines. Decisions are required in order
to determine the appropriate valuation methodology and subsequently in determining the inputs into the valuation model used. These
decisions include selecting appropriate quoted company comparables, appropriate multiples to apply, adjustments to comparable multiples
and estimating future cash flows of investee companies. In estimating the fair value of an asset, market-observable data is used, to the
extent it is available.
The Valuations Committee, which is chaired by a Director, determines the appropriate valuation techniques and inputs for the model. The
Audit Committee considers the work of the Valuations Committee and the results of their discussion with the AIFM, Portfolio Manager and
the external auditors and works closely with the AIFM and Portfolio Manager to review the appropriate valuation techniques and inputs to
the model. The Chairman of the Audit Committee reports its findings to the Board of Directors of the Group every six months to explain the
cause of fluctuations in the fair value of the investments.
Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in
Note 20.4.
70
AUGMENTUM FINTECH PLC
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF AUGMENTUM FINTECH PLC
Opinion
We have audited the financial statements of Augmentum Fintech plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 March 2020 which comprise the Consolidated Income Statement, Consolidated and Company Statement of Changes in Equity,
Consolidated Balance Sheet, Company Balance Sheet, Consolidated Cash Flow Statement, Company Cash Flow Statement, and the 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 International Financial Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
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 2020
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union
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; and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
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 are 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. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs (UK) require us to
report to you whether we have anything material to add or draw attention to:
•
•
•
•
the directors’ confirmation in the annual report that they have carried out a robust assessment of the Group’s emerging and principal
risks and the disclosures in the annual report that describe the principal risks and the procedures in place to identify emerging risks
and explain how they are being managed or mitigated;
the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the going concern
basis of accounting in preparing the financial statements and the directors’ identification of any material uncertainties to the Group
and the Parent Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the
financial statements;
whether the directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3)
is materially inconsistent with our knowledge obtained in the audit; or
the directors’ explanation in the annual report as to how they have assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
71
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Key audit matter
How we addressed the Key Audit Matter in the Audit
Our sample for the 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. A
breakdown of the investment portfolio valuation technique is
shown below.
Valuation of unquoted investments (Group and Company)
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 Investment Manager is responsible for valuing investments
in the financial statements, and there is a high level of estimation
of 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 investments.
The Company’s accounting policy for assessing the fair value of
investments is disclosed on page 67 in note 20.4 and disclosures
regarding the fair value estimates are given on page 69 in
note 20.17.
For all Investments in our sample we:
• We considered whether the assumptions and underlying
evidence supporting the year end valuations are in line with
IFRS 9 and IFRS 13 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
23 June 2020. We also 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. For a sample of investments, we received direct
confirmation of the capital structure from the investee company
•
•
For CPORT valuations, we agreed the price of recent
investment to supporting documentation and management
information. We considered whether the portfolio company
has not significantly varied from expectations at the
transaction date by obtaining management’s evaluation of
post transaction performance against relevant milestones to
determine the level of adjustment, if any, made to the recent
transaction price. In particular, we challenged management in
respect of the impact of the Covid-19 pandemic on the
prospects of investee companies where valuations have been
calibrated to a price of recent investment
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;
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AUGMENTUM FINTECH PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
How we addressed the Key Audit Matter in the Audit
•
•
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
to understand the performance of the portfolio company, the
potential impact of the Covid-19 pandemic, including its cash
runway, and challenged estimates used in the valuations of
the investments. These included, but were not restricted to, a
review of the appropriateness of the basket of comparable
companies, the rationale for and consistency of discounts or
premiums applied and the basis for budgeted revenue figures
used
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
weighed probability of the various scenarios.
We also considered the completeness and clarity of disclosures
regarding the valuation of investments in the financial statements.
Key observations:
Based on the procedures performed we consider the unquoted
investment valuations to be within an appropriate range, and the
estimates made by management in valuing the unquoted
investments to be reasonable.
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 reasonably influence the economic decisions of 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 this level 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.
The quantum and purpose of materiality is tabulated below. In setting materiality, we had regard to the nature and disposition of the
investment portfolio.
Materiality Measure Purpose Key considerations and benchmarks 2020 Quantum (£)
Financial Statement Materiality
(Group and Company)
2% Net assets (2019: 1.75%
Net assets)
Assessing whether the financial
statements as a whole present a true
and fair view. We consider this to be the
key measurement for shareholders.
Performance materiality
70% of materiality (2019: 75% of
materiality)
The maximum error in an assertion that
we would be prepared to accept and still
conclude that the result from an audit
procedure has achieved our objective.
•
•
•
•
•
•
The value of investments
£2,690,000
The level of judgement inherent in
the valuation
The range of reasonable alternative
valuations
Financial statement materiality
1,880,000
Risk and control environment
History of prior errors
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
73
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Parent company materiality was set at £2,555,000 which was capped at 95% of group materiality.
The materiality for the subsidiary company was £27,000 and was equal to its local statutory audit materiality that was less than our group
materiality.
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £135,000 for Group and
Company as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
An overview of the scope of our audit
Our audit approach was developed by obtaining an understanding of the Group’s activities and the overall control environment. Based on
this understanding we assessed those aspects of the Group’s transactions and balances which were most likely to give rise to a material
misstatement.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In
particular, we looked at where the directors made subjective judgements, for example in respect of the valuation of investments which
have a high level of estimation uncertainty involved in determining the unquoted investment valuations.
How the audit was considered capable of detecting irregularities, including fraud
We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates, and
considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. These included but
were not limited to compliance with Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance
Code, industry practice represented by the AIC SORP International Financial Reporting Standards (IFRSs) as adopted by the European
Union. We also considered the Company’s qualification as an Investment Trust under UK tax legislation.
We designed audit procedures to respond to the 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.
We focused on laws and regulations that could give rise to a material misstatement in the Company financial statements. Our tests
included, but were not limited to:
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agreement of the financial statement disclosures to underlying supporting documentation;
enquiries of management;
review of minutes of board meetings throughout the year; and
obtaining an understanding of the control environment in monitoring compliance with laws and regulations
There are inherent limitations in the audit procedures described above 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 would become aware of it. We also addressed
the risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the
directors that represented a risk of material misstatement due to fraud.
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.
In connection with our audit of the financial statements, 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 audit or otherwise
appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to
report that fact.
We have nothing to report in this regard.
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AUGMENTUM FINTECH PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the
following conditions:
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Fair, balanced and understandable – the statement given by the directors that they consider the 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’s
position, performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
Audit committee reporting– the statement describing the work of the audit committee does not appropriately address matters
communicated by us to the audit committee; or
Directors’ statement of compliance with the UK Corporate Governance Code– the parts of the directors’ statement required under the
Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review
by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK
Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
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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.
Matters on which we are required to report by exception
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.
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:
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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 directors’ responsibilities statement , 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.
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.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
75
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Other matters which we are required to address
Following the recommendation of the audit committee, we were appointed by The Board of Directors to audit the financial statements for
the year ending 31 March 2020 and subsequent financial periods. This is therefore our first year of engagement.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent Company and we remain
independent of the Group and the Parent Company in conducting our audit.
Other than those disclosed in note 2 to the financial statements, we have provided no non-audit services to the group or company in the
year to 31 March 2020.
Our audit opinion is consistent with the additional report to the audit committee.
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
15 July 2020
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AUGMENTUM FINTECH PLC
ALTERNATIVE INVESTMENT FUND MANAGERS
DIRECTIVE (UNAUDITED)
The Company’s AIFM, Frostrow Capital LLP and the Company are
required to make certain disclosures available to investors in
accordance with the Alternative Investment Fund Managers
Directive (“AIFMD”).
Those disclosures that are required to be made pre-investment are
included within an Investor Disclosure Document which can be
found on the Company’s website www.augmentum.vc
The periodic disclosures to investors are made below:
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Information on the investment strategy, sector investment
focus and principal stock exposures are included in the
Strategic Report.
None of the Company’s assets are subject to special
arrangements arising from their illiquid nature.
There are no new arrangements for managing the liquidity of
the Company or any material changes to the liquidity
management systems and procedures employed by Frostrow.
The Strategic Report and Note 14 to the Financial Statements
set out the risk profile and risk management systems in place.
There have been no changes to the risk management systems
in place during the year under review and no breaches of the
risk limits set, with no breach expected.
The maximum level of leverage did not change in the year
under review. During the year ended 31 March 2020, the
maximum permitted levels were 200% on a gross basis and
225% on a commitment basis (see Glossary for further
details).
No right of re-use of collateral or any guarantee has been
granted during the year.
Following completion of an assessment of the application of
the proportionality principle to the FCA’s AIFM Remuneration
Code, the AIFM has disapplied the pay-out process rules with
respect to it and any of its delegates. This is because the AIFM
considers that it carries out non-complex activities and is
operating on a small scale.
Note: These disclosures are not audited by the Company’s
statutory auditor.
INFORMATION FOR SHAREHOLDERS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
77
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 relationship to non-mainstream
investment procedures 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 nor constitutes any form
of recommendation, can be found below:
AJ Bell Youinvest http://www.youinvest.co.uk/
Barclays Smart Investor https://www.smartinvestor.barclays.co.uk/
Bestinvest http://www.bestinvest.co.uk/
Charles Stanley Direct https://www.charles-stanley-direct.co.uk/
EQi https://www.eqi.co.uk
Halifax Share Dealing http://www.halifax.co.uk/Sharedealing/
Hargreaves Lansdown http://www.hl.co.uk/
HSBC https://investments.hsbc.co.uk/
iDealing http://www.idealing.com/
interactive investor http://www.iii.co.uk/
IWEB http://www.iweb-sharedealing.co.uk/
Saga Share Direct www.sagasharedirect.co.uk/
The Share Centre https://www.share.com/
share-dealing-home.asp
Financial Calendar
Date Event
31 March Financial Year End
June/July Financial Results Announced
September Annual General Meeting
30 September Half Year End
November 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 Asset Services , who will be able to
assist you with:
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Balance queries
Lost certificates
Change of address notifications
Link’s full details are provided on page 79 or please visit
www.linkassetservices.com.
Link Asset Services – Share Dealing Service
A share dealing service is available to existing shareholders
through the Company’s Registrar, Link Asset Services, to either buy
or sell shares. An online and telephone dealing facility via service.
To deal online or by telephone all you need is your surname,
investor code, full postcode and your date of birth. Your investor
code can be found on your share certificate. Please have the
appropriate documents to hand when you log on or call, as this
information will be needed before you can buy or sell shares.
For further information on this service, please contact:
www.linksharedeal.com (online dealing) Telephone: 0371 664 0445
(Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom are charged at the
applicable international rate. Lines are open between 8.00 a.m. –
4.30 p.m., Monday to Friday excluding public holidays in England
and Wales).
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.
The value of ISA and Junior ISA tax advantages will depend on
personal circumstances. The favourable tax treatment of ISAs
and Junior ISAs may not be maintained.
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AUGMENTUM FINTECH PLC
GLOSSARY AND ALTERNATIVE
PERFORMANCE MEASURES
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.
API’s
Application Programming Interface
Admission
Admission to trading, when the Company’s shares were listed and
admitted for trading on an official stock exchange.
Alternative Investment Fund Managers Directive (“AIFMD”)
Agreed by the European Parliament and the Council of the EU and
transposed into UK legislation, the 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.
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”)
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.
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 per share is also described as ‘shareholders’ funds’ per share.
The NAV is often expressed in pence per share after being divided
by the number of shares which are in issue. 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.
NAV per share Total Return*
The theoretical total return on the NAV per share, reflecting the
change in NAV during the period assuming that any dividends paid
to shareholders were reinvested at NAV 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.
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 period ended
31 March 31 March
2020 2019
£’000 £’000
Operating expenses 4,989 2,376
Less: due diligence costs (43) (128)
Less: cash management fee* (27) (60)
Less: carried interest fee (2,367) –
Recurring operating expenses 2,552 2,188
Pro-rata adjustment** – (109)
Annualised expenses 2,552 2,079
Average net assets 123,130 97,969
Ongoing charges ratio 2.1% 2.1%
* Cash management fee is deducted as this is paid where cash is placed on
deposit through an investment platform, it is only incurred where there would be
offsetting interest income.
** Pro-rata adjustment is to reflect that the 2019 accounting period was longer
than 12 months.
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 government regulations.
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.
* Alternative Performance Measure.
ANNUAL REPORT AND FINANCIAL STATEMENTS 2020
79
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)
Legal Adviser to the Company
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
United Kingdom
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
Tel: 0203 008 4910
Email: info@frostrow.com
Portfolio Manager
Augmentum Fintech Management Limited
5-23 Old Street
London EC1V 9HL
United Kingdom
Joint Corporate Brokers
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
United Kingdom
N+1 Singer
1 Bartholomew Lane
London
EC2N 2AX
United Kingdom
Depositary
IQ EQ Depositary Company (UK) Limited
2 London Bridge
London SE1 9RA
United Kingdom
A member of the Association of
Investment Companies
Independent Auditors
BDO LLP
150 Aldersgate Street
London
EC1A 4AB
United Kingdom
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Telephone (in UK): 0371 664 0300†
E-Mail: enquiries@link.co.uk
Website: www.linkassetservices.com
Please contact the Registrars if you have a query about a
certificated holding in the Company’s shares.
† Calls outside the UK will be charged at the applicable International rate and may
be recorded for training purposes.Lines are open from 9.00 a.m. to 5.30 p.m.
Monday to Friday excluding public holidays in England and Wales.
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 Asset Services, 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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ABOUT AUGMENTUM FINTECH PLC
Augmentum Fintech plc (the “Company”) invests in fast growing
fintech businesses that are disrupting the financial services sector.
The Company is the UK’s only publicly listed investment company
focusing on the fintech sector in the UK and wider Europe, having
launched on the main market of the London Stock Exchange in
2018, giving businesses access to patient capital and support,
unrestricted by conventional fund timelines and giving public
markets investors access to a largely privately held investment
sector during its main period of growth.
The Company is an investment trust listed on the London Stock
Exchange. The Company has an independent Board of Directors.
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”.
As a subsidiary of the Company AFML, the Portfolio Manager, is
focused on the Company and aligned with the interests of
shareholders.
Governance
The Company is directed by the Board, which consists of three
non-executive directors who have the requisite balance of skills
required to manage an investment company. In accordance with
AIFM Regulations, Frostrow Capital LLP (“Frostrow”) acts as the
Alternative Investment Fund Manager.
UNSOLICITED APPROACHES FOR SHARES: WARNING TO SHAREHOLDERS
Many companies have become aware that their shareholders have received unsolicited phone calls or correspondence concerning
investment matters. These are typically from overseas based ‘brokers’ who target UK shareholders offering to sell them what often turn
out to be worthless or high-risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders
are therefore advised to be very wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.
Please note that it is very unlikely that either the Company or the Company’s Registrar, Link Asset Services, would make unsolicited
telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders
and never in respect of investment ‘advice’.
Shareholders who suspect they may have been approached by fraudsters should advise the Financial Conduct Authority (‘FCA’) using
the share fraud report form at www.fca.org.uk/scams or call the FCA Customer Helpline on 0800 111 6768. You may also wish to call
either the Company Secretary or the Registrar whose contact details can be found on page 79.
Perivan 258713
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FOR THE YEAR ENDED 31 MARCH 2020
AL REPOR
ANNUUA
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(cid:3)
(cid:3)
(cid:55)(cid:75)(cid:72) (cid:83)(cid:88)(cid:79)(cid:83) (cid:76)(cid:86) (cid:69)(cid:79)(cid:72)(cid:68)(cid:70)(cid:75)(cid:72)(cid:71) (cid:88)(cid:86)(cid:76)(cid:81)(cid:74) (cid:68) (cid:87)(cid:82)(cid:87)(cid:68)(cid:79)(cid:79)(cid:92) (cid:70)(cid:75)(cid:79)(cid:82)(cid:85)(cid:76)(cid:81)(cid:72) (cid:73)(cid:85)(cid:72)(cid:72) (cid:11)(cid:55)(cid:38)(cid:41)(cid:12) (cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:17)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:55)(cid:75)(cid:76)(cid:86) (cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87) (cid:75)(cid:68)(cid:86) (cid:69)(cid:72)(cid:72)(cid:81) (cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:72)(cid:71) (cid:88)(cid:86)(cid:76)(cid:81)(cid:74) (cid:89)(cid:72)(cid:74)(cid:72)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72) (cid:69)(cid:68)(cid:86)(cid:72)(cid:71) (cid:76)(cid:81)(cid:78)(cid:86)(cid:17)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
(cid:3)
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