IntegraFin Holdings Annual Report 2016

FY2016 Annual Report · IntegraFin Holdings

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ANNUAL REPORT
YEAR ENDED
30 SEPTEMBER 2016

CONTENTS

The Strategic Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

The Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Statement of Directors’ Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Independent Auditor’s Report to the
Members of Integrated Financial Arrangements Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Consolidated Statement of Profit or Loss
and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Company Statement of Profit or Loss and
Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Company Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Company Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21-56

EXECUTIVE DIRECTORS

COMPANY SECRETARY

REGISTERED OFFICE

M Howard
I A Taylor
A Scott
J M Davidson

NON-EXECUTIVE
DIRECTORS

N J Holden
J Brettell
S Bazley

D G C Johnson

AUDITOR

BDO LLP
55 Baker Street
London
W1U 7EU

IntegraFin Holdings Limited
29 Clement’s Lane
London
United Kingdom
EC4N 7AE

Telephone: +44 20 7608 4900

Registered in England No. 08860879

INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016 1

THE STRATEGIC REPORT

The Directors
present their Strategic
Report of IntegraFin
Holdings Limited
(“the Company”)
for the year ended
30 September 2016.

Overview

The Company acts as a holding
company for its subsidiaries
(“the Group”).

The principal activity of the Group
during the year was the provision
of “Transact”, a wrap service that
arranges and executes transactions
between clients, their financial
advisers and financial product
providers including investment
managers and stockbrokers.

Transact offers a number of different
wrappers to clients. Integrated
Financial Arrangements Ltd (IFAL),
a wholly owned subsidiary of the
Company, is registered with HM
Revenue & Customs as an ISA
Manager and is the provider of the
Transact ISA. It is also the provider
of the Transact Self Invested Personal
Pension and the Transact General
Investment Account.

IFAL wholly owns two long-term
insurance businesses, one in the UK,
IntegraLife UK Limited (ILUK) and
one on the Isle of Man, IntegraLife
International Limited (ILInt), which
provide insurance based tax wrappers.
IFAL acts as the scheme administrator
for the Transact Personal Pension
scheme, the Transact Executive
Pension scheme and the Transact
Section 32 Buy-Out Bond.

The strategy of the business continues
to be the provision of a range of
wrappers and access to products to
advisers and clients. The Company
will widen that range in line with
changes in the UK tax environment
without compromising its renowned
and market-leading customer service
levels, and maintaining the Company’s
profitability.

Group structure changes

IntegraFin Services Limited (ISL),
a Group services company wholly
owned by the Company, became
operational on 1 October 2015.
All staff and intra-group service
contracts have been transferred from
IFAL to the services company.

Integrated Application Development
Pty Ltd (IAD), the supplier of software
services to the Group, was acquired
by the Company during the year.

The Isle of Man Financial Services
Authority (the Authority) came into
force as the single financial services
regulator in the Isle of Man on 1
November 2015, following the transfer
of functions to the Authority from
the previous regulatory bodies, the
Insurance and Pensions Authority and
the Financial Supervision Commission.

Business review and
financial results

Gross inflows averaged £298 million
per month in 2016 (2015: £281
million), and funds under direction
increased from £19.1 billion to
£24.6 billion at 30 September 2016.
As at 30 September 2016, the number
of registered advisers with funds
on the platform was 6,000, and the
number of clients grew from 125,000
to 134,000.

Total gross inflows in 2016 were the
highest inflows since inception and this
growth, coupled with strong markets
in the last quarter of the financial year,
led to funds under direction increasing
by 29% year on year.

As required by IFPRU 9.1.3, IHL’s
consolidated net return on assets,
calculated as net profit divided by
total balance sheet, is 24% in 2016
(2015: 22%).

During the year the Company paid
dividends totalling £9.0m (2015:
£7.8m).

The Group recorded a consolidated
before tax profit of £38.3 million
(2015: £20.2 million restated under
IFRS) and £20.8 million after tax
(2015: £16.3 million restated under
IFRS) for the year. At the end of
the year consolidated shareholders’
funds stood at £86.2 million (2015:
£75.0 million).

Key performance indicators

The Board of Directors of the
Company (the Board) has set key
performance indicators which it uses
to measure performance. A summary
of the key performance indicators,
illustrating the five year trends, is
shown in the charts below:

Funds under direction

Funds under direction (FUD) have
steadily grown over the last five years.
Strong market growth, especially in
the quarter to September 2016, has
helped drive this increase.

TOTAL FUD (£bn)

D
U
F

30.0

25.0

20.0

15.0

10.0

5.0

0.0

12.0

FY12

GROSS INFLOWS (£bn)

s
w
o
l
f
n
I

s
s
o
r
G

4.0

3.0

2.0

1.0

0.0

1.8

FY12

14.3

16.9

24.6

19.1

FY13

FY14
Financial year (end)

FY15

FY16

3.1

3.4

3.6

2.2

FY13

FY14
Financial year (end)

FY15

FY16

2 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016

INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016 3

THE STRATEGIC REPORT continued

Clients and wrappers

TOTAL NUMBER OF CLIENTS (K)

RISK AND RISK MANAGEMENT

The total number of clients continues
to grow, with the number of wrappers
open at the end of each year also
showing steady development over
time. Average growth in client
numbers of over 7% per annum has
been achieved.

s
t
n
e

i
l

f
o

r
e
b
m
u
N

150

125

100

99K

105K

115K

125K

134K

FY12

FY13

FY14
Financial year (end)

FY15

FY16

IHL - TOTAL NUMBER OF WRAPPER / POLICIES
IN FORCE AT END OF YEAR (K)

172K

186K

203K

211K

228K

s
e
i
c
i
l

o
P

250

200

150

100

Overview

How risks are managed

Risk management assists the
Board in understanding its current
and future risks, and provides risk
appropriate management information
that is incorporated into its strategic
decision making and business
planning process. Risk management
activities encompass all financial,
strategic and operational risks that
may prevent the Company from
fulfilling its business objectives.

The Company has a prudent capital
management approach and currently
invests surplus shareholder assets
in high quality, highly liquid, short-
dated investments.

The Board, through its Group Risk
Committee, is responsible for and
provides oversight of the Company’s
Risk Management Framework.
The Company has established its
framework using and adapting
the Committee of Sponsoring
Organisation of the Treadway
Commission (COSO) Integrated
Framework Principles, providing a
consistent approach to identification,
assessment, mitigation and reporting
of risks throughout the Company and
the wider Group.

The Risk Management Framework
is shown below:

FY12

FY13

FY14
Financial year (end)

FY15

FY16

Risk and governance framework

Board

Strategic

OVERSIGHT

ENTERPRISE RISK MANAGEMENT

OWNERSHIP

RISKS

Earnings

IHL – PROFIT BEFORE TAX (£M)

Earnings continue to show stable
growth demonstrating the continuing
strength of the business. Whilst
there has been minimal impact
on profit from converting to IFRS
from UK GAAP the changes to
the consolidation of the insurance
companies has resulted in an
exceptional increase in 2016.
Earnings per share, based on an
average of 1,137,278 shares in issue
in 2016 (2015: 1,137,278, 2014:
1,139,550) have grown each year,
demonstrating increased value for
shareholders.

T
B
P

38.34M

17.77M

20.17M

FY14

FY15
Financial year (end)

FY16

IHL - EARNINGS PER SHARE (£)

S
P
E

20.0

16.0

12.0

8.0

4.0

0.0

12.27

14.33

18.30

FY14

FY15
Financial year (end)

FY16

Reputational

Market

Credit

Operational

Insurance

Liquidity

Conduct

Group

t
i
d
u
a

a
n
r
e
t
n
I

e
c
n
a

i
l

p
m
o
c

d
n
a

t
n
e
m
e
g
a
n
a
m
k
s
i
R

Model
governance
and data
quality

Risk management
policies
(e.g. market, credit
liquidity etc)

Board
with Risk
Committee
guidance

Systems and Controls policies
(Group policy, process and procedures
principles and guidance documents)

Procedures, manuals,
operational limits, methodology,
specifications, control activities,
training, reporting

Management,
Corporate and
Client Accounting,
Operations,
Sales and
Marketing,
Information
Technology,
Human Resources,
Legal, Technical,
Quality Control,
Actuarial

4 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016

INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016 5

THE STRATEGIC REPORT continued

The Group Risk Committee is made
up of independent non-executive
directors and is responsible for
reviewing the manner in which the
Group and its subsidiary companies
implement, and monitor the
adequacy of, the Risk Management
framework. The Group Risk
Committee assists in fostering
a culture that encourages good
stewardship of risk and emphasises
and demonstrates the benefits of a
risk-based approach to management
of the Group.

The Group implements a
comprehensive bottom-up approach
to managing risks through regular
monitoring and reporting. Risk
Management reports to the Risk
Committee, on at least a quarterly
basis, information and analysis on
the key risks the organisation faces
(including forward looking risks),
capital requirements and comparison
against risk appetite.

For risk management to be effective
it is important that the roles and
responsibilities of all those involved
are clearly defined. The Group’s
approach is represented by the ‘three
lines of defence’ model.

The first line of defence is
represented by those individuals,
including the management team,
directly involved in business
operations. It is responsible for
the daily risk management of the
business at the operational level, in
accordance with the risk policies,
appetites and controls that have been
approved by the Board.

Risk appetite

The Group has generally adopted
a conservative approach which is
reflected in its risk appetite values
and in the overall approach to
risk management. The actual risk
exposures of the Group’s regulated
subsidiaries are regularly assessed
against risk appetite using a
comprehensive set of indicators
and reported to the Group Risk
Committee. Risk assessments are
addressed within this body and
reported to the Boards, to ensure
the companies remains within their
agreed risk appetites as defined by
the Boards.

Risk governance

The Risk Management Framework
defines risk governance as the
combination of processes and
structures implemented by the Board
in order to inform, direct, manage
and monitor the activities of the
Group towards the achievement of
its objectives for the benefit of its
key stakeholders.

The second line of defence is
provided by the risk oversight
functions, i.e. Risk Management
and Compliance. These functions
are responsible for establishing risk
policies, risk processes and controls
as well as the monitoring and
reporting of risks and controls.

The third line of defence is the
responsibility of the internal and
external auditors. These parties
provide independent assurance to
the Board that the risk management
process is effective and challenged.

This internal control system provides
reasonable assurance to the Board on
the achievement of the strategic and
operational objectives of the Group.

Solvency II

During 2015/16 ILUK fully embedded
the requirements of the new
Solvency II regime which came
into force on 1 January 2016. The
new regulations bring in detailed
requirements covering risk and risk
management, including stress and
scenario testing, as well as new
valuation and reporting requirements.
However, this has not fundamentally
changed ILUK’s business or risk
profile and ILUK continues to safely
manage its solvency position through
the economic cycle.

ILUK has adopted the Standard
Formula approach in calculating
the Solvency Capital Requirement
(SCR), and none of the Transitional
Provisions in the calculation of the
Solvency II balance sheet or SCR.

Viability statement

The Directors have assessed the
Group’s prospects by reference
to the three-year planning period
to September 2019 and have
reasonable expectation that the
Group will continue to operate and
meet its liabilities as they fall due
over the period of this assessment.

This is based on the Group’s business
plan which is produced on an annual
basis covering a three year period.
The assessment covers projected
performance of all of the Group at
solo entity level and on a consolidated
basis. The Group’s regulated
subsidiaries are assessed with
regards to profitability, solvency and
liquidity, including under stress and
scenario tests. Assessments of the
economic, regulatory and competitive
environments are also included, as
well as the current and potential
future impact of the principal risks
faced by the Group benchmarked
against its risk appetite.

6 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016

INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016 7

THE STRATEGIC REPORT continued

PRINCIPAL RISKS AND
UNCERTAINTIES

The principal risks and uncertainties
of the Company relate to the
upstream of capital, predominantly
from its regulated subsidiary IFAL,
in order to support its dividend
paying capacity to its shareholders.
The key drivers of this upstream of
capital will be the underlying financial
performance and solvency position of
IFAL and are provided in the relevant
supplementary accounts.

In summary, due to the nature of
the business written by IFAL and
its subsidiaries, profitability arises
primarily from charges on the
assets held in the portfolios less the
expenses of administering those
portfolios. Thus, the predominant risk
types are outflow risk, expense risk,
market risk and operational risk.

The Group seeks to limit its exposure
to any other insurance and financial
risks.

The following tables (split between
financial and non-financial) describe
the key risks of the Group with a
summary description of how we
manage and mitigate the risks:

FINANCIAL RISKS

NON-FINANCIAL RISKS

KEY RISK DESCRIPTION

MANAGEMENT AND CONTROLS

KEY RISK DESCRIPTION

MANAGEMENT AND MITIGATION

Outflow risk – loss of future profits
due to more customers than
expected terminating policies or
more outflows (e.g. withdrawals or
transfers) than expected.

Expense risk – administration
costs exceed expense allowance.

Market risk - the impact changes
in interest rates, credit spreads,
currency exchange rates, inflation,
equity and property market
values may have on the value of
customers’ portfolios, resulting in
a reduction in future charges or an
increase in future expenses.

Credit risk – this is the risk of
loss due to defaults from holdings
of cash and cash equivalents,
deposits, formal loans and
reinsurance treaties with banks
and financial institutions.

Outflow risk is mitigated
by focussing on providing
exceptionally high levels of
service. Outflow rates are closely
monitored and unexpected
experience is investigated.
Despite the current challenging
and uncertain economic and
geopolitical environment, outflow
rates remain low and stable.

Expense risk is mitigated through
regular stress testing, monitoring
of expenditure and closely
managing expenses in line with
the business plan.

The Group only suffers a second
order impact from market
movements as future charges are
predominantly determined based
on customers’ portfolio values.
The Group does not offer any
guarantees on portfolio values.

The Group currently invests
its shareholder assets in high
quality, highly liquid, short-dated
investments.

Expense inflation risk is mitigated
through regular stress testing,
monitoring of expenditure and
closely managing expenses in line
with the business plan.

The Group currently invests
its shareholder assets in high
quality, highly liquid, short-
dated investments. Maximum
counterparty limits are set for
banks and minimum credit quality
steps are also set.

Liquidity risk – this is the risk of
the Company not having available
sufficient financial resources to
enable it to meet its obligations as
they fall due, or can secure such
resources only at excessive cost.

There are robust controls in place
to mitigate liquidity risk, for
example, holding corporate cash
across a range of banks, in order to
mitigate the risk of a single point of
counterparty default failure.

Regulatory risk – the risk of
new regulatory requirements
having adverse impacts on the
business model, or failing to
comply with existing or new
regulations resulting in a fine
or regulatory censure.

Operational risk – the risk of loss
arising from inadequate or failed
internal processes, people and
systems, or from external events.

Competition risk – the risk of
competitor activity resulting in
loss of new business, increased
outflows of existing business or
pressure on profit margins.

Geopolitical risk – the risk of
changes in the political landscape
disrupting the operations of the
business or resulting in significant
development costs.

The compliance risk is mitigated
through regular monitoring of
regulatory developments and
maintaining open and transparent
dialogue with the regulators.

The Group aims to minimise
operational risk at all times
through a strong and well-
resourced control and operational
structure. This is supported by
the strong corporate governance
structure that is embedded in the
Group as a whole.

Competitor risk is mitigated by
focusing on providing exceptionally
high levels of service and being
responsive to customer and
financial adviser demands through
an efficient expense base.

Geopolitical risk cannot be
directly mitigated by the Group,
but through close monitoring
of developments through its
risk horizon scanning process,
potential impacts are taken into
consideration as part of the
business planning process.

By Order of the Board

David Johnson
Company Secretary

Registered Office
29 Clement’s Lane
London
EC4N 7AE

14 December 2016

8 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016

INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016 9

THE DIRECTORS’ REPORT

STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors present their report
and financial statements for the year
ended 30 September 2016.

whereby employees are encouraged
to develop and contribute to the
overall aims of the business.

The review of the business and
principal risks and uncertainties are
disclosed within the Strategic report.

POLICY ON DISABLED
EMPLOYEES

DIRECTORS

The Directors who served during the
year were as follows:

M Howard

I A Taylor

A Scott

J M Davidson

P W A Westerman
(resigned 11 January 2016)

N J Holden

J Brettell

S Bazley

According to the Register of Directors’
Interests in the Company, no rights to
subscribe for shares or share options
were granted or exercised by any
of the Directors or their immediate
families during the financial year.

INDEMNITY PROVISION

Directors and officers insurance is
in place to indemnify the Directors
against liabilities arising from the
discharge of their duties as Directors
of the Company.

EMPLOYEE INFORMATION

The Company has no employees
(2015: nil), but the Group has 447
employees (2015: 362). The Group
continues to promote a culture

The Group’s policy regarding
employment, training, career
development and promotion of
disabled employees, and employees
who become disabled whilst in
employment, is to make reasonable
adjustments as required.

POLITICAL DONATIONS

No political contributions were made
during the year (2015: £nil).

AUDITORS

BDO LLP have indicated their
willingness to continue in office.
A resolution to reappoint BDO LLP
as auditors for the ensuing year will
be proposed at the next AGM.

Each of the persons who is a director
at the date of approval of this report
confirms that:

n so far as the Director is aware,

there is no relevant audit
information of which the Company’s
auditor is unaware; and

n the Director has taken all the

steps that he ought to have taken
as a Director in order to make
himself aware of any relevant audit
information and to establish that
the Company’s auditor is aware of
that information. This confirmation
is given and should be interpreted
in accordance with the provision of
s418 of the Companies Act 2006.

By Order of the Board

David Johnson
Company Secretary

Registered Office
29 Clement’s Lane
London
EC4N 7AE

14 December 2016

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT
OF THE STRATEGIC REPORT, DIRECTORS’ REPORT AND THE
FINANCIAL STATEMENTS

The Directors are responsible for
preparing the Annual Report and the
financial statements in accordance
with the Companies Act 2006 and
for being satisfied that the financial
statements give a true and fair view.

The Directors are also responsible for
preparing the financial statements
in accordance with International
Financial Reporting Standards as
adopted by the European Union
(IFRSs). These are the Group’s first
financial statements prepared in
accordance with IFRSs, and IFRS 1
First-time Adoption of International
Financial Reporting Standards has
been applied.

Company law requires the Directors to
prepare financial statements for each
financial year, which give a true and
fair view of the state of affairs of the
Company and Group, and of the profit
or loss of the Group for that year.

In preparing those financial
statements, the Directors are
required to:

a) select suitable accounting policies
and then apply them consistently;

b) make judgements and estimates
that are reasonable and prudent;

c) state whether applicable

accounting standards have been
followed, subject to any material
departures disclosed and explained
in the financial statements; and

d) prepare the financial statements

on the going concern basis unless
it is inappropriate to presume
that the Company and Group will
continue in business.

The Directors are responsible
for keeping adequate accounting
records that show and explain the
Group’s transactions, disclose with
reasonable accuracy at any time the
financial position of the Company
and enable them to ensure that the
financial statements comply with the
Companies Act 2006.

They are also responsible for
safeguarding the assets of the
Company and Group and hence
for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.

The current Directors, at the date
of approval of this report, confirm
that they have taken all of the steps
that they ought to have taken as
Directors to make themselves aware
of any information needed by the
Company’s auditors for the purposes
of their audit, and to establish that the
auditors are aware of that information.
The Directors are not aware of any
relevant audit information of which the
auditors are unaware.

10 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016

INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016 11

INDEPENDENT AUDITOR’S REPORT

INDEPENDENT AUDITOR’S
REPORT TO THE MEMBERS
OF INTEGRAFIN HOLDINGS
LIMITED

We have audited the financial
statements of IntegraFin Holdings
Limited for the year ended 30
September 2016 which comprise
the primary statements such as
the consolidated and Company
Statement of Profit or Loss and
other Comprehensive Income, the
consolidated and Company Statement
of Financial Position, the consolidated
Statement of Cash Flows, the
consolidated and Company Statement
of Changes in Equity and the related
notes. The financial reporting
framework that has been applied in
their preparation is applicable law
International Financial Reporting
Standards (IFRSs) as adopted by the
European Union.

This report is made solely to the
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
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 Company and the
Company’s members as a body, for
our audit work, for this report, or for
the opinions we have formed.

RESPECTIVE
RESPONSIBILITIES OF
DIRECTORS AND AUDITORS

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. Our responsibility is to
audit and express an opinion on the
financial statements in accordance
with applicable law and International
Standards on Auditing (UK and
Ireland). Those standards require
us to comply with the Financial
Reporting Council’s (FRC’s) Ethical
Standards for Auditors.

SCOPE OF THE AUDIT OF THE
FINANCIAL STATEMENTS

A description of the scope of an
audit of financial statements is
provided on the FRC’s website at:
www.frc.org.uk/auditscopeukprivate.

OPINION ON FINANCIAL
STATEMENTS

In our opinion the financial
statements:

n give a true and fair view of the state
of the Group’s and the Company’s
affairs as at 30 September 2016 and
of the Group’s and the Company’s
profit for the year then ended;

n have been properly prepared in
accordance with International
Financial Reporting Standards; and
have been prepared in accordance
with the requirements of the
Companies Act 2006.

OPINION ON OTHER
MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006

In our opinion the information given
in the Strategic report and Directors’
report for the financial year for which
the financial statements are prepared
is consistent with the financial
statements.

MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY
EXCEPTION

We have nothing to report in respect
of the following matters where the
Companies Act 2006 requires us to
report to you if, in our opinion:

n adequate accounting records have
not been kept by the Company, or
returns adequate for our audit have
not been received from branches
not visited by us; or

n the Company financial statements

are not in agreement with the
accounting records and returns; or

n certain disclosures of Directors’

remuneration specified by law are
not made; or

n we have not received all the

information and explanations we
require for our audit.

Neil Fung-On
(Senior Statutory Auditor)

For and on behalf of BDO LLP,
Statutory Auditor

London
United Kingdom
22 December 2016

BDO LLP is a limited liability
partnership registered in England
and Wales (with registered number
OC305127).

12 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2016

FINANCIAL
STATEMENTS
Year ended
30 September 2016

CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME

For the year ended 30 September 2016

COMPANY STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME

For the year ended 30 September 2016

Revenue

Cost of sales

Gross profit

Other operating income

Administrative expenses

Operating profit

Interest income

Profit on ordinary activities before taxation

Tax on profit on ordinary activities

Policyholder tax

Profit for the financial year

All activities of the Group are classed as continuing.

Note

5&6

2016
£’000

93,770

(488)

93,282

(55,392)

37,890

451

38,341

(5,296)

(12,229)

20,816

2015
£’000

68,244

(504)

67,740

(47,857)

19,883

284

20,167

(4,063)

197

16,301

Revenue

Cost of sales

Gross profit

Administrative expenses

Operating profit

Dividend income

Interest income

Profit on ordinary activities before taxation

Tax on profit on ordinary activities

Profit for the financial year

All activities of the Company are classed as continuing.

Note

2016
£’000

(-)

(1,010)

39,649

38,641

(78)

38,563

2015
£’000

(-)

(483)

8,070

7,587

7,665

14 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 15

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

COMPANY STATEMENT OF FINANCIAL POSITION

As at 30 September 2016

30 September
2016
£’000

30 September
2015
£’000

Note

1 October
2014
£’000

30 September
2016
£’000

30 September
2015
£’000

Note

1 October
2014
£’000

Non-current assets

Long-term investments

Deferred tax asset

Current assets

Other receivables

Cash and cash equivalents

Current liabilities

Trade and other payables

Net assets

Capital and reserves

Called up equity share capital

Profit or loss account

Total equity

14,213

16,422

16,431

388

30,256

30,199

30,256

449

527

221

671

614

671

807

847

790

847

These financial statements were approved by the Board of Directors on 14 December 2016 and are signed on their behalf by:

I Taylor
Director
Company Registration Number: 08860879

Non-current assets

Long-term investments

Intangible assets

Property, plant and equipment

Other receivables

Deferred acquisition costs

Deferred tax assets

Investments and cash held for the benefit of policyholders

Current assets

Investments

Other prepayments and accrued income

Trade and other receivables

Current tax assets

Cash and cash equivalents

Current Liabilities

Trade and other payables

Current tax liabilities

Non-current liabilities

Provisions for liabilities

Deferred income liability

Liabilities for linked investment contracts

Deferred tax liabilities

Net assets

Capital and reserves

Called up equity share capital

Share premium account

Capital redemption reserve

Share-based payment reserve

Other reserves

Non-distributable reserves

Profit or loss account

Total equity

13,006

2,072

31,792

392

1,400

1,403

29,736

750

3,187

1,793

809

28,096

11,316,471

11,363,341

8,441,189

8,474,198

7,524,053

7,558,688

8,976

9,842

13,012

199

90,571

122,600

14,289

1,685

15,974

26,965

31,792

6,945

8,311

7,462

88,186

110,904

16,037

1,094

17,131

20,802

29,736

5,004

1,599

12,422

76,192

95,217

15,016

1,299

16,315

16,009

28,096

11,316,471

8,441,189

7,524,053

8,495

1,279

3,012

11,383,723

8,493,006

7,571,170

86,244

74,965

66,420

5,722

308

501

79,622

86,244

5,722

308

501

68,375

74,965

5,722

308

501

59,830

66,420

These financial statements were approved by the Board of Directors on 14 December 2016 and are signed on their behalf by:

Ian Taylor
Director
Company Registration Number: 08860879

16 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 17

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 September 2016

Cash flows from operating activities

Profit before tax

Adjustments for:

Amortisation and depreciation

Interest

Decrease/(increase) in receivables

(Decrease)/increase in payables

Decrease/(increase) in current asset investments

Decrease/(increase) in long term investments

Decrease/(increase) in provisions

Cash generated from operations

Income taxes paid

Net cash flows from operating activities

Investing activities

(Acquisition)/disposal of tangible assets

(Acquisition)/disposal of subsidiary

Interest received

Net cash from/(used in) investing activities

Financing activities

Equity dividends paid

Net cash used in financing activities

2016
£’000

2015
£’000

38,341

20,167

2,216

(451)

(7,203)

5,578

(2,031)

392

6,163

43,005

(16,932)

26,073

(1,014)

(13,505)

451

(14,068)

2,365

(284)

(1,020)

(630)

(1,941)

358

4,793

23,808

(4,071)

19,737

(189)

284

(9,652)

(7,838)

Net increase/(decrease) in cash and cash equivalents

2,353

11,994

Cash and cash equivalents at beginning of year

Exchange gains/(losses) on cash and cash equivalents

Cash and cash equivalents at end of year

88,186

76,192

90,571

88,186

Share
capital

Share
premium

Other
reserve

Share
based
payment
reserve

Non-
distrib-
utable
reserve

Retained
earnings

Total
equity

£’000

Balance at 1 Oct 2014

5,722

Profit for the year

Dividends paid

ILInt transfer from
non-linked fund

Other movement

Balance at 1 October 2015

5,722

Profit for the year

Other comprehensive income

Dividends paid

Other movement

Balance at 30 September 2016

5,722

308

501

59,831

66,421

16,301

(7,838)

308

501

68,376

74,966

20,816

(9,652)

308

501

79,622

86,244

18 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 19

For the year ended 30 September 2016COMPANY STATEMENT OF CHANGES IN EQUITY

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 30 September 2016

Year ended 30 September 2016

Balance at 1 Oct 2014

Profit for the year

Dividends paid

Balance at 1 October 2015

Profit for the year

Dividends paid

Balance at 30 September 2016

Share
capital
£’000

Share
premium
£’000

Capital
redemption
reserve
£’000

Share
based
payment
reserve
£’000

Retained
earnings
£’000

790

7,665

Total
equity
£’000

847

7,665

(7,841)

614

38,563

(8,978)

30,199

671

38,563

(8,978)

30,256

1. Basis of preparation and significant accounting policies

a) Basis of preparation and adoption of IFRS

The accounting policies set out below have been applied consistently to all periods presented in these financial
statements and in preparing the opening IFRS statement of financial position as at the transition date of 1 October
2014 for the purposes of the transition to IFRSs, unless otherwise stated.

The financial statements comply with International Financial Reporting Standards (IFRSs) as adopted by
the European Union. The financial statements have been prepared on the historical cost basis, except for
the revaluation of certain financial instruments, have been prepared in sterling and are rounded to the
nearest thousand.

The preparation of the financial statements in compliance with adopted IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting
policies. The areas where significant judgments and estimates have been made in preparing the financial
statements and their effect are disclosed in note 2.

These are the Company’s first financial statements prepared in accordance with IFRSs, and IFRS 1 First-time
Adoption of International Financial Reporting Standards has been applied. An explanation of how the transition
to IFRSs has affected the reported financial position, financial performance and cash flows of the Company is
provided in note 34.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.
Subsidiaries are those entities which the Company controls by having the power to govern the financial and
operating policies. Subsidiaries are fully consolidated from the date on which control is obtained by the Company
and are deconsolidated from the date that control ceases. Acquisitions are accounted for under the acquisition
method. Intercompany transactions, balances, income and expenses, and profits and losses are eliminated.

The financial statements of all of the wholly owned subsidiary companies are incorporated into the consolidated
financial statements. Two of these subsidiaries, IntegraLife International Limited (ILInt) and IntegraLife UK Limited
(ILUK) issue contracts with the legal form of insurance contracts, but which do not transfer significant insurance
risk from the policyholder to the Company, and which are therefore accounted for as investment contracts. In
accordance with IAS 39, the contracts concerned are therefore reflected in the consolidated statement of financial
position as investments held for the benefit of policyholders, and a corresponding liability to policyholders.

b) Future standards, amendments to standards, and interpretations not early-adopted in the 2015 annual

financial statements.

At the date of authorisation of these financial statements the following standards, amendments to standards,
and interpretations, which are relevant to the Group, have been issued by the International Accounting
Standards Board.

IFRS 9 ‘Financial Instruments

The IASB has issued components of IFRS 9 Financial Instruments, which is the first step in its project to replace
lAS 39 ‘Financial Instruments: Recognition and Measurement’ in its entirety. The project has three main phases:

n Phase I: Classification and measurement of financial instruments;
n Phase II: Amortised cost and impairment of financial assets; and
n Phase III: Hedge Accounting

20 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 21

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

IFRS 9, as currently issued, includes requirements for the classification and measurement of financial assets and
liabilities, liabilities derecognition requirements and additional disclosure requirements. The main changes from IAS
39 include the following:

n Financial assets are to be classified and measured based on the business model for managing the financial and the

cash flow characteristics of the financial asset, either at fair value or amortised cost.

n A financial asset or liability that would otherwise be at amortised cost may only be designated as at fair value

through profit or loss if such a designation reduces an accounting mismatch.

n For financial liabilities designated as at fair value through profit or loss a further requirement is that all changes in
the fair value of financial liabilities attributable to credit risk be transferred to ‘Other Comprehensive Income’ with
no recycling through profit or loss on disposal.

This standard is effective for accounting periods beginning on or after 1 January 2018; it is yet to be endorsed by the
EU. It is not possible to determine the full potential financial impact at this stage, but adoption of the standard is not
expected to have a significant impact on the Group.

IFRS 15 Revenue from Contracts with Customers

The standard provides a comprehensive new model for revenue recognition. The Group would be required to
disclose information about its contracts with customers, disaggregating information about recognised revenue and
information about its performance obligations at the end of the reporting period.

This standard is effective for accounting periods beginning on or after 1 January 2018; it is yet to be endorsed by
the EU. The impact of the new standard will be further assessed in more detail, but adoption of the standard is not
expected to have a significant impact on the Group.

IFRS 16 Leases

The new standard brings most leases on-balance sheet for lessees under a single lessee accounting model,
eliminating the distinction between operating and finance leases.

This standard is effective for accounting periods beginning on or after 1 January 2019; it is yet to be endorsed by
the EU. Management is still determining the impact of this standard, and it is dependent on the EU endorsing the
standard.

c) Critical accounting estimates and judgements

Critical accounting estimates are those which involve the most complex or subjective judgements or assessments.
The areas of the Group’s business that typically require such estimates are the determination of the fair value for
financial assets, impairment charges, deferred acquisition costs, deferred fee income and deferred taxes. Each of
these is discussed in more detail in the relevant accounting policies and notes to the financial statements.

d) Principal accounting policies

Revenue recognition

Revenue represents the fair value of services supplied by the Group, net of value-added tax. The main revenue
streams comprise: charges levied on the acquisition of assets, due when transactions complete; annual commission
levied on the value of assets and cash held on the platform, due at the end of each month; and an annual wrapper
charge levied on certain wrapper types, due at the end of each quarter. Charges are levied on Portfolios as stated in
the Transact Terms and Conditions. Revenue is recognised as follows:

Fee income

Fees charged for managing investment contracts comprise fees taken both on inception and throughout the life
of the contract. All fee income is recognised as revenue in line with the provision of the investment management
services.

Deferred acquisition costs and deferred income liabilities

Incremental costs directly attributable to securing investment contracts are deferred. These costs consist of fees
paid to policyholder financial advisers. The costs are capitalised as deferred acquisition costs and are amortised
as an expense over the Directors’ best estimate of the life of the contract which is deemed to be ten years, as
the services are provided. Equal service provision is assumed over the lifetime of the contract and, as such,
the deferred costs are amortised on a linear basis over the expected life of the contract, adjusted for expected
persistency.

A corresponding deferred income liability is recognised in respect of charges taken from customers of the
Company at the contracts’ inception to meet obligations to financial advisers. Deferred income liabilities are also
amortised over the Director’s best estimate of the life of the contract, which is again deemed to be ten years.

Investment income

Interest on cash and coupon on shareholder gilts are the two sources of investment income received. Interest
income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to that financial asset’s carrying amount.

Investments

Fixed asset investments in subsidiaries are stated at cost less any provision for impairment.

Other investments comprise UK Government fixed interest securities backing insurance contracts or held as
shareholder investments. All investments are classified as ‘fair value through profit or loss at initial recognition’
and are stated at quoted bid prices which equates to fair value, with any resultant gain or loss recognised in profit
or loss. Purchases and sales of securities are recognised on the trade date.

Investment contracts – investments and cash held for the benefit of policyholders

Investment contracts are comprised of unit-linked contracts in ILInt and ILUK. Investment contracts result
in financial liabilities whose fair value is dependent on the fair value of underlying financial assets. They are
designated at inception as financial liabilities at ‘fair value through profit or loss’.

Valuation techniques are used to establish the fair value at inception and each reporting date. The Company’s
main valuation techniques incorporate all factors that market participants would consider and are based on
observable market data. The financial liability is measured both initially and subsequently at fair value. The fair
value of a unit-linked financial liability is determined using the fair value of the financial assets contained within
the funds linked to the financial liability.

Dividends

Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised
when paid.

Liquid resources

For the purposes of the cash flow statement, liquid resources are defined as current asset investments and short
term deposits.

Intangible non-current assets

Intangible fixed assets are stated at cost less accumulated amortisation and comprise intellectual property
software rights. Intellectual property rights are amortised over seven years on a straight line basis as it is
considered that the code is replaced every seven years, and therefore has a finite useful life.

22 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 23

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

Property, plant and equipment

Segmental reporting

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment
losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent costs
are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Company and the cost can be
measured reliably. Repairs and maintenance costs are charged to the statement of income during the period in
which they are incurred.

The major categories of property, plant and equipment are depreciated on a straight-line basis as follows:

Short Leasehold Land and Buildings Over 10 years
Over 10 years
Fixtures & Fittings
Over 3-5 years
Equipment

Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if
appropriate.

Impairment of non-financial assets

Property, plant and equipment and intangible assets are tested for impairment when events or changes in
circumstances indicate that the carrying amount may not be recoverable. Recoverable amount is the higher of an
asset’s fair value less costs to sell and value in use (being the present value of the expected future cash flows of
the relevant asset).

The Company evaluates impairment losses for potential reversals when events or circumstances warrant such
consideration.

Goodwill is tested for impairment annually, and once an impairment is recognised this cannot be reversed.

Pensions

The Group makes defined contributions to the personal pension schemes of its employees. These are chargeable
to profit or loss in the year in which they become payable.

Foreign currencies

Transactions in foreign currencies are translated into the functional currency at the exchange rate in effect at the
date of the transaction. Foreign currency monetary assets and liabilities are translated to sterling at the year end
closing rate. Non-monetary assets denominated in a foreign currency that are measured in terms of historical cost
are translated using the exchange rate in effect at the date when the fair value was determined. Foreign exchange
rate differences that arise are reported net in profit or loss as foreign exchange gains/losses.

Taxation

The taxation charge is based on the taxable result for the year. The taxable result for the year is determined in
accordance with enacted legislation and taxation authority practice for calculating the amount of corporation tax
payable.

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the
statement of financial position differs from its tax base. Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be available against which the difference can be utilised.

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted
by the reporting date and are expected to apply when the deferred tax assets/liabilities are recovered/settled.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision-maker. The chief operating decision-maker is responsible for allocating resources and assessing
performance of the operating segments and has been identified as the chief executive officer of the Company.

For the year ended 30 September 2016, the business of ILUK and ILInt was the direct insurance of investment
linked pensions business, written by single premium in the United Kingdom, single premium life assurance linked
bonds and linked qualifying investment plans written in the United Kingdom. Such contracts are treated as
investment contracts because they do not carry significant insurance risk.

ILInt and ILUK policyholder assets and liabilities

Investments held for the benefit of policyholders are stated at fair value and reported on a separate line in the
statement of financial position. The assets are classified using the ‘fair value through profit or loss’ option with any
resultant gain or loss recognised through the income statement. Investments held for the benefit of policyholders
also includes cash and cash equivalents held within policyholders’ portfolios of assets.

Investment inflows received from policyholders are invested in funds selected by the policyholders. The resulting
liabilities for linked investment contracts are accounted for under the ‘fair value through profit or loss’ option, in
line with the corresponding assets as permitted by IAS 39

As all investments held for the benefit of policyholders are matched entirely by corresponding linked liabilities,
any gain or loss on assets recognised through the income statement are offset entirely by the gains and losses on
linked liabilities. The net impact on profit is therefore £nil.

Client assets and client monies

IFAL client assets and client monies are not recognised in the parent and consolidated statements of financial
position (see Note 21) as they are owned by the clients of IFAL.

Operating lease agreements

Rental costs under operating leases are charged to the statement of profit or loss and other comprehensive
income on a straight line basis over the term of the lease. Where an incentive to sign the lease has been taken,
the incentive is spread on a straight line basis over the lease term. Details of the operating lease commitments are
set out in Note 28.

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits, money market OEIC funds and other short-term
deposits with an original maturity of three months or less. The carrying amount of these assets approximates to
their fair value.

Financial instruments

Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions
of the instrument. Financial assets are derecognised when the rights to receive cash flows from the assets
have expired or have been transferred and the Company has transferred substantially all risks and rewards
of ownership. Financial liabilities are derecognised when the obligation specified in the contract is discharged,
cancelled or expires.

24 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 25

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

At initial recognition, the Company classifies its financial instruments in the following categories:

2. Critical accounting estimates and judgements

(i) Financial assets and liabilities at fair value through profit or loss

A financial asset or liability is classified in this category if acquired principally for the purpose of selling or
repurchasing in the short-term.

Financial instruments in this category are recognised initially and subsequently at fair value. Transaction costs
are expensed in the consolidated statement of income. Gains and losses arising from changes in fair value are
presented in the consolidated statement of income within “administrative expenses” in the period in which
they arise. Financial assets and liabilities at fair value through profit or loss are classified as current except
for the portion expected to be realised or paid beyond twelve months of the balance sheet date, which are
classified as long-term.

(ii) Available-for-sale investments

Available-for-sale investments are non-derivatives that are either designated in this category or not classified
in any of the other categories. The Company’s available-for sale assets comprise investments in debt and
equity securities.

Available-for-sale investments are recognised initially at fair value plus transaction costs and are subsequently
carried at fair value. Gains or losses arising from remeasurement are recognised in other comprehensive
income. When an available-for-sale investment is sold or impaired, the accumulated gains or losses are moved
from accumulated other comprehensive income to the statement of income and are included in “administrative
expenses”. Available-for-sale investments are classified as non-current, unless an investment matures within
twelve months, or management expects to dispose of it within twelve months.

Interest on available-for-sale debt instruments, calculated using the effective interest method, is recognised in
the statement of income as part of interest income.

(iii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not
quoted in an active market. The Company’s loans and receivables comprise accrued fees, trade and other
receivables and cash and cash equivalents, and are included in current assets due to their short-term nature.
Loans and receivables are initially recognised at the amount expected to be received, less, when material, a
discount to reduce the loans and receivables to fair value. Subsequently, loans and receivables are measured
at amortised cost using the effective interest method less any provisions for impairment.

(iv) Financial liabilities at amortised cost

Financial liabilities at amortised cost comprise trade and other payables. These are initially recognised
at the amount required to be paid, less, when material, a discount to reduce the payables to fair value.
Subsequently, trade payables are measured at amortised cost using the effective interest method. They are
classified as current liabilities due to their short-term nature.

Provisions for liabilities

Provisions are recognised when the Company has an obligation, legal or constructive, as a result of a past
event, and it is probable that the Company will be required to settle that obligation. Provisions are estimated at
the Directors’ best estimate of the expenditure required to settle the obligation at the reporting date, and are
discounted to present values where the effect is material.

Trade and other payables

Other payables are short-term, not interest-bearing and are stated at their amortised cost which is not materially
different to cost and approximates to fair value.

In preparing these financial statements, management has made judgements, estimates and assumptions about
the future that affect the application of the Group’s accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised
prospectively.

Impairment of accrued fees pending

The Group has recognised an impairment of £181,460 (2015: £117,474) for accrued fees owed by customers.
This comprises accrued fees that have not been received after three months, and also all fees due on portfolios
that comprise only limited liquidity assets. Management believes, based on past experience, that these fees are
unlikely to be received, and an impairment has therefore been recorded in the statement of profit or loss.

Impairment of financial assets

At each reporting date, the Company assesses whether there is objective evidence that a financial asset (other
than a financial asset classified as fair value through profit or loss) is impaired. A financial asset is only impaired
if there is objective evidence of impairment as a result of one or more events that have occurred after the initial
recognition of the asset (a ”loss event”) and that loss event (or events) has an impact on the estimated future
cash flows of the receivable that can be reliably estimated.

The criteria used to determine objective evidence of an impairment loss include:

(i) significant financial difficulty of the obligor;
(ii) delinquencies in interest or principal payments; and
(iii) it becomes probable that the borrower will enter bankruptcy or other financial reorganisation.

For equity securities, a significant or prolonged decline in the fair value of the security below its cost is also
evidence that the assets are impaired.

If such evidence exists, the Company recognises an impairment loss, as follows:

(i) Financial assets carried at amortised cost: The loss is the difference between the amortised cost of the loan or
receivable and the present value of the estimated future cash flows, discounted using the instrument’s original
effective interest rate. The carrying amount of the asset is reduced by this amount and the amount of the loss
is recognised in the profit or loss for the period.

(ii) Available-for-sale financial assets: The impairment loss is the difference between the original cost of the asset
and its fair value at the measurement date, less any impairment losses previously recognised in the statement
of income. This amount represents the loss in accumulated other comprehensive income that is reclassified to
net income.

Impairment losses on financial assets carried at amortised cost and available-for-sale debt instruments are
reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognised. Impairment losses on available-for-sale equity
instruments are not reversed.

26 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 27

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

3. Financial instruments

(i) Principal financial instruments

The principal financial instruments, from which financial instrument risk arises, are as follows:

n Trade and other receivables
n Accrued fees
n Cash and cash equivalents
n Investments in quoted debt instruments
n Listed shares and securities
n Trade and other payables

(ii) Financial instruments by category

As explained in Note 1, financial assets and liabilities have been classified into categories that determine their
basis of measurement and, for items measured at fair value, whether changes in fair value are recognised in the
statement of income or other comprehensive income. The following tables show the carrying values of assets and
liabilities for each of these categories.

Financial assets:

Fair value through
profit or loss

Loans and
receivables

Available
for sale

30 Sep
2016
£’000

30 Sep
2015
£’000

30 Sep
2016
£’000

30 Sep
2015
£’000

30 Sep
2016
£’000

30 Sep
2015
£’000

Cash and cash equivalents

Listed shares and securities

Investments in quoted debt
instruments

Investments in unquoted equity
instruments with no active market

Accrued income

Trade and other receivables

Investments and cash held for the
policyholders

Deferred acquisition costs

Current tax asset

Deferred tax asset

8,925

6,882

90,571

88,186

6,806

13,013

5,919

7,462

11,316,471

8,441,188

31,792

29,736

199

Total financial assets

11,325,447 8,448,133

142,381

131,381

392

Financial liabilities:

Trade and other payables

PAYE and other taxation

Corporation tax

Accruals

Deferred income liability

Liabilities for linked investments
contracts

Deferred tax liabilities

Fair value through profit or loss

Amortised cost

30 Sep
2016
£’000

30 Sep
2015
£’000

30 Sep
2016
£’000

5,800

1,621

1,685

6,867

30 Sep
2015
£’000

9,329

487

1,094

6,222

31,792

29,736

11,316,471

8,441,189

Total financial liabilities

11,316,471

8,441,189

(iii) Financial instruments not measured at fair value

8,495

56,260

1,279

48,147

Financial instruments not measured at fair value include cash and cash equivalents, accrued fees, trade and other
receivables, and trade and other payables. Due to their short-term nature, the carrying value of these financial
instruments approximates their fair value.

(iv) Financial instruments measured at fair value – fair value hierarchy

The table below classifies financial assets that are recognised on the statement of financial position at fair value in
a hierarchy that is based on significance of the inputs used in making the measurements. The levels of hierarchy
are disclosed in Note 1.

Assets held at fair value also comprises investments held in gilts, and these are held at fair value through profit
and loss.

The following table shows the Group’s financial assets and liabilities measured at fair value and split into the three
levels described below:

n Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

n Level 2: inputs 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); and

n Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

28 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 29

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

Level 1
£’000

Level 2
£’000

Level 3
£’000

Total
£’000

Changes to valuation methodology

There have been no changes in valuation methodology during the year under review.

At 30 September 2016

Financial assets designated at fair value
through the income statements

- Investments and securities

- Bonds and other fixed-income securities

306,461

822,930

65,480

12,743

- Holdings in collective investment schemes

8,069,840

2,042,262

1,885

1,606

2,235

373,827

837,279

10,114,337

Total

9,199,231

2,120,485

5,726

11,325,443

At 30 September 2015

Financial assets designated at fair value
through the income statements

Level 1
£’000

Level 2
£’000

Level 3
£’000

Total
£’000

- Investments and securities

- Bonds and other fixed-income securities

250,858

620,238

49,051

12,383

- Holdings in collective investment schemes

6,256,225

1,254,417

710

1,556

2,694

300,619

634,176

7,513,336

Total

7,127,321

1,315,850

4,960

8,448,131

Level 1 valuation methodology

Financial assets included in Level 1 are measured at fair value using quoted mid prices that are available at the
reporting date and are traded in active markets. These financial assets are mainly collective investment schemes
and listed equity instruments.

Level 2 and Level 3 valuation methodology

The Group regularly reviews whether a market is active, based on available market data and the specific
circumstances of each market. Where the Group assesses that a market is not active, then it applies one or more
valuation methodologies to the specific financial asset. These valuation methodologies use quoted market prices
where available, and may in certain circumstances require the Group to exercise judgement to determine fair value.

Financial assets included in Level 2 are measured at fair value using observable mid prices traded in markets that
have been assessed as not active enough to be included in Level 1.

Otherwise, financial assets are included in Level 3. These are assets where one or more inputs to the valuation
methodology are not based on observable market data.

Level 3 sensitivity to changes in unobservable measurements

For financial assets assessed as Level 3, it is believed that any change to the unobservable inputs used to measure
fair value would not result in a significantly higher or lower fair value measurement.

Transfers between Levels

The Group’s policy is to assess each financial asset it holds at the current financial year-end, based on the last
known price and market information, and assign it to a Level.

Transfers from Level 1 to Level 2 are made where the Group determines that the market is now not active enough
to be Level 1, or the Group is not able to get a quoted price on the reporting date.

Transfers from Level 2 or 3 to Level 1 are made where the Group determines that the market is now active enough
to be Level 1, and the Group is also able to get a quoted price on the reporting date.

Transfers from Level 1 or 2 to Level 3 are made where the Group determines that one or more of the inputs to the
valuation methodology is now unobservable.

Transfers from Level 3 to Level 2 are made where the Group determines that all of the inputs to the valuation
methodology are now observable.

Transfers between Levels between 30 September 2015 and 30 September 2016 are presented in the table below
at their valuation at 30 September 2016:

Transfers from

Transfers to

Level 1

Level 2

Level 3

Level 2

Level 3

Level 1

Level 3

Level 1

Level 2

£’000s

1,910

199

39,237

1,237

The reconciliation between opening and closing balances of Level 3 assets are presented in the table below (all
balances are in £’000s):

Balance at 30 September 2015

Unrealised gains or losses in the year ended 30 September 2016

Transfers in to Level 3 at 30 September 2016 valuation

Transfers out of Level 3 at 30 September 2015 valuation

Purchases, sales, issues and settlement

Balance at 30 September 2016

£’000s

4,960

1,003

209

(259)

(187)

5,726

Realised and unrealised gains or losses for the period are recognised in “administrative expenses” in the
Statement of Comprehensive Income.

30 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 31

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

4. Risk and risk management

The Company’s regulated subsidiaries carries out different types of stress testing:

This note supplements the details provided in the Risk and risk management section of this report on pages 5 to 9.

n Sensitivity tests, where one risk factor is assumed to vary and others are assumed to remain unchanged;

Risk assessment

n Scenario testing, where a combination of risk factors are assumed to vary; and

Risk assessment is the determination of quantitative and/or qualitative values of risk related to a concrete
situation and a recognised threat. Quantitative risk assessment requires calculations of two components of risk,
the magnitude of the potential impact, and the likelihood that the risk materialises. There are also qualitative
aspects that are more difficult to express quantitatively, but are still taken into account in order to fully evaluate
the impact of the risk on the organisation.

Risk culture

Risk culture is defined by the following statements:

n The Company has adopted a risk culture that has risk management informing into its strategic decision making

n Reverse stress testing, where risk factors are assumed to be stressed to such an extent as to break the business

model.

Further information on the types and management of specific risks faced by the Company are described below:

(1) Market risk

Description of risk

Market risk is the risk of loss arising either directly or indirectly from fluctuations in the level and in the volatility of
market prices of assets, liabilities and other financial instruments.

and business planning process.

Market risk from reduced income

n The Company pro-actively seeks to identify risks through its risk horizon scanning process.

n The Group Risk Committee assists the Board in fostering a culture within the Company that encourages good

stewardship of risk and emphasises and demonstrates the benefits of a risk-based approach to internal control
and management of the Company.

n The Company manages its risks within a robust and embedded risk culture. This is achieved by:

- Continuous risk management training and communication at all levels;

- Close relationship and coaching from the Risk Management function to all areas of the business; and

- Risk management objectives are incorporated in the job descriptions and roles and responsibilities.

n The Company believes training is essential to integrate the risk management culture into the business.

Risk preferences

The Company’s risk preferences are articulated as follows:

n The Company ensures risks that are taken are aligned with our strategic aims and provide an acceptable level of

return.

n The Company accepts certain business risks (e.g. outflow, market, expense, operational and new business) and

ensures these are appropriately managed and mitigated if required.

n The Company has a preference for products with low capital requirements and without financial guarantees.
Additionally, the Company has a preference for secondary market risk through charges determined based on
customers’ portfolio values. This is central to the Company’s proposition and we accept the potential impact on
financial performance.

The Company’s dividend income from its regulated subsidiary IFAL is exposed to market risk. IFAL’s main source
of income is derived from annual management fees and transaction fees which are linked to the value of the
customers’ portfolios.

Market risk from direct asset holdings

The Company has limited exposure to primary market risk as its surplus capital is invested in high quality, highly
liquid, short-dated investments.

(a) Interest rate risk

The Company’s balance sheet and capital requirements are relatively insensitive to first order impacts from
movements in interest rates.

(b) Currency risk

The Company is not directly exposed to significant currency risk.

The Company has exposure related to expense inflation risk, where actual inflation deviates from expectations.
The Company has no exposures to defined benefit staff pension schemes or customer related index linked
liabilities.

(2) Credit (counterparty default) risk

Credit risk is the risk that the Company is exposed to a loss if another party fails to meet its financial obligations.
For the Company, the exposure to counterparty default risk arises primarily from:

n corporate assets directly held by the Company; and

n The Company does not actively seek to take operational risk to generate returns. It accepts a level of

n exposure to other debtors.

operational risk that means the controls in place should prevent material losses, but should not excessively
restrict business activities.

n The Company has zero risk appetite for unfair customer outcomes arising from systematic failures in its cultural

outlook or in any element of the customer life cycle.

Stress testing

Risk models are used as part of stress testing to determine the financial stability of the Company’s regulated
subsidiaries. This involves testing beyond normal operational capacity, often to a breaking point, in order to
observe the outcomes and evaluate available management actions. The stress testing outcomes provide additional
information to adjust the Company’s risk appetite.

Counterparty default risk exposure to other debtors

The Company has no prepayments or other debtors arising, due to the nature of its business, and the structure of
the Group.

Impact of credit risk on fair value

Due to the limited direct exposure that the Company has to credit risk, credit risk does not have a material impact
on the fair value movement of financial instruments for the year under review. The fair value movements on these
instruments are predominantly due to changes in market conditions.

32 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 33

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

(3) Liquidity risk

Liquidity risk is the risk that cash is not accessible such that the Company, although solvent, does not have sufficient
financial resources to meet obligations as they fall due, or can secure such resources only at excessive cost.

As a holding company, the Company’s direct liquidity risk is limited to paying out dividends and operating
expenses it may incur.

Maturity schedule

The following table shows an analysis of the financial assets and financial liabilities by remaining expected
maturities as at 30 September 2015 and 30 September 2016:

Financial assets:

As at 30 September 2015

Deferred acquisition costs

Up to 3
months
£’000

3-12
months
£’000

1-5 years
£’000

Over
5 years
£’000

Total
£’000

1,401

4,075

16,589

7,671

29,736

Investments and cash held for the
policyholders

8,441,189

Investments

Long-term investments

Deferred tax asset

Accrued income

Trade and other receivables

Current tax asset

Cash

Total

5,919

7,462

88,186

6,882

392

8,441,189

6,945

392

5,919

7,462

88,186

8,544,220

10,957

16,667

8,063

8,579,907

As at 30 September 2016

Deferred acquisition costs

Up to 3
months
£’000

3-12
months
£’000

1-5 years
£’000

Over
5 years
£’000

Total
£’000

1,498

4,304

17,479

8,511

31,792

Investments and cash held for the
policyholders

11,316,471

Investments

Deferred tax asset

Accrued income

Trade and other receivables

Current tax asset

Cash

Total

6,806

12,991

90,571

8,925

199

11,316,471

8,976

6,806

13,012

199

90,571

11,428,388

13,450

17,479

8,511 11,467,827

Financial liabilities:

As at 30 September 2015

Deferred income liabilities

Liabilities for linked
investment contracts

Deferred tax liabilities

Trade and other payables

Current tax liabilities

Total

As at 30 September 2016

Deferred income liabilities

Liabilities for linked
investment contracts

Deferred tax liabilities

Trade and other payables

Current tax liabilities

Total

Up to
3 months
£’000

3-12
months
£’000

1,401

4,075

1-5
years
£’000

16,589

Over
5 years
£’000

7,671

8,441,189

15,994

270

1,087

1,244

(325)

Total
£’000

29,736

8,441,189

1,279

16,037

1,094

8,458,681

5,432

17,876

7,346

8,489,335

Up to 3
months
£’000

3-12
months
£’000

1-5
years
£’000

Over
5 years
£’000

Total
£’000

1,498

4,304

17,479

8,511

31,792

11,316,471

377

1,141

5,102

1,875

14,289

(45)

11,332,590

1,731

7,176

8,495

14,289

1,686

22,581

10,386 11,372,733

Financial assets held in portfolio investments and the corresponding liabilities are deemed to have a maturity of up
three months since the liabilities are repayable on demand. In practice the contractual maturities of the underlying
assets may be longer than three months, but the majority of assets held within portfolios are highly liquid.

(4) Outflow risk

Outflows occur when funds are withdrawn from the platform for any reason. Outflows typically occur where
customers’ circumstances and requirements change. However, these outflows can also be triggered by operational
failure, competitor actions or external events such as regulatory or economic changes.

Outflow risk is mitigated by focusing on providing exceptionally high levels of service. Outflow rates are closely
monitored and unexpected experience is investigated. Despite the current challenging and uncertain economic and
geopolitical environment, outflow rates remain low and stable.

(5) Expense risk

Expense risk arises where costs increase faster than expected or from one off expense shocks. As a significant
percentage of the Group’s expenses are staff related, the key inflationary risk arises from salary inflation.

The Group’s expenses are governed at a high level by the Group’s Expense Policy. The monthly management
accounts are reviewed against projected future expenses by the Board and by senior management and action is
taken where appropriate.

34 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 35

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

(6) Operational risk

5. Segmental reporting

Operational risk is the risk of loss arising from inadequate or failed internal processes, people and systems, or
from external events.

This risk has been identified as being a key risk for the Group. This risk arises mainly from the regulatory
requirements IFAL needs to meet whilst administering its business and from the Third Party Administration
arrangements with ISL.

The revenue and profit before tax are attributable to activities carried out in the UK.

The Group has three classes of business as follows:
n provision of investment management services
n transaction of ordinary long term insurance and underwriting life assurance
n provision of consultancy services

Operational risk exposure and concentration

Analysis by class of business is given below:

The key operational risks are IT infrastructure and Business Continuity Plan failure risk, regulatory risk, operational
process risk, financial process risk, information security risk, outsourcing risk, CASS risk and cyber risk.

Operational risk mitigation

The Company aims to minimise operational risk at all times through a strong and well-resourced control and
operational structure. This is supported by the strong corporate governance structure that is embedded in the
Group as a whole.

(7) Brand and reputation risk

Reputational risk is the risk that current and potential clients’ desire to do business with the Group reduces due to
perception of the service in the market place. It should be noted that clients don’t directly purchase wrappers from
the Company – they are provided as part of the Transact wrap service. Therefore the reputation of the Transact
brand is where the risk lies.

Risk exposure

The Transact brand is exposed to a wide range of future events which may have a significant adverse impact on its
reputation. These include consequences of operational risk events e.g. errors, fraud or regulatory fines. In these
cases, reputational risk would be triggered on the event of the operational risk failure becoming public knowledge.
External reputational risk could also arise from public opinion of the wrap sector as a whole diminishing.
Reputational risk can be triggered by a one-off event resulting in a significant loss or could be the result of a
gradual decline in how the Group is perceived.

Risk mitigation

The risk that reputational damage control is not properly managed is monitored through the Risk Management
Framework and is mitigated to some extent by internal operational risk controls, error management and
complaints handling processes, and root cause analysis investigations.

(8) Conduct risk

This is the risk of acting against customers’ best interests with consequential damage to the long term
sustainability of the business.

The Group has no appetite for unfair customer outcomes arising from systematic failures in its cultural outlook
or in any element of the customer life cycle. This includes meeting the requirements of treating customers fairly.
The Group uses various indicators to monitor performance against this appetite, including customer retention,
complaints and errors.

Revenue

Investment management services

Insurance and life assurance business

Consultancy services

Profit before tax

Investment management services

Insurance and life assurance business

Consultancy services

Net assets

Investment management services

Insurance and life assurance business

Consultancy services

2016
£’000

37,853

55,817

100

93,770

11,393

26,808

139

38,341

38,100

47,456

688

86,244

2015
£’000

35,672

32,572

68,244

9,540

10,627

20,167

53,479

21,486

74,965

The figures above comprise the results of the companies that fall directly into each segment, as well as a proportion
of the results from the other Group companies that only provide services to the revenue-generating companies.
This therefore has no effect on revenue, but has an effect on the profit before tax and net assets figures.

The Company’s income is generated solely from dividends received from subsidiaries.

6. Revenue

Group

Fee income

Other operating income

Consultancy income

The Company’s income is generated solely from dividends received from subsidiaries.

2016
£’000

68,257

25,413

100

93,770

2015
£’000

63,643

4,602

68,244

36 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 37

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

7. Expenses by nature

Staff (including executive Directors) costs during the year, included within administrative expenses, were as follows:

The following expenses are included within administrative expenses:

Group

Depreciation

Amortisation

Wages and employee benefits expense

Auditor’s remuneration:

- auditing of the financial statements of the Company pursuant to legislation

- auditing of the financial statements of subsidiaries

- other assurance services

- taxation service

Other Auditor’s remuneration:

- auditing of the financial statements of subsidiaries

- other assurance services

Impairment losses

Operating lease costs:

- Land and buildings

- Equipment

Company

Auditor’s remuneration:

- auditing of the financial statements of the Company pursuant to legislation

- other assurance services

- taxation services

Impairment losses

Wages and employee benefits expense

2016
£’000

872

1,345

25,623

554

1,783

392

The average number of staff (including executive directors) employed by the Group during the financial year
amounted to:

Customer services staff

Corporate and client accounting staff

Technical and support staff

Software development staff

Sales staff

2016
No.

177

130

442

2015
£’000

579

1,786

21,466

1,295

1,820

392

2015
No.

166

104

352

Wages and salaries

Social security costs

Other pension costs

2016
£’000

21,542

2,353

1,728

2015
£’000

18,534

2,087

845

25,623

21,466

Compensation of key management personnel

Key management personnel are defined as those persons having authority and responsibility for planning, directing
and controlling the activities of the entity and as such, only Directors are considered to meet this definition.

Short term employee benefits

Post employment benefits

Highest paid Director:

Short term employee benefits

Post employment benefits

Number of Directors for whom pension contributions are paid

8. Interest income

2016
£’000

1,566

1,650

465

2015
£’000

1,078

110

1,188

443

Interest income on bank deposits

Interest income on loans

Interest income on financial assets
at fair value through profit or loss

Other interest

Group
2016
£’000

Company
2016
£’000

Group
2015
£’000

Company
2015
£’000

145

306

451

144

100

284

38 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 39

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

Company

a) Analysis of charge in year

Deferred tax charge/(credit) (see note 20)

Total

b) Factors affecting tax charge for the year
Profit on ordinary activities before tax

Profit on ordinary activities multiplied by effective rate of Corporation Tax 20%
(2015: 20.5%)

Deferred tax charge/(credit) (see note 20)

Effects of:

Income not taxable and expenses not deductible for tax purposes, multiplied
by effective rate of Corporation Tax 20% (2015: 20.5%)

Total

2016
£’000

2015
£’000

(78)

2015
£’000

38,641

7,587

7,728

1,555

(78)

(7,728)

(1,555)

(78)

9. Tax on profit on ordinary activities

Group

a) Analysis of charge in year

The income tax expense comprises:

Corporation tax

Corporation tax – under-provision in previous year

Total

Movement in deferred tax asset

Movement in deferred tax liability (note 20)

Deferred tax charge/(credit)

Total

2016
£’000

5,197

5,218

2015
£’000

4,079

4,134

(78)

(71)

5,296

4,063

b) Factors affecting tax charge for the year

The tax on the Company’s profit before tax differs from the amount that
would arise using the weighted average tax rate applicable to profits of the
consolidated entities as follows:

Profit on ordinary activities before tax

38,341

20,167

Profit on ordinary activities multiplied by effective rate of Corporation Tax
20% (2015: 20.5%)

Deferred tax charge/(credit) (see note 20)

Effects of:

7,668

4,134

(71)

Income not taxable and expenses not deductible for tax purposes, multiplied
by effective rate of Corporation Tax 20% (2015: 20.5%)

(2,191)

242

Profits not taxable, multiplied by effective rate of Corporation Tax 20%
(2015: 20.5%)

Corporation tax – under-provision in prior year

Profits charged at different rates to UK Corporation Tax rate

Total

Changes in tax rates

(285)

(288)

5,296

4,063

As a result of the Finance Bill 2015 the rate of Corporation Tax was reduced from 21% to 20% with effect from 1
April 2015, this gives an effective rate of 20% for the Group for the year ended 30 September 2016.

40 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 41

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

10. Intangible assets – Group

11. Property, plant and equipment – Group

Cost

At 1 October 2014

At 30 September 2015

Amortisation

At 1 October 2014

Charge for the year

At 30 September 2015

Net Book Value

At 30 September 2014

At 30 September 2015

Cost

At 1 October 2015

Addition in the year (see note 29)

At 30 September 2016

Amortisation

At 1 October 2015

Charge for the year

At 30 September 2016

Net Book Value

At 30 September 2015

At 30 September 2016

Software
and IP rights
£’000

Goodwill
£’000

12,505

9,318

1,786

11,104

3,187

1,400

12,505

11,105

1,345

12,450

1,400

12,951

Total
£’000

12,505

9,318

1,786

11,104

3,187

1,400

12,505

12,951

25,456

11,105

1,345

12,450

1,400

13,006

Amortisation of intangibles is recognised within administrative expenses in the profit or loss account.

Short
Leasehold
Land and
Buildings
£’000

Equipment
£’000

Fixtures
and
Fittings
£’000

Motor
vehicles
£’000

Cost

At 1 October 2015

Additions

Disposals

At 30 September 2016

Depreciation

At 1 October 2015

Charge for the year

Disposals

At 30 September 2016

Net Book Value

At 30 September 2015

At 30 September 2016

Cost

At 1 October 2014

Additions

Disposals

1,242

373

1,615

362

163

525

880

1,090

1,242

At 30 September 2015

1,242

Depreciation

At 1 October 2014

Charge for the year

Disposals

At 30 September 2015

Net Book Value

At 30 September 2014

At 30 September 2015

238

124

362

1,004

880

1,463

739

(589)

1,613

1,045

446

(589)

902

418

711

1,420

189

(146)

1,463

759

432

(146)

1,045

661

418

226

327

553

121

235

356

105

197

227

122

128

105

101

Additions in the year includes £526k from the acquisition of IAD (see note 29).

The Company holds no property, plant and equipment.

Total
£’000

2,931

1,540

(589)

3,882

1,528

871

(589)

1,810

1,403

2,072

2,889

189

(146)

2,932

1,096

579

(146)

1,529

1,793

1,403

42 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 43

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

12. Long-term investments

Group

At 1 October 2015

Impairment

At 30 September 2016

Net book value

At 30 September 2015

At 30 September 2016

At 1 October 2014

Additions

Impairment

At 30 September 2015

Net book value

At 30 September 2014

At 30 September 2015

Company

At 1 October 2015

Additions (see note 29)

Impairment

At 30 September 2016

Net book value

At 30 September 2015

At 30 September 2016

At 1 October 2014

Additions

Impairment

At 30 September 2015

Net book value

At 30 September 2014

At 30 September 2015

Total
£’000

392

(392)

392

750

(392)

392

750

392

449

14,156

(392)

14,213

449

14,213

807

(392)

449

807

449

Name of Company

Holding

% Held

Incorporation
and significant
place of business

Business

Direct holdings

Integrated Financial Arrangements Ltd

Ordinary Shares

100%

United Kingdom

IntegraFin Services Limited

Ordinary Shares

100%

United Kingdom

Transact IP Limited

Ordinary Shares

100%

United Kingdom

Integrated Application Development Pty Ltd Ordinary Shares

100%

Australia

Investment
Management

Services
Company

Software
provision &
development

Software
maintenance

Objective Asset Management Limited

Ordinary Shares

100%

United Kingdom

Dormant

Indirect holdings

IntegraFin Limited

Ordinary Shares

100%

United Kingdom

Non-trading

Transact Nominees Limited

Ordinary Shares

100%

United Kingdom

Non-trading

IntegraLife UK Limited

Ordinary Shares

100%

United Kingdom

Life Insurance

IntegraLife International Limited

Ordinary Shares

100%

Isle of Man

Life Assurance

ObjectMastery (UK) Limited

Ordinary Shares

100%

United Kingdom

Consultancy

Objective Funds Limited

Ordinary Shares

100%

United Kingdom

Dormant

Objective Wealth Management Limited

Ordinary Shares

100%

United Kingdom

Dormant

IntegraFin (Australia) Pty Limited

Ordinary Shares

100%

Australia

Non-trading

Transact Trustees Limited

Ordinary Shares

100%

United Kingdom

Non-trading

The group has 100% voting rights on shares held in each of the subsidiary undertakings.

The above subsidiaries have all been included in the consolidated financial statements. The results of IntegraLife
International Limited and IntegraLife UK Limited are included as described in the basis of consolidation accounting
policy in note 1.

Integrated Financial Arrangements Ltd is authorised and regulated by the Financial Conduct Authority. The
principal activity of the company and its subsidiaries is the provision of “Transact”, a wrap service that arranges
and executes transactions between clients, their financial advisers and financial product providers including
investment managers and stockbrokers.

IntegraFin Services Limited (ISL), is the Group services company. All intra-group service contracts are held by this
services company.

Integrated Application Development Pty Ltd (IAD) provides software maintenance services to the Group. IAD was
acquired by the Company on 1 July 2016 (see note 29).

IntegraFin Limited is the trustee of the IntegraSIP Share Incentive Plan, which was set up to allocate Class C
Shares in the capital of the Company to staff. IntegraFin Limited undertakes no other activities.

Transact Nominees Limited holds customer assets as a nominee company on behalf of Integrated Financial
Arrangements Ltd.

44 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 45

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

IntegraFin (Australia) Pty Limited is currently non-trading.

15. Current asset investments

Transact IP Limited licenses its proprietary software to other members of the IHL Group.

IntegraLife UK Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct
Authority and the Prudential Regulation Authority. Its principal activity is the transaction of ordinary long term
insurance business within the United Kingdom.

IntegraLife International Limited is authorised and regulated by the Isle of Man Financial Services Authority and
its principal activity is the transaction of ordinary long term insurance business within the United Kingdom through
the Transact Offshore Bond.

13. Deferred acquisition costs

Opening balance

Capitalisation of deferred acquisition costs

Amortisation of deferred acquisition costs

Change in deferred acquisition costs

Closing balance

2016
£’000

29,736

7,966

(5,909)

2,057

31,793

2015
£’000

28,096

7,011

(5,371)

1,640

29,736

14. Non-current asset investments – ILInt and ILUK

Investments and cash held for the benefit of policyholders

ILInt

Cash and cash equivalents held for the
benefit of the policyholder

Investments held for the benefit of the
policyholder

ILUK

Cash and cash equivalents held for the
benefit of the policyholder

Investments held for the benefit of the
policyholder

2016
Cost
£’000

2016
Fair value
£’000

2015
Cost
£’000

2015
Fair value
£’000

82,931

60,892

1,637,842

2,928,144

1,082,219

1,902,625

1,720,773

3,011,075

1,143,111

1,963,517

715,881

539,089

6,898,345

7,589,515

6,074,081

5,938,583

7,614,226

8,305,396

6,613,170

6,477,672

Listed shares and securities

Gilts

Investments held as current assets are held at fair value.

16. Other prepayments and accrued income

Accrued income

Prepayments

17. Trade and other receivables

Amounts owed by Group undertakings

Interest receivable

Other receivables

Amounts due from HMRC

18. Trade and other payables

Group
30 Sep
2016
£’000

1,550

11,454

13,012

Group
30 Sep
2016
£’000

364

1,621

5,436

6,867

14,289

Company
30 Sep
2016
£’000

363

388

Group
30 Sep
2016
£’000

8,925

8,976

Group
30 Sep
2016
£’000

6,806

3,036

9,842

Group
30 Sep
2015
£’000

1,995

5,444

7,462

Group
30 Sep
2015
£’000

317

487

9,012

6,221

16,037

Group
30 Sep
2015
£’000

6,882

6,945

Group
30 Sep
2015
£’000

5,919

2,392

8,311

Company
30 Sep
2015
£’000

Total

11,316,471

8,441,189

All amounts are current. These assets are held to cover the liabilities for unit linked investment contracts. All
contracts with customers are deemed to be investment contracts and, accordingly, assets are 100% matched to
corresponding liabilities.

Trade payables

PAYE and other taxation

Due to Group undertakings

Other payables

Accruals and deferred income

46 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 47

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

19. Deferred income liability

21. Client monies and client assets

Opening balance

Capitalisation of deferred income

Amortisation of deferred income

Change in deferred acquisition costs

Closing balance

20. Deferred tax

2016
£’000

2015
£’000

(29,736)

(28,096)

(7,966)

5,909

(2,057)

(7,011)

5,371

(1,640)

(31,793)

(29,736)

2016

Client monies

Client assets

2015

Client monies

Client assets

£’000

1,836,756

Amounts due to clients

1,836,756

22,763,205

Corresponding liability

22,763,205

1,376,766

Amounts due to clients

1,376,766

17,707,907

Corresponding liability

17,707,907

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19%
(2015: 20%). This new rate has been applied to deferred tax balances which are expected to reverse after 1 April
2017, the date on which that new rate becomes effective.

The above client monies are held separately in client bank accounts which are excluded from the Company’s net
current assets. In addition the above client assets are held on behalf of Integrated Financial Arrangements Ltd by
Transact Nominees Limited, the holdings are also excluded from the Company’s net current assets.

22. Provisions for liabilities

30 Sep
2016
£’000

30 Sep
2015
£’000

1,279

3,012

Balance brought forward

(Decrease)/increase in dilapidations provision

Increase in ILInt non-linked unit provision

Increase in ILUK tax provision

Increase in rent provision

Balance carried forward

Dilapidations provisions

ILInt non-linked unit provision

ILUK tax provision

Rent provision

Liabilities – Group

Balance brought forward

Release in year at 19 (2015: 20%) future corporation tax rate in respect of:

- Share-based payments

- Accelerated depreciation

Deferred tax (credit) / charge

Movement in policyholder tax

Balance carried forward

Analysed as:

- Share-based payments

- Accelerated depreciation

- Policyholder deferred tax

Assets – Group and Company

Balance brought forward

Release in year at 19% (2015: 20.5%) future corporation tax rate in respect of:

- Unused capital losses

Deferred tax charge

Balance carried forward

7,216

8,495

8,483

8,495

(78)

(31)

(1,740)

1,279

1,267

1,279

(78)

The dilapidation provisions relate to the former leasehold premises at 5-7 Singer Street, the current leasehold
premises at 29 Clement’s Lane, and the current ILInt leasehold premises at 6 Goldie Terrace in the Isle of Man.
The Group is committed to restoring the premises to their original state at the end of the lease term. Whilst it is
probable that payments will be required for dilapidations, uncertainty exists with regard to the amount and timing
of these payments, and the amounts provided represent management’s best estimate of the Group’s liability. The
Group’s 2015 movement in provision has been adjusted by £32k to take into account a reclassification of ILInt’s
dilapidations provision for Goldie Terrace from other payables.

The rent provision relates to potential litigation regarding disputed rent. There is potential for a claim to be made
against the Group until March 2019, though uncertainty exists as to the timing of any potential claim and whether
the claim will be successful.

Group
30 Sep
2016
£’000

20,802

6,055

Group
30 Sep
2015
£’000

16,009

4,729

26,965

20,802

279

26,559

102

26,965

183

20,505

102

20,802

48 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 49

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

23. Called up share capital – Company and Group

25. Capital redemption reserve – Group

Allotted, called up and fully paid:

Ordinary Class A shares of £0.05 each

Ordinary Class B shares of £0.05 each

Ordinary Class C shares of £0.05 each

Ordinary Class D shares of £0.05 each

Movement in called up share capital

Balance brought forward

Shares issued – Class A

Shares issued – Class C

Shares issued – Class D

Shares redeemed – Class A

Shares redeemed – Class C

Shares redeemed – Class D

30 Sep
2016
Number

417,868

357,000

332,410

30,000

30 Sep
2015
Number

417,868

357,000

332,410

30,000

30 Sep
2016
£’000

30 Sep
2015
£’000

2016
£’000

2015
£’000

Class A and Class B Ordinary share capital have full voting and dividends rights.

Class C Ordinary share capital has no voting rights, but ranks equally for dividends.

Class D Ordinary Share Capital has no voting rights, and shareholders are only entitled to receive dividends to the
extent that the amount per Ordinary Share paid to the holders of Class A Shares, Class B Shares and Class C Shares
in any financial year exceeds the amount per Ordinary Share received by holders of those Ordinary Shares (excluding
any Special Dividends) in the financial year prior to the financial year in which relevant Class D Shares are issued.

Balance brought forward

Purchase of own shares

Balance carried forward

2016
£’000

2015
£’000

On 12 December 2013 IFAL (formerly IFA plc) was granted authority by shareholders to repurchase £4,500,000
worth of ordinary shares from shareholders. IFAL purchased 45,917 shares, and they were then cancelled, giving
rise to a capital redemption reserve of £2,271.

26. Share-based payment reserve – Group

Balance brought forward

Transfer to profit and loss reserve

Balance carried forward

27. Other reserves – Group

Balance brought forward

Currency Translation reserve

Balance carried forward

28. Operating lease commitments

The total future minimum lease payments of operating leases are due as follows:

2016
£’000

308

2016
£’000

2015
£’000

308

2015
£’000

24. Share premium account – Group

Balance brought forward

Premium on shares issued during the year

Balance carried forward

2016
£’000

5,722

2015
£’000

5,722

Group

Within 1 year

Within 2-5 years

Over 5 years

Land and
Buildings
2016
£’000

Equipment
2016
£’000

Land and
Buildings
2015
£’000

Equipment
2015
£’000

2,098

8,375

3,490

2,120

8,377

5,583

The land and building lease commitments relate to the current leasehold premises at 29 Clement’s Lane, and the
current ILInt leasehold premises at 6 Goldie Terrace in the Isle of Man. The equipment commitment relates to the
lease of a franking machine.

50 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 51

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

29. Related parties

Mike Howard is a Director of the Company, and is also a Director and controlling shareholder of IAD.

IAD provides software development and maintenance services to the Group. The contract for these services was
between IFAL and IAD until 30 September 2015. On 1 October 2015 the contract moved, and is now between
ISL and IAD. IAD therefore invoices ISL, and ISL passes the charge on proportionately to the rest of the Group
through its service charge. These transactions are commercial, arm’s length transactions undertaken in the normal
course of business.

Acquisition of IAD

On 1 July 2016 the Company acquired 100% of the voting equity instruments of IAD for £14.16m. Ganymede
Investments Pty Ltd, a company controlled by Mike Howard, received £10.59m of the consideration. The principal
reason for the acquisition was to bring the software development and maintenance services in-house, and thus
increase efficiency and reduce costs to the Group.

During the year the Company did not render nor receive any services with related parties within the Group, and at
the year end the Company had the following intra-Group receivables:

Company

Integrated Financial Arrangements Ltd

IntegraFin Services Limited

IntegraFin Limited

IntegraLife UK Limited

Amounts owed by/
(to) related parties

2016
£’000

2015
£’000

(2)

(6)

(1)

(62)

(3)

Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as
follows:

The Group has not made any allowance for bad or doubtful debts in respect of related party debtors nor has any
guarantee been given or received during 2016 or 2015 regarding related party transactions.

Cash and cash equivalents

Trade and other receivables

Property, plant and equipment

Current liabilities

Total net assets

Consideration – cash

Goodwill

Fair value
£’000

651

320

526

(292)

1,205

14,156

12,951

The main factor leading to the recognition of goodwill is the presence of intangible assets, such as the assembled
workforce of the acquired entity, which do not qualify for separate recognition.

The goodwill has not been tested for impairment during the current year, due to the fact that the acquisition was
only completed recently, but it will be tested for impairment annually going forward.

All of the above transactions are commercial, arm’s length transactions undertaken in the normal course of
business.

30. Share incentive plan (SIP)

The Company introduced a SIP trust scheme for its staff in October 2005. The SIP is an approved scheme under
Schedule 2 of the Income Tax (Earnings & Pensions) Act 2003.

This scheme entitles all the staff who were employed in October 2005 to Class C shares in the Company, subject to
their remaining in employment with the Company until certain future dates.

The trustee for this scheme is IntegraFin Limited, a wholly owned non-trading subsidiary of Integrated Financial
Arrangements Ltd.

The cost to the Company in the financial year to 30 September 2016 was £nil (2015: £nil).

31. Share-based payments

There are no share options outstanding. All options have been exercised, and there have been no new share
options granted.

32. Events after the reporting date

There are no events subsequent to the year-end that require disclosure in, or amendment to the financial
statements.

33. Dividends

During the year the company paid an interim dividend of £8,978,224 (2015: £7,840,946) to shareholders.

52 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 53

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

NOTES TO THE FINANCIAL STATEMENTS

Year ended 30 September 2016

34. Transition to IFRS

Reconciliation of equity and comprehensive income as previously reported under UK GAAP to IFRS

As stated in note 1, these are the Group’s first consolidated financial statements prepared in accordance
with IFRS. The accounting policies set out in note 1 have been applied in preparing the consolidated financial
statements for the period ending 30 September 2015, the comparative information, and in the preparation of an
opening IFRS statement of financial position at 1 October 2014 (the Group’s date of transition). In preparing its
opening IFRS statement of financial position, the Group has adjusted amounts reported previously in the financial
statements prepared in accordance with UK GAAP. An explanation of how the transition from previous GAAP to
IFRS has affected the Group’s financial position and financial performance is set out in the following tables.

On a Company level, the adoption of IFRS has not resulted in the restatement of any numbers previously recorded
in the financial statement under the previous accounting framework and therefore no reconciliations have been
presented.

Year ended
30 Sep
2015
£’000

Comprehensive income as reported under UK GAAP

Note

16,373

IFAL – holiday pay accrual

ILUK – increase in IFRS DAC deferred tax provision in year

ILUK – reverse decrease in sterling reserves in year

ILInt – reduction in profit due to reversing sterling reserves

Profit for the financial year reported under IFRS

(9)

(20)

(46)

16,301

Equity as reported under UK GAAP

Other adjustment

IFRS adjustments:

IFAL – holiday pay accrual

ILUK and ILInt deferred acquisition costs

ILUK and ILInt deferred income liability

ILUK – additional ILUK deferred tax provision

Investments and cash held for the benefit of policyholders

Liabilities for linked investment contracts

ILUK – release sterling reserves into non-distributable reserve

ILInt – release sterling reserves into non-distributable reserve

Reversal of ILInt reserve movement in the year

Reversal of ILUK reserve movement in the year

ILUK and ILInt inclusion of non-linked cash

ILUK and ILInt inclusion of provision for liabilities

ILUK and ILInt other IFRS reclassifications

30 Sept
2015
£’000

74,997

1 Oct
2014
£’000

66,397

Notes explaining the conversion from UK GAAP to IFRS

a. IFRS (IAS 19 Employee Benefits) requires that an accrual is made for holiday that has been earned by

employees, but not yet used at the reporting date. In order to meet the requirements of the standard, an
accrual as at 1 October 2014 and 30 September 2015 has been calculated and reflected in the restated
accounts. This amounts to a £48k reduction in profit in FY2014 and a £4k increase in profit in FY2015.

ILUK, and therefore consolidated into the Group financial statements.

b. Deferred acquisition costs (DAC) and deferred income liability (DIL) are now reflected on the SOFP in ILInt and

Note

(44)

29,736

(48)

28,096

(29,736)

(28,096)

(438)

(429)

8,441,188

7,524,053

(8,441,188)

(7,524,053)

466

(46)

(20)

21,254

(20,473)

(783)

466

17,572

(16,277)

(1,296)

DAC and DIL exactly offset each other and there is, therefore, no impact on the financial results of ILUK or ILInt
or the Group aside from a tax reserve required for Life DAC in ILUK. The tax reserve accounts for the different
bases for spreading expenses in the ILUK Life tax computation and under IFRS.

c. ILInt and ILUK both issue contracts which are accounted for under IFRS as investment contracts. The definition
of an investment contract is one where there is not a significant transfer of insurance risk. As ILInt and ILUK
issue investment contracts, then the fair value of assets held for the benefit of policyholders is reflected on the
SOFP, as well as the corresponding liability. The positions are fully matched.

d. The creation of a non-distributable reserve is due to the reversal of sterling reserves that are no longer required
under IFRS. Under IFRS the non-unit, counterparty and resilience reserves are released. The balance of £466K
for ILInt and £35k for ILUK has been transferred to non-distributable reserves. Other provisions still include the
remaining negative unit and post closure reserves.

e. Non-linked cash balances are now reflected on the Group financial statements, with offsetting balances included

mainly within provisions, and also within some of the other SOFP balances that have been reclassified.

f. The adjustments to the Income Statement are the movements in the year in respect of the changes to the

SOFP described in notes a. to d.

Adjustment to the statement of cash flows

The transition from UK GAAP to IFRS had no significant impact on cash flows generated by the Group.

Equity as reported under IFRS

74,965

66,420

54 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS | FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 55

56 FINANCIAL STATEMENTS YEAR ENDED 30 SEPTEMBER 2016 | NOTES 1 TO 34 FORM PART OF THESE FINANCIAL STATEMENTS

M137 September 2016

IntegraFin Holdings Limited, 29 Clement’s Lane, London, EC4N 7AE

Tel: (020) 7608 4900 Fax: (020) 7608 5300

(Registered office: as above; Registered in England and Wales under number: 8860879)

The holding company of the Integrated Financial Arrangements Ltd group of companies