This report is printed on Revive 100% White Silk, a totally recycled
paper produced using 100% recycled waste at a mill that has been
awarded the ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
To view the report online visit: www.augmentum.vc
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Augmentum Fintech plc
Annual Report for the year ended
31st March 2021
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Investing in Fintech.
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About Augmentum Fintech plc
Augmentum Fintech plc (the “Company”) is the
UK’s only publicly listed investment company
focusing on the fintech sector, having launched
on the main market of the London Stock
Exchange in 2018, giving businesses access
to patient funding and support, unrestricted
by conventional fund timelines.
We invest in early and later stage fast growing fintech businesses
that are disrupting the banking, insurance, asset management and
wider financial services sectors.
Portfolio management is undertaken by Augmentum Fintech
Management Limited (“AFML”). AFML is a wholly owned
subsidiary of the Company, together referred to as the “Group”.
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www.augmentum.vc
260547 Augmentum pp001-pp028.qxp 14/06/2021 22:17 Page 1
CONTENTS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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
12 Other Investments
14 Portfolio Manager’s Review
17
Strategic Report
21 Viability Statement
Corporate Governance
29 Board of Directors
30 Management Team
31 Directors’ Report
35 Corporate Governance Report
41 Directors’ Remuneration Report
44 Directors’ Remuneration Policy
49 Report of the Audit Committee
52 Statement of Directors’ Responsibilities
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 Auditor’s Report to the Members of
Augmentum Fintech plc
Further Information
77 Information for Shareholders
78 Glossary and Alternative Performance Measures
79 Contact Details
From left to right: 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.
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AUGMENTUM FINTECH PLC
CHAIRMAN’S STATEMENT
Financial Highlights
31 March
2021
31 March
2020
130.4p
12.3%
116.1p
5.9%
128.8%
(41.6%)
1.9%
2.1%
NAV per Share
NAV per Share
Total Return*
Total Shareholder
Return*
Ongoing
Charges Ratio*
* These are considered to be Alternative Performance Measures. Please see the Glossary and Alternative
Performance Measures on page 78.
To read more about our KPIs see pages 20 and 21.
I am pleased to present our third annual report since the launch of
the Company in March 2018. This report covers the year ended
31 March 2021.
Investment Policy
Your Company invests in early stage European fintech businesses
which have disruptive technologies and offer the prospect of high
growth with scalable opportunities, a policy consistent with our
objective to provide long term capital growth to shareholders.
Performance
In what has been a challenging year for many businesses, I am
pleased to report that your Company’s diverse portfolio of
investments have performed well with an increase in the
Company’s NAV* per share of 12.3%.
The trend towards a digital economy has accelerated during the
pandemic and our portfolio companies have generally been
beneficiaries of this. By way of example: Tide, Farewill, interactive
investor and Grover have all expanded rapidly, enjoying customer
numbers and revenue growth ahead of expectations.
There is a full review of the portfolio and investment transactions
in the year in the Portfolio Manager’s Review beginning on page 14.
Portfolio Changes
Given the uncertainty caused by the pandemic, we took a cautious
approach to cash deployment in the first half of the year under
review to ensure we would be in a position to support the existing
portfolio. In the event, the need for support was minimal. We made
net investments of £14.3 million during the year, a mix of two new
and eleven follow-on to support existing portfolio growth.
After the year end, we added two new investments, the first in
Epsor, a French workplace savings platform with international
potential, followed by Cushon, a workplace pensions and payroll-
linked ISA provider with more than 200,000 members across 8,000
UK employers. We also made our first disposal with the sale of Dext
(previously Receiptbank) realising a 30.5% IRR* over an investment
period of just 15 months. The proceeds from the sale will be
reinvested in opportunities over the coming year.
Valuations
Together with our advisors, we have carefully reviewed both the
status and the forecasts of the portfolio companies. We have used
a variety of methodologies to determine the value of each
investment and to sense check our conclusions. The outcome of this
is reflected in the valuations in this report. The Portfolio Manager
will, where possible, structure investments to afford downside
protection* through mechanisms such as a liquidation preference
and/or anti-dilution provisions.
Articles of Association
In case we should face restrictions on public gatherings similar to
those imposed by the UK Government last year, we have reviewed
the Company’s Articles of Association to enable us to hold general
meetings remotely, or in a hybrid format, should the need arise.
Pursuant to this, a resolution to adopt amended Articles is included
in the Notice of the Annual General Meeting (“AGM”) for approval
by shareholders.
Dividend
No dividend has been declared or recommended for the year. Your
Company is focused on providing capital growth and has a policy to
only pay dividends to the extent that it is necessary to do so in
order to maintain the Company’s investment trust status.
Share Capital and Share Premium
Shareholders will recall that at the onset of pandemic concerns
early in 2020 markets were substantially down and the Company’s
share price was adversely affected, falling as low as 57.5p per share
shortly before the last year end. The price during that first
lockdown period represented a substantial discount to the
underlying NAV. The Company took advantage of this to buy back
195,000 shares into treasury in March and April 2020 at an average
discount of 47.6% to the 31 March 2020 NAV per share, benefitting
the NAV per share of remaining shareholders. As I reported in my
half year statement, the share price recovered strongly thereafter
and indeed has continued to rise to the date of this report.
In November 2020, we raised £27.5 million of new capital, net of
costs. In December, we sold, at a premium, the 195,000 shares held
in treasury for £0.2 million, slightly more than double the cost of
the associated buy-backs.
* See Glossary on page 78.
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CHAIRMAN’S STATEMENT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
3
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At 31 March 2021, the share price stood at 159.0p per share, which
represented a premium of 21.9% to the year-end NAV per share of
130.4p. This substantial premium to NAV reflects heightened
interest in the fintech sector and a view that the Company’s
portfolio has significant potential for further growth.
Circular to Shareholders
Augmentum is the only London listed fintech specialist and given
the demand for our shares and the strong pipeline of investment
opportunities that the team has access to, we are seeking to raise
further capital this year. To this end a circular will be sent to
shareholders on or around the date this annual report is published
seeking approval to issue new ordinary shares. We aim to build
your Company to a scale that enhances its attractiveness to
institutional investors and benefits all shareholders by diluting
fixed costs. The circular will also include a resolution to adjust the
investment policy as outlined below. As set out in the circular,
a General Meeting is being convened on 8 July 2021, at which the
resolutions included therein will be put to shareholders. Details of
how shareholders may vote at the General Meeting will be set out
in the circular. The Board recommends that shareholders vote in
favour of the resolutions, as they intend to do in respect of their
own shares.
Investment Policy Change
As the fintech sector evolves and the scale of the market
opportunity becomes more apparent, an increasing volume of
investment capital is drawn to the sector. As a result, competition to
access some of the most attractive businesses is increasing. One
way to get a foot in the door at the Series A or sometimes later
rounds is to be an existing seed stage investor. However, at this
early seed stage, companies tend to be financed at a local level.
The Portfolio Manager has therefore recommended the launch of a
“Scout Programme” which will engage a group of individuals who
are embedded within the seed stage ecosystem throughout Europe
to act as introducers to earlier stage opportunities than those in
which the Company would usually invest. These may well be in
locations where the Portfolio Manager does not have a permanent
physical presence.
This strategy will require the Company's investment policy to be
amended to allow seed stage investment.
As businesses at this seed stage are inherently more risky
aggregate investment in companies still at the seed stage will not
exceed 1 per cent. of the Company’s NAV at the time of investment
and, if shareholders approve the policy change, this limit will be
incorporated into the investment policy. It is expected that initial
investments into seed stage businesses introduced through the
Scout Programme will be relatively small in size, typically less than
£100,000 each.
Separately, to reflect the growth of the Company since its launch,
guidance as to the amount of cash as a percentage of Gross Assets
that the Company expects to hold at any given time (primarily for
making follow-on investments) is reduced from 10-20% to 5-15%.
These changes to the Company’s investment policy require the
approval of shareholders.
Board
The Board’s main role is to promote the success of the Company in
the best interest of all stakeholders. It seeks, individually and
collectively, to act with independence, diligence and integrity to
produce high standards of governance and to provide support and
constructive challenge to the Portfolio Manager.
To perform this role effectively the Board needs to be adequately
resourced. Our recent review of Board performance concluded that
we need to supplement our three person team to reflect the
workload created by the Board, its four committees and the
Company’s regular fund raising events. Over the course of the next
year, we intend to add one or two new directors with a passion for
fintech who can also bring new skills and experience and a different
perspective to our discussions.
AGM
The third AGM of the Company will be held on Tuesday, 21 September
2021 at 11.00 a.m. It is hoped to hold this year’s AGM in a normal
format, at the offices of Frostrow Capital LLP, 25 Southampton
Buildings, London WC2A 1AL. However, it is possible that the UK
Government will continue to mandate restrictions on public
gatherings. In either case, the Board strongly encourages all
shareholders to register their votes in advance by voting online
using the Registrar’s portal, www.signalshares.com or, if they are
not held directly, by instructing the nominee company through
which you hold your shares.
The Notice of the AGM is being published as a separate document and
will be sent to shareholders with the Annual Report. Both documents
will also be available to view on or download from the Company’s
website at www.augmentum.vc. Updates on any restrictions to
admittance to the Meeting will be published on the website.
The Directors consider that all the resolutions listed are in the best
interests of the Company and its shareholders and recommend a
vote in favour of each, as the Directors intend to do in respect of
their own holdings.
Outlook
The recovery from the lows of last spring has continued and the
European economy appears set to rebound in the coming year,
driven by increases to consumer spending from a position of record
personal savings.
Along with this, your Directors expect the recent strong growth of the
digital economy to continue. As the acknowledged specialist in early
stage fintech, Augmentum should benefit from that. Your Company’s
well regarded team continue to see the vast bulk of the opportunities
in the sector and it is expected this will provide a number of
compelling new investment opportunities. This should enable the
Company to effectively deploy capital over the coming months.
We may also have an opportunity to realise value from one or two
of the more mature investments this year. This capital will increase
the resources available to focus on earlier stage fintech businesses
with higher growth potential.
Your Directors and the Portfolio Manager have confidence in the
Augmentum model as evidenced by their own shareholdings and are
positive about the near and long term prospects for the Company.
Neil England
Chairman
11 June 2021
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AUGMENTUM FINTECH PLC
INVESTMENT OBJECTIVE AND POLICY
Investment objective
The Company’s investment objective is to generate capital growth
over the long term through investment in a focused portfolio of
fast growing and/or high potential private financial services
technology (“fintech”) businesses based predominantly in the UK
and wider Europe.
Investment policy
In order to achieve its investment objective, the Company invests in
early^ or later stage investments in unquoted fintech businesses.
The Company intends to realise value through exiting these
investments over time.
The Company seeks exposure to early stage businesses which are
high growth, with scalable opportunities, and have disruptive
technologies in the banking, insurance and wealth and asset
management sectors as well as those that provide services to
underpin the financial sector and other cross-industry propositions.
Investments are expected to be mainly in the form of equity and
equity-related instruments issued by portfolio companies, although
investments may be made by way of convertible debt instruments.
The Company intends to invest in unquoted companies and will
ensure that the Company has suitable investor protection rights
where appropriate. The Company may also invest in partnerships,
limited liability partnerships and other legal forms of entity. The
Company will not invest in publicly traded companies. However,
portfolio companies may seek initial public offerings from time to
time, in which case the Company may continue to hold such
investments without restriction.
The Company may acquire investments directly or by way of
holdings in special purpose vehicles or intermediate holding
entities (such as the Partnership*).
The Management Team has historically taken a board or board
observer position 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;
the aggregate value of seed stage investments will represent
no more than 1 per cent. of Net Asset Value^; and
at least 80 per cent. of Net Asset Value will be invested in
businesses which are headquartered in or have their main
centre of business in the UK or wider Europe.
* Please refer to the Glossary on page 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 of the FCA.
Each of the restrictions above will be calculated at the time of
investment and disregard the effect of the receipt of rights, bonuses,
benefits in the nature of capital or by reason of any other action
affecting every holder of that investment. The Company will not be
required to dispose of any investment or to rebalance the portfolio
as a result of a change in the respective valuations of its assets.
Hedging and derivatives
Save for investments made using equity-related instruments as
described above, the Company will not employ derivatives of any
kind for investment purposes. 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 5 and
15 per cent. of its Gross Assets in cash or cash equivalent
investments^, for the purpose of making follow-on investments in
accordance with the Company’s investment policy and to manage
the working capital requirements of the Company.
Changes to the investment policy
No material change will be made to the investment policy without
the approval of Shareholders by ordinary resolution. Non-material
changes to the investment policy may be approved by the Board. In
the event of a breach of the investment policy set out above 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.
^ As mentioned in the Chairman’s Statement the policy has been
amended to incorporate changes being put to shareholders at a
General Meeting convened for 8 July 2021 to permit limited seed
stage investment and to amend the cash management guidelines.
Should the amendments not be approved by shareholders the
policy will revert to proscribing seed stage investment and the
associated limit will be deleted.
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PORTFOLIO REVIEW
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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Fair value of Fair value of
holding at Net holding at
31 March investments/ Investment 31 March
2020 (realisations) return 2021 % of
£’000 £’000 £’000 £’000 portfolio
Interactive Investor^ 21,807 667 10,157 32,631 19.9%
Tide 14,221 2,000 2,741 18,962 11.6%
Onfido 10,867 – 3,984 14,851 9.0%
Grover 6,267 2,631 4,039 12,937 7.9%
BullionVault^ 11,191 (1,068)* 1,342 11,465 7.0%
Farewill 7,216 2,572 803 10,591 6.5%
Dext (formerly Receipt Bank) 7,500 – 3,036 10,536 6.4%
Monese 10,159 1,000 (818) 10,341 6.3%
Zopa^ 7,930 1,173 398 9,501 5.8%
Iwoca 7,600 252 119 7,971 4.9%
Top 10 Investments 104,758 9,227 25,801 139,786 85.3%
Other Investments** 18,374 5,041 926 24,341 14.7%
Total Investments 123,132 14,268 26,727 164,127 100.0%
^ Held via Augmentum I LP
* During the year WhiskyInvestDirect was spun out of BullionVault, when its valuation was £446,000, and is now held directly by Augmentum I LP. In addition, £622,000
of dividends were received from BullionVault during the year.
** There are ten other investments (31 March 2020: seven) including WhiskyInvestDirect at its current fair value of £545,000. See pages 12 and 13 for further details.
260547 Augmentum pp001-pp028.qxp 14/06/2021 22:17 Page 6
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AUGMENTUM FINTECH PLC
KEY INVESTMENTS
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KEY INVESTMENTS continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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interactive investor is the No.1 UK direct-to-consumer fixed fee
investment platform, with over £45 billion of assets under
administration and over 350,000 customers across its general
trading, ISA and SIPP account. It accounts for a fifth 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 2020 completed the acquisition of Share
plc. In March 2021 interactive investor announced the acquisition of
D2C investment platform Equinti for £48.5m, which is expected to
increase its assets under administration to £50 billion and
customers to 400,000.
Source: ii 31 March 31 March
2021 2020
£’000 £’000
Cost: 3,843 3,175
Value: 32,631 21,807
% ownership (fully diluted) 3.8% 3.7%
As per last filed audited accounts of the investee company for the
year to 31 December 2019:
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 has passed 5% market
share of business accounts in the UK, a key milestone in the
business's growth, serving over 320,000 SMEs.
In September 2019 Augmentum led Tide's £44.1m first round of
Series B funding, alongside Japanese investment firm The SBI
Group. Tide appointed Sir Donald Brydon as its first independent
Non-Executive Chair in September 2020; Sir Donald brings
extensive experience to the Board, previously chairing the London
Stock Exchange, the Royal Mail and Sage. In the same month Tide
also won a second major BCR grant in partnership with ClearBank.
Source: Tide 31 March 31 March
2021 2020
£’000 £’000
Cost: 11,000 9,261
Value: 18,962 14,221
% ownership (fully diluted)*: 5.9% 5.9%
* £2.5m (2020: nil) is in a convertible loan note.
2019 2018
£’000 £’000
As per last filed audited accounts of the investee company for the year
to 31 December 2019:
Turnover 90,170 72,956
Pre tax profit 13,933 8,925
2019 2018
£’000 £’000
Net assets 128,005 116,624
Turnover 4,860 1,858
Pre tax loss (20,821) (9,558)
Net assets 26,021 1,595
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AUGMENTUM FINTECH PLC
KEY INVESTMENTS continued
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. The company has over 800,000 users and
surpassed €50 million in Annual Recurring Revenue in 2020.
In September 2019 Augmentum led a €11 million funding round with
a €6 million convertible loan note (“CLN”) investment. This
coincided with Grover signing a new €30 million debt facility with
Varengold Bank, one of Germany’s major fintech banking partners.
In March 2021 Grover completed a €60 million Series B funding
round, with Augmentum participating and converting its CLN. The
round was made up of €45 million from equity investors and
€15 million in venture debt financing.
Source: Grover 31 March 31 March
2021 2020
£’000 £’000
Cost: 7,978 5,347
Value: 12,937 6,267
% ownership (fully diluted)*: 8.3% N/A
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2020: Investment was via a convertible loan note.
As an unquoted German company, Grover is not required to publicly file audited
accounts.
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 Remitly, 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.
In November 2020 Onfido appointed Mike Tuchen as CEO, a highly
experienced executive with a track record of scaling software
businesses globally.
Augmentum invested an additional £3.7 million in a convertible
loan note in December 2019 as part of a £4.7 million round. This
converted into equity when Onfido raised an additional
£64.7 million in April 2020.
Source: Onfido 31 March 31 March
2021 2020
£’000 £’000
Cost: 7,750 7,750
Value: 14,851 10,867
% ownership (fully diluted)*: 2.6% 1.7%*
* 2020: £5.7m of investment was in a convertible loan note.
As per last filed audited accounts of the investee company for the
year to 31 December 2019:
2019 2018
£’000 £’000
Turnover 27,561 18,591
Pre tax loss (26,488) (17,265)
Net (liabilities)/assets (9,494) 13,576
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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 accounts for one out of every ten wills written, or a 10%
market share, and has raised £340 million for charity in pledged
income.
Augmentum led Farewill’s £7.5 million Series A fundraise, with a
£4 million investment. Augmentum participated in Farewill's
£20 million Series B, led by Highland Europe in July 2020.
Source: Farewill 31 March 31 March
2021 2020
£’000 £’000
Cost: 6,573 4,000
Value 10,591 7,216
% ownership (fully diluted): 14.1% 13.4%
Farewill is not currently required to file audited accounts.
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
US$3.8 billion of assets under administration, over US$100 million
worth of gold and silver traded monthly, and over 95,000 clients.
Each user’s property is stored at an unbeaten low cost in secure,
specialist vaults in London, New York, Toronto, Singapore and
Zurich. BullionVault’s unique Daily Audit then proves the full
allocation of client property every day.
The company generates solid monthly profits from trading,
commission and interest. It is cash generative, dividend paying, and
well-placed for any cracks in the wider financial markets.
Source: BullionVault 31 March 31 March
2021 2020
£’000 £’000
Cost: 8,424 8,424
Value: 11,465 11,191*
% ownership (fully diluted): 11.1% 11.1%
Dividends paid: 622 360
* 31 March 2020 value includes WhiskyInvestDirect, which during the year was
spun out of BullionVault at a valuation of £446,000.
As per last filed audited accounts of the investee company for the
year to 31 October 2020:
2020 2019
£’000 £’000
Gross profit 15,707 9,340
Pre tax profit 10,703 5,197
Net assets 34,851 35,712
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Dext (formerly 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 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 over 400,000 businesses using the platform, Dext 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. Dext now has over 1 million users, with 250,000 of
those joining in 2020. The business rebranded from Receipt Bank
to Dext in February 2020.
Augmentum’s £7.5 million investment in January 2020 was part of
Dext’s £55 million Series C round led by US based Insight Partners.
Following the year end Dext was sold for £10.5 million realising a
30% IRR over an investment period of just 15 months. The
proceeds from the sale will be reinvested in opportunities over the
coming year.
Source: ReceiptBank 31 March 31 March
2021 2020
£’000 £’000
Cost: 7,500 7,500
Value: 10,536 7,500
With its mobile-only dual UK and Euro IBAN current account, its
portability across 31 countries, and both the app and its customer
service available in 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. In October
2020 Mastercard and Monese announced a multi-year strategic
partnership, with Monese becoming a principal Mastercard issuer.
Augmentum is invested alongside Kinnevik, PayPal and
International Airlines Group.
Source: Monese 31 March 31 March
2021 2020
£’000 £’000
Cost: 10,261 9,261
Value: 10,341 10,159
% ownership (fully diluted)*: 7.5% 5.4%
% ownership (fully diluted): 3.7% 3.7%
* £0.9m (2020: £4.0m) of investment in a convertible loan note.
As per last filed audited accounts of the investee company for the
year to 31 December 2019:
As per last filed audited accounts of the investee company for the
year to 31 December 2019:
2019 2018
£’000 £’000
2019 2018
£’000 £’000
Turnover 28,537 18,619
Turnover 10,297 5,485
Pre tax loss (12,383) (17,619)
Pre tax loss (38,061) (12,663)
Net (liabilities)/assets (9,981) 3,601
Net (liabilities)/assets (17,398) 18,101
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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 £140 million 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, a money management product and
motor finance.
In March 2021, Augmentum participated in a £20m funding round
led by Silverstripe.
Source: Zopa 31 March 31 March
2021 2020
£’000 £’000
Cost: 19,670 18,500
Value: 9,501 7,930
% ownership (fully diluted): 3.0% 6.1%
As per last filed audited accounts of the investee company for the
year to 31 December 2019:
2019 2018
£’000 £’000
Operating income 33,464 24,020
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 has surpassed
£100 million worth of lending through the Coronavirus Business
Interruption Loan Scheme to businesses grappling with the fallout
of the economic crisis caused by the coronavirus. Iwoca launched
iwocaPay in June 2020, an innovative business-to-business (B2B)
‘buy now pay later’ product to provide flexible payment terms to
buyers while giving peace of mind to sellers.
Source: iwoca 31 March 31 March
2021 2020
£’000 £’000
Cost: 7,880 7,600
Value: 7,971 7,600
% ownership (fully diluted)*: 2.5% 2.5%
* £0.4m (2020: nil) of investment in a convertible loan note.
As per last filed audited accounts of the investee company for the
year to 31 December 2019:
2019 2018
£’000 £’000
Pre tax loss (18,136) (18,295)
Turnover 68,587 47,534
Net assets 36,535 48,903
Pre tax (loss)/profit (1,427) 506
Net assets 43,051 28,957
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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 application programming interface as an end-to-
end solution for go to market execution, compliant on-boarding and
lifecycle risk assessment.
DueDil ingests billions of data points a day and surfaces more than
270 million connections. 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 nearly 400,000
better understand their mortgage needs and submitted almost
£6 billion of mortgages. Habito launched their own buy-to-let
mortgages in July 2019 and in March 2021 launched a 40-year
fixed-rate mortgage ’Habito One', the UK's longest-ever fixed rate
mortgage.
Augmentum invested £5 million in August 2019. In August 2020,
Augmentum led Habito's £35 million Series C funding round.
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
processes over 100,000 invoices a day.
Augmentum invested £250,000 in a convertible loan note in
August 2019. This converted into equity as part of the company’s
US$11 million funding round in March 2020, alongside Reefknot
Investments and Mastercard, as well as existing investors Bessemer
Venture Partners and Hambro Perks. Previse was awarded a
£2.5 million Banking Competition Remedies’ Capability and
Innovation Fund grant in August 2020.
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 290 family offices in
18 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
served over 11,000 buyers and sellers, with £12.9 million traded.
£1.1 billion has been invested into pitches to date with over 1,324
total deals funded.
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 not owned by the occupier.
Intellis
IntIIntellis
Intellis
Intellis
Intellis
IntelliseIntellisllis
Intellis is an automated forex trading platform governed by AI.
Augmentum exercised its option to invest a further €1 million in
March 2020 and a further €1 million in March 2021.
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Volt is a provider of account-to-account payments connectivity for
international merchants and payment service providers (PSPs). An
application of Open Banking, Account-to-account payments —
where funds are moved directly from one bank account to another
rather than via payment rails — deliver benefits to both consumers
and merchants. This helps merchants shorten their cash cycle,
increase conversion and lower their costs. Volt has connectivity to
over 3,500 banks, 27 geographies, 9 currencies and 5 networks.
Augmentum invested in Volt in December 2020.
!
ParaFi Capital is an investor in decentralised finance protocols that
address tangible use cases of the technology and demonstrate
signs of product-market fit. The ParaFi investment has drawn on
their domain expertise developed in both traditional finance and
crypto to identify and invest in leading protocols such as
Compound (lending and interest accrual), Aave (asset borrowing),
Uniswap (automated liquidity provision), and Synthetix (synthetic
asset trading), MakerDAO (stablecoins). ParaFi also supports its
protocols as a liquidity provider and governance participant.
Augmentum invested in ParaFi in January 2021. Co-investors
include Bain Capital Ventures and Galaxy Digital.
Founded in 2015, WhiskyInvestDirect, was a subsidiary of
BullionVault and is the online market for buying and selling Scotch
whisky as it matures in barrel. This is an asset class that has a long
track record of growth, yet has previously been opaque and
inaccessible.
The Company has over 3,500 bulk-stockholding clients holding the
equivalent of 29 million bottles of whisky stored in barrels. 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.
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PORTFOLIO MANAGER’S REVIEW
our placing and retail offer in late October, our focus has once again
been on growing the portfolio. Over the full reporting period we
deployed a net total of £14.3 million of capital across thirteen
companies, two of which were new additions to the portfolio.
Additionally, since the year end we have invested a further
£15.5 million in two new companies and four existing portfolio
companies.
New Investments
In December we welcomed Volt to the portfolio. Volt is a leading
provider of account-to-account payments orchestration for
international merchants and payment service providers. Broadly,
this means they are providing resilient payment networks using
open banking ‘rails’ as an alternative to traditional card ‘rails’. The
company is operating in a nascent and rapidly growing market,
driving our decision to engage at an earlier stage than we typically
would. The investment was structured as a convertible loan note.
This converted into equity in the company’s funding round which
closed in June 2021 and in which we invested a further £4 million.
Our aim at Augmentum is to invest ahead of popular adoption of
mainstream technologies in fintech, and we are fortunate to
benefit from wide experience amongst our advisory and broader
networks. During the latter half of 2020 we invested time to
understand the opportunities in DeFi (Decentralised Finance); an
ecosystem of applications and protocols built on blockchains,
primarily Ethereum, which support smart contracts. DeFi provides
many of the same services as classical finance, namely borrowing,
lending, and saving, but in an autonomous and decentralised
manner. The segment is entirely nascent and therefore requires
deep knowledge and a portfolio of investments to diversify
individual risk. In January, we invested in Parafi Capital, a US
managed fund of DeFi investments, with an initial investment
totalling US$3.9 million. This relationship is already bearing fruit in
terms of new deal flow and opportunities.
Since the year end, we closed a €2.5 million new investment into
the French company Epsor, in a competitive €20 million financing
round. Epsor have developed a next generation workplace savings
platform in France, providing facilities for both pension
contributions and a French specific tax advantaged bonus savings
scheme. The market is poorly served by a range of legacy providers
who have failed to adapt to the digital age, providing Epsor with an
opportunity to build a large wealth management proposition in
France and adjacent international territories.
In addition, we led Cushon’s Series A fundraising round of
£26 million with an investment of £5 million. Cushon are targetting
a parallel workplace savings opportunity to Epsor but with focus on
the UK market. Distributed through employers, the company
provides integrated pensions and payroll-linked ISAs to employees,
with a strong focus on the quality of user experience which is
delivered through the Cushon app and desktop portal. As of
April 2021, Cushon is authorised by The Pensions Regulator as a
Master Trust following their acquisition of the Salvus Master Trust.
Industry dynamics in the Master Trust space are geared towards
further consolidation, which the company will look to leverage as
it scales.
Overview
The period since our last review has been a time of radical change
as governments, societies and businesses around the world have
grappled with the challenges of the COVID-19 pandemic. Wholesale
disruption to daily life has driven long term changes to customer
behaviour, and businesses have needed to adapt in order to
survive.
Fintech has been a major growth driver for European venture
capital, with its share of total European venture capital deployment
increasing from 13% to 22% in the 5 years to 2020. This is the
premise on which Augmentum was built. The disruption caused by
the pandemic has significantly accelerated this growth. Businesses
have been forced to evaluate old ways of thinking, inefficient
processes have been exposed, and new innovation opportunities
have been identified. In response large swathes of capital have
come into the market to meet new opportunities, partly through
the schemes ushered in by government to address the pandemic,
and partly as private sector investors have recognised the
opportunities at hand.
A number of sectors within Fintech have become mainstream,
while other emerging technologies such as open banking and
digital currencies have enjoyed significant momentum. Broadening
institutional interest in the digital assets space suggests that the
asset class has crossed the point of no return, despite ongoing
price volatility. The industry is now attracting attention from
regulators and central banks and opportunities are arising both in
the emerging infrastructure necessary to handle the assets, and
the new applications a fully digital store of value can enable.
Exits
Shortly after the year end, in April, we announced the first exit
from the Augmentum portfolio when Dext was acquired by Hg
Capital. Whilst this was earlier than we had planned, the
transaction returns £10.5 million to the Augmentum portfolio,
realising a 40% uplift and an IRR of 30.5% on an investment made
as recently as January 2020.
Investments
The year ended 31 March 2021 has been a period of transition.
Having ensured portfolio liquidity throughout 2020 and completed
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Over the reporting period we have been particularly focused on the
existing portfolio, ensuring the companies in it had sufficient
runway at the start of the pandemic as well as supporting growth
rounds for those that have seen accelerated growth. Over the year
we invested a net total of £10.9 million across the existing portfolio.
In July we supported Farewill’s £20 million Series B round with an
investment of £2.6 million. 2020 proved to be a breakout year for
Farewill who delivered year-on-year revenue growth of over 524%.
The company continues to drive innovation and digitisation across
the fragmented, inefficient and expensive wills, probate and
funerals markets.
Tide had a successful 2020 despite the pandemic, emerging with 6%
market penetration and over 400,000 members. Tide is now the
joint first SME challenger bank, with only the incumbent Big 5 banks
serving more SMEs in the UK. Recognising this growth and the
opportunity available to the business, we agreed in January to
contribute £2 million as part of an advanced subscription agreement
that will convert into the company’s next financing round.
In February we took the opportunity to increase our stake in
Interactive Investor in a small secondary transaction. 2020 was a
record year for new client acquisition with the company adding 170%
more new customers and 150% more assets than it did in the prior
year, bringing Assets Under Management to over £38 billion and
total customers to more than 400,000. Continued strong trading
volumes and foreign exchange revenues combined to deliver 46%
year-on-year growth in revenues in 2020, 25% ahead of budget. The
company remains focused on growth and the completion of a
number of strategic projects are already well underway.
Following the receipt of a full banking licence from the Prudential
Regulation Authority in June last year, we supported Zopa’s £20
million fundraising round in March. Zopa Bank is now fully
launched, making them the only truly multi-product neo-bank
serving personal loans, auto finance and credit cards funded
through fixed term savings and P2P investments. These new
product categories have seen an encouraging early trajectory,
booking over 30,000 credit card customers and raising over £180
million in fixed-term deposits. The business is on the threshold of
profitability and looks set to break even by the end of 2021.
Grover completed its Series B funding round in March, raising
€60 million to further develop the rental platform and expand into
new geographies. We added a further €2 million in the round and
converted our existing €7 million convertible loan note at a 1.8
times uplift to our investment cost (part of this uplift was captured
in our September 2020 valuation). Grover enjoyed another year of
excellent performance in the period delivering 2.5 times year-on-
year growth in annual subscription value to over €70 million as of
March 2021.
Habito launched its first residential lending product in March,
Habito One – the UK’s first long-term (40 year) fixed rate mortgage.
The offering has no early repayment charges or exit fees, enabling
customers to safeguard against future interest rate rises, while
maintaining “flexibility and freedom” over their home finances. It
provides compelling differentiation versus other products available
in the market.
Onfido continues to build on the foundation it laid in its US$100
million financing round completed in April 2020. Their combination
of technology, talent and capital has enabled them to harness new
opportunities arising from the pandemic, which saw enterprises
across many industries accelerate digital transformation projects
which in turn drove demand for digital identity verification
services. The company delivered 82% year-on-year growth in
annual recurring revenues in 2020 with a doubling of sales in the
US, one of the company’s fastest growing regions, and the addition
of 320 new clients in the year. In November Founder/CEO Hussayn
Kassai stepped aside for new CEO Mike Tuchen, an experienced US
enterprise software executive with a track record of scaling
software businesses globally.
Monese was quick to respond to the impact of the pandemic on
trading, adjusting focus towards improving unit economics and
reducing the cost base. The business continues to develop its
technology platform and product, which is now available in 31
countries across Europe. In October 2020, Monese and Mastercard
announced a multi-year strategic partnership, with Monese now
operating as a principal Mastercard issuer. During the period and
post-year end Augmentum has supported Monese with £2.1 million
of follow-on investment alongside co-investors PayPal and Kinnevik.
In the face of market uncertainty and low interest rates
BullionVault delivered an exceptional year as private investors
moved capital into precious metals and the gold price touched
record levels. Pre-tax profits for its financial year ended October
2020 grew 99% year-on-year and the business recorded an
increase of 115% in new user registrations. The company is now
very well established and as market conditions have stabilised has
continued to trade well, albeit at lower volumes than those seen
across 2020. In September 2020, WhiskyInvestDirect was spun
out of BullionVault to become a standalone company and we now
hold our investment in it directly.
Operating as an SME lender across the UK and Germany, iWoca’s
market and target customer group were impacted by the pandemic.
New loan originations and the existing loan book were challenged
as the pandemic took hold and the roll out of significant
Government support funding distorted the lending market further.
iWoca proved nimble in response to the unprecedented situation
and secured accreditation from the British Business Bank for
distribution of the Coronavirus Business Interruption Loan Scheme
through which the business has now distributed over £300 million
of capital. As economies emerge from the pandemic and
Government support measures reduce, we expect iWoca to see a
return in demand for its core loan products. The business is well
capitalised having raised further capital in July 2020 which
Augmentum supported.
Fund Performance
Performance of the portfolio has benefitted from an acceleration of
the trend to digital. For the year to 31 March 2021, we are reporting
gains on investments of £26.7 million (2020: £12.6 million). Since
IPO this represents an IRR of 19.0% on the capital that we
have deployed.
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Outlook
Fintech is coming of age with multiple multi-billion pound fintechs
now established across Europe. Dealflow is at record levels, but so
too is the appetite to fulfil them. Given the opportunity at hand,
private venture rounds in fintechs are getting both larger and
earlier in a company’s maturity profile. The competition to
participate in these rounds has also increased as new investors are
increasingly recognising the size of the opportunity and this is
being reflected at the margin in the pricing of deals. We have
remained disciplined and have stepped away from opportunities we
judged to be over-priced.
Our task at Augmentum is to continue to navigate this evolving
investment landscape as we have done to date. Our portfolio is well
placed to benefit from this new wave of interest, deploying at the
point of maximum opportunity, and we remain focused on ensuring
they execute to their potential. We invest in exceptional companies
where we have high conviction and where we see significant
potential returns. We anticipate that over the coming 12 months we
will see opportunities for M&A and exits within the portfolio, and
opportunities for investment in new assets across the maturity
profile. With our platform, our reach, our network and our
capabilities we are well positioned for this next phase of growth.
Tim Levene CEO
Augmentum Fintech Management Ltd
11 June 2021
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STRATEGIC REPORT
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Business Review
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.
The Strategic Report has been prepared 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
UK version of the alternative investment fund managers’ directive
(“AIFMD”) and has appointed Frostrow Capital LLP as its
alternative investment fund manager (“AIFM”).
The Company’s key risks fall broadly under the following categories:
During the year, the Board, Frostrow Capital LLP, as AIFM and the
Portfolio Manager undertook all strategic and administrative
activities.
Principal Risks and Risk Management
The Board considers that the risks detailed below are the principal
risks currently facing the Company. These are the risks that could
affect the ability of the Company to deliver its strategy.
The Board is responsible for the ongoing identification, evaluation
and management of the principal risks faced by the Company and
has established a process for the regular review of these risks and
their mitigation. This process accords with the UK Corporate
Governance Code and the FRC’s Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting.
The Board has carried out a robust assessment of the emerging
and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency and
liquidity. Further details of the risk management processes that are
in place can be found in the Corporate Governance Statement.
Other than the risks associated with the COVID-19 pandemic, the
Board's policy on risk management has not materially changed
during the course of the reporting period and up to the date of
this report.
The Company maintains a framework of the key risks, with the
policies and processes devised to monitor, manage and mitigate
them where possible. Its detailed risk map is reviewed regularly by
the Audit Committee.
Further details on the financial risks are included in Note 13
starting on page 62.
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.
Within the constraints dictated by its objective, the Company’s
portfolio is diversified across a range of sectors, has no leverage,
a net cash balance and as set out below the Portfolio Manager
structures investments to provide downside protection, where
possible.
All of these factors could be influenced by the ongoing pandemic
and potential fallout from Brexit. 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 Board, AIFM and Portfolio Manager monitor the
macroeconomic environment and this is discussed at each Board
meeting, along with the potential impact. The Portfolio Manager
also provides a detailed update on the investments at each
meeting, including, inter alia, developments in relation to the
macro environment and trends.
Strategy Implementation Risks
The Group is subject to the risk that its long term strategy and
its level of performance fail to meet the expectations of its
shareholders.
A robust and sustainable corporate governance structure has
been implemented with the Board responsible for continuing to
act in the best interests of shareholders.
Experienced fintech Portfolio Managers have been retained in
order to deliver the strategy.
Change in assessment of risk over last financial year
No change
Increased
Decreased
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AUGMENTUM FINTECH PLC
STRATEGIC REPORT continued
Principal Risks and Uncertainties
Mitigation
Investment Risks
The performance of the Group’s portfolio is influenced by a
number of factors. These include, but are not limited to:
(i) 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 of these
factors could have an impact on the valuation of an
investment and on the Group’s ability to realise the
investment in a profitable and timely manner.
The Company also invests in early-stage companies which, by
their nature, may be smaller capitalisation companies. Such
companies may not have the financial strength, diversity and the
resources of larger and more established companies, and may
find it more difficult to operate, especially in periods of low
economic growth.
Portfolio Diversification Risk
The Group is subject to the risk that its portfolio may not be
diversified, being heavily concentrated in the fintech sector, with
the investments primarily located in the UK and that the
portfolio value may be dominated by a single or limited number
of companies.
Cash Risk
Returns to the Company through holding cash and cash
equivalents are currently low. The Company may hold significant
cash balances, particularly when a fundraising has taken place,
and this may have a drag on the Company’s performance.
The Company may require cash to fund potential follow-on
investments in existing investee companies. If the Company does
not hold sufficient cash to participate in subsequent funding
rounds carried out by portfolio companies, this could result in
the interest 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.
Change in assessment of risk over last financial year
No change
Increased
Decreased
The Portfolio Manager has put in place a rigorous investment
process which ensures disciplined investment selection and
portfolio management. This includes detailed due diligence,
regular portfolio reviews and in many cases active engagement
with portfolio companies by way of board representation or
observer status.
Investing in young businesses that may be cash consuming for a
number of years is inherently risky. In order to reduce the risks
of permanent capital loss the Portfolio Manager will, where
possible, structure investments to afford a degree of downside
protection through mechanisms such as a liquidation preference
and/or anti-dilution provisions.
As noted above the Portfolio Manager provides a detailed
update at each Board meeting, including, inter alia, investee
company developments, funding requirements and the pipeline
of potential new investments.
The Group attempts to mitigate this risk by making investments
across a range of companies in a range of fintech company
subsectors and in companies at different stages of their lifecycle
in accordance with the Investment Objective and Investment
Policy. Given the nature of the Company’s Investment Objective
this remains a significant risk.
To mitigate this risk the Board has agreed prudent cash
management guidelines with the AIFM and Portfolio Manager.
The Group maintains sufficient cash resources to manage its
ongoing operational and investment commitments. Regular
discussions are held to consider the future cash requirements of
the Company and its investments to ensure that sufficient cash
is maintained.
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STRATEGIC REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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Principal Risks and Uncertainties
Mitigation
Credit Risk
As noted the Company may hold significant cash balances. There
is a risk that the banks with which the cash is deposited fail and
the Company could be adversely affected through either delay in
accessing the cash deposits or the loss of the cash deposit.
When evaluating counterparties there can be no assurance that
the review will reveal or highlight all relevant facts and
circumstances that may be necessary or helpful in evaluating
the creditworthiness of the counterparty.
Valuation Risk
The valuation of investments in accordance with IFRS 13 and
International Private Equity and Venture Capital (IPEV) Valuation
Guidelines requires considerable judgement and is explained in
Note 19.17.
The Company’s investments 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.
Operational Risk
The Board is reliant on the systems of the Group and Company’s
service providers and as such disruption to, or a failure of, those
systems could lead to a failure to comply with law and
regulations leading to reputational damage and/or financial loss
to the Group and/or Company.
Change in assessment of risk over last financial year
No change
Increased
Decreased
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 in Notes 19.4 and 19.17. This process is led by the Board and
includes benchmarking valuations against actual prices received
when a sale of shares is made, as well as taking account of
liquidity issues and/or any restrictions over investments.
To manage these risks the Board:
l receives a quarterly compliance report from the AIFM and
the Portfolio Manager, which includes, inter alia, details of
compliance with applicable laws and regulations;
l reviews internal control reports, where available, key policies,
including measures taken to combat cybersecurity issues,
and also the disaster recovery procedures of its service
providers;
l maintains a risk matrix with details of risks to which the
Group and Company are exposed, the controls relied on to
manage those risks and the frequency of 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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Principal Risks and Uncertainties
Mitigation
Key person risk
There is a risk that the individuals responsible for managing the
portfolio may leave their employment or may be prevented from
undertaking their duties.
Change in assessment of risk over last financial year
No change
Increased
Decreased
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 mitigating actions to be reactive
rather than being proactive and, in the worst case, could cause the
Company to become unviable or otherwise fail or force the
Company to change its structure, objective or strategy.
The Audit Committee reviews 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 are useful in these
discussions, as are update papers and advice received from the
Board’s key service providers such as the Portfolio Manager, the
AIFM and the Company’s Brokers. In addition, the Company is a
member of the AIC, which provides regular technical updates as
well as drawing members’ attention to forthcoming industry and/or
regulatory issues and advising on compliance obligations.
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.
The Board manage this risk by:
l receiving reports from AFML at each Board meeting, such
reports include any significant changes in the make-up of the
team supporting the Company;
l putting in place a compensation structure designed to retain
key staff and encourage alignment with shareholders;
l meeting the wider team, outside the designated lead
managers, at the Portfolio Manager’s offices and by video
conference, and encouraging the participation of the wider
AFML team in investor updates; and
l delegating to the Management Engagement & Remuneration
Committee responsibility to perform an annual review of the
service received from AFML, including, inter alia, the team
supporting the lead managers and succession planning.
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. 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
external comparison against which to assess the KPIs and as such
performance against the KPIs is considered on an absolute basis.
Information on the Company’s performance is provided in the
Chairman’s Statement and the Portfolio Manager’s Review. The
KPIs have not changed from the prior year:
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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 an Alternative Performance Measure (“APM”) and its
calculation is explained in the Glossary on page 78. Essentially,
it adds back distributions made in the period to the change in
the net asset value to arrive at a total return.
The Group’s NAV per share total return for the year was 12.3%
(2020: 5.9%). This result is discussed in the Chairman's
Statement (beginning on page 2).
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STRATEGIC REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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The Directors also regard the Company’s TSR as a key
indicator of performance. Like the NAV per share total return
discussed above, this is an APM and its calculation is explained
in the Glossary on page 78. The TSR is similar in nature to the
NAV per share total return, except that it adds back
distributions made in the period to the change in the share
price, to reflect more closely the return in the hands of
shareholders. Share price performance is monitored closely by
the Board.
The Group’s TSR for the year was 128.8% (2020: (41.6%)).
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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.
The Group’s OCR for the year was 1.9% (2020: 2.1%). The
Board aims for this ratio to reduce over time.
* Alternative Performance Measure (see glossary on page 78).
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 Manager’s investment
approach and performance. The subject is thoroughly discussed at
every Board meeting.
In addition, the AIFM updates the Board on company
communications, promotions and investor feedback, as well as
wider investment issues.
An outline of performance, investment activity and strategy, 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 14 to 16.
Viability Statement
The Board has considered the Company’s financial position,
including its ability to liquidate portfolio assets and meet its
expenses as they fall due, and notes the following:
The Board has considered the viability of the Company under
various scenarios, including periods of acute stock market and
economic volatility such as experienced in 2020.
The expenses of the Company are predictable and modest in
comparison with the assets and there are no capital commitments
currently foreseen which would alter that position.
In considering the Company's longer-term viability, as well as
considering the principal risks on pages 17 to 20 and the financial
position of the Company, the Board considered the following
factors and assumptions:
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long-term illiquid investments which are not publicly traded;
The Board reviews the liquidity of the Company, regularly
considers any commitments it has and cash flow projections;
The Board, AIFM and Portfolio Manager will continue to adopt
a long term view when making investments and anticipated
holding periods will be at least five years;
As detailed in the Directors’ Report, the Valuations Committee
oversees the valuation process;
There will continue to be demand for investment trusts;
Regulation will not increase to a level that makes running the
Company uneconomical; and
The performance of the Company will continue to be
satisfactory.
Whilst acknowledging that market and economic uncertainty have
increased as a result of the pandemic, based on the results of its
review, and taking into account the long-term nature of the
Company, the Board has a reasonable expectation that the
Company will be able to continue its operations and meet its
expenses and liabilities as they fall due for the foreseeable future,
taken to mean at least the next five years. The Board has chosen
this period because, whilst it has no information to suggest this
judgement will need to change in the coming five years, forecasting
over longer periods is imprecise. The Board’s long-term view of
viability will, of course, be updated each year in the Annual Report.
Going Concern
In light of the conclusions drawn in the foregoing Viability
Statement and as set out in note 19.1 to the financial statements on
page 66, the Company has adequate financial resources to
continue in operational existence for at least the next 12 months.
Therefore, the directors believe that it is appropriate to continue to
adopt the going concern basis in preparing the financial
statements. In reviewing the position as at the date of this report,
the Board has considered the guidance on this matter issued the
Financial Reporting Council.
Management Arrangements
Principal Service Providers
The Company is structured as an internally managed closed-ended
investment company. Augmentum Fintech Management Limited
(“Portfolio Manager”) is the wholly owned operating subsidiary of
the Company that manages the investment portfolio of the
Company as a delegate of the AIFM.
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STRATEGIC REPORT continued
The other principal service providers to the Company are Frostrow
Capital LLP (“Frostrow” or the “AIFM”) and IQ EQ Depositary Company
(UK) Limited (the “Depositary”). Details of their key responsibilities
and their contractual arrangements with the Company follow.
Alternative Investment Fund Manager (“AIFM”)
Frostrow under the terms of its AIFM agreement with the Company
provides, inter alia, the following services:
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Augmentum Fintech Management Limited;
promotion of the Company’s shares;
investment portfolio administration and valuation;
risk management services;
share price discount and premium monitoring;
administrative and company secretarial services;
advice and guidance in respect of corporate governance
requirements;
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review of the Company’s website;
preparation and publication of annual and half year reports; and
ensuring compliance with applicable legal and regulatory
requirements.
AIFM Fees
Under the terms of the AIFM Agreement Frostrow is entitled to an
annual fee of:
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on that part of NAV in excess of £150 million and up to
£500 million: 0.2% per annum; and
on that part of NAV in excess of £500 million: 0.175% per
annum,
calculated on the last working day of each month and payable
monthly in arrears.
The AIFM Agreement may be terminated by either party on giving
notice of not less than 12 months.
Portfolio Manager
Augmentum Fintech Management Limited, as delegate of the AIFM,
is responsible for the management of the Company’s portfolio of
investments under an agreement between it, the Company and
Frostrow (the “Portfolio Management Agreement”).
Under the terms of its Portfolio Management Agreement,
Augmentum Fintech Management Limited provides, inter alia, the
following services:
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seeking out and evaluating investment opportunities;
recommending the manner by which monies should be
invested, disinvested, retained or realised;
advising on how rights conferred by the investments should be
exercised;
analysing the performance of investments made; and
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advising the Company in relation to trends, market movements
and other matters which may affect the investment objective
and policy of the Company.
Portfolio Manager Fees
Under the terms of the Portfolio Management Agreement
Augmentum Fintech Management Limited (the “Portfolio Manager”)
receives an annual fee of 1.5% of the NAV per annum, falling to 1.0%
of any NAV 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 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
fee shall be in respect of investments acquired using 80% of the
net proceeds of the Company’s IPO* in March 2018 (including the
Initial Portfolio), and related follow-on investments.
Subject to certain exceptions, the Portfolio Manager receives, in
aggregate, 15% of the net realised cash profits from the
investments and follow-on investments made over the relevant
period once the Company has received an aggregate annualised
10% realised return on investments (the ‘hurdle’) and follow-on
investments made during the relevant period. The Portfolio
Manager’s return is subject to a ‘’catch-up’’ provision in its favour.
The carried interest fee is paid in cash as soon as practicable after
the end of each relevant period, save that at the discretion of the
Board payments of the 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 2021 the hurdle
has been met, on an unrealised basis, and as such a carried interest
fee has been provided for as set out in Notes 2 and 12. This will only
be payable if the hurdle is met on a realised basis.
The Portfolio Management Agreement may be terminated by either
party giving notice of not less than 12 months.
AIFM and Portfolio Manager Evaluation and Re-Appointment
The performance of Frostrow as AIFM and Augmentum Fintech
Management Limited as Portfolio Manager is regularly monitored by
the Board with a formal evaluation being undertaken each year. As
part of this process the Board monitors the services provided by the
AIFM and the Portfolio Manager and receives regular reports and
views from them.
Following a review at a Management Engagement & Remuneration
Committee meeting in March 2021 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:
* See Glossary on page 78
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the quality and depth of experience of the management,
company secretarial, administrative and marketing team that
the AIFM brought to the management of the Company; and
the quality and depth of experience allocated by the Portfolio
Manager to the management of the portfolio, together with
the clarity and rigour of the investment process.
Depositary
The Company has appointed IQ EQ Depositary (UK) Limited as its
Depositary in accordance with the AIFMD on the terms and subject
to the conditions of an agreement between the Company, Frostrow
and the Depositary (the “Depositary Agreement”).
The Depositary provides the following services, inter alia, under its
agreement with the Company:
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verification of non-custodial investments;
cash monitoring;
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foreign exchange services.
The Depositary must take reasonable care to ensure that the
Company is managed in accordance with the Financial Conduct
Authority’s Investment Funds Sourcebook, the AIFMD and the
Company’s Articles of Association.
Under the terms of the Depositary Agreement, the Depositary is
entitled to receive an annual fee of £25,000 plus certain event
driven fees.
The notice period on the Depositary Agreement is not less than
six months.
Dividend Policy
The Company invests with the objective of achieving capital growth
over the long term and it is not expected that a revenue dividend
will be paid in the foreseeable future. The Board intends only to pay
dividends out of revenue to the extent required in order to
maintain the Company’s investment trust status.
Potential returns of capital
It is expected that the Company will realise investments from time
to time. The proceeds of these disposals may be re-invested, used
for working capital purposes or, at the discretion of the Board
returned to shareholders.
The Company commits to return to Shareholders up to 50 per cent.
of the gains realised by the disposal of investments in each
financial year. It is expected that such returns of capital would be
made annually. The Company may also seek to make returns of
capital to Shareholders where available cash is not expected to be
substantially deployed within the following 12-18 months. The
options for effecting any return of capital to shareholders may
include the Company making tender offers to purchase Shares,
paying special dividends or any alternative method or a
combination of methods. Certain methods intended to effect a
return of capital may be subject to, amongst other things,
shareholder approval. Shareholders should note that the return of
capital by the Company is at the discretion of the Directors and is
subject to, amongst other things, the working capital requirements
of the Company.
Company Promotion
The Company has appointed Peel Hunt LLP and N+1 Singer as joint
corporate brokers, to work alongside one another to encourage
demand for the Company’s shares.
In addition to AIFM services, Frostrow also provides marketing and
distribution services.
Engaging regularly with investors:
The Company's brokers and Frostrow meet with institutional
investors, discretionary wealth managers and execution-only
platform providers around the UK and hold regular seminars and
other investor events;
Making Company information more accessible:
Frostrow manages the investor database and produces all key
corporate documents, distributes monthly factsheets, annual
reports and updates from the Portfolio Manager on portfolio and
market developments; and
Monitoring market activity, acting as a link between the Company,
shareholders and other stakeholders:
The Company’s brokers and Frostrow maintain regular contact with
sector broker analysts and other research and data providers, and
provide the Board with up-to-date information on the latest
shareholder and market developments.
Community, Social, Employee, Human Rights, Environmental
Issues, Anti-bribery and Anti-corruption
The Company is committed to carrying out business in an honest
and fair manner with a zero-tolerance approach to bribery, tax
evasion and corruption. As such, policies and procedures are in
place to prevent bribery and corruption. In carrying out its
activities, the Company aims to conduct itself responsibly, ethically
and fairly, including in relation to social and human rights issues.
As an investment trust with limited internal resource, the Company
has little impact on the environment. The Company believes that
high ESG (Environmental, Social and Governance) standards within
both the Company and its portfolio companies make good business
sense and have the potential to protect and enhance investment
returns. Consequently, the Group’s investment process ensures
that ESG issues are taken into account and best practice is
encouraged.
Diversity
There are currently two male Directors and one female Director
(being 33% female representation) 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. In addition, the
Board encourages diversity in the management team at AFML and
the promotion of the benefits of diversity in portfolio companies.
Further details are included on page 27.
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AUGMENTUM FINTECH PLC
STRATEGIC REPORT continued
Engaging with our stakeholders
The following ‘Section 172’ disclosure describes how the Directors have had regard to the views of the Company’s stakeholders in their
decision-making.
Who?
Why?
How?
STAKEHOLDER GROUP
THE BENEFITS OF ENGAGEMENT WITH
OUR STAKEHOLDERS
Investors
Portfolio Manager
Service Providers
Clear communication of the Company’s
strategy and the performance against
objective can help the share price trade at a
narrower discount or a wider premium to its
net asset value which benefits shareholders.
New shares may be issued to meet demand
without diluting the NAV per share of existing
shareholders. Increasing the size of the
Company can benefit liquidity as well as
spread costs.
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. It also gives them clarity on the
Board’s expectations.
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,
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 meets 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 receives quarterly
performance and compliance reporting at
each Board meeting.
The Portfolio Manager’s attendance at each
Board meeting provides the opportunity for
the Portfolio Manager and Board to further
reinforce their mutual understanding of what
is expected from all parties.
The Board and Frostrow engage regularly
with all service providers both in one-to-one
meetings and via regular written reporting.
This regular interaction provides an
environment where topics, issues and
business development needs can be dealt
with efficiently and collegiately.
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STRATEGIC REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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Who?
Why?
How?
STAKEHOLDER GROUP
THE BENEFITS OF ENGAGEMENT WITH
OUR STAKEHOLDERS
Employees of AFML
Attract and retain talent to ensure the Group
has the resources to successfully implement
its strategy and manage third-party
relationships.
COVID-19/well being of
employees
Portfolio companies
Incorporating consideration of ESG factors
into the investment process assists in
understanding and mitigating risks of an
investment and potentially identifying future
opportunities.
HOW THE BOARD THE AIFM AND THE
PORTFOLIO MANAGER HAS ENGAGED
WITH OUR STAKEHOLDERS
In normal times all employees of AFML sit in
one open plan office, facilitating interaction
and engagement. Notwithstanding remote
working, interaction has continued during the
lockdown conditions faced over the last year.
The senior team report to the Board at each
meeting.
Given the small number of employees,
engagement is at an individual level rather
than as a group.
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?
Outcomes and actions
WHAT ACTIONS WERE TAKEN, INCLUDING PRINCIPAL
DECISIONS?
Key topics of engagement with investors
l
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.
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.
This interaction informed the Board's deliberations,
particularly with respect to prospects for increasing the scale
of the Company, but did not otherwise lead to specific
actions.
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 Regular Board calls with representatives of the Portfolio
l The integration of environmental, social and governance
(‘ESG’) into the Portfolio Manager’s investment processes.
Manager and AIFM.
l All of the Company's service providers successfully
implemented remote working with no adverse impact on
service delivery.
l Performance and compensation of Group employees is
decided by the Management Engagement & Remuneration
Committee with the Directors of AFML.
l The portfolio manager reports 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.
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AUGMENTUM FINTECH PLC
STRATEGIC REPORT continued
Approach to Responsible Investing
Augmentum Fintech Management Limited (“AFML”) is committed
to a responsible investment approach through the lifecycle of its
investments, from pre-screening to exit. AFML believes that the
integration of Environmental, Social and Governance (“ESG”)
factors within the investment analysis, diligence and operating
practices is pivotal in mitigating risk and creating sustainable,
profitable investments.
Five-Stage Approach to Future-Proofing the Portfolio
ESG principles adapted from the UN PRI (Principles of Responsible
Investment) are integrated throughout business operations; in
investment decisions, at the screening stage through an exclusion
list and due diligence, ongoing monitoring and engaging with
portfolio companies post-investment and when making follow-on
investment decisions, as well as within fund operations.
1.
Screening
An Exclusion List is used to screen out companies incompatible
with AFML’s corporate values (sub-sectors and types of business).
AFML also commits to being satisfied that the investors they invest
alongside are of good standing.
2. Due Diligence
An ESG Due Diligence (DD) survey is completed 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, an action plan is
agreed with the management team on areas for improvement and
commitments are incorporated into the Term Sheet.
3. Post-Investment Monitoring and Engagement
An annual survey is completed by portfolio companies and areas
for improvement are discussed with management teams, with
commitments agreed and revisited as appropriate.
4. Follow On Investments
ESG risks and opportunities are assessed when making follow-on
investment decisions, with an ESG scorecard completed and co-
investors taken into consideration. Follow on investments are only
made into companies that continue to meet AFML’s ESG criteria.
5.
Internally at Augmentum
AFML have continued to identify priority areas in which to make
suitable ESG-related advancements across fund operations. Key
progress areas include:
l
Incorporating environmental considerations into operating
decisions, from limiting unnecessary printing and encouraging
recycling in the office to a Bike2Work scheme for staff and
using a sustainable clothing company for branded
merchandise;
l Maintaining the highest levels of governance and ethical
integrity in accordance with the regulatory standards to which
we are subject, including the Financial Conduct Authority and
the London Stock Exchange; and
l
Continuing to embrace diversity and inclusion through
inclusive hiring and professional development practices, as
well as charity partnerships and other initiatives including
TeenVC (see page 27).
ESG Focus Areas
AFML have identified eight key areas for consideration, across the
three ESG categories, which best align with their values and are
most relevant for companies operating in the fintech industry.
The key environmental consideration as identified by the AFML is
the potential impact of business operations on the global issue of
climate change. Social factors include the risks and opportunities
associated with data security, privacy and ethical use, consumer
protection, diversity and financial inclusion. Governance
considerations include anti-bribery and corruption, board structure
and independence and compliance.
AFML is committed to:
l
l
l
l
Incorporating ESG and sustainability considerations into its
investment analysis, diligence, and operating practices.
Providing ESG training and support to the AFML employees
involved in the investment process, so that they may perform
their work in accordance with AFML’s policy.
Actively engaging with portfolio companies to encourage
improvement in key ESG areas.
Annual reporting on progress to stakeholders.
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STRATEGIC REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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ESG in Action
Diverse Dealflow and Events
Advancements continue to be seen in ESG practices across the
portfolio, both in business models and operating procedures. Below
we highlight some examples.
Farewill
2020 alone saw £150 million pledged to cancer, homelessness,
military and health charities through gifts in Farewill wills. The
company helped over 5,000 NHS staff members to write a free will
during lockdown and continues to offer them a 10% discount.
Grover
“Making technology accessible to everyone” remains at the core of
Grover’s circular economy business model. By the end of 2020
Grover had seen 175,000 devices refurbished and recirculated since
their launch, saving 775 tons of e-waste in the process. Through
Grover Business, the company equipped thousands of businesses
with the tech they needed to keep their wheels turning while teams
shifted to remote working in the wake of COVID-19.
Habito
In August 2020, Habito the first mortgage company in the UK to
secure the B Corp accreditation, joining a community of companies
“using the power of business to make the world a better place”.
In March 2021, Habito demonstrated their commitment to
transparency, certainty and flexibility for their customers by
launching the UK’s longest-ever fixed rate mortgage, ‘Habito One’.
interactive investor
interactive investor was awarded “Best Sustainable ISA” and “Best
Sustainable Pension” in the 2021 Boring Money Best Buys awards.
Their ACE 40 list and Ethical Growth portfolio remain carefully-
curated options for ethically-minded customers.
Encouraging a Diverse Fintech Industry: Progress highlights
AFML have continued to show their support for a diverse, inclusive
fintech industry through involvement in various diversity-focused
initiatives and events, and have been recognised for an industry-
leading approach. Learn more below.
AFML have been involved in multiple diversity-focused events
including numerous Female Founder Office Hours, ‘Power to Black
Founders’, The Sutton Trust’s Banking and Finance pathway
sessions (championing social mobility) and supporting a 24 hour
virtual investment hackathon for students through Project Venture.
TeenVC
In 2020 AFML launched TeenVC (www.teen-vc.com), a free online
education platform for students from all backgrounds to learn
about venture capital, technology and entrepreneurship. AFML
have continued to engage with students through the platform itself,
hosting students across a number of educational sessions and
offering ongoing internships and career support through a
dedicated LinkedIn group. The initial phase of the initiative saw
over 10,000 students around the world engaging with the content,
and The TeenVC Challenge saw entries being submitted from as far
as San Francisco, South Africa, Bangladesh and Scotland.
ESG Awards and Recognition
l
Diversity VC Standard Level 1
Augmentum was one of just 11 VC funds across the UK and
Canada to be awarded Level 1 of the Diversity VC Standard,
championing diversity and inclusion across investment and
internal fund processes. Details on this standard can be found
at their website – www.diversity.vc/the-diversity-vc-standard/.
l
Fintech for All Charter
AFML is a founding signatory of the Fintech for All Charter,
aimed at tackling harassment and promoting diversity within
the fintech sector. The Charter has been led by InChorus and
supported by Innovate Finance, the FinTech Alliance, and
Level39, with the Financial Conduct Authority supporting the
steering committee.
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AUGMENTUM FINTECH PLC
STRATEGIC REPORT continued
l
ESG Investing Awards
AFML was a finalist in the ESG Investing Awards, in the “Best
Corporate Sustainability Strategy” and "Most Innovative ESG
Initiative" categories. The ESG Investing Awards exist to assess
and evaluate the best companies involved in all areas of ESG
investing across the globe. They are designed exclusively for
banks, investment managers, research houses, ratings
agencies, index and ETF providers and exchanges. Further
detail on the ESG Investing Awards can be found at
www.esginvesting.co.uk/awards/.
This strategic report was approved by the Board of Directors and
signed on its behalf by:
Neil England
Chairman
11 June 2021
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BOARD OF DIRECTORS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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Neil England
(Chairman of the Board and Nominations
Committee)
Neil has extensive international business
expertise in a career spanning public and
private companies varying in size from
start-ups to global corporations.
Karen Brade
(Chairman of the Audit Committee)
Karen has extensive experience of project
finance, private equity and asset
management. She started her career at
Citibank working on various multi-national
project finance transactions.
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 is Chairman of Schroder British
Opportunities Trust plc and has been
Chairman of a number of other companies,
most recently ITE Group plc, Blackrock
Emerging Europe plc and three private
businesses.
Remuneration: £45,000 pa*
Shareholding in the Company: 110,000
Standing for re-election: yes
Karen worked at CDC (Commonwealth
Development Corporation), the UK
Government’s development finance
institution, where she held a variety of
positions in equity and debt investing,
portfolio management, fund raising and
investor development.
Karen has been an adviser to hedge funds,
family offices and private equity houses.
She currently serves as Chairman of
Aberdeen Japan Investment Trust PLC;
Chairman of Keystone Positive Change
Investment Trust plc; Non-Executive
Director of HeiQ plc and is an external panel
member of the Albion Capital VCT
investment committee.
Remuneration: £35,000 pa*
Shareholding in the Company: 32,234
Standing for re-election: yes
* With effect from 1 April 2021, see Remuneration Report on page 43 for the years to 31 March 2021 and 2020.
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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*
Shareholding in the Company: 85,983
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.
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DIRECTORS’ REPORT
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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The Directors present the audited Financial Statements of the
Group and the Company for the year ended 31 March 2021 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 2021, the following information is set out
in the Strategic Report on pages 17 to 28: 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 on page 43.
The Corporate Governance Statement starting on page 35 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:
Directors
The current Directors of the Company are listed on page 29. They
have all served as Directors from appointment on 12 February 2018,
including throughout the current and prior years.
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 11 June 2021.
The Board has reviewed the performance and commitment of the
Directors standing for re-election and considers that each of them
should continue to serve on the Board as they bring wide, current
and relevant experience that allows them to contribute effectively
to the leadership of the Company. More details are contained
within the Notice of Annual General Meeting.
Directors’ Conflicts of Interest
Directors report on actual or potential conflicts of interest at each
Board meeting. Any Director or Directors with a potential conflict
would be excluded from any related discussion.
Directors’ & Officers’ Liability Insurance Cover
Directors’ and officers’ liability insurance cover has been
maintained by the Company since its incorporation. It is intended
that cover will continue for the year ending 31 March 2022 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.
(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
Directors’ Fees
The Directors’ Remuneration Report and the Directors’
Remuneration Policy are set out on pages 41 to 48.
the Portfolio Manager (Augmentum Fintech Management
Limited), the principal activity of which is to act as the
investment manager of the Company.
Directors’ Responsibilities
The Statement of Directors Responsibilities is to be found on
page 52 and is included in this Directors' Report by reference.
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.
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.
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AUGMENTUM FINTECH PLC
DIRECTORS’ REPORT continued
Capital Structure
Articles of Association
During the year the Company raised £27.5 million, net of costs, and
as at 31 March 2021 there were 140,423,291 shares of 1p each in
issue.
As at 11 June 2021 the number of voting rights was 140,423,291. 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 11,685,691 shares, which will expire at
the forthcoming Annual General Meeting.
The Company’s capital structure is summarised in Note 15 on
page 65.
Substantial Interests
The Company was aware of the following interests in voting rights
of 3% or more of the Company as at 31 March 2021 and 31 May
2021, being the latest practicable date before publication of the
Annual Report.
31 May 2021 31 March 2021
Number % of Number % of
of Issued of Issued
Ordinary Share Ordinary Share
Shareholder Shares Capital Shares Capital
Canaccord Genuity Wealth
Management - Institutional 15,377,687 11.0 14,979,999 10.7
EFG Harris Allday, stockbrokers 9,051,838 6.4 8,953,773 6.4
Rathbones 7,369,019 5.2 7,325,219 5.2
Interactive Investor 6,869,289 4.9 6,766,381 4.8
Hargreaves Lansdown,
stockbrokers 6,542,950 4.7 6,507,789 4.6
Close Brothers Asset
Management 6,446,899 4.6 6,888,085 4.9
South Yorkshire Pension
Authority 5,698,937 4.1 6,000,000 4.3
Wellian Investment Solutions 5,682,767 4.0 5,682,767 4.1
A special resolution will be proposed at the forthcoming annual
general meeting to adopt updated articles of association that have
been amended to permit the Company to hold virtual and/or hybrid
shareholder meetings, including AGMs. There are no other
amendments.
The Board believes that virtual and/or hybrid meetings will allow
for greater shareholder and stakeholder engagement over the
coming years in a way that is more convenient for all parties,
particularly if there is a recurrence of restrictions on physical
meetings.
This flexibility is particularly necessary at the moment given the
ongoing uncertainty as regards the duration of social distancing
measures and restrictions on gatherings, and the need to maintain
open channels of communication between shareholders, directors
and stakeholders. These changes to the articles of association will
allow the Board to continue to fulfil its legal obligation to hold
shareholder meetings irrespective of any legislation or government
guidance preventing physical meetings taking place or limiting the
number of people who may attend a physical meeting.
If the Board determines that a virtual or hybrid meeting is the most
appropriate form of shareholder meeting in any circumstances, the
Board will seek to ensure the meeting continues to fulfil its purpose
of facilitating shareholder engagement and Board scrutiny and will
observe any applicable codes of best practice.
If it appears to the chair of the general meeting that an electronic
facility has become inadequate for the purposes referred to above
then the chair may, without having to seek the consent of the
meeting given that this may not be practicable in the
circumstances, exercise his or her rights to manage the meeting
(for example, under the Company’s articles) to pause, interrupt or
adjourn the general meeting. All business conducted at that
general meeting up to the time of that adjournment (or an earlier
time if determined by the chair to be appropriate) will be valid. The
usual provisions of the articles relating to the adjournment of
general meetings will apply to any such adjournment.
Charles Stanley 5,403,819 3.8 5,337,712 3.8
Brewin Dolphin, stockbrokers 4,273,173 3.0 4,268,252 3.0
Global Greenhouse Gas Emissions for the year ended
31 March 2021
Percentage shown as a percentage of 140,423,291 ordinary shares, being the
number of shares in issue at 31 March 2021 and to the date of this report.
Interests in the Company’s shares of key management personnel of its
subsidiary at 31 March 2021 are shown below:
Tim Levene 2,657,303 1.8%
Richard Matthews 575,000 0.4%
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.
At the date of this report, the Group has a staff of eight individuals,
operating from small office premises in the UK. Accordingly, it does
not have any significant greenhouse gas emissions to report from
the operations of the Group, nor does it have responsibility for any
other emissions producing sources under the Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013,
including those within its underlying investment portfolio. The
Group consumed less than 40,000 kWh of energy during the year
in respect of which the Directors’ Report is prepared and therefore
is exempt from the disclosures required under the Streamlined
Energy and Carbon Reporting criteria.
Modern Slavery Act 2015
As an investment vehicle, the Company does not provide goods or
services in the normal course of business and does not have
customers. Also, the Company's portfolio management subsidiary,
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DIRECTORS’ REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
33
which does provide services, to the Company, is not in scope on
grounds of scale. Accordingly, the Directors consider that the
Group and Company are not required to make any anti-slavery or
human trafficking statement under the Modern Slavery Act 2015.
which the Company’s auditor is unaware and they have taken all
steps they ought to have taken to make themselves aware of any
relevant audit information and to establish that the Company’s
auditor is aware of that information.
Political Donations
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 is now an
annual requirement. The Registrars, Link group, have been
engaged to collate such information and file the reports with HMRC
on behalf of the Company.
Listing Rule 9.8.4
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
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 2021.
Alternative Performance Measures
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 that are viewed as particularly
relevant for investment trusts, which are summarised on page 2
and explained in greater detail in the Strategic Report, under the
heading “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 the Auditor
As at the date of this report each of the Directors confirms that so
far as they are aware, there is no relevant audit information of
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This confirmation is given and should be interpreted in accordance
with the provisions of Section 418 of the Companies Act 2006.
Independent Auditor
Resolutions to reappoint BDO LLP as the Company's auditor and to
authorise the Audit Committee to determine their remuneration
will be proposed at the forthcoming Annual General Meeting.
Further details are included in the Report of the Audit Committee
on pages 49 to 51.
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.
Annual General Meeting
The Annual General Meeting will be webcast on Tuesday,
21 September 2021. 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 2021.
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
A special resolution will be proposed at the forthcoming annual
general meeting to grant the Company authority to purchase its
own shares, so as to permit the purchase of up to 21,049,451 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 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.
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DIRECTORS’ REPORT continued
Voting Rights
Other Statutory Information
Subject to any rights or restrictions attached to any shares, on a
show of hands, every member who is present in person has one
vote and every proxy present who has been duly appointed has one
vote. However, if the proxy has been duly appointed by more than
one member entitled to vote on the resolution, and is instructed
by one or more of those members to vote for the resolution and by
one or more others to vote against it, or is instructed by one or
more of those members to vote in one way and is given discretion
as to how to vote by one or more others (and wishes to use that
discretion to vote in the other way) that proxy has one vote for and
one vote against the resolution. Every corporate representative
present who has been duly authorised by a corporation has the
same voting rights as the corporation would be entitled to. On a
poll, every member present in person or by duly appointed proxy or
corporate representative has one vote for every share of which
they are the holder or in respect of which the appointment as
proxy or corporate representative has been made.
A member, proxy or corporate representative entitled to more than
one vote need not, if they vote, use all their votes or cast all the
votes used the same way.
In the case of joint holders, the vote of the senior who tenders a
vote shall be accepted to the exclusion of the votes of the other
joint holders, and seniority shall be determined by the order in
which the names of the holders stand in the register of members.
A member is entitled to appoint another person as their proxy to
exercise all or any of their rights to attend and to speak and vote at
a meeting of the Company. The appointment of a proxy shall be
deemed also to confer authority to demand or join in demanding a
poll. Delivery of an appointment of proxy shall not preclude a
member from attending and voting at the meeting or at any
adjournment of it. A proxy need not be a member. A member may
appoint more than one proxy in relation to a meeting, provided that
each proxy is appointed to exercise the rights attached to a
different share or shares.
The following information is disclosed in accordance with the
Companies Act 2006:
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The rules on the appointment and replacement of Directors
are set out in the Company’s articles of association (the
“Articles”). Any change to the Articles is governed by the
Companies Act 2006.
Subject to the provisions of the Companies Act 2006, to the
Articles, and to any directions given by special resolution, the
business of the Company shall be managed by the Directors
who may exercise all the powers of the Company. The powers
shall not be limited by any special powers given to the
Directors by the Articles and a meeting of the Directors at
which a quorum is present may exercise all the powers
exercisable by the Directors. The Directors’ powers to issue
and buy back shares in force at the end of the year are
recorded in the Directors’ Report.
•
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
11 June 2021
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Corporate Governance Statement
Company’s purpose, values and strategy
The Board has considered the principles and provisions of the AIC
Code of Corporate Governance (the “AIC Code”). The AIC Code
addresses all the principles and provisions set out in the UK
Corporate Governance Code (the “UK Code”), as well as setting out
additional principles and recommendations on issues that are of
specific relevance to the Company as an investment company.
The Board considers that reporting against the principles and
provisions of the AIC Code will provide the best information to
shareholders and the Financial Reporting Council has confirmed
that by following the AIC Code, 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 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 and the Group. Further details are
provided on page 51.
Board Leadership and Purpose
Responsibility for effective governance and for the overall
management of the Company’s affairs lies with the Board. The
governance framework of the Company reflects the fact that it is
an investment company that outsources company secretarial,
administration, marketing, portfolio and risk management services
to Frostrow. Portfolio management is then delegated to
Augmentum Fintech Management Limited (“Portfolio Manager”) by
Frostrow.
Role of the Board
The Board’s statutory duties are defined by sections 171 to 177 of
the Companies Act 2006. In particular, under section 172 the
Directors have a duty to promote the success of the Company
taking into consideration the likely consequences of any decision in
the long-term; the need to foster the Company’s business
relationships with its service providers; the impact of the
Company’s operations on the community and the environment; the
desire for the Company to maintain a reputation for high standards
of business conduct; and the need to act fairly between members
of the Company. The Board reports on its engagement with
stakeholders in the context of its duties under section 172 within
the Strategic Report on pages 24 and 25.
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.
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The Company’s purpose is to generate value for shareholders over
the long term in accordance with its investment objective, and the
Board assesses the basis on which this is achieved. The Strategic
Report describes how opportunities and risks to the future success
of the business have been considered and addressed, the
sustainability of the Company’s business model and how its
governance contributes to the delivery of its strategy. The
Company’s investment objective and investment policy are set out
on page 4.
The Board’s key responsibilities are to set the strategy, values and
standards; to provide leadership within a controls framework which
enables risks to be assessed and managed; to challenge
constructively and scrutinise 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
As expanded in the Report of the Audit Committee starting on
page 49, 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.
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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 2021, 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 on the remuneration of Directors and
the need to appoint external remuneration consultants. The
Committee met twice in the year and considered 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.
Nominations Committee
The Nominations Committee considers annually the skills
possessed by the Board and identifies any skill shortages to be
addressed. When considering new appointments, the Board reviews
the skills of the Directors and seeks to add persons with
complementary skills or who possess the skills and experience
which fill any gaps in the Board’s knowledge or experience and who
can devote sufficient time to the Company to carry out their duties
effectively.
In view of the size of the Board and the nature of the Company, all
independent non-executive Directors are members of each Committee.
Copies of the full terms of reference, which clearly define the
responsibilities of each Committee, can be obtained from the
Company Secretary. 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 2021 and
the number of meetings attended by each Director.
In addition to the scheduled Board and Committee meetings,
Directors attended a number of ad hoc Board and Committee
meetings to consider matters such as the impact of the pandemic
and associated lockdowns (in addition to receiving regular
updates), the fundraise in October 2020 and more routine matters
such as approval of regulatory announcements.
Board
(including Audit ME&R Valuations Nomination
ad hoc) Committee Committee Committee Committee
Neil England 10 3 2 2 1
Karen Brade 10 3 2 2 1
David Haysey 10 3 2 2 1
All the Directors attended the Annual General Meeting in September 2020.
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
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 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 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.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
37
•
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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 UK Corporate
Governance Code.
The Board has delegated authority to the Portfolio Manager to vote
the shares owned by the Company. The Portfolio Manager’s
commitment to responsible investing is set out on pages 26 to 28.
The Board has instructed that the Portfolio Manager submit votes
on behalf of the Company wherever possible, in the best long-term
interest of shareholders in accordance with their own investment
philosophy and knowledge of the relevant circumstances, although
the Portfolio Manager may refer to the Board on matters of a
contentious nature.
The Board also monitors the ESG policies of the Portfolio Manager,
given the likely influence of such factors on the long-term growth
prospects of the companies in the portfolio.
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Stakeholders
Section 172 of the Companies Act 2006 requires that the Directors
have regard to the Company’s stakeholders, amongst other
considerations, within their duty to promote the success of the
Company. The Board’s report on its compliance with Section 172 of
the Companies Act 2006 is contained within the Strategic Report
on pages 24 and 25.
Subsidiary Employees
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 Nominations Committees advise the Board in respect of
policies on remuneration-related matters.
Since the subsidiary company has only eight employees, including
its two executive directors, the Board considers that the directors
of AFML are best-placed to engage with the workforce. In
accordance with the Company’s whistleblowing policy, members of
staff who wish to discuss any matter with someone other than the
subsidiary directors are able to contact the Audit Committee
Chairman, or in her absence another member of the Audit
Committee.
Relationship with other service providers
The Board has delegated a wide range of activities to external
agents, in addition to the Portfolio Manager.
These services include investment administration, management
and financial accounting, Company Secretarial and certain other
administrative and registration services. The contracts for each of
these were entered into after full and proper consideration by the
Board of the quality and cost of the services offered, including the
control systems in operation in so far as they relate to the affairs of
the Company.
Further information on the service providers is contained within
the Strategic Report on pages 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.
Viability Statement and Going Concern
The Board’s assessment of the Company’s longer-term viability and
that it is appropriate for the financial statements to be prepared on
a going concern basis are set out in the Strategic Report on
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 shares in the Company are held via a nominee company,
the Company undertakes:
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Division of Responsibilities
Responsibilities of the Chairman
The Chairman’s primary role is to provide leadership to the Board,
assuming responsibility for its overall effectiveness in directing the
company. The Chairman is responsible for:
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ensuring that the Board is effective in its task of setting and
implementing the Company’s direction and strategy taking the
chair at general meetings and Board meetings, conducting
meetings effectively and ensuring all Directors are involved in
discussions and decision-making;
setting the agenda for Board meetings and ensuring the
Directors receive accurate, timely and clear information for
decision-making;
taking a leading role in determining the Board’s composition
and structure, overseeing the induction of new Directors and
the development of the Board as a whole, leading the annual
board evaluation process and assessing the contribution of
individual Directors;
supporting and also challenging the AIFM and the Portfolio
Manager (and other suppliers where necessary) ensuring
effective communications with shareholders and, where
appropriate, stakeholders; and
engaging with shareholders to ensure that the Board has a
clear understanding of shareholder views.
Given the small size of the Board and the Company’s shareholder
register, the Board has not appointed a senior independent
director, but will address this after the planned board recruitment.
Directors’ Interests
The beneficial interests of the Directors in the Company are set out
on page 43 of this annual report.
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, Neil England was appointed as chairman of
Schroder British Opportunities Trust plc and Karen Brade was
appointed as a non-executive director of HeiQ plc. Each of the
other 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. It was however apparent from the review that
the workload associated with the Board, its four committees and
the regular fund raising events is making significant demands on
non-executive time and additional Board resources are required. A
recruitment company with experience of fintech is in the process of
being engaged to assist with identification of appropriate
candidates.
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, although Frostrow or AFML may
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.
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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 in order 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. Unless otherwise determined by the
Company by ordinary resolution, the number of Directors shall not
be less than two.
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.
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.
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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.
Conflicts of Interest
In line with the Companies Act 2006, the Board has the power to
sanction any potential conflicts of interest that may arise and
impose such limits or conditions as it thinks fit. A register of
interests and external appointments is maintained and is reviewed
at every Board meeting to ensure all details are kept up to date.
Should a conflict arise, the Board has the authority to request that
the director concerned abstains from any relevant discussion or
vote where a perceived conflict may arise. Appropriate
authorisation will be sought prior to the appointment of any new
Director or if any new conflicts or potential conflicts arise.
Exercise of Voting Powers
Stewardship and the exercise of voting powers is summarised on
page 37.
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.
The Board applies the same standards to its service providers in
their activities for the Company.
A copy of the Company’s Anti Bribery and Corruption Policy can be
found on its website at www.augmentum.vc. The policy is reviewed
regularly by the Audit Committee.
Prevention of the Facilitation of Tax Evasion
In response to the implementation of the Criminal Finances Act
2017, the Board adopted a zero-tolerance approach to the criminal
facilitation of tax evasion. A copy of the Company’s policy on
preventing the facilitation of tax evasion can be found on the
Company’s website www.augmentum.vc. The policy is reviewed
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.
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AUGMENTUM FINTECH PLC
CORPORATE GOVERNANCE REPORT continued
Company Secretary
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.
These include specific reasons why (in the Board’s opinion) each
Director’s contribution is, and continues to be, important to the
Company’s long-term sustainable success.
In addition to the ordinary business of the meeting the following
items of special business will be proposed:
Resolution 8 Authority to allot shares
Relationship with the AIFM and with the Portfolio Manager
Resolution 9 Authority to disapply pre-emption rights
The Company manages its own operations through the Board and
AIFM, as set out on pages 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
Resolution 10 Authority to sell shares held in Treasury on a non
pre-emptive basis
Resolution 11 Authority to buy back shares
Resolution 12 Amend the Company’s Articles
Resolution 13 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
document being sent to Shareholders with this Report and will be
available on the Company’s website www.augmentum.vc.
The Statement of Directors’ Responsibilities on page 52 describes
the Directors’ responsibility for preparing this report.
By order of the Board
Frostrow Capital LLP
Company Secretary
11 June 2021
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.
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.
The third AGM of the Company will be held on Tuesday,
21 September 2021 at 11.00 a.m. at the offices of Frostrow Capital LLP,
25 Southampton Buildings, London WC2A 1AL.
The Notice for the Annual General Meeting is published as a
separate document from this annual report and financial
statements. A summary of the Annual General Meeting business is
appended to that document, in the form of explanatory notes to
the resolutions.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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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:
–
–
–
–
Base salary.
Performance-related annual bonus.
Other benefits (including life and health insurance).
Participation in AFML’s carried interest plan.
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
clawed back 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 participants’ returns 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.
Consideration by Directors of Matters Relating to Directors’
Remuneration
Each of the Directors is appointed pursuant to a letter of appointment
with the Company. Subject to their re-election by shareholders,
Directors’ initial term is three years from their appointment, and their
appointments are terminable upon three months’ notice by either
party.
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 2021. 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:
–
–
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 two 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 executive 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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AUGMENTUM FINTECH PLC
DIRECTORS’ REMUNERATION REPORT continued
The Committee assesses the workload and responsibilities of the non-
executive directors and reviews, annually, the fees paid to them in
accordance with the policy set out on pages 44 to 48.
At the most recent review of Directors’ fees, held in March 2021,
it was agreed that Directors’ fees would increase, with effect from
1 April 2021, as follows:
The Directors’ fees are determined subject to the limit set out in
the Company’s Articles of Association.
The Directors are remunerated exclusively by fixed fees in cash and
do not receive bonus payments or pension contributions from the
Company, hold options to acquire shares in the Company, or other
benefits, nor do they participate in the AFML carried interest plan.
The Company does not have share options or a share scheme.
Directors are entitled to be reimbursed for reasonable out of
pocket expenses incurred by them in order to perform their duties
as Directors of the Company.
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 2021.
Chairman of the Board: from £35,000 to £45,000 per annum;
Additional fees paid to Audit and Valuation Committee Chairs: from
£5,000 to £8,000 per annum; Directors fees: from £25,000 to
£27,000 per annum. This is the first increase since the Company’s
IPO in March 2018.
The Committee was not provided with any external advice or
services during the financial year ended 31 March 2021 in respect of
the fees payable to the non-executive Directors.
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.
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 meetings held in 2019 and 2020.
At the Annual General Meeting held on 29 September 2020 an ordinary resolution to approve the Directors’ Remuneration Report for the
year ended 31 March 2020 was put to shareholders and approved on a poll. At the Annual General Meeting held on 11 September 2019 an
ordinary resolution to approve the Directors’ Remuneration Policy was put to shareholders and approved on a show of hands. The result of
the poll in 2020 and the proxy votes lodged with the registrar in 2019 for the respective resolutions were as follows:
Votes Total Votes Votes
Resolution Votes For % Against % Cast Withheld
Approval of the Directors’ Remuneration Report
for the year ended 31 March 2020 25,659,048 99.8 59,414 0.2 25,718,462 99,876
Approval of the Directors’ Renumeration Policy 21,638,197 99.8 38,899 0.2 21,677,096 32,305
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DIRECTORS’ REMUNERATION REPORT continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
43
Single total figure of remuneration (Audited)
Total Shareholder Return
The following table shows the single figure of remuneration of the
non-executive directors’ remuneration for the year:
2021 2020
Fixed Fixed
fees fees %
Role £’000s £’000s change
Neil England Chairman of the 35 35 0%
Board and Nominations
Committee
Karen Brade Chairman of the Audit 30 30 0%
Committee
David Haysey Chairman of the 30 30 0%
Management
Engagement
& Remuneration
Committee
and Valuations
Committee
Total 95 95 0%
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 2021 2020
Neil England Chairman of the Board and 110,000 100,000
Nominations Committee
Karen Brade Chairman of Audit 32,234 32,234
Committee
David Haysey Chairman of Management 85,983 85,983
Engagement & Remuneration
Committee and Valuations
Committee
The Directors are not required to own shares in the Company.
There are no changes to Directors’ share interests from 31 March
2021 to the date of this report.
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The graph below shows the total return for the period from
13 March 2018 to 31 March 2021 against the FTSE 250 Ex Investment
Trust Index.
%
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
Mar
2018
Jun
2018
Dec
2018
Mar
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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
2020
Mar
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Augmentum Fintech Ord (Share price total return)
FTSE 250 Ex Investment Trust
Relative importance of spend on pay
2021 2020
Spend £’000 £’000
Fees of non-executive Directors 95 95
Remuneration paid to or 1,530 1,081
receivable by all employees of
the Group in respect of the year**
Total Expenses** 2,879 2,622
** excludes carried interest provision and other capital expenses.
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
11 June 2021
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AUGMENTUM FINTECH PLC
DIRECTORS’ REMUNERATION POLICY
REMUNERATION POLICY
Consideration of Shareholder Views
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 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 continue to apply until the Annual General Meeting
in 2022, when it will next be voted on by shareholders.
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.
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DIRECTORS’ REMUNERATION POLICY continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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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
The maximum aggregate fee
for Directors, including the
Chairman, is limited by the
Company’s articles of
association to £500,000 p.a.
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 Management Engagement
& Remuneration Committee
Fees are reviewed annually to ensure that they
remain in line with market practice and are paid
in equal monthly instalments
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 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
i. 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 currently £220,000 (2020: £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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AUGMENTUM FINTECH PLC
DIRECTORS’ REMUNERATION POLICY continued
ii. 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)
iii. 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
iv. 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
v. 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.
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DIRECTORS’ REMUNERATION POLICY continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
47
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 2020 and shows potential pay-
outs at different levels of performance. The value of each element
has been included.
CEO Remuneration £m
2.2
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 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
11 June 2021
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REPORT OF THE AUDIT COMMITTEE
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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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 a further time in the subsequent period 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
Discussion and approval of the fee for the external audit
Review of Audit Committee terms of reference and the audit
policies
Review of the Company’s key risks and internal controls
Review of the Annual and Interim Reports, including
consideration of the significant accounting issues relating to
the financial statements
l Meeting with the external auditor without management present
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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 auditor.
Internal Controls and Risk Management
The Board has overall responsibility for risk management and for
the review of the internal controls of the Company, undertaken in
the context of its investment objective.
A summary of the principal risks facing the Company is provided in
the Strategic Report.
The review covers the key business, operational, compliance and
financial risks facing the Company, including emerging risks.
In arriving at its judgement of what risks the Company faces, the
Board has considered the Company’s operations in light of the
following factors:
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the nature and extent of risks which it regards as acceptable
for the Company to bear within its overall investment
objective;
the threat of such risks becoming a reality; and
the Company’s ability to reduce the incidence and impact of
risk on its performance.
Against this background, a risk matrix has been developed which
covers all key risks that the Company faces, the likelihood of their
occurrence and their potential impact, how these risks are
monitored and mitigating controls in place.
Statement 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
l
Providing advice to the Board on whether the annual financial
statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company’s performance, business
model and strategy
l Making recommendations to the Board in relation to the
appointment of the external auditor and approving their
remuneration and the terms of their engagement
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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,
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AUGMENTUM FINTECH PLC
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.
Financial Reporting Council ("FRC") review of the Company's
Annual Report & Accounts to 31 March 2020
During the year the FRC carried out a review of the Company’s
Annual Report and Accounts to 31 March 2020.
The review was based on the document itself and did not benefit
from detailed knowledge of the Company. However, it was
conducted by staff of the FRC who had an understanding of the
relevant legal and accounting framework. The Committee was
pleased to note that, based on the FRC’s review, while there were a
small number of minor disclosure matters that required, and have
received, consideration there were no questions that the FRC
wished to raise.
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 the AIFM, Portfolio Manager and the external
auditor. We consider the work to be detailed, comprehensive and
that the persons preparing the reports have sufficient and
appropriate expertise through their experience and qualifications.
Furthermore, we believe that the process is planned and managed
so as to devote adequate time and resource to preparation and
review by the AIFM, Portfolio Manager and the 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 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.
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 8 June 2021 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
11 June 2021.
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
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the extent of non-audit services provided by the Auditor.
In order to consider the effectiveness of the audit process, we
reviewed:
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the Auditor’s execution and fulfilment of the agreed audit plan,
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.
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REPORT OF THE AUDIT COMMITTEE continued
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
51
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
11 June 2021
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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
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 this was in
compliance with the requirements.
Internal Audit Function
The Group does not have an internal audit function. Through
Frostrow, the AIFM, most of the Company’s operations are
delegated to third parties and the investment management
subsidiary, AFML, employs only a small staff. AFML and certain
other key service providers are subject to external regulation and
have compliance functions in place. The Audit Committee receives
an annual assurance report on the AIFM’s internal controls, which
includes a report from the AIFM’s auditor on the control policies
and procedures in operation. AFML provides half yearly compliance
reports to the Audit Committee confirming, amongst other things,
that compliance monitoring is carried out in the manner and with
the frequency specified in its compliance monitoring programme.
The appointment of separate service providers ensures a clear
separation of duties and a structure of internal controls that is
balanced and robust. For these reasons, supported by the review of
the effectiveness of internal controls referred to above, the Audit
Committee considers that an internal audit function specific to the
Company is unnecessary. The Board and the AIFM will continue to
monitor the system of internal controls in order to provide
assurance that it operates as intended and the Directors will review
at least annually whether a function equivalent to an internal audit
is needed.
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52
AUGMENTUM FINTECH PLC
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE ANNUAL REPORT,
THE DIRECTORS’ REMUNERATION REPORT AND
THE FINANCIAL STATEMENTS
Responsibility Statement
The Directors consider that the annual report and accounts, taken
as a whole, are fair, balanced, and understandable and provides the
information necessary for shareholders to assess the Group and
Company’s position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed under
the ‘Board of Directors’ on page 29 confirm that, to the best of
their knowledge:
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the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit of the Group
and Company;
The annual report includes a fair review of the development
and performance of the business and the financial position of
the group and Company, together with a description of the
principal risks and uncertainties that they face.
Neil England
Chairman
11 June 2021
Note to those who access this document by electronic means:
The Annual Report for the year ended 31 March 2021 has been
approved by the Board of Augmentum Fintech plc.
Copies of the Annual Report and the Half Year Report are
circulated to shareholders and, where possible, to investors
through other providers’ products and nominee companies (or
written notification is sent when they are published online). It is
also made available in electronic format for the convenience of
readers. Printed copies are available from the Company’s
registered office in London.
The directors are responsible for preparing the annual report and
financial statements in accordance with United Kingdom applicable
law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors have prepared
the Group and Company financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. Under Company law the
directors must not approve the financial statements unless they
are satisfied that they give a true and fair view of the state of
affairs of the Group and Company and of the return or loss for the
Group and Company for that period.
In preparing these group financial statements, the directors are
required to:
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select suitable accounting policies and then apply them
consistently;
l make judgements and accounting estimates that are
reasonable and prudent;
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state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006, subject to any
material departures disclosed and explained in the group
financial statements;
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
prepare a directors’ report, a strategic report and directors’
remuneration report which comply with the requirements of
the Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Company’s transactions and disclose with reasonable accuracy at
any time the financial position of the Group and Company and
enable them to ensure that the financial statements comply with
the Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets of the Group
and the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of
the company’s website: www.augmentum.vc. Legislation in the
United Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
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CONSOLIDATED INCOME STATEMENT
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
53
Year ended 31 March 2021 Year ended 31 March 2020
Revenue Capital Total Revenue Capital Total
Notes £’000 £’000 £’000 £’000 £’000 £’000
Gains on Investments 8 – 26,727 26,727 – 12,683 12,683
Interest Income 7 – 7 106 – 106
Expenses 2 (2,879) (4,179) (7,058) (2,579) (2,410) (4,989)
(Loss)/Return before Taxation (2,872) 22,548 19,676 (2,473) 10,273 7,800
Taxation 6 – – – – – –
(Loss)/Return for the year (2,872) 22,548 19,676 (2,473) 10,273 7,800
(Loss)/Return per Share (pence) 7 (2.3)p 18.2p 15.9p (2.2)p 9.2p 7.0p
The total column of this statement represents the Group’s Consolidated Income Statement, prepared in accordance with IFRS as adopted by the UK.
The revenue and capital columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
The Group does not have any other comprehensive income and hence the total return, as disclosed above, is the same as the Group’s total comprehensive income.
All items in the above statement derive from continuing operations.
All returns are attributable to the equity holders of Augmentum Fintech plc, the parent company. There are no non-controlling interests.
The notes on pages 59 to 69 are integral to and form part of these Financial Statements.
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AUGMENTUM FINTECH PLC
CONSOLIDATED AND COMPANY STATEMENTS
OF CHANGES IN EQUITY
Year ended 31 March 2021
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Group £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders funds 1,171 24,760 92,033 22,328 (4,499) 135,793
Issue of shares following placing and offer for subscription 234 27,812 – – – 28,046
Costs of placing and offer for subscription – (546) – – – (546)
Issue of shares from Treasury – 125 119 – – 244
Purchase of own shares into Treasury – – (51) – – (51)
Return/(loss) for the year – – – 22,548 (2,872) 19,676
At 31 March 2021 1,405 52,151 92,101 44,876 (7,371) 183,162
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
Year ended 31 March 2021
Ordinary Share Other
share premium Special capital Revenue
capital account reserve reserve reserve Total
Company £’000 £’000 £’000 £’000 £’000 £’000
Opening Shareholders funds 1,171 24,760 92,033 22,328 (4,690) 135,602
Issue of shares following placing and offer for subscription 234 27,812 – – – 28,046
Costs of placing and offer for subscription - (546) - - - (546)
Issue of shares from Treasury – 125 119 – – 244
Purchase of own shares into Treasury – – (51) – – (51)
Return/(loss) for the year – – – 22,548 (3,084) 19,464
At 31 March 2021 1,405 52,151 92,101 44,876 (7,774) 182,759
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
The notes on pages 59 to 69 are integral to and form part of these Financial Statements.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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CONSOLIDATED BALANCE SHEET
as at 31 March 2021
2021 2020
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 164,127 123,132
Property, plant & equipment 6 17
Current Assets
Right of use asset 5 145 333
Other receivables 10 47 112
Cash and cash equivalents 27,433 15,111
Total Assets 191,758 138,705
Current Liabilities
Other payables 11 (1,940) (212)
Lease liability 5 (148) (333)
Provisions 12 (6,508) (2,367)
Total Assets less Current Liabilities 183,162 135,793
Net Assets 183,162 135,793
Capital and Reserves
Called up share capital 15 1,405 1,171
Share premium 52,151 24,760
Special reserve 92,101 92,033
Retained earnings:
Capital reserves 44,876 22,328
Revenue reserve (7,371) (4,499)
Total Equity 183,162 135,793
Net Asset Value per share (pence) 16 130.4p 116.1p
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The Financial Statements on pages 53 to 58 were approved by the Board of Directors on 11 June 2021 and signed on its behalf by:
Neil England
Chairman
The notes on pages 59 to 69 are integral to and form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
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AUGMENTUM FINTECH PLC
COMPANY BALANCE SHEET
as at 31 March 2021
2021 2020
Note £’000 £’000
Non-Current Assets
Investments held at fair value 8 164,127 123,132
Investment in subsidiary undertakings 9 500 500
Current Assets
Other receivables 10 17 83
Cash and cash equivalents 26,533 14,387
Total Assets 191,177 138,102
Current Liabilities
Other payables 11 (1,910) (133)
Provisions 12 (6,508) (2,367)
Total Assets less Current Liabilities 182,759 135,602
Net Assets 182,759 135,602
Capital and Reserves
Called up share capital 15 1,405 1,171
Share premium 52,151 24,760
Special reserve 92,101 92,033
Retained earnings:
Capital reserves 44,876 22,328
Revenue reserve (7,774) (4,690)
Total Equity 182,759 135,602
The accompanying notes are an integral part of these Financial Statements.
The Company return for the year was £19,464,000 (2020: £7,636,000). 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 11 June 2021 and signed on its behalf by:
Neil England
Chairman
The notes on pages 59 to 69 are integral to and form part of these Financial Statements.
Augmentum Fintech plc
Company Registration Number: 11118262
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CONSOLIDATED CASH FLOW STATEMENT
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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Year Year
ended ended
31 March 31 March
2021 2020
£’000 £’000
Operating activities
Purchases of investments (12,538) (32,849)
Acquisition of property, plant and equipment (2) (13)
Interest income received 68 70
Expenses paid (2,758) (2,454)
Lease payments (141) (158)
Net cash outflow from operating activities (15,371) (35,404)
Issue of shares following placing and offer for subscription 28,046 25,818
Costs of placing and offer for subscription (546) (827)
Purchase of own shares into Treasury (51) (68)
Issue of shares from Treasury 244 –
Net cash generated from financing activities 27,693 24,923
Net increase/(decrease) in cash and cash equivalents 12,322 (10,481)
Cash and cash equivalents at start of year 15,111 25,592
Cash and cash equivalents at end of year 27,433 15,111
The notes on pages 59 to 69 are integral to and form part of these Financial Statements.
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AUGMENTUM FINTECH PLC
COMPANY CASH FLOW STATEMENT
Year Year
ended ended
31 March 31 March
2021 2020
£’000 £’000
Operating activities
Purchases of investments (12,538) (32,849)
Interest income received 66 70
Expenses paid (3,075) (2,803)
Net cash outflow from operating activities (15,547) (35,582)
Issue of shares following placing and offer for subscription 28,046 25,818
Costs of placing and offer for subscription (546) (827)
Purchase of own shares into Treasury (51) (68)
Issue of shares from Treasury 244 –
Net cash generated from financing activities 27,693 24,923
Net increase/(decrease) in cash and cash equivalents 12,146 (10,659)
Cash and cash equivalents at start of year 14,387 25,046
Cash and cash equivalents at end of year 26,533 14,387
The notes on pages 59 to 69 are integral to and form part of these Financial Statements.
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NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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 located in the UK, continental Europe and the US.
2 Expenses
2021 2020
Revenue Capital Total Revenue Capital Total
£’000 £’000 £’000 £’000 £’000 £’000
AIFM fees 334 – 334 278 – 278
Administrative expenses 817 39 856 1,016 43 1,059
Directors fees* 95 – 95 95 – 95
Carried Interest (see Note 4)^ – 4,140 4,140 – 2,367 2,367
Staff costs (see Note 4) 1,535 – 1,535 1,081 – 1,081
Auditors’ remuneration 98 – 98 109 – 109
Total expenses 2,879 4,179 7,058 2,579 2,410 4,989
£197,000 of interest and depreciation relating to a lease (2020: £158,000) 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 43.
^ 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 12 for further details.
Auditors’ Remuneration
2021 2020
Group Company Group Company
£’000 £’000 £’000 £’000
Audit of Group accounts pursuant to legislation* 66 66 641 641
Audit of subsidiaries accounts pursuant to legislation* 14 – 12 –
Audit related assurance services* 18 15 332 302
Total auditors’ remuneration 98 81 109 94
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 £nil (2020: £25,000) 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.
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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.
2021 2020
Other Other
Salary/Fees benefits Total Salary/Fees benefits Total
£’000 £’000 £’000 £’000 £’000 £’000
Key management personnel remuneration 755 78 833 495 73 568
Carried Interest Allocation* 2,640 – 2,640 1,656 – 1,656
3,395 78 3,473 2,151 73 2,224
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 eight (2020: seven). All employees are within the investment
and administration function and employed by the Company's subsidiary.
2021 2020
£’000 £’000
Wages and salaries 1,254 876
Social security costs 179 114
Other pension costs 78 68
Other staff benefits 24 23
Staff costs 1,535 1,081
Carried Interest (charged to capital)* 4,140 2,367
Total 5,675 3,448
* 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 2021 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, its subsidiary. See page 22 and Note 19.9 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 2021 and 2020, in the UK from which it operates for a fixed fee. The
Group had no other leases in 2021 and 2020. 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
2021 2020
Group Group
Office Premises Office Premises
£’000 £’000
As at 1 April 333 –
Addition – Recognised on initial adoption of IFRS 16 on 1 April 2020 – 164
Addition – 320
Depreciation (188) (151)
At 31 March 145 333
Lease Liability
2021 2020
Group Group
Office Premises Office Premises
£’000 £’000
As at 1 April 333 –
Addition – Recognised on initial adoption of IFRS 16 on 1 April 2020 – 164
Addition – 320
Interest Expense 9 7
Lease Payments (194) (158)
At 31 March 148 333
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5 Leases (continued)
Maturity Analysis
Group
Between
At 31 March 2021 Up to 3 months 3 – 12 months 1 – 2 years
£’000 £’000 £’000
Lease payments 34 104 10
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
2021 2020
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £’000 £’000 £’000 £’000 £’000 £’000
Current tax:
UK corporate tax on profits for the year – – – – – –
The difference between the income tax expense shown above and the amount calculated by applying the effective rate of UK corporation
tax of 19% (2020: 19%) to the (loss)/return before tax is as follows:
2021 2020
Revenue Capital Total Revenue Capital Total
For the year ended 31 March £’000 £’000 £’000 £’000 £’000 £’000
(Loss)/return before taxation (2,872) 22,548 19,676 (2,473) 10,273 7,800
(Loss)/return before tax multiplied by the effective rate of
UK corporation tax of 19% (2020: 19%) (546) 4,284 3,738 (470) 1,952 1,482
Effects of:
Non-taxable capital returns – (5,078) (5,078) – (2,410) (2,410)
Excess management expenses 546 794 1,340 470 458 928
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 £9,998,000 (2020: £7,089,000). It is not
anticipated that these excess expenses will be utilised in the foreseeable future.
7
(Loss)/Return per Share
The (loss)/return per share figures are based on the following figures:
2021 2020
£’000 £’000
Net revenue loss (2,872) (2,473)
Net capital return 22,548 10,273
Net total return 19,676 7,800
Weighted average number of ordinary shares in issue 123,553,057 111,066,278
Pence Pence
Revenue loss per share (2.3) (2.2)
Capital return per share 18.2 9.2
Total return per share 15.9 7.0
The return per share is the figure calculated in accordance with IAS 33 ‘Earnings per share’.
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8 Investments Held at Fair Value
Non-current Investments Held at Fair Value
2021 2020
Group and Group and
Company Company
As at 31 March £’000 £’000
Unlisted at fair value 164,127 123,132
Reconciliation of movements on investments held at fair value are as follows:
Group and Group and
Company Company
£’000 £’000
As at 1 April 123,132 77,600
Purchases at cost 14,268 32,849
Gains on investments 26,727 12,683
As at 31 March 164,127 123,132
9
Subsidiary undertakings
The Company has an investment of £500,000 (2020: £500,000) in the issued ordinary share capital of its wholly owned subsidiary
undertaking, Augmentum Fintech Management Limited (“AFML”), which is registered in England and Wales, operates in the United
Kingdom and is regulated by the Financial Conduct Authority. AFML’s principal activity is the provision of portfolio management services to
the Company. AFML’s registered office is 5-23 Old Street, London EC1V 9HL.
10 Other Receivables
2021 2021 2020 2020
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Other receivables 47 17 112 83
11 Other Payables
2021 2021 2020 2020
Group Company Group Company
As at 31 March £’000 £’000 £’000 £’000
Purchases payable 1,730 1,730 – –
Other payables 210 180 212 133
1,940 1,910 212 133
12 Provisions
2021 2020
Group and Group and
Company Company
As at 31 March £’000 £’000
Carried Interest provision* 6,508 2,367
* See page 22 and Notes 4 and 19.9 for further details.
13 Financial Instruments
(i)
Management of Risk
As an investment trust, the Group’s investment objective is to seek capital growth from a portfolio of securities. The holding of these
financial instruments to meet this objective results in certain risks.
The Group’s financial instruments comprise securities in unlisted companies, partnership interests, trade receivables, trade payables, and
cash and cash equivalents.
The main risks arising from the Group’s financial instruments are fluctuations in market price, and credit and liquidity risk. The policies for
managing each of these risks are summarised below. These policies have remained constant throughout the year under review. The
financial risks of the Company are aligned to the Group’s financial risks.
Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments in the Group’s portfolio. It represents the
potential loss the Group might suffer through holding market positions in the face of price movements, mitigated by stock diversification.
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13 Financial Instruments (continued)
The Group is exposed to the risk of the change in value of its unlisted equity and non-equity investments. For unlisted equity and non-
equity investments the market risk is principally deemed to be the assumptions used in the valuation methodology as set out in the
accounting policies.
Liquidity Risk
The Group’s assets comprise unlisted equity and non-equity investments. Whilst unlisted equity is illiquid, short-term flexibility is achieved
through cash and cash equivalents.
Credit Risk
The Group’s exposure to credit risk principally arises from cash and cash equivalents. Only highly rated banks (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.
2021 2020
Bank Credit Ratings at 31 March 2021 £’000 £’000 Moody’s
Barclays Bank plc 27,433 4,095 A1
Santander International* – 11,016 Aa3
27,433 15,111
*Rating is for the parent company
Financial Assets and Liabilities
(ii)
Group Company Group Company
Fair value Fair value Fair value Fair value
2021 2021 2020 2020
As at 31 March £’000 £’000 £’000 £’000
Financial Assets
Unlisted equity shares 157,719 157,719 103,991 103,991
Unlisted convertible loan notes 6,408 6,408 19,141 19,141
Cash and cash equivalents 27,433 26,533 15,111 14,387
Other assets 47 17 112 83
Financial Liabilities
Other payables (1,940) (1,910) (212) (133)
Cash and other receivables and payables are measured at amortised cost and the rest of the financial assets in the table above are held at
approximate to fair value. The carrying values of the financial assets and liabilities measured at amortised cost are equal to the fair value.
The unlisted financial assets held at fair value are valued in accordance with the IPEV Guidelines as detailed within Note 19.4.
(iii)
Fair Value Hierarchy
Fair value is the amount for which an asset could be exchanged, or a liability settled between knowledgeable willing parties in an arm’s
length transaction.
The Group complies with IFRS 13 in respect of disclosures about the degree of reliability of fair value measurements. This requires the
Group to classify, for disclosure purposes, fair value measurements using a fair value hierarchy that reflects the significance of the inputs
used in making the measurements.
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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 2021. 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.
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13 Financial Instruments (continued)
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
£26,727,000 (year ended 31 March 2020: £12,683,000).
The table below presents those investments in portfolio companies whose fair values are recognised in whole or in part using valuation
techniques based on assumptions that are not supported by prices or other inputs from observable current market transactions in the
same instrument and the effect of changing one or more of those assumptions behind the valuation techniques adopted based on
reasonable possible alternative assumptions.
Fair Value Fair Value Reasonably Change in
2021 2020 possible shift valuation
Valuation Technique £’000 £’000 Unobservable Inputs in input +/- +/(-) £’000
Multiple methodology 75,461 34,554 Multiple 10% 5,427/(5,444)
Illiquidity adjustment 30% (7,422)/8,333
CPORT* 69,536 69,437 Transaction price 10% 6,088/(5,917)
PWERM** 4,503 19,141 Probability of conversion 25% 265/(503)
NAV 4,091 – Discount to NAV 30% (1,228)
Sales Price 10,536 – N/a
* Calibrated price of recent transaction.
** Probability weighted expected return methodology.
14 Substantial holdings in Investments
The table below shows substantial holdings in investments where the Company owns more than 3% of the fully diluted capital of the
investee company, and the investment value is more than 5% of the Company’s non-current investments.
2021 2020
% ownership % of % ownership % of
(fully diluted) portfolio (fully diluted) portfolio
Interactive Investor* 3.8 19.9 3.7 17.7
BullionVault* 11.1 7.0 11.1 9.1
Zopa* 3.0 5.8 6.1 6.4
Augmentum I LP ** 100.0 34.8 100.0 36.1
Tide 5.9 11.6 5.9 11.5
Grover 8.3 7.9 – –
Monese 7.5 6.3 5.4 8.3
Dext (formerly Receipt Bank) 3.7 6.4 3.7 6.1
Farewill 14.1 6.5 13.4 5.9
* 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.
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15 Called up Share Capital
2021 2020
Ordinary Shares Ordinary Shares
No. £’000 No. £’000
Opening issued and fully paid ordinary shares of 1p each 116,931,911 1,171 94,000,000 940
Issue of shares from public offering 23,371,380 234 23,051,911 231
Ordinary shares purchased into treasury (75,000) – (120,000) –
Issue of shares from Treasury 195,000 – – –
Closing issued and fully paid ordinary shares of 1p each 140,423,291 1,405 116,931,911 1,171
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.
On 1 November 2020 23,371,380 ordinary shares were issued. The nominal value of the shares issued was £234,000 and the total gross
cash consideration received was £28,046,000. This consideration has been offset against costs of issue, which totalled £546,000.
At 31 March 2021 there were no shares held in treasury (2020: 120,000).
16 Net Asset Value per Share
The Net Asset Value (“NAV”) per share of 130.4p (2020: 116.1p) is calculated by dividing the NAV of £183,162,000 (2020: £135,793,000) by
the number of ordinary shares in issue at the year end amounting to 140,423,291 (31 March 2020: 116,931,911).
17 Related Party Transactions
Balances and transactions between the Company and its subsidiaries are eliminated on consolidation. Details of transactions between the
Group and Company and other related parties are disclosed below.
The following are considered to be related parties:
•
•
•
Frostrow Capital LLP (under the Listing Rules only)
The Directors of the Company and the Company’s subsidiary, Augmentum Fintech Management Limited
Augmentum Fintech Management Limited
Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, are disclosed on page 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 43. Details of the Directors’ interests in the capital of the Company can
also be found on page 43.
Augmentum Fintech Management Limited is appointed as the Company’s delegated Portfolio Manager. The Portfolio Manager earns a
portfolio management fee of 1.5% of NAV up to £250 million and 1.0% of NAV for any excess over £250 million and is entitled to a 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 £2,235,000 (2020: £1,861,000), which has been eliminated on consolidation and therefore does not
appear in these accounts. A carried interest provision of £6,508,000 (2020: £2,367,000) 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 (2020: nil).
18 Capital Risk Management
Group Group
2021 2020
£’000 £’000
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Equity
Equity share capital 1,405 1,171
Retained earnings and other reserves 181,757 134,622
Total capital and reserves 183,162 135,793
The Group’s objective in the management of capital risk is to safeguard its liquidity in order to provide returns for shareholders and to
maintain an optimal capital structure. In doing so the Group may adjust the amount of dividends paid to shareholders or issue new shares
or debt.
The Group manages the levels of cash deposits held whilst maintaining sufficient liquidity for investments and operating expenses.
There are no externally imposed restrictions on the Company’s capital.
There is a mis-match between accounting standards which requires the Company’s subsidiary, AFML, to recognise carried interest
potentially payable to employees based on current investment valuations but is not permitted to recognise the matching carried interest
fee payable from the Company to AFML until it is virtually certain to be paid. As a result of this mis-match AFML has a net deficit position
on both an accounting and regulatory capital basis. The Board have reviewed this matter and consider that the solvency of AFML is not
affected by this as it would only, under the carried interest arrangements, pay carried interest to employees after receipt of the carried
interest from the Company.
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19 Basis of Accounting and Significant Accounting Policies
19.1
Basis of preparation
The Group and Company Financial Statements for the year ended 31 March 2021 have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union (“IFRS”).
The Financial Statements have been prepared on a going concern basis and under the historical cost basis of accounting, modified to
include the revaluation of certain assets at fair value, as disclosed in Note 19.4. The Board has considered a detailed assessment of the
Group and Company’s ability to meet their liabilities as they fall due, including stress tests which modelled the effects of a fall in portfolio
valuations and liquidity constraints on the Group and Company’s financial position and cash flows. 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.
The Board should determine whether the indirect costs of generating capital returns should be allocated to capital as well as the direct
costs incurred in generating capital profits. In this regard the Board has decided to follow a non-allocation approach to indirect costs,
which will therefore be charged in full to the revenue column of the Consolidated Income Statement.
19.2
Basis of Consolidation
The Consolidated Financial Statements include the Company and certain subsidiary undertakings.
IFRS 10 and IFRS 12 define an investment entity and include an exemption from the consolidation requirements for investment entities.
The Company has been deemed to meet the definition of an investment entity per IFRS 10 as the following conditions exist:
•
•
•
•
•
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 9 is wholly owned. It provides investment related services through the provision of
investment management. As the primary purpose of this subsidiary is to provide investment related services that relate to the Company’s
investment activities it is not held for investment purposes. This subsidiary has been consolidated.
The Company also owns 100% of the interests in Augmentum I LP (the ‘LP’). As this LP is itself an investment entity and is held as part of
the Company’s investment portfolio it has not been consolidated.
19.3
Application of New Standards
(i) New standards, interpretations and amendments effective from 1 April 2020
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 April 2020 that had a
significant effect on the Group’s financial statements.
(ii) New standards, interpretations and amendments not yet effective
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board (‘IASB’) that
are effective in future accounting periods. The Group does not expect any of the standards issued by the IASB, but not yet effective, to
have a material impact on the Group or Company.
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19 Basis of Accounting and Significant Accounting Policies (continued)
19.4
Investments
All investments are defined by IFRS as fair value through profit or loss (described in the Financial Statements as Investments held at fair
value) and are subsequently measured at reporting dates at fair value. The fair value of direct unquoted investments is calculated in
accordance with the Principles of Valuation of Investments below. Purchases and sales of unlisted investments are recognised when the
contract for acquisition or sale becomes unconditional.
Increases or decreases in valuation are recognised as part of gains on investments at fair value in the Consolidated Income Statement.
Principles of Valuation of Investments
(i) General
The Group estimates the fair value of each investment at the reporting date in accordance with IFRS 13 and the International Private Equity
and Venture Capital Valuation (“IPEV”) Guidelines.
Fair value is the price for which an asset could be exchanged between knowledgeable, willing parties in an arm’s length transaction. In
estimating fair value, the AIFM and Board apply valuation techniques which are appropriate in light of the nature, facts and circumstances
of the investment and use reasonable current market data and inputs combined with judgement and assumptions. Valuation techniques
are applied consistently from one reporting date to another except where a change in technique results in a better estimate of fair value.
In general, the enterprise value of the investee company in question will be determined using one of a range of valuation techniques. The
enterprise value is adjusted for factors such as surplus assets, excess liabilities or other contingencies or relevant factors; the resulting
amount is apportioned between the investee company’s relevant financial instruments according to their ranking and the effect of any
instrument that may dilute economic entitlements.
(ii) Unlisted Equity Investments
In respect of each unlisted investment one or more of the following valuation techniques is used:
•
•
•
A market approach, based on the price of the recent investment, market multiples or industry valuation benchmarks.
A probability-weighted expected returns methodology. Under the PWERM fair value is based on consideration of values for the
investment under different scenarios. This will primarily be used where there is a convertible element to the investment.
A net assets based approach based on the value of the underlying assets of the investment.
In assessing whether a methodology is appropriate techniques that use observable market data are preferred.
Price of Recent Investment/Transaction
Where the investment being valued was itself made recently, or there has been a third party transaction in the investment, the price of the
transaction may provide a good indication of fair value. Using the Price of Recent Investment technique is not a default and at each
reporting date the fair value of investments is estimated to assess whether changes or events subsequent to the relevant transaction
would imply a material change in the investment’s fair value.
Multiple
Under the multiple methodology an earnings or revenue multiple technique is used. This involves the application of an appropriate and
reasonable multiple to the maintainable earnings 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 (‘Probability-Weighted Expected Returns Methodology’)
Under the PWERM potential scenarios are identified. Under each scenario the value of the investment is estimated and a probability for
each scenario was selected. The fair value is then calculated as the sum of the value under each scenario multiplied by its probability.
Net Assets
For the net asset approach the fair value estimate is based on the attributable proportion of the reported net asset value of the investment
derived from the fair value of underlying assets / investments. Valuation reports provided by the manager or general partner of the
investments are used to calculate fair value where there is evidence that the valuation is derived using fair value principles that are
consistent with the Company’s accounting policies and valuation methods. Such valuation reports may be adjusted to take account of
changes or events to the reporting date, or other facts and circumstances which might impact the underlying value.
19.5
Cash and Cash Equivalents
Cash comprises cash at bank and short-term deposits with an original maturity of less than 3 months.
19.6
Presentation and Functional Currency
The Group’s and Company’s presentation and functional currency is Pounds Sterling (“Sterling”), since that is the currency of the primary
economic environment in which the Group operates.
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19 Basis of Accounting and Significant Accounting Policies (continued)
19.7
Other income
Interest income received from cash equivalents is accounted for on an accruals basis.
19.8
Expenses
Expenses are accounted for on an accruals basis, and are charged through the revenue column of the Consolidated Income Statement
except for transaction costs and the carried interest fee as noted below.
Transaction costs are legal and professional fees incurred when undertaking due diligence on investment transactions. Transaction costs,
when incurred, are recognised in the Income Statement. If a transaction successfully completes, as a direct cost of an investment, the
related transaction cost is charged to the capital column of the Income Statement. If the transaction falls through the related cost is
charged to the revenue column of the Income Statement.
19.9
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.
19.10 Leases
All leases are accounted for by recognising a right-of-use asset and a lease liability.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount
rate determined by reference to the Group’s incremental borrowing rate. Right-of-use assets are measured at the amount of the lease
liability less provisions for dilapidations, where applicable.
Subsequent to initial measurement, lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding
and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease.
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.
19.11
Taxation
The tax effect of different items of income/gain and expense/loss is allocated between capital and revenue on the same basis as the
particular item to which it relates.
19.12 Deferred Tax
Deferred taxation is provided on all timing differences other than those differences regarded as permanent. Deferred tax assets are only
recognised to the extent that it is probable that taxable profits will be available from which the reversal of timing differences can be
utilised. Deferred tax is not recognised if the temporary difference arises from the initial recognition of assets and liabilities in a
transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax is provided at the tax rates that are expected to apply in the year when the liability is settled or the asset is realised based on
tax laws and rates that have been enacted or substantively enacted at the Statement of Financial Position date.
19.13 Receivables and Payables
Receivables and payables are typically settled in a short time frame and are carried at amortised cost. As a result, the fair value of these
balances is considered to be materially equal to the carrying value, after taking into account potential impairment losses.
19.14 Share Capital
Ordinary shares issued by the Group are recognised at the proceeds or fair value received with the excess of the amount received over
nominal value being credited to the share premium account. Direct issue costs are deducted from equity.
19.15 Share Premium and Special Reserve
The share premium account arose following the Company’s Admission and represented the difference between the proceeds raised and the
par value of the shares issued. Costs of the share issuance were offset against the proceeds of the relevant share issue and also taken to
the share premium account.
Subsequent to admission and following the approval of the Court, the initial share premium account was cancelled and the balance of the
account was transferred to the Special Reserve. The purpose of this was to enable the Company to increase the distributable reserves
available to facilitate the payment of future dividends or with which to make share repurchases.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
69
19 Basis of Accounting and Significant Accounting Policies (continued)
19.16 Revenue and Capital Reserves
Net capital return is added to the Capital Reserve in the Consolidated Statement of Financial Position, while the net revenue return is
added to the Revenue Reserve. When positive, the revenue reserve is distributable by way of dividend, as is any realised portion of the
capital reserve. The realised portion of the capital reserve is £(208,000) (2020: £(171,000)) representing transaction costs charged to
capital.
19.17 Critical Accounting Judgements and Key Sources of Estimation Uncertainty
Critical accounting judgements and key sources of estimation uncertainty used in preparing the financial information are continually
evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be
reasonable. The resulting judgements and estimates will, by definition, seldom equal the related actual results.
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 19.2.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty in the reporting year, that may have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are
discussed below.
Fair value measurements and valuation processes
Unquoted assets are measured at fair value in accordance with IFRS 13 and the IPEV Valuation Guidelines. Decisions are required in order
to determine the appropriate valuation methodology and subsequently in determining the inputs into the valuation model used. These
decisions include selecting appropriate quoted company comparables, appropriate multiples to apply, adjustments to comparable multiples
and estimating future cash flows of investee companies. In estimating the fair value of an asset, market-observable data is used, to the
extent it is available.
The Valuations Committee, which is chaired by a Director, determines the appropriate valuation techniques and inputs for the model. The
Audit Committee considers the work of the Valuations Committee and the results of their discussion with the AIFM, Portfolio Manager and
the external auditors and works closely with the AIFM and Portfolio Manager to review the appropriate valuation techniques and inputs to
the model. The Chairman of the Audit Committee reports its findings to the Board of Directors of the Group every six months to explain the
cause of fluctuations in the fair value of the investments.
Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in
Note 19.4. As set out in Note 19.9 carried interest is calculated based on the valuation of the investments and as such is considered a
significant accounting estimate.
20 Post Balance Sheet Events
There are no significant events after the end of the reporting period requiring disclosure.
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70
AUGMENTUM FINTECH PLC
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF AUGMENTUM FINTECH PLC
Opinion on the financial statements
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 2021
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006;
the Group financial statements have been properly prepared in accordance with international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union;
the Parent Company financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 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.
We have audited the financial statements of Augmentum Fintech plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 March 2021 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 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 accounting standards in conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, and
as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is
consistent with the additional report to the audit committee.
Independence
Following the recommendation of the audit committee, we were appointed by the members in February 2020 to audit the financial
statements for the year ending 31 March 2020 and subsequent financial periods. The period of total uninterrupted engagement including
retenders and reappointments is 2 years, covering the years ending 31 March 2020 to 31 March 2021. We remain independent of the Group
and the Parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Group or the Parent
Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to
continue to adopt the going concern basis of accounting included:
Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to adopt the going concern basis of
accounting included agreeing the inputs and assumptions within the board’s assessment of the going concern status of the Group and
Parent Company to supporting documentation and our own understanding of the Group. We remodelled stress testing of extreme downside
scenarios and cash flow forecasts, as well as conducting a robust review of the Group and Parent Company’s liquidity position.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group or Parent’s ability to continue as a going concern for a period of at least 12 months
from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this
report.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
71
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Overview
Coverage* 100% (2020: 100%) of Group profit before tax
100% (2020: 100%) of Group revenue
100% (2020: 100%) of Group total assets
Key audit matters 2021 2020
Valuation of unquoted investments Yes Yes
Materiality Group financial statements as a whole
£3.65m (2020: £2.69m) based on 2% (2020: 2%) of net assets.
*% coverage of Group components subject to full scope audit by BDO LLP
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override
of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material
misstatement.
The group audit team performed a full audit of the Parent Company and the subsidiary using the local statutory audit materiality as
discussed in the materiality section.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing
the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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AUGMENTUM FINTECH PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Key audit matter
Valuation of unquoted investments (Group and Company)
How the scope of our audit addressed the key audit matter
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.
Our testing of unquoted investments was stratified according to
risk considering, inter alia, the value of individual investments, the
nature of the investment, the extent of the fair value movement
and the subjectivity of the valuation technique.
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
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 Group’s accounting policy for assessing the fair value of
investments is disclosed on page 67 in note 19.4 and disclosures
regarding the fair value estimates are given on page 69 in note
19.17.
For all unquoted investments:
• 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 28 May
2021 where we discussed the valuations with management
and challenged significant judgements made.
• We recalculated the attributable value based on the rights of
the relevant instruments, which were agreed to investment
agreements. We received direct confirmation of the capital
structure from all of the investee companies.
•
•
For Calibrated Price of Recent Transaction valuations, we
agreed the price of recent investment to supporting
documentation and management information. We considered
whether or not the performance of the portfolio company has
significantly varied from expectations at the transaction date
by obtaining management’s evaluation of post transaction
performance against relevant milestones to determine the
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 or otherwise connected;
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Key audit matter
How the scope of our audit addressed the key audit matter
•
•
•
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.
For investments based on share of net assets of fund
investment, we confirmed the market value based on the Net
Asset Value statement provided by the independent fund
administrator. We obtained an understanding of the controls
surrounding the fund accounting and reconciliation process
performed by the independent administrator of the General
Fund through review of the Systems and Organization
Controls Report certified by an independent auditor. We also
assessed the Investment Manager’s reasonableness testing of
the market value of the underlying assets using information
obtained from the due diligence procedures performed by the
Investment Manager and movements in the publicly quoted
Decentralized Finance index to the year end.
We also considered the completeness and clarity of disclosures
with reference to the accounting standards 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.
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AUGMENTUM FINTECH PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as
follows:
Group financial statements Parent company financial statements
2021 2020 2021
£m £m £m
Materiality 3.65 2.69 3.47
2020
£m
2.55
Basis for determining materiality 2% of net assets 2% of net assets 95% Group
materiality
95% Group
materiality
Rationale for the benchmark applied
Relative difference
between Group and
Parent Company
figures
Relative difference
between Group and
Parent Company
figures
• The nature of the
investment portfolio
and the level of
judgement inherent
in the valuation.
• The nature of the
investment portfolio
and the level of
judgement inherent
in the valuation.
• The range of
reasonable
alternative
valuations.
• The range of
reasonable
alternative
valuations.
Performance materiality 2.56 1.88 2.42
1.79
Basis for determining
performance materiality
70% of materiality
based on risk
assessment of
control environment
and consideration of
number of historical
errors identified.
70% of materiality
based on risk
assessment of
control environment
and consideration of
number of historical
errors identified.
70% of materiality
based on risk
assessment of
control environment
and consideration of
number of historical
errors identified
70% of materiality
based on risk
assessment of
control environment
and consideration of
number of historical
errors identified
Component materiality
We set materiality for each component of the Group based on our assessment of the risk of material misstatement of that component. The
materiality for the subsidiary is £44,000 (2020: £27,000), which is equal to its local statutory audit materiality. We further applied
performance materiality levels of 70% of the component materiality to our testing to ensure that the risk of errors exceeding component
materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £183,000 (2020: £135,000).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
75
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Other information
The directors are responsible for the other information. The other information comprises the information included in the Annual Report
other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies
Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if,
in our opinion:
•
•
•
•
adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
the Parent Company financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with
the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
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.
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AUGMENTUM FINTECH PLC
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF AUGMENTUM FINTECH PLC continued
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
We focused on laws and regulations that could give rise to a material misstatement in the company financial statements and obtained an
understanding of the legal and regulatory framework applicable to the Group 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 compliance with
Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, and applicable accounting
standards.
Our tests included, but were not limited to:
•
•
•
enquiries of management;
review of minutes of board meetings throughout the period; and
obtaining an understanding of the control environment in monitoring compliance with laws and regulations
We 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, in particular in respect of the most significant
accounting estimate, being the valuation of investments as discussed in the key audit matter.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained
alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
Peter Smith (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
11 June 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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INFORMATION FOR SHAREHOLDERS
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
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 and does not constitute
any form of recommendation, can be found below:
AJ Bell Youinvest www.youinvest.co.uk
Charles Stanley Direct www.charles-stanley-direct.co.uk
EQi www.eqi.co.uk
Hargreaves Lansdown www.hl.co.uk
iDealing www.idealing.com
interactive investor www.ii.co.uk
Pello Capital www.pellocapital.com
Redmayne Bentley www.redmayne.co.uk
Share Deal Active www.sharedealactive.co.uk
Shareview www.shareview.co.uk
The Share Centre www.share.com
X-O www.x-o.co.uk
Financial Calendar
Date Event
31 March Financial Year End
June/July Financial Results Announced
September Annual General Meeting
30 September Half Year End
November Half Year Results Announced
Website
For further information on share prices, regulatory news and other
information, please visit www.augmentum.vc.
Shareholder Enquiries
In the event of queries regarding your shareholding, please contact
the Company’s registrar, Link Group, who will be able to assist you
with:
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Registered holdings
Balance queries
Lost certificates
Change of address notifications
Link’s full details are provided on page 79 or please visit
www.linkgroup.eu.
Shareholder services
Link Group (a trading name of Link Market Services Limited and
Link Market Services Trustees Limited) may be able to provide you
with a range of services relating to your shareholding. To learn
more about the services available to you please visit the
shareholder portal at www.signalshares.com or
call +44 (0) 371 664 0300.
Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between 09:00 - 17:30,
Monday to Friday excluding public holidays in England and Wales.
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.
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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.
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.
Average net assets
The average net assets figure is the average of the net assets of
the Group calculated on a time weighted basis and adjusted for
share buybacks and issuance.
Downside Protection
Downside protection is an investment technique that is employed
to mitigate against or prevent a decrease in the value of an
investment. In relation to venture capital investing the key methods
of achieving this are through liquidation preferences, over existing
shareholders, and/or anti-dilution provisions, which allow an
investor to maintain their ownership percentage in the event that
new shares are issued.
Discount or Premium
A description of the difference between the share price and the net
asset value per share. The size of the discount or premium is
calculated by subtracting the share price from the net asset value per
share and is usually expressed as a percentage (%) of the net asset
value per share. If the share price is higher than the net asset value
per share the result is a premium. If the share price is lower than the
net asset value per share, the shares are trading at a discount.
Initial Public Offering (“IPO”)
An IPO is a type of public offering in which shares of a company are
sold to institutional investors and usually also retail (individual)
investors. Through this process, colloquially known as floating, or
going public, a privately held company is transformed into a
public company.
Internal Rate of Return (“IRR”)
IRR is the annualised return on an investment calculated from the
cash flows arising from that investment taking account of the
timing of each cash flow. It is derived by computing the discount
rate at which the present value of all subsequent cash flows arising
from an investment are equal to the original amount invested.
Leverage
For the purposes of the Alternative Investment Fund Managers
(AIFM) Directive, leverage is any method which increases the
Company’s exposure, including the borrowing of cash and the use
of derivatives. It is expressed as a ratio between the Company’s
exposure and its net asset value and can be calculated on a gross
and a commitment method.
Under the gross method, exposure represents the sum of the
Company’s positions after the deduction of sterling cash balances,
without taking into account any hedging and netting arrangements.
Under the commitment method, exposure is calculated without the
deduction of sterling cash balances and after certain hedging and
netting positions (as detailed in the AIFMD) are offset against each
other.
Net Asset Value (“NAV”)
The value of the Company’s assets, principally investments made in
other companies and cash being held, minus any liabilities. The
NAV is also described as ‘shareholders’ funds’. The NAV is often
expressed in pence per share after being divided by the number of
shares in issue. 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
2021 2020
£’000 £’000
Operating expenses 7,058 4,989
Less: due diligence costs (39) (43)
Less: cash management fee^ (7) (27)
Less: carried interest fee (4,140) (2,367)
Recurring operating expenses 2,872 2,552
Average net assets 148,348 123,130
Ongoing charges ratio 1.9% 2.1%
^ Cash management fee is deducted as this is paid when cash is placed on deposit
through an investment platform. It is only incurred where there would be
offsetting interest income.
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.
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CONTACT DETAILS
Directors
Neil England (Chairman of the Board and Nominations Committee)
Karen Brade (Chairman of the Audit Committee)
David Haysey (Chairman of the Management & Remuneration
Committee and Valuations Committee)
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
100 Liverpool Street
London
EC2M 2AT
United Kingdom
N+1 Singer
1 Bartholomew Lane
London
EC2N 2AX
United Kingdom
Depositary
IQ EQ Depositary Company (UK) Limited
4th Floor
3 More London Riverside
London
SE1 2AQ
United Kingdom
Legal Adviser to the Company
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH
United Kingdom
Independent Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
United Kingdom
A member of the Association of
Investment Companies
ANNUAL REPORT AND FINANCIAL STATEMENTS 2021
79
Registrars
If you have any queries in relation to your shareholding please
contact:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
email: enquiries@linkgroup.co.uk
telephone +44 (0)371 664 0300
Website: www.linkgroup.eu
+ Calls are charged at the standard geographic rate and will vary by provider.
Calls outside the United Kingdom will be charged at the applicable international
rate. Lines are open between 09:00 - 17:30, Monday to Friday excluding public
holidays in England and Wales.
Shareholder Portal
If you hold your shares directly and not through a platform you
can register online to view your holdings using the Share Portal,
a service offered by Link Group at www.signalshares.com.
The Share Portal is an online service enabling you to quickly and
easily access and maintain your shareholding online – reducing the
need for paperwork and providing 24 hour access to your
shareholding details.
Through the Share Portal you may:
• Cast your proxy vote online;
• View your holding balance and get an indicative valuation;
• View movements on your holding;
• View the dividend payments you have received;
• Update your address;
• Register and change bank mandate instructions so that dividends
can be paid directly to your bank account;
• Elect to receive shareholder communications electronically; and
• Access a wide range of shareholder information including the
ability to download shareholder forms.
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”) is the
UK’s only publicly listed investment company
focusing on the fintech sector, having launched
on the main market of the London Stock
Exchange in 2018, giving businesses access
to patient funding and support, unrestricted
by conventional fund timelines.
We invest in early and later stage fast growing fintech businesses
that are disrupting the banking, insurance, asset management and
wider financial services sectors.
Portfolio management is undertaken by Augmentum Fintech
Management Limited (“AFML”). AFML is a wholly owned
subsidiary of the Company, together referred to as the “Group”.
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www.augmentum.vc
This report is printed on Revive 100% White Silk, a totally recycled
paper produced using 100% recycled waste at a mill that has been
awarded the ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
To view the report online visit: www.augmentum.vc
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Augmentum Fintech plc
Annual Report for the year ended
31st March 2021
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