REG-Augmentum Fintech plc: Circ re Amendment of Investment Advisory Structure

Augmentum FintechAnnouncement

Today 07:00

1 July 2025

Augmentum Fintech plc

Amendment of Investment Advisory Structure

and

Notice of General Meeting

 

Augmentum Fintech plc (LSE: AUGM) (the "Company" or "Augmentum"), Europe's
leading publicly listed fintech fund, announces that, subject to Shareholder
approval, the Company’s portfolio manager, Augmentum Fintech Management
Limited (“AFML”) will appoint Augmentum Capital LLP (“ACLLP”) as
Investment Adviser in relation to AFML’s duties as portfolio manager in
respect of the Company’s portfolio (the “IA Appointment”). ACLLP will
engage, as employees or members, the staff of AFML who are currently engaged
in the provision of investment advice. ACLLP is controlled by Tim Levene and
Richard Matthews and is not a subsidiary of the Company.

The Board believes that the proposed IA Appointment and related entry into the
Agreements, as more fully described below (the “Proposal”) is in the best
interests of Shareholders and believe that the Proposal will have the
following benefits for Shareholders: (i) the Proposal will ensure that the
investment advisory team at ACLLP has a more conventional employee
remuneration structure which should assist with employee recruitment and
retention and provide greater alignment with long term shareholder returns;
and (ii) the Company has agreed fee share arrangements as part of the Proposal
such that the Company can benefit from the fees received by ACLLP in
connection with Further Funds that ACLLP and AFML may launch thereby
potentially providing the Company with additional income.

The Board is acutely aware of the wide discount to Net Asset Value at which
the Company’s shares currently trade, and shares the frustrations of many
Shareholders regarding it. The Board considers that the Proposal will improve
the competitiveness and robustness of its management arrangements which it
believes could assist, and will not hinder, in addressing the discount.

The proposed IA Appointment is a Relevant Related Party Transaction and
requires Shareholder approval. A circular (the “Circular”), containing a
notice convening the General Meeting in order to pass the Resolution, will be
despatched to Shareholders today and will shortly be available on the
Company's website at https://augmentum.vc/.

The General Meeting which has been convened for 10.00 a.m. on 24 July 2025 at
the registered office of the Company at 25 Southampton Buildings, London WC2A
1AL, United Kingdom.

Further details regarding the Proposal can be found in the Circular and are
set out at the end of this announcement.

Capitalised terms used in this announcement have the meanings given to them in
the circular, unless the context provides otherwise.

Enquiries

 Augmentum Fintech Tim Levene (Portfolio Manager) Nigel Szembel (Analysts/IR)  +44 (0)20 3961 5420 nigel@augmentum.vc  
 Woodrow Communications Henry Kirby (Press and Media)                          +44 (0)20 8636 8753 press@augmentum.vc  
 Peel Hunt LLP Liz Yong, Huw Jeremy (Investment Banking)                       +44 (0)20 7418 8900                     
 Singer Capital Markets James Moat, James Fischer (Investment Banking)         +44 (0)20 7496 3000                     
 Frostrow Capital LLP Paul Griggs (Company Secretary)                          +44 (0)20 3709 8733                     

About Augmentum Fintech

Augmentum invests in fast growing fintech businesses that are disrupting the
financial services sector. Augmentum is the UK's only publicly listed
investment company focusing on the fintech sector in the UK and wider Europe,
having launched on the main market of the London Stock Exchange in 2018,
giving businesses access to patient capital and support, unrestricted by
conventional fund timelines and giving public markets investors access to a
largely privately held investment sector during its main period of growth.

 

Background to the Proposal

At the time of the Company’s IPO in 2018, it was decided that the Company
would adopt an internalised management structure, with Augmentum Fintech
Management Limited (“AFML” or the “Portfolio Manager”), a subsidiary
of the Company, appointed as the Company’s portfolio manager (after an
initial period whilst AFML obtained FCA authorisation during which Frostrow
Capital LLP (“Frostrow” or the “Manager”) acted as manager and
Augmentum Capital LLP (“ACLLP”) as investment adviser).

The IPO Prospectus noted that, in time, the business of AFML may be expanded
to take on other fund management and advisory mandates with third parties
(“Further Funds”), providing an additional income stream to the Group.

Since that date, an unanticipated disadvantage of the internalised structure
has emerged. During 2021, the Company was advised that the long-term employee
benefit plan to incentivise employees of AFML and align them with Shareholders
through participation in the realised investment profits of the Group had
adverse accounting consequences for the Group. As a result, the AFML employee
remuneration plan that had been in place since shortly after the Company’s
IPO was terminated.

AFML continued to be entitled to a performance fee as before, but any
performance fee paid by the Company to AFML would thenceforth be allocated to
employees of AFML on a discretionary basis by the board of AFML with oversight
from the Management Engagement & Remuneration Committee of the Company.

Replacing the original remuneration plan with a discretionary arrangement
meant that AFML was not able to offer its directors and employees a binding
points-based remuneration structure. Such a structure, which is the
established practice for venture capital investment managers, would better
align the interests of the Company as a long-term investor with the incentives
of its management team, and better align management remuneration with
investment performance to Shareholders’ returns. Instead, incentive
arrangements are required to be entirely discretionary, and this has, in the
Board’s view, put AFML at a competitive disadvantage in hiring at a senior
level and could be detrimental to staff retention as well as potentially
having a negative impact on the Company’s future long-term investment
performance and Shareholder returns.

The Company is keenly aware of the importance of staff retention and
recruitment within its portfolio manager, from the twin perspectives of
generating investment returns from the portfolio for the benefit of
Shareholders and maximising the opportunity of earning additional income from
launching and managing Further Funds.

Following careful consideration by the Board, and consultation with major
Shareholders, the Company has agreed that, subject to Shareholder approval,
AFML will appoint ACLLP as Investment Adviser in relation to AFML’s duties
as portfolio manager in respect of the Company’s portfolio (the “IA
Appointment”). ACLLP will engage, as employees or members, the staff of AFML
who are currently engaged in the provision of investment advice.

ACLLP is an English limited liability partnership controlled by Tim Levene and
Richard Matthews; it is not a subsidiary of the Company. ACLLP is authorised
and regulated by the FCA.

ACLLP should be able to offer its members and employees a more conventional
remuneration package than AFML can. As further described below, there will be
no change to the overall level of fees paid by the Company, the provisions for
fee sharing in respect of Further Funds will be formalised and the notice
period under which AFML and ACLLP can be terminated will not be extended.
Furthermore, the Company and/or AFML will continue to own intellectual
property associated with the management of the portfolio.

The appointment will be effected through the entry into an investment advisory
agreement (the “Investment Advisory Agreement”) and a framework agreement
(the “Framework Agreement”) (together, and with certain other agreements,
the “Agreements”).

Provision of services

Under the proposed new arrangements, there will be no change to the
Company’s AIFM, Frostrow Capital LLP; and AFML will remain as portfolio
manager to the Company. Tim Levene and Richard Matthews will remain as
directors of AFML and members of AFML’s investment committee. The services
to be provided by ACLLP as investment adviser to AFML are limited to
investment advisory services, including the provision of specific investment
advice and the background and supporting services that an investment adviser
would ordinarily provide. AFML will retain certain functions (and associated
personnel), being portfolio management, investor relations and marketing,
systems and office administration.

Fees and termination

ACLLP will be entitled to a fee payable by AFML out of the fee income earned
by AFML. Following the IA Appointment, there will be no change to the rate at
which the annual management fee or performance fee (together, the “Fees”)
payable by the Company are currently calculated.

The basis of the calculation of the Fees is not changing under the proposed IA
Appointment, save that there will be a valuation of the assets within the
portfolio at the date of the IA Appointment with this interim valuation being
the end point for the AFML calculation and starting point for the ACLLP
calculation. Accordingly, there is not expected to be any direct economic
effect on the Company as a result of the IA Appointment. When a performance
fee payment is due, there will be two parallel calculations to establish the
amount attributable to AFML alone and the amount attributable to ACLLP, with
this interim valuation being the end point for the AFML calculation and
starting point for the ACLLP calculation.

The Investment Advisory Agreement is terminable by either AFML or ACLLP on 12
months’ notice. It is also terminable on certain standard breach events. The
Investment Advisory Agreement will automatically terminate on termination of
the Framework Agreement or the Portfolio Management Agreement.

The Framework Agreement contains a key person termination provision that
replaces the one in the existing Portfolio Management Agreement. The existing
provision allows the Company to terminate if both Tim Levene and Richard
Matthews cease to be officers or employees of the Group and are not replaced
with personnel that are reasonably satisfactory within three months. The new
provision allows the Company to terminate if Tim Levene (alone) ceases to
devote a sufficient amount of his normal working time to the performance of
the Investment Advisory Agreement and is not satisfactorily replaced within
six months. The Framework Agreement may also be terminated by any party if
another party commits certain standard breach events, or if the Investment
Advisory Agreement is terminated.

No changes are proposed to the existing Portfolio Management Agreement between
the Company, Frostrow and AFML.

Ownership of assets

Pursuant to the Framework Agreement, the valuable assets of AFML will continue
to be owned by AFML (or the Company where applicable) following the IA
Appointment. The Company and AFML will continue to own the intellectual
property of the Group, including intellectual property generated by ACLLP
under its appointment following the IA Appointment. The Company and AFML will
grant a licence to ACLLP over that intellectual property, but only for the
term of the Investment Advisory Agreement and for the purpose of performing
its duties as Investment Adviser. The Company will retain rights to the
Augmentum name and associated trademarks.

The lease for premises is expected to remain in AFML’s name, at least for
the duration of the current lease, and is guaranteed by the Company.

AFML’s assets include retained income of approximately £1.0 million which
is currently available for making incentive payments to its directors and
employees. Pursuant to the Framework Agreement, this would be used at the
direction of ACLLP, principally for making loans to employees and members of
ACLLP to fund their commitments to invest into Third Party Funds and/or Other
Funds, (as defined below), and otherwise for meeting AFML’s costs and
expenses.

Further Funds

The Framework Agreement provides that AFML and ACLLP may launch Further Funds,
and it is intended that any such funds would be structured so that AFML is the
portfolio manager and ACLLP is the Investment Adviser, but there will be
flexibility depending on the requirements of each instance. Further Funds are
split into “Third Party Funds” and “Other Funds”.

The consent of the Company would be required (not to be unreasonably withheld,
delayed or conditioned) in respect of the launch of Third Party Funds, which
are defined as funds with a similar investment objective and policy to the
Company. Such Third Party Funds will be subject to an allocation policy in
respect of investments that are also suitable for the Company.

The Company will not have a right of veto in respect of Other Funds, which are
defined as funds that don’t have a similar investment policy to the Company.

The Company has agreed fee share arrangements such that the Company can
benefit from the fees received by ACLLP in respect of Further Funds under
management. It is intended that these arrangements be agreed at the time of
launch, but in the absence of such an agreement there is a default position as
follows: the fee share percentage is 25 per cent. in respect of Third Party
Funds and 12.5 per cent. in respect of Other Funds, in each case calculated on
gross management, advisory or analogous fees received by ACLLP from that fund,
but excluding performance fees. For Other Funds there is a threshold of
£500,000 fee income on which ACLLP is not required to share fees.

The Company’s consent is required for any Further Funds to use the Augmentum
name.

Employment arrangements

The Framework Agreement will provide that employees of AFML whose roles relate
to its current investment advisory function will be transferred to become
employees of ACLLP. The other employees of AFML whose roles relate to AFML’s
retained function, being primarily portfolio management and investor relations
will remain employees of AFML. Tim Levene and Richard Matthews will continue
as employees and directors of AFML as well as being engaged as members of
ACLLP.

By a letter of undertaking, each of Tim Levene and Richard Matthews will agree
not to sell ACLLP (or a substantial part of its business) for a period of four
years from the date of the IA Appointment, without the consent of the Board.
Tim Levene and Richard Matthews are permitted to reduce their interest by way
of the admission of new partners to ACLLP, or transfers of their interests
(e.g. to a new individual or investor) provided that they retain a combined
interest of 50 per cent. or more.

Benefits of the Proposal

The Directors believe that the Proposal will have the following benefits for
Shareholders:
* retention and recruitment of a skilled investment advisory team: the IA
Appointment will enable ACLLP to provide the investment advisory team
(following their transfer from AFML) with a more conventional employee
remuneration structure which should assist with employee recruitment and
retention and provide greater alignment with long term shareholder returns;
and 
* prospect of additional income from Third Party Funds and Other Funds: the
Framework Agreement contemplates that AFML and ACLLP may launch Further Funds.
As detailed above, in respect of such Further Funds, the Company has agreed
fee share arrangements such that the Company can benefit from the fees
received by ACLLP in connection with Third Party Funds and Other Funds thereby
potentially providing the Company with additional income.
Relevant Related Party Transaction

As at the date of this document, ACLLP is a related party of the Company for
the purposes of the United Kingdom Listing Rules. ACLLP is controlled by Tim
Levene and Richard Matthews, who are directors of AFML, a wholly-owned
subsidiary of the Company, as that company’s chief executive officer and
chief operating officer, respectively. ACLLP is therefore an associate of Tim
Levene and Richard Matthews, who are related parties to the Company because of
their directorships of AFML. ACLLP is therefore a related party of the Company
for the purposes of the United Kingdom Listing Rules. 

Accordingly, the proposed IA Appointment, which relates to the Fees payable by
the Company in connection with services rendered by AFML as its portfolio
manager (although the basis of calculation of those Fees is not changing under
the Proposal), is a Relevant Related Party Transaction and requires
Shareholder approval.

Such approval is being sought at the General Meeting, notice of which is set
out at the end of this document. ACLLP is not a Shareholder in the Company.
ACLLP will not vote on the Resolution and has undertaken to take all
reasonable steps to ensure that its associates will not vote on the Resolution
at the General Meeting. In addition, Tim Levene and Richard Matthews, as
associates of ACLLP, have themselves undertaken not to vote on the Resolution
in respect of their holdings of Shares in the Company.

In respect of the Relevant Related Party Transaction, the Board considers that
the IA Appointment and the entry into the Agreements pursuant to the Proposal
is fair and reasonable so far as Shareholders are concerned and the Directors
have been so advised by Singer Capital Markets (as sponsor to the Company). In
providing its advice to the Directors, Singer Capital Markets has taken into
account the Directors’ commercial assessment of the effects of the Relevant
Related Party Transaction.

General Meeting

The Proposal is conditional on the approval by Shareholders of the Resolution
to be proposed at the General Meeting which has been convened for 10.00 a.m.
on 24 July 2025 at the registered office of the Company at 25 Southampton
Buildings, London WC2A 1AL, United Kingdom.

The Resolution, which will be proposed as an ordinary resolution, will, if
passed, authorise the Relevant Related Party Transaction contemplated by the
IA Appointment and the entry into the Agreements.

An ordinary resolution requires a simple majority of members entitled to vote
and present, in person or by proxy, to vote in favour in order for it to be
passed.

In accordance with the Articles, all Shareholders present in person or by
proxy (or, if a corporation, by a representative), shall upon a show of hands
have one vote and upon a poll shall have one vote in respect of each Share
held. In order to ensure that a quorum is present at the General Meeting, it
is necessary for two Shareholders entitled to vote to be present, whether in
person or by proxy (or, if a corporation, by a representative).

The formal notice convening the General Meeting is set out at the end of this
document.

Action to be taken in respect of the General Meeting

Before taking any action, Shareholders are recommended to read the whole of
this document.

Voting:

All Shareholders are encouraged to vote in favour of the Resolution to be
proposed at the General Meeting and, if their Shares are not held directly, to
arrange for their nominee to vote on their behalf.

Shareholders are requested to complete and return proxy appointments to the
Registrar by one of the following means:

a)      electronically by visiting Computershare’s website
(www.investorcentre.co.uk/eproxy); or

b)      by completing and signing the Form of Proxy enclosed with this
document in accordance with the instructions printed thereon and returning it
by post; or

c)      in the case of CREST members by utilising the CREST electronic
proxy appointment service in accordance with the procedures set out in the
notes to notice of General Meeting; or

d)      by contacting their investment platform (if they hold their
Shares through an investment platform or other nominee service such as a
wealth manager).

In each case, proxy appointments must be transmitted so as to be received by
the Registrar as soon as possible and, in any event, so as to arrive no later
than 10.00 a.m. on 22 July 2025.

Appointment of a proxy (by any of the methods noted above) will not prevent
you from attending and voting in person at the General Meeting should you wish
to do so.

Recommendation to Shareholders

The Board considers that the Proposal is in the best interests of the Company
and its Shareholders as a whole. Accordingly the Board unanimously recommends
that Shareholders vote in favour of the Resolution to be proposed at the
General Meeting. The Directors intend to vote in favour of the Resolution in
respect of their holdings of Shares, amounting to 527,249 Shares in aggregate
(representing approximately 0.32 per cent. of the voting rights of the Company
as at the date of this document).

 



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