Audit Committee – Terms of Reference

 

Composition of the Committee

The Committee shall be comprised of three or more independent non-executive Directors appointed by the Board. The Chairman of the Board may be a member of the Committee but may not act as the Committee Chairman. To the extent practicable, at least one member of the Committee should have recent and relevant financial experience ideally with a professional qualification from one of the professional accountancy bodies. The Committee as a whole shall have competence relevant to the sector. 

Meetings

The Committee will meet at least twice each year, to review the drafts of the annual and half-year reports of the Company, for audit planning purposes and at such other times as may be required. A quorum shall be any two members including the Chairman of the Committee, or the Chairman's nominated delegate.

The Secretary shall minute the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance. The draft minutes of each meeting of the Committee shall be circulated to all members of the Committee and, once agreed by the Committee, will be circulated to all other members of the Board. Any Director, upon request to the Secretary, may obtain copies of the Committee's agenda and minutes provided that there is no conflict of interests.

Attendance

The Committee may invite other Board members to attend meetings and may request representatives of the Auditors, Investment Adviser and Administrator or any other relevant person to attend meetings, but such invitees shall have no right of attendance.

Resources

The Company Secretary shall act as Secretary to the Committee and should ensure that the Committee receives information and papers in a timely manner to enable full and proper consideration to be given to the issues.

Authority

The Committee is authorised to:

(i)              investigate and review any matter within its terms of reference and consider any matter the Committee deems relevant to the discharge of its duties;

(ii)             seek any information it reasonably requires from a representative of any third party service provider in order to perform its duties;

(iii)            request a representative of a third party service provider to attend any meeting of the Committee;

(iv)            obtain at the Company's expense outside legal or other professional advice on any matters within its terms of reference;

(v)             have timely and unrestricted access to relevant documents relating to the affairs of the Company; and

(vi)            have the right to publish in the Company's annual report, details of any issues that cannot be resolved between the Committee and the Board.

Principal Responsibilities

The principal responsibilities of the Committee are:

(i)              to monitor the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance;

(ii)             to review the Company's internal financial controls and the internal control and risk management systems of the Company and its third party service providers;

(iii)            to make recommendations to the Board in relation to the appointment of the external auditors and their remuneration;

(iv)            to ensure that the audit services contract is put out to tenure such that the Company complies with the permissible period of tenure and the selection procedure set out in section 489A of the Companies Act 2006;

(v)             to review and monitor the Auditors' independence and objectivity and the effectiveness of the audit process; and

(vi)            to develop and implement policy on the engagement of the Auditors to supply non-audit services and taking into account relevant guidance regarding the provision of non-audit services by the Auditors.

The Committee shall report to the Board on how it has discharged its responsibilities.

Financial Reporting

The Committee shall:

(i)              where requested, provide advice to the Board on whether the annual report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's position and performance, business model and strategy;

(ii)             review the significant financial reporting issues and judgements made in connection with the preparation of the Company's financial statements, announcements of results and related formal statements

(iii)            consider significant accounting policies and whether the polices adopted are appropriate, any changes to them and any significant estimates and judgements;

(iv)            review the adequacy and scope of the external audit, compliance with regulatory and financial reporting requirements, the clarity and completeness of disclosures in the financial statements and consider whether the disclosures made are set properly in context;

(v)             satisfy itself that the annual and half-year reports and any other significant published financial information are properly and carefully prepared and give a fair representation of the Company's affairs;

(vi)            seek clarification from the Administrator of any changes in accounting policy or treatment affecting the Company's report and accounts;

(vii)           review related information presented with the financial statements, including the operating and financial review, and corporate governance statements relating to the audit and to risk management; and

(viii)          where board approval is required for other statements containing financial information (for example, summary financial statements, significant financial returns to regulators and release of price sensitive information), whenever practicable the Committee shall review such statements first.

Internal Controls and Risk Management Systems

The Committee shall:

(i)              review the reports on the internal controls of the Company's service providers which identify the risk management systems in place for assessing, managing and monitoring risks applicable to such service providers;

(ii)             establish a process for identifying, assessing, managing and monitoring the risks which may have a financial impact on the Company;

(iii)            review reports on the conclusions of any testing carried out by the Auditors; and

(iv)            review and approve the statements included in the annual report in relation to internal control and the management of risk.

Whistleblowing

The Committee shall, from time to time, review the arrangements by which staff of the Investment Adviser and Administrator and other service providers as the Committee sees fit may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters and satisfy itself that arrangements are in place for the proportionate and independent investigation of such matters and for appropriate follow-up action.

Audit

Internal

The Committee, annually, shall monitor and review the need for an internal audit function, and make an appropriate recommendation to the Board.

External

The Committee shall:

(i)              be responsible for making recommendations to the Board on the appointment, reappointment and removal of the Auditors and on their terms of engagement and remuneration;

(ii)             meet annually with the Auditors to review the annual results and to discuss any major issues that arose during the course of the audit;

(iii)            satisfy itself that the level of fee payable in respect of the audit services provided is appropriate for an effective audit to be conducted;

(iv)            review and if necessary seek amendments to the letter of representation to be given by the Board to the Auditors;

(v)             review and discuss with the Auditors a) their engagement letter issued at the start of each audit, ensuring that it has been updated to reflect changes in circumstances arising since the previous year, and b) the scope of the audit process proposed to be undertaken by the Auditors;

(vi)            annually, assess the qualification, expertise, resources and independence of the Auditors and the effectiveness of the audit process;

(vii)           develop and recommend to the Board, the Company's policy on the provision of non-audit services by the Auditors;

(viii)          consider and if appropriate approve all non-audit work to be carried out by the Auditors and, where non-audit services are provided, ensure that the relevant disclosures are made in the annual report regarding auditor objectivity, independence and the fees paid for non-audit work;

(ix)            oversee the selection process when conducting audit tenders and appointing new external auditors; and

(x)             at the end of the annual audit cycle, assess the effectiveness of the audit process.

The Committee shall disclose the workings of the Committee in the annual report, ensuring that the Terms of Reference for the Committee are generally available upon request or on the Company's website and that the annual report contains the Directors' explanation of their responsibility for preparing the accounts and a statement by the Auditors about their reporting responsibilities.

The Committee shall ensure disclosure in the annual report of:

(i)              the Company's investment objective and investment policy and the Company's full portfolio listing;

(ii)             those areas of decision-making reserved to the board and those over which the Investment Adviser has discretion;

(iii)            the Investment Adviser's overall performance;

(iv)            ongoing charges figures and their impact on capital erosion per share class; and

(v)             relevant bank-borrowing covenant details, indicating the consequences of any material breach.

The Committee will prepare a separate section of the annual report to describe the work of the Committee in discharging its responsibilities.  This report will include:

(i)              the significant issues that the Committee considered in relation to the financial statements, and how these issues were addressed;

(ii)             an explanation of how it has assessed the effectiveness of the external audit process and the approach taken to the appointment or reappointment of the Auditors, and information on the length of tenure of the current audit firm and when a tender was last conducted; and

(iii)            if the Auditors provides non-audit services, an explanation of how Auditors objectivity and independence is safeguarded.

 

 

Definitions

 

In these Terms of Reference, unless the context otherwise requires, the following definitions shall apply:

"Administrator" means Frostrow Capital LLP, or such other administrator appointed by the Company from time to time;

"Auditors" means the auditors appointed by the Company from time to time;

"Board" means the board of Directors;

"Chairman" means the chairman of the Committee;

"Committee" means the audit committee of the Company;

"Company" means Augmentum Fintech plc (company no. 11118262);

"Company Secretary" means the company secretary of the Company from time to time;

"Directors" mean the directors of the Company from time to time;

"Investment Adviser" means Augmentum Capital LLP (registration no. OC350764), or such other investment adviser appointed by the Company from time to time; and

"Secretary" means the secretary of the Committee.

 

 

Management Engagement and Remuneration Committee –Terms of Reference


Background

These Terms of Reference have been produced to accord with the relevant Principles of The AIC Code of Corporate Governance published in July 2016 (Principles 8, 15 and 18). The Financial Reporting Council has confirmed that AIC member companies who report against the AIC Code of Corporate Governance and who follow the AIC's Corporate Governance Guide for Investment Companies will be meeting their obligations in relation its UK Corporate Governance Code.

Composition of the Committee   

The Committee shall be comprised of three non-executive directors. Members of the Committee shall be appointed by the Board.

Appointments shall be for a period of up to three years, which may be extended for further periods of up to three years, provided the Director still meets the criteria for membership of the Committee.   

The Committee Chairman shall be appointed by the Board and shall be an independent Director. The Chairman of the Board may be a member of the Committee but may not act as the Chairman of the Committee.

Meetings

The Committee will meet at least once each year and at such other times as the Chairman of the Committee shall require.

A quorum shall be any two members including the Chairman of the Committee, or the Chairman's nominated delegate.

Unless otherwise agreed, notice of each meeting confirming the venue, date and time together with an agenda of items to be discussed and supporting papers, shall be forwarded to each member of the Committee not less than three working days prior to the date of the meeting.

The Chairman of the Committee will report to the Board on the Committee's decisions and recommendations.

The Secretary shall minute the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance. Draft minutes of Committee meetings shall be circulated promptly to all members of the Committee. Minutes should be circulated to all other members of the Board only when the minutes have been agreed by the Committee.

Attendance

The Committee may invite other Directors to attend and may request representatives of the third party service providers to the Company or any other relevant person to attend meetings but such invitees shall have no right of attendance.

Resources

The Company Secretary shall act as Secretary to the Committee and should ensure that the Committee receives information and papers in a timely manner to enable full and proper consideration to be given to the issues.

The Committee shall have access to sufficient resources in order to carry out its duties and shall be provided with appropriate and timely training, both in the form of an induction programme for new members and on an on-going basis for all members.

Authority

The Committee is authorised to:

(i)              investigate and review any matter within its terms of reference and consider any matter it deems relevant to the discharge of its duties;

(ii)             seek any information it reasonably requires from a representative of any third party service provider in order to perform its duties;

(iii)            request a representative of a third party service provider to attend any meeting of the Committee (including without limitation a representative of the Investment Adviser);

(iv)            obtain at the Company's expense outside legal or other professional advice on any matters within its terms of reference;

(v)             have timely and unrestricted access to relevant documents relating to the affairs of the Company; and

(vi)            have the right to publish in the Company's annual report, details of any issues that cannot be resolved between the Committee and the Board.

AIC Code Principle 8

Director remuneration should reflect their duties, responsibilities and the value of their time spent.

Noting that the New Portfolio Manager, when appointed, will be a wholly-owned subsidiary of the Company and will have employees, the Committee shall perform the duties listed below in respect of the Company and each entity within the Group, as appropriate.  

The Committee shall:

(i)              take responsibility for setting the remuneration policy for the Directors (including the Chairman of the Board), the Management Team and staff of the New Portfolio Manager, including pension rights and compensation payments (the "Remuneration Policy"). The Board itself or, where required by the Articles, the shareholders, should determine the remuneration of the non-executive Directors within the limits set in the Articles. No Director shall be involved in any decisions as to their own remuneration;

(ii)             recommend and monitor the level and structure of remuneration for the Directors, the Management Team and staff of the New Portfolio Manager; 

(iii)            periodically review the management fee payable to the New Portfolio Manager with the intention of ensuring that the fee reflects the costs of operating the New Portfolio Manager; and seek to agree adjustments (upwards or downwards) to the management fee from time to time to reflect such costs;

(iv)            determine the allocation to the Management Team of the carried interest fees paid to the New Portfolio Manager;

(v)             in determining the Remuneration Policy, take into account all factors which it deems necessary including account remuneration trends, relevant legal and regulatory requirements, the provisions and recommendations of the AIC Code and associated guidance;  

(vi)            when setting the Remuneration Policy, review and have regard to conditions across the Group, especially when determining increases in remuneration;

(vii)           review the on-going appropriateness and relevance of the Remuneration Policy;

(viii)          within the terms of the agreed Remuneration Policy and in consultation with the Chairman of the Board and/or senior staff members of the Management Team and the New Portfolio Manager, as appropriate, determine the total individual remuneration package of staff members and other designated senior executives including bonuses, incentive payments and share options or other share awards. Provision may also be made for additional remuneration for the non-executive Directors where they are involved in duties beyond those normally expected as part of the Director's appointment;

(ix)            obtain reliable, up-to-date information about remuneration in other Groups of comparable scale and complexity. To help it fulfil its obligations the Committee shall have full authority to appoint remuneration consultants and to commission or purchase any reports, surveys or information which it deems necessary at the expense of the Company but within any budgetary restraints imposed by the Board;

(x)             be exclusively responsible for establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Committee;

(xi)            ensure that contractual terms on termination, and any payments made, are fair to the individual, and the relevant entity within the Group, that failure is not rewarded and that the duty to mitigate loss is fully recognised;

(xii)           oversee any major changes in benefits structures throughout the Group;

(xiii)          agree the policy for authorising claims for expenses from the Directors, the Management Team and the staff at the New Portfolio Manager; and

(xiv)         work and liaise as necessary with all other Board committees.

The Committee shall report to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.

The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.

If the Committee has appointed remuneration consultants, the annual report of the Remuneration Policy should identify such consultants and state whether they have any other connection with the Group. 

Through the Chairman of the Board, the Committee shall ensure that the Company maintains contact as required with its principal shareholders about remuneration within the Group.

The Committee shall give due consideration to laws, regulations and any other published guidelines or recommendations regarding the remuneration of directors of listed companies and the formation and operation of share schemes including but not limited to the provisions of the AIC Code and the requirements of the FCA's Listing Rules, Prospectus Rules and Disclosure Guidance and Transparency Rules as well as any guidelines published by the Investment Association, Pensions & Investment Research Consultants Ltd (PIRC) and Pensions and Lifetime Savings Association and any other applicable rules, as appropriate. 

The Committee shall arrange for periodic reviews of its own performance and, at least annually, review its constitution and these terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary for Board approval.

AIC Code Principle 15

The board should regularly review both the performance of, and contractual arrangements with, the Investment Adviser.

The Committee shall:

(i)              monitor and evaluate the Investment Adviser's performance (and, if necessary, provide appropriate guidance) and compliance by the Investment Adviser with the terms of the Alternative Investment Fund Management Agreement entered into between the Company and the Investment Adviser from time to time;

(ii)             consider the merit of obtaining, on a regular basis, an independent appraisal of the Investment Adviser;

(iii)            require the Investment Adviser to provide attribution and volatility analyses and consider whether it should be published at least annually;

(iv)            review at least annually the continued retention of the Investment Adviser's services;

(v)             review the level and method of remuneration and the notice period. Due weight should be given to the competitive position of the Company against its peer group;

(vi)            consider whether the annual fee should be based on gross assets, net assets or market capitalisation;

(vii)           ensure that the Investment Adviser has an appropriate risk management and internal control system designed to safeguard the shareholders' investment and the Company's assets; and

(viii)          produce a disclosure statement to be included in the Company's annual report about its activities (including an overview of the review of the effectiveness of the Investment Adviser's risk management and internal control systems designed to safeguard the shareholders' investment and the Company's assets).

AIC Code Principle 18

The board should monitor and evaluate other service providers to the Company from time to time, including by:

(i)              reviewing and considering the appointment and remuneration of service providers to the Company; and

(ii)             considering any points of conflict which may arise between the providers of services to the Company.

The Committee shall report accordingly in the Company's annual report.

 

 

Definitions

In these Terms of Reference, unless the context requires otherwise, the following definitions shall apply:

"AIC" means the Association of Investment Companies;

"AIC Code" means the AIC Code of Corporate Governance;

"Articles" means the Company's articles of association, as may be amended from time to time;

"Board" means the board of Directors;

"Chairman" means the chairman of the Committee;

"Committee" means the management engagement committee of the Company;

"Company" means Augmentum Fintech plc (company no. 11118262);

"Company Secretary" means the company secretary of the Company from time to time;

"Directors" mean the non-executive directors of the Company from time to time;

"Group" means the Company and its subsidiaries from time to time;

"Investment Adviser" means Augmentum Capital LLP (registration no. OC350764), or such other investment adviser appointed by the Company from time to time;

"Management Team" means the investment management team of the Investment Adviser until such time as the Portfolio Management Agreement has become effective and the New Portfolio Manager appointed, and thereafter the investment management team of the New Portfolio Manager, in each case from time to time;

"New Portfolio Manager" means Augmentum Fintech Management Limited, a wholly-owned subsidiary of the Company;

"Portfolio Management Agreement" means the portfolio management agreement dated [●] 2018 between, inter alia, the Company and the New Portfolio Manager; and

"Secretary" means the secretary of the Committee.

 

 

12 February 2018