ANNUAL REPORT
AND FINANCIAL
STATEMENTS
YEAR ENDED
30 SEPTEMBER 2017
IntegraFin Holdings Limited
Company registration
number: 08860879
CONTENTS
Strategic Report
Financial Statements
Chairman’s Statement . . . . . . . . . . . . . . . . . . 2
Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Chief Executive Officer’s Review . . . . 4
Consolidated Profit and Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . 46
Transact at a Glance . . . . . . . . . . . . . . . . . . . . . 6
Company Profit and Loss and Other Comprehensive Income . . . . . . . . . . . . . . . . . . . . . 47
About Transact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Our Marketplace . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Our Business Model . . . . . . . . . . . . . . . . . . . . . . 9
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Strategic Priorities and Progress . . . . 9
Company Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Operating and Financial Review . . . 10
Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Risk and Risk Management . . . . . . . . . . 19
Company Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Principal Risks and Uncertainties . . 24
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Corporate Social Responsibility . . . . 27
Other Information
Governance
Directors, Company Details, Advisers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Board of Directors . . . . . . . . . . . . . . . . . . . . . . 28
Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Corporate Governance Report . . . . . . 31
Audit Committee Report . . . . . . . . . . . . . . 33
Directors’ Remuneration Report . . . 36
Risk Committee Report . . . . . . . . . . . . . . . 37
Directors’ Report . . . . . . . . . . . . . . . . . . . . . . . . 41
Statement of Directors’
Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . 42
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 1
STRATEGIC REPORT
Michael Howard
Chairman
CHAIRMAN’S
STATEMENT
Dear Shareholders,
Welcome to the annual report of
your company for 2017, another
financial year that has been kind to us.
My friend and colleague, Ian Taylor,
provides further information on the
year elsewhere in his report but,
suffice for me to say, your company
has had an excellent profit outcome.
Since 2000, wrap services, or platforms
as they are often called, like ours,
have transformed the financial
services landscape because they
represent, quite simply, a better
proposition than the “old way”.
Diversified investment together with
consolidated administration has made
financial planning easier and more
effective for advisers and for their
clients. Financial advisers are thriving
in this reconfigured environment,
and we thrive with them.
Current indicators point to continuing
bright prospects for your company
due to the accumulation of investors’
annual savings, plus the literally
trillions of pounds still retained in
“old fashioned” investments that are
moving onto platforms. This latter
process looks set to continue for
many years to come.
As well as our usual business
operations, this has been another
year of getting ready to list
our company on the London
Stock Exchange. So far, matters
are progressing as we would
hope, and we continue to be
optimistic that conditions remain
favourable and we plan to list in the
first half of 2018.
As part of our preparation, and
in line with corporate governance
best practice for listed companies,
changes have been made to
IntegraFin Holdings Limited
(IntegraFin), Integrated Financial
Arrangements Ltd (IFAL), IntegraLife
UK Limited (ILUK) and IntegraLife
International Limited (ILInt)
Board members.
On 1 October 2017, I stood
down from the chairmanship
of IntegraFin, as well as the
chairmanship and Boards of IFAL
and ILUK and the Board of ILInt.
I remain as a Director of IntegraFin.
On 1 October 2017, Patrick Snowball
took up the reins as Non-Executive
Chairman of IntegraFin and IFAL.
Patrick has an impeccable
background in financial services
having been the CEO of Aviva UK
from 2005 to 2007 and from 2009
to 2015, the CEO of the ASX 100,
financial services giant, Suncorp.
2 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Finally, and most importantly,
I would like to take this opportunity
to thank all those involved in
making our business, and our
year, successful. This includes our
customers, our business partners
and, of course, our staff and
Directors. Without the support
of all of these groups, we would
have no business.
May our 2018 year deliver all that
we hope for it.
Michael Howard
Chairman for financial year 2017
12 December 2017
I welcome him as a most valuable
addition to our merry band and thank
him for agreeing to join us.
On 1 October 2017, the chairmanship
of ILUK was taken up by Neil Holden.
Neil has been a Director of the Group
since 2011.
I wish them all well in their new roles.
While Jeremy Brettell, Stuart Bazley
and Judith Davidson each stepped
down from the IntegraFin Board
on 1 October 2017, they continue
to be Directors of IFAL, plying their
skills on behalf of the Group, where
most needed.
Finally, on matters directorial, we have
made the Board of IntegraFin more
compact. In the past, IntegraFin
and IFAL have had identical boards.
We did this to avoid making too many
changes at once. In fact, the role
of IntegraFin, the holding company,
is to direct the strategy and oversee
the execution of its operating
subsidiaries. It is the subsidiaries
that do the actual work involved
in providing Transact.
The IntegraFin Board now comprises
Patrick Snowball, Ian Taylor,
Alexander Scott, Neil Holden,
Christopher Munro and myself.
We believe this representation better
reflects the particular needs of each
of the Group companies.
Penultimately, to the matter always
of interest to shareholders – your
company’s dividend. Based on
our 2017 profit and our policy of
distributing 65% of what we have
earned, post tax, we will be paying
an interim dividend to shareholders
of £19.42 million, according to our
usual schedule, in January, 2018.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 3
STRATEGIC REPORT
continued
Ian Taylor
Chief Executive Officer
CEO REVIEW
Headlines
By many measures, the year to
30 September 2017 was one of our
most rewarding so far.
Gross inflows of £5.31 billion were
48.6% higher than last year and
net inflows were 66% higher.
We ended the year with 151,000
clients (+13%) and funds under
direction of £27.9 billion (+13.5%)1.
This, combined with sensible
control of expenses, means that
we are pleased to report that profits
after tax increased by 43% to
£29.9 million.
The market background
The year was a busy one for the
UK investment platform industry.
Many platforms saw substantial
uplifts in new business and Platforum
estimates that funds under
direction across the advised platform
sector grew from £405 billion
(September 2016) to £488 billion
(September 2017).
Not all platforms were winners,
however, and it seems, to this
observer at least, that advisers
are concentrating flows of business
ever more to those platforms
that are seen to be significant
players now and, more importantly,
into the future.
There was also some consolidation
of platform ownership during the year
and more evidence of the potential
for technology costs to become very
substantial indeed for those platforms
who outsource this key component.
Our activity
Alongside the daily provision of
Transact, a number of developments
took place during the year.
Most notably, in July 2016 we bought
Integrated Application Development
Pty Ltd from Michael Howard and
its other owners. This was the
final step in our longer term plan
to bring entirely within the Group
the ownership and control of the
technology upon which we rely
so heavily. This continues to
contribute to profits and will
stand us in good stead as we
prepare for listing.
We also continued to support the
implementation of financial
planning by developing new
functionality, enjoyed by advisers
and by their clients. In particular
Transact was the only adviser
platform to introduce a Lifetime ISA
wrapper when legislation changed.
1 Platform assets experienced a one off drop in April 2017 following the account closure
of a single private client for which we were charging a nominal fee for custody.
4 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
In April we made further adjustments
to some of our prices. We have
an established record of sharing
some of our profits with our
customers when circumstances
permit. We do this when we are
comfortable that doing so will have
no negative impact on service levels
or revenues. We call this ‘responsible
pricing’ and it means that the best
service in the platform market
becomes even better value.
During the course of the year
we won awards from Moneyfacts
(Best Wrap/Platform), Professional
Adviser (Best Platform for Advisers
– AUA above £15bn), Professional
Paraplanner (Best Overall Service
for New Business), Money Marketing
(Best Platform) and FT Adviser
(Investment Innovation and
Five Star Investment). Transact was
rated the best adviser platform in
adviser surveys run by CoreData,
Investment Trends and Platforum.
The outlook
The closing months of 2017 and the
early months of 2018 will involve
us in a great deal of work driven by
changes in regulation and legislation.
From Europe we have the second
Markets in Financial Instruments
Directive (MiFID II) and the General
Data Protection Regulation (GDPR),
and from the FCA the investment
platform market study.
Nevertheless, there is no reason to
think that the natural flow of business
from old world administration and
custody to new world administration
and custody should slow down – and
we will benefit from this.
Our plan is simple – we will continue
to drive organic growth and to
provide the best adviser platform
in the UK.
Ian Taylor
Chief Executive Officer
12 December 2017
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 5
STRATEGIC REPORT continued
Transact is only marketed in the UK
and is designed specifically to meet
the needs of UK financial advisers
and their clients.
TRANSACT AT A GLANCE
About IntegraFin
IntegraFin Holdings Limited
(IntegraFin) is the holding company
for all of the entities involved in the
provision of the Transact service.
Our corporate structure as at
30 September 2017 is shown below:
INTEGRAFIN CORPORATE STRUCTURE
lntegraFin Holdings Limited
Integrated Financial
Arrangements Ltd
lntegraFin Services
Limited
Transact IP Ltd
Integrated Application
Development Pty Ltd
ObjectMastery (UK)
Limited
Transact Nominees
Limited
IntegraLife UK
Limited
IntegraLife International
Limited
Transact Trustees
Limited
6 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
How we operate
Transact provides a market leading
platform infrastructure for advisers
and their clients to make the
implementation and management
of client portfolios as simple and
efficient as possible. Our leading
investment platform functionality
is supported by a high-touch
client service team which provides
extensive day-to-day and technical
support no matter how simple or
complex a query may be.
As an independent platform we
provide access to a wide range of tax
wrappers and investment products.
There are currently over 8,000 funds
available on Transact and we can
provide access to any asset listed
on a major stock market.
INTEGRAFIN PROPOSITION
Advice
fees
151k Clients
Financial
planning and
advice
5k Advisers
3k Adviser Firms
Services and
platform
functionality
Platform
fees
Statements
Instant
portfolio
valuations
On-line
access
Proprietary Platform Functionality
Asset
custody
Transaction
processing
Adviser
fees
Portfolio
monitoring
Reporting
tools
Wide Range of Wrappers
ISAs
GIAs
Pensions
Onshore bonds
Offshore bonds
Open Investment Architecture
~ 8,125
Funds
~ 350
ITs
~ 850
ETFs
~ 3,100
Stocks
~ 425
Gilts
~ 100
VCTs
Cash
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 7
STRATEGIC REPORT continued
The rapid growth of the sector has
occurred because the platform
proposition is extremely attractive to
both clients and advisers. Ultimately,
platforms provide clients with greater
control over their investments as they
offer the visibility and convenience
of having all tax wrappers and a
wide range of investments, held and
managed in one place, and at a lower
price than the pre-platform era.
Transact has over 151,000 clients
across the UK managed by over
5,000 fi nancial advisers.
£488.76bn - Sept 2017
Our marketplace
Transact was the fi rst investment
platform service to launch in
the UK back in 2000, providing
a revolutionary solution for
fee based fi nancial advisers.
Since then other providers have
continued to enter the market and
the UK platform sector has grown
rapidly and now totals £488.76
billion of assets (Platforum, Issue
32, November 2017).
UK PLATFORM MARKET GROWTH
XXX
£500bn
£400bn
£300bn
£200bn
£100bn
£0
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
Financial year (end)
D
T
Y
7
1
0
2
Award-winning service
TRANSACT ADVISER RATINGS
Category:
Large Platforms
(> £12bn FUD)
Category:
Large Platforms
(> £10bn FUD)
Category:
Large Platforms
(> £10bn FUD)
We have become renowned for
high quality service. The results of
independent research studies stand
testament to this as Transact has
consistently been rated by advisory
professionals as the top platform
year on year in both the Investment
Trends and CoreData quantitative
research studies (2010 to 2017
inclusive), and consistently performs
strongly in Platforum quarterly and
annual surveys.
This year we also completed our
second annual client survey, the
results of which were extremely
positive with 98% of respondents
saying that they would recommend
Transact to others.
2017
2016
2015
2014
8 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Our business model
A key aspect of our proposition
is the control we have over every
aspect of what we do. We do not
outsource any material component
of our service or technology and
this gives us total control over
the quality and cost of our whole
operation. We also set our own
priorities when deciding on the
service enhancements we make
and the frequency with which
we make them.
The main components of our
proposition are:
Control of our systems development
is crucial to our business model as
it enables our Client Service teams
to operate effectively. We design our
systems and processes around the
needs of financial advisers and their
clients and regularly consult with them
to ensure our solutions are appropriate.
Similarly, our Client Service teams
receive extensive training through
our internal training programmes
and have been instrumental in our
success and the many accolades
and awards Transact has received
over the years.
Systems
Technology
▪ Proprietary software systems technology.
▪ Full control of the client experience.
▪ We set our own priorities and control management
of associated costs.
▪ We react quickly to client and industry demands.
Operations
▪ High-touch client service team of over 160 of our
own staff.
▪ The teams cover our entire proposition and are not
product centric. This means that the adviser and client
experience is highly efficient.
▪ This also enables us to build strong adviser
relationships.
Manufacturer
of Wrappers
▪ We provide a wide range of tax efficient wrappers.
▪ First B2B platform to introduce the Lifetime ISA.
We do not own any financial advice
firms. We are proud to have
long-standing relationships with
many firms across the UK and
currently work with over 5,000
advisers who have independently
selected Transact for their clients.
We receive all of our income from
the fees paid by clients via our
platform. Our Board and Senior
Management Team are confident
that the business model we operate
is truly sustainable as over 85%
of revenue is of a recurring nature.
Strategic priorities and progress
Our focus for the coming year will be
to make continuous improvements
to maintain our reputation as
a premium service provider and
a leading platform within the market.
We continue to see a strong uptake
in advisers choosing our platform,
with more registering with Transact
each month.
This year has presented new legal
and regulatory challenges for the
platform industry. These include
MiFID II and GDPR, both coming
into effect in 2018. We are on track
to meet our obligations and have
been providing support to advisers,
where appropriate, in helping them
to meet theirs.
We continue to monitor government
announcements regarding the
savings and investment tax regime
and are ready to respond accordingly
to any changes in the provisions of
pensions and ISAs in particular.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 9
STRATEGIC REPORT continued
OPERATING AND
FINANCIAL REVIEW
It has been a year of significant net
inflow growth which together with
good market performance has led
to strong growth in funds under
direction (FUD).
Year ended 30 September
Funds under direction (FUD)
2017
£m
2016
£m
Opening fee generating FUD
Inflows
Outflows
Net Inflows
Market and other movements2
Closing fee generating FUD
Other FUD3
Total Closing FUD
Average fee generating FUD
22,686
5,310
(1,647)
3,663
1,578
27,927
1
27,928
25,307
18,027
3,574
(1,378)
2,196
2,463
22,686
1,914
24,600
20,357
Total gross inflows for the financial
year to 30 September 2017
increased by £1.74 billion, or
48.6% to £5.31 billion from £3.57
billion, averaging £442 million per
month, whilst a far smaller increase
in the level of gross outflows saw
a significant increase in net new
inflows on the prior year, totalling
£3.66 billion, an increase of 66.8%.
The 2017 financial year has seen
the Group experience its highest
total gross inflows since inception.
This growth, coupled with good
market performance has led to fee
generating funds under direction
increasing by 23.1% to £27.9 billion
at 30 September 2017.
During the year the majority of
other FUD was removed from the
platform as the Group continues to
make preparations towards an IPO.
INTEGRAFIN GROUP – TOTAL FUD
)
£
(
D
U
F
30bn
25bn
20bn
15bn
10bn
5bn
0bn
19.1
17.9
FY15
24.6
22.7
27.9
FY16
Financial year (end)
FY17
Fee generating FUD
Other FUD3
INTEGRAFIN GROUP – NET & GROSS FEE GENERATING INFLOWS
)
£
(
s
w
o
F
l
6.0bn
5.0bn
4.0bn
3.0bn
2.0bn
1.0bn
0.0bn
5.31
3.37
3.57
3.66
2.04
2.20
FY15
FY16
Financial year (end)
FY17
Net Flows
Gross Inflows
2 Other movements includes dividends, interest, fees and tax charges and rebates.
3 FUD held on behalf of a single private client for which the only charge was a nominal
fee for custody. Other FUD is being removed from the platform with no material impact
on revenue.
10 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Maintaining strong relationships with
both advisers and clients already
using Transact is as important to the
continuing growth of the business
as bringing new advisers to the
platform. As at 30 September 2017
over 68% of registered advisers
recommending Transact had been
using the platform for over five
years. At the year end the number
of registered advisers with funds on
the platform averaging greater than
£1,000 had increased to over 5,000.
Both advisers with long standing
relationships, and new advisers,
bring new clients and new money
to Transact. With our focus on
premium service delivering strong
client retention, and attracting
new clients, this has seen our total
number of clients increase by 13%
to 151,000 from 137,000.
This has led to continuing growth
in the number of open tax wrappers,
increasing by 10% over the year.
INTEGRAFIN – TOTAL NUMBER OF CLIENTS
128k
137k
151k
s
t
n
e
i
l
C
f
o
r
e
b
m
u
N
175k
150k
125k
100k
75k
50k
25k
0
FY15
FY16
Financial year (end)
FY17
INTEGRAFIN – TOTAL NUMBER OF WRAPPERS
AT THE END OF THE YEAR
s
r
e
p
p
a
r
w
f
o
r
e
b
m
u
N
300k
290k
280k
270k
260k
250k
240k
230k
220k
247k
FY15
294k
266k
FY16
Financial year (end)
FY17
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 11
STRATEGIC REPORT continued
Financial performance
Income
for the financial year ended 30 September
Revenue
Cost of Sales
Gross Profit
Operating Expenses
Operating Profit attributable
to shareholder returns
Interest Income
Profit before tax attributable
to shareholder returns
Tax on ordinary activities
Profit after tax
2017
£m
80.2
(0.6)
79.6
(42.8)
36.8
0.2
37.0
(7.1)
29.9
2016
£m
68.4
(0.5)
67.9
(42.1)
25.8
0.4
26.2
(5.4)
20.8
Total gross profit in the financial year
to 30 September 2017 increased
by £11.7 million, or 17.2%, to
£79.6 million from £67.9 million.
This growth has been driven by the
increase in value of funds under
direction, which has resulted from
strong new inflow growth and
good market growth together with
an increase in the number of tax
wrappers held on the platform.
Components of Revenue
for the financial year ended 30 September
Annual Commission Income
Wrapper Fee Income
Other Income
Total Revenue
2017
£m
69.5
7.3
3.4
80.2
2016
£m
58.9
6.5
3.0
68.4
Revenue comprises three elements,
of these annual commission income
and wrapper fee income constitute
the recurring revenue. Other income
includes ‘buy commission’ and
‘dealing income’.
12 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
These recurring revenue streams
constituted 95.8% (2016: 95.8%)
of total fee income.
Other income, including transactional
revenue, increased by £0.4 million,
or 13.3%, to £3.4 million in the
financial year ended 30 September
2017. This was due to an increase in
the number of transactions, and the
average value of those transactions.
Annual commission income increased
by £10.6 million, or 18.0%,
to £69.5 million in the financial
year ended 30 September 2017.
This growth was due to the increased
value of FUD arising from strong new
inflow growth, and market growth.
This increase in annual commission
income has been achieved even
after allowing for the reduction in
the annual commission rate charge
effective from 1 April 2017.
Wrapper administration fee income
increased by £0.8 million, or 12.3%,
to £7.3 million in the financial year
ended 30 September 2017. This was
due to an increase in the number
of clients on the platform with open
tax wrappers and new tax wrappers
opened in the year by clients already
using Transact at the start of the
financial year. This has been offset
by wrappers being closed.
INTEGRAFIN – REVENUE
e
u
n
e
v
e
R
£80m
£70m
£60m
£50m
£40m
£30m
£20m
£10m
£0m
53.9
58.9
69.5
3.8 5.9
FY15
6.5
3.0
FY16
Financial year (end)
7.3
3.4
FY17
Other Income
Wrapper Fee
Annual Commission
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 13
2017
£m
30.5
3.5
4.5
3.7
42.2
0.6
42.8
2016
£m
25.5
3.2
4.6
6.9
40.2
1.9
42.1
Depreciation and amortisation costs
decreased by £1.3 million, or 68.4%,
to £0.6 million compared to
£1.9 million in the prior financial year.
This decrease was due to the
amortisation of the platform
intellectual property ceasing in July
2016, resulting in a cost reduction
of £1.3 million. Depreciation charges
increased marginally in the year
due to the fixed assets brought into
account on the acquisition of IAD.
Total capitalised expenditure for
the financial year was £0.4 million
compared with £1.5 million in
the prior year. This was mainly
attributable to our policy of replacing
information technology hardware on
a regular cycle with a small amount
also spent on office refurbishment.
STRATEGIC REPORT continued
Operating Expenses
for the financial year ended 30 September
Staff Costs
Occupancy
Regulatory and Professional Fees
Other Costs
Total Expenses
Depreciation and Amortisation
Total Operating Expenses
Total operating expenses increased
by £0.7 million, or 1.7%, to £42.8 million
in the financial year ended 30 September
2017 compared to £42.1 million in
the financial year ended 30 September
2016. This increase was due to
general inflation of staff costs, a small
increase in staff numbers, in part
offset by a reduction from the full
year effect of the acquisition of IAD
and subsequent Group reorganisation.
Staff costs increased by £5.0 million,
or 19.6%, to £30.5 million in the
financial year ended 30 September
2017 compared to £25.5 million in the
financial year ended 30 September
2016. There are several factors
affecting staff costs in this period.
This is the first full year following the
acquisition of IAD, our development
company, in July 2016, which added
65 staff to the Group. This acquisition
reduced other costs by £2.4 million.
We believe this acquisition will generate
a long-term benefit for the Group,
bringing experience and capability in
house, giving us full control over our
platform offering and software costs.
The average number of staff employed
by the Group increased from 442 to
451 over the financial year, reflective
of the increase in business volumes
and our commitment to maintaining
premium service. There were general
inflation increases in staff costs as
well as a budgeted increase in the
percentage of salary paid by the
Group to the staff money purchase
pension arrangement.
14 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Profit before tax attributable to
shareholder returns
Over the course of the year we have
continued to invest in our infrastructure
and people, delivering award-winning
service to our advisers and clients,
whilst also implementing charge
reductions that have lowered the costs
to our clients. This has been achieved
whilst also increasing our operating
margin from 37.8% to 45.9%.
Profit before tax increased
by £10.8 million, or 41.2%,
to £37.0 million in the financial year
ended 30 September 2017 compared
to £26.2 million in the prior financial
year. This is reflective of our strong
operating performance delivering
significant inflow growth and
expense control.
As required by IFPRU 9.1.3,
IntegraFin’s consolidated net return
on assets, calculated as net profit
divided by total balance sheet is 29%
in 2017 (2016: 24%).
Tax
Tax on ordinary activities described
below comprises solely the Group’s
‘shareholder corporation tax’ which
is distinguished from the ‘policyholder
tax’ that the Group collects and
remits to HMRC in respect of ILUK,
which is taxed under the “I minus E”
tax regime.
Whilst the Group has operations in
three tax jurisdictions, UK, Australia
and Isle of Man, Group profits are
therefore varyingly subject to tax
at three different rates, the vast
majority of the Group’s income is
earned in the UK.
Taxation increased by £1.7 million,
or 35.6%, to £7.1 million in the
financial year ended 30 September
2017 compared to £5.4 million
in the prior financial year. Due to
a reduction in the UK standard rate
of corporation tax, effective from
1 April 2017, the effective rate
of tax over the period reduced to
19.2% from 20.2%. Our tax strategy
is published on our website at
www.integrafin.co.uk.
Earnings continue to show growth,
increasing by 43% from £18.41 per
share to £26.39 per share, for the
A, B and C shares, demonstrating the
continuing strength of the business
and reflecting the strong performance
over the year.
Earnings per share
for the financial year ended 30 September
Operating Profit attributable
to shareholder returns
Interest Income
Profit before tax attributable
to shareholder returns
Tax on ordinary activities
Profit after tax
Ordinary A, B, C shares – earnings per
share (Pounds per share)
Ordinary D shares – earnings per share
(Pounds per share)
2017
£m
36.8
0.2
37.0
(7.1)
29.9
26.39
22.39
2016
£m
25.7
0.5
26.2
(5.4)
20.8
18.41
14.41
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 15
STRATEGIC REPORT continued
INTEGRAFIN – PROFIT BEFORE TAX
T
B
P
£40M
£35M
£30M
£25M
£20M
£15M
£10M
£5M
£0M
£36.98m
£20.32m
£26.20m
FY15
FY16
Financial year (end)
FY17
INTEGRAFIN – EARNINGS PER SHARE
S
P
E
£30
£25
£20
£15
£10
£5
£0
£14.50
£10.50
£18.41
£14.41
£26.39
£22.39
FY15
FY16
Financial year (end)
FY17
EPS A,B,C
EPS D
Liquidity and Capital Management
The Group monitors its liquidity
position on a regular basis, having
cognisance to cash and cash
equivalent holdings and levels of
outgoings. At 30 September 2017
the Group held £105.8 million cash
and cash equivalents compared with
£90.6 million at 30 September 2016.
Cash is used to expand the business
through: continued organic growth,
paying the operating expenses of
the business; further enhancing the
premium service; further developing
the resilience of the Group’s systems
through investment in technology
and infrastructure; and paying
shareholder dividends.
There are three regulated entities
within the Group, a UK investment
firm and two life insurance companies,
one in the UK and one in the
Isle of Man. Each regulated entity is
required to maintain a minimum level
of regulatory capital. Cash is chosen
as the main deployment of regulatory
capital required by the regulated
subsidiaries. The regulatory capital
for insurance companies under the
Solvency II regime is based on a
modelled stressed value-in-force
concept for the business, rather than
on the accounting concept of capital.
The solvency requirements for
Isle of Man insurance companies
are due to change with effect from
30 June 2018.
16 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Regulatory Capital
for the financial year
ended 30 September 2017
IFAL
ILUK
ILInt (Current requirement)
ILInt (Estimate based on proposed new rules)
Regulatory
Capital
Requirement
£m
Allowable
Capital
Resource
£m
14.2
134.9
4.1
17.5
34.7
154.0
13.5
31.9
The table above details the regulatory capital requirement for each of the
Regulated Subsidiaries.
Consolidated Capital
for the financial year ended 30 September 2017
Shareholder funds
Goodwill, intangibles and other deductibles
Available capital pre dividend
Dividend provision
Available capital post dividend
Estimated capital for regulatory capital
requirements4
Estimated surplus
£m
102.5
(16.8)
85.7
19.4
66.3
38.4
27.9
Note that for the purpose of this estimate, ILUK’s capital has been taken using
the accounting concept of capital, rather than on a Solvency II basis.
The Board considers the impact of prospective dividends on its regulatory
capital requirements and risk appetite levels. Our Pillar 3 document contains
further details and can be found on our website at www.integrafin.co.uk
Dividend
for the financial year ended 30 September
Total ordinary dividend
Dividend pounds per A, B and
C class shares
Dividend pounds per D class share
2017
£
19.4m
17.18
13.18
2016
£
13.5m
12.00
8.00
4 Estimated capital required to cover regulatory capital requirements
takes consideration of COREP, Solvency II and Isle of Man life insurance
capital requirements.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 17
STRATEGIC REPORT continued
The strategy and business plan is
approved annually by the Board and
updated as appropriate. It considers
the Group’s profitability, cash flows,
capital requirements, dividend
payments, and other key variables
such as liquidity and the solvency
requirements of the regulated
entities. These are considered under
stress and scenario tests to ensure
the business has sufficient flexibility
to withstand such impacts by
adjusting its plans within the normal
course of business.
Viability Statement
The Directors have assessed the
Company’s prospects by reference
to the three-year planning period
to September 2020, and have
reasonable expectation that the
Company will continue to operate
and meet its liabilities as they fall due
over the period of this assessment.
The Directors’ assessment has been
made with consideration and reference
to: the Group’s current position and
business plan; the Group’s risk appetite;
the Group’s financial projections;
and the Group’s principal risks and
uncertainties, as detailed in the
Strategic Report.
It is the Board’s view that a three
year time horizon is an appropriate
period over which to assess its viability
and prospects, and to execute its
business plan. This assessment
period is consistent with the Group’s
current business plan projections and
the ICAAP and ORSAs of the Group’s
regulated entities.
18 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
and effectiveness of policies and
procedures designed to detect any
risk of failure by any of the
Regulated Subsidiaries to comply
with their obligations under the
regulatory system.
The Group has a prudent capital
management approach and
currently invests shareholder
assets in high quality, highly liquid,
short-dated investments.
How risks are managed
The Risk Management Policy provides
general guidelines for the design
and implementation of the Risk
Management Framework with the
Board responsible for establishing the
risk strategy and Senior Management
responsible for its implementation.
The Risk Management Policy is
overseen by the Chief Financial
Officer and is reviewed at least on
an annual basis. All material changes
to this policy are considered by the
Risk Committee and approved by
the Board.
The Board is responsible for,
and provides oversight of, the
Group’s Risk Management Framework
with guidance provided by the
Risk Committee. The Group has
established its framework with
consideration of the Committee
of Sponsoring Organisation of the
Treadway Commission (COSO)
Integrated Framework Principles,
providing a consistent, pro-active
approach to identification, assessment,
mitigation and reporting of risks
throughout the Group.
RISK AND RISK
MANAGEMENT
Overview
Risk management assists the Board
in understanding its current and
future risks and provides appropriate
risk management information that
is incorporated into its strategic
decision making and business
planning processes. Risk management
activities encompass all financial,
strategic and operational risks that
may prevent IntegraFin Holdings
Limited (the Company) and the
Group from fulfilling their business
objectives. Given the nature of the
activities undertaken by the Group,
the key risks that the Company faces
are financial risks (comprising market
risk, liquidity risk, outflow risk,
expense risk and credit risk) and
non-financial risks (comprising
regulatory risk, operational risk,
competition risk, geopolitical risk
andreputational risk).
The Chief Executive Officer,
supported by the Chief Financial
Officer, is responsible for executing
the strategy set by the Board within
the risk appetite defined by the Risk
Committee of IFAL (Risk Committee)
and approved by the Boards of
Directors of each of IFAL, ILUK and
ILInt (collectively known as the
“Regulated Subsidiaries”). The Chief
Financial Officer reports directly
to the Chief Executive Officer and
is additionally accountable to the
Board and the Group’s regulators
for the effective management of
risk across the business. The Chief
Financial Officer is responsible for
overall management of risk controls,
including the monitoring of risk
exposures, reporting in relation
to risk management arrangements
and for assessing the adequacy
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 19
STRATEGIC REPORT continued
The Group’s Risk Management Framework is shown below:
OVERSIGHT
ENTERPRISE RISK MANAGEMENT
OWNERSHIP
RISKS
Risk and governance framework
Board
Strategy/Business
Market
Credit
Operational
Insurance
Liquidity
Conduct
Group
t
i
d
u
a
l
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
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
20 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
▪ the Group does not actively
seek to take operational risk
to generate returns. It accepts
a level of operational risk that
means the controls in place
should prevent material losses,
but should not excessively restrict
business activities
▪ the Group has no risk appetite
for unfair client outcomes arising
from systematic failures in its
cultural outlook or in any element
of the client life cycle; and
▪ the Group has a zero risk appetite
for material regulatory breaches.
The actual risk exposures of the
Regulated Subsidiaries are regularly
assessed by the Group’s Risk
Management function against risk
appetite using a comprehensive set
of key risk indicators and reported
to the Risk Committee and Senior
Management.
Risk appetite
The Group’s risk appetite is the
degree of risk that the Regulated
Subsidiaries are prepared to
accept in pursuit of their strategic
and operational objectives.
The Group’s Risk Management
Policy and Framework provides
the mechanism to define the
Group’s risk appetite. The Group
has generally adopted an overall
conservative approach which is
reflected in its risk appetite values
and preferences and in the overall
approach to risk management.
The Group’s risk preferences can
be articulated as follows:
▪ the Group ensures risks that
are taken are aligned with its
strategic aims and provide an
acceptable level of return
▪ the Group accepts certain risks
and ensures that these are
appropriately managed, mitigated
and monitored
▪ the Group has a preference
for products with low capital
requirements and without
financial guarantees. Additionally,
the Group has a preference for
secondary market risk through
charges determined based on
clients’ portfolio values. This is
central to the Group’s proposition
and it accepts the potential
impact on financial performance
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 21
STRATEGIC REPORT continued
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.
The Risk Committee is made up of
independent Non-Executive Directors
(NEDs) and is responsible for
reviewing the manner in which the
Group and the Regulated Subsidiaries
implement, and monitor the
adequacy of, the Risk Management
Framework. The Risk Committee also
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
“top-down” and “bottom-up”
approach to managing risks through
regular assessments, monitoring
(including horizon scanning) and
reporting in conjunction with Senior
Management and risk owners.
The Risk Management function
reports to the Risk Committee, on at
least a quarterly basis, information
and analysis on the key risks the
Group faces (including forward-
looking risks), capital requirements
and comparison against risk appetite.
The Chairman of the Risk Committee
then provides a summary to the
members of the Boards.
The “three lines of defence” risk
governance model
For risk management to be effective
it is important that the roles and
responsibilities of all those involved
are clearly defined. Accordingly,
the Group’s Risk Management
Framework is designed along the
“three lines of defence” model
(illustrated below), which aims
to ensure at least three stages
of oversight to ensure that the
Regulated Subsidiaries operate
within the risk appetite defined by
the Risk Committee and approved
by the Boards of Directors of each of
the Regulated Subsidiaries.
THE ”THREE LINES OF DEFENCE” RISK GOVERNANCE MODEL OF THE
REGULATED SUBSIDIARIES:
The Board
Risk
Committee
Audit
Committee
Risk Ownership
Risk Oversight
Risk Assurance
Managers
Business
Operations
Risk Management
Compliance
Internal Audit
First Line of
Defence
Second Line of
Defence
Third Line of
Defence
22 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
First line of defence
Second line of defence
The Group’s first line of defence
is its business departments which
have responsibility for managing and
controlling their risks in accordance
with agreed risk appetites through
the implementation of a sound set
of processes and controls.
Responsibility for risk management
resides at all levels within the Group’s
business lines, from the Senior
Management Team to department and
team managers. All staff members are
accountable for managing risks within
the business areas for which they
are responsible, ensuring compliance
with prescribed company plans,
policies and prevailing regulatory
and legislative requirements.
The business lines are also responsible
for complying with the policies and
standards which comprise the Group’s
Risk Management Framework.
Current key risks and issues facing
the Group are considered by the
Management Team, with each key
risk owned by the member of the
Management Team who is responsible
for the strategic management of that
risk across the Group.
The Group’s second line of defence
comprises of two functions:
the Risk Management function
and the Compliance function.
The Risk Management function is
responsible for co-ordinating all
the risk management activities
within the business. This includes
the development, maintenance
and enhancement of the Risk
Management Policy and Framework,
as well as Risk Management
reporting. The Risk Management
function provides regular risk reports
to the Risk Committee, which is
comprised solely of NEDs.
The Compliance function is primarily
responsible for supporting the Group
to ensure that its activities are
conducted in accordance with all
applicable regulatory requirements.
Third line of defence
The Group’s third line of defence
is the Internal Audit department,
which provides independent assurance
on the adequacy and effectiveness
of the Group’s risk management
and major business process control
arrangements. The Head of Internal
Audit reports directly to the Chairman
of the Audit Committee, which is
comprised solely of NEDs.
Internal Audit conducts regular
audits on the implementation and
effectiveness of the Risk Management
Policy and Framework across the
business. The results of these audits
are reported to the Audit Committee
and the Board. The Board is satisfied
that Internal Audit provides
sufficient assurance about the Risk
Management Policy and Framework.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 23
STRATEGIC REPORT continued
PRINCIPAL RISKS AND
UNCERTAINTIES
The principal risks and uncertainties
to which the Company is exposed
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 are the
underlying financial performance
and solvency position of IFAL and its
regulated subsidiaries, provided in
the relevant supplementary accounts.
In summary, due to the nature of
the business written by IFAL and
the other regulated subsidiaries,
profitability arises primarily from
charges on the assets held in the
portfolios less the expenses of
administering those portfolios.
As a consequence, the predominant
risks to which the Company is
exposed are market risk, liquidity
risk, outflow risk, expense risk and
operational risk. The Company seeks
to limit its exposure to these and
any other applicable financial and
non-financial risks.
The following tables (split between
financial and non-financial risks)
describe the key risks of the
Company with a summary
description of how we manage
and mitigate the risks:
Solvency II
ILUK has fully embedded the
requirements of the Solvency II
regime which came into force on
1 January 2016. The new regulations
brought 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 has not adopted any
of the Transitional Provisions in the
calculation of the Solvency II balance
sheet or SCR. As at 30 September
2017, ILUK has Own Funds of
£154m and an SCR of £135m which
gives a solvency coverage ratio
of 114%.
24 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
FINANCIAL RISKS
KEY RISK DESCRIPTION
MANAGEMENT AND CONTROLS
Market risk – the impact changes
in equity and property market
values, currency exchange rates,
credit spreads, interest rates and
inflation, may have on the value
of clients’ portfolios, resulting in
a reduction in future charges
or an increase in future expenses.
The upstream of capital to the Company is exposed to second order
impacts from market movements as future charges are predominantly
determined based on clients’ portfolio values. The Regulated Subsidiaries
of the Group do not offer any guarantees on portfolio values and currently
invest their 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.
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.
The Company’s principal liquidity risk is limited to paying out dividends
and operating expenses as they occur.
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.
Outflow risk – loss of future
profits due to more clients than
expected terminating policies or
more outflows (e.g. withdrawals
or transfers) than expected.
The Group seeks to mitigate outflow risk by focusing on providing the
highest level of service that it can. 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 – administration costs
exceed expense allowance, which
can occur due to costs increasing
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. Expense risk is mitigated
through regular stress testing, monitoring of expenditure and closely
managing expenses in line with the business plan.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 25
STRATEGIC REPORT continued
NON-FINANCIAL RISKS
KEY RISK DESCRIPTION
MANAGEMENT AND MITIGATION
Regulatory risk – the risk of new
regulatory requirements having
adverse impacts on the Group’s
business model, or the Group failing
to comply with existing or new
regulations resulting in a fine or
regulatory censure.
Regulatory risk is mitigated through regular monitoring of regulatory
developments and maintaining open and transparent dialogue with the
regulators to which the different regulated subsidiaries are subject.
On-going compliance with existing rules is monitored by the Compliance
function with additional assurance provided by the Internal Audit function
for the key regulatory risks on a regular basis.
Operational risk – the risk of loss
arising from inadequate or failed
internal processes, people and
systems, or from external events.
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.
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.
Competitor risk is mitigated by focusing on providing exceptionally high
levels of service and being responsive to client and financial adviser
demands through an efficient expense base.
Geopolitical risk cannot be directly mitigated by the Group. However,
through close monitoring of developments through its risk horizon
scanning process, potential impacts are taken into consideration as part
of the business planning process.
Reputational risk – the risk that
current and potential clients’ desire
to do business with the Group reduces
due to perception of the Transact
service in the market place.
The Risk Management Framework provides the monitoring mechanisms
to ensure that reputational damage controls operate effectively and
reputational risk is mitigated, to some extent, by internal operational risk
controls, error management and complaints handling processes as well as
root cause analysis investigations.
26 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
CORPORATE SOCIAL
RESPONSIBILITY
IntegraFin demonstrates its social
responsibilities primarily through
its relationship, as ultimate parent
company, with companies in its
Group that operate ethically and
deliver commercial benefits to
customers, shareholders and staff.
IntegraFin also acknowledges its
responsibilities more widely in
relation to the Company’s effects on
environmental and social wellbeing.
Culture
Transact was founded on the principle
of offering adviser firms and clients a
high quality service with transparent
charging (for clients in relation
to payment for platform services
and adviser firms’ services) and a
demonstrably agnostic attitude
to clients’ investment choice.
This ethical approach informs all of
the Group’s business principles.
Environment
IntegraFin has a limited direct
impact on the environment. However,
we still take steps to reduce our
environmental impact by encouraging
adviser firms and clients to use
electronic rather than paper based
instruction delivery, by encouraging
staff to reduce consumption of
electricity, other utilities and paper
and by recycling waste materials.
Community
We organise a variety of events
each year to raise money for, and
awareness of, a number of charities
chosen from staff suggestions.
We do not make political donations.
The Group also makes tax
payments. The UK corporation tax
and employer’s national insurance
payable in respect of the year ended
30 September 2017 was £9.2 million.
In addition other taxes such as VAT
and business rates were paid.
This Strategic Report (up to page 27)
was approved by the Board of
Directors on 12 December 2017
and signed on its behalf by
David Johnson
Company Secretary
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 27
GOVERNANCE
BOARD OF DIRECTORS TO 30 SEPTEMBER 2017
Michael Howard
Executive Chairman
Appointed:
24 January 2014
Ian Taylor
Chief Executive Officer
Appointed:
24 January 2014
Alexander Scott
Group Director
Appointed:
24 January 2014
▪ Executive Chairman of the Group
from 2001 until stepping down
in October 2017 and becoming
Executive Director. Prior to this he
was the Managing Director from
April 1999 to December 2001
▪ CEO of the Group since April
2002, prior to which he was
Executive Director and General
Manager from 1999 to 2002
Experience includes:
▪ AIB Govett Asset Management –
Marketing Director 1992-1999
▪ Royal Life Holdings Group – Marketing
Development Manager 1990-1992,
Business Planning Manager
1988-1990.
▪ Founded ObjectMastery in
Australia in April 1992 which
developed the software
powering Transact
Experience includes:
▪ Norwich Union Life Insurance –
launched platform Navigator in 1990,
Managing Director of Norwich Australia
Asset Management from 1989-1992,
Marketing Development Manager
1988-1989 and Accounts & Company
Secretary 1986-1988
▪ Touche Ross – Audit division in
Melbourne office 1984-1986, in the UK
1980-1984.
▪ Group Director since May 2013
▪ CFO and Head of Risk from
November 2010 to May 2013
▪ Joined the Group as Actuary
and Head of Group Technical
Operations in October 2009
Experience includes:
▪ Sterling Insurance Group – Life
Director and Chief Actuary 2004-2009
▪ Criterion Assurance Group –
Non-Executive Director 2003-2010,
Group Director 2002-2003, Director
1999-2002, Actuary 1997-1999
▪ National Provident Institution –
Actuarial Division 1991-1997.
28 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Judith Davidson
Chief Operating Officer
Christopher Munro
Non-Executive Director
Neil Holden
Non-Executive Director
Appointed:
24 January 2014
Appointed:
29 March 2017
Appointed:
24 January 2014
▪ COO of the Group since
Experience includes:
Experience includes:
November 2010
Experience includes:
▪ Symbiotic Consulting – Founder and
Managing Partner 2009 to present
▪ Sodexo UK – Client Relations and
Commercial Director 2005-2009,
Director of Strategy UK & Ireland
2002-2005, SAP Implementation
Director 2000-2002, UK & Ireland
Sales Director 1997-2000, Divisional
MD, Business and Industry 1996-1997,
Managing Director Education
1995-1996
▪ Gardner Merchant – Sales and
Operational Roles 1986-1995
▪ Trust House Forte Airport Services –
Operational Roles 1983-1986.
▪ London and Continental Partners LLP
▪ Saffron Building Society –
– Founding Partner 2016
▪ Beckwith Asset Management – Director
1994 to 2016
▪ Pacific Capital Partners – Director 2004
to present
▪ Jupiter Enhanced Income Trust –
Director 1996 and 2009
▪ River & Mercantile Investment
Management – CEO 1994-1996
▪ Robert Fleming Holdings Limited –
Director 1988 and 1994
▪ Jardine Fleming Holdings – Director
1983-1986.
Committees:
Remuneration Committee,
Risk Committee,
Regulatory Compliance Committee,
Audit Committee.
Non-Executive Director since 2014
▪ Calmindon Ltd – Director since 2010
▪ Stanbic International Insurance
Limited – Non-Executive Director
since 2003
▪ Bank of London and The Middle East Plc
– Non-Executive Director since 2006
▪ Quadrant Risk Management
International Limited – Non-Executive
Director 2006-2009
▪ Standard Bank Group and Standard
Bank Plc – Consultant 2006-2008,
Managing Director in Corporate and
Investment Banking Financial Risk
1999-2006
▪ WestLB – Director and Head of Risk
Management Support & Control
1996-1998.
Committees:
Remuneration Committee (Chair),
Risk Committee,
Regulatory Compliance Committee,
Audit Committee (Chair).
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 29
GOVERNANCE continued
Appointment subsequent
to 30 September 2017
Jeremy Brettell
Non-Executive Director
Stuart Bazley
Non-Executive Director
Patrick Snowball
Non-Executive Chairman
Appointed:
24 January 2014
Appointed:
24 January 2014
Appointed:
1 October 2017
Experience includes:
Experience includes:
Experience includes:
▪ Chair of Airdrie Savings Bank
▪ Visiting Professor in Financial
▪ Dabre Insurance Group plc –
since 2015
▪ Chair of Guarantee Protection
Insurance Ltd since 2014
▪ Chair of Anderson Strathern Asset
Regulation and Compliance at BPP
2008-present
Non-Executive Chairman 2017
to present
▪ IFAL – Head of Compliance 2011-2012
▪ IFAL – Consultant 2010-2011 and
▪ Aviva UK – CEO 2005-2007
▪ Suncorp Group Limited –
Management since 2014
2012-2013
CEO 2009-2015
▪ Wesleyan Bank – Non-Executive
▪ Momenta – Head of Regulatory
▪ Towergate – Deputy Chairman
Consulting 2004-2008
2007-2008
▪ Edward Jones – UK General Counsel
and Compliance Director 1999-2004
▪ Irish Life Assurance UK – Legal
Adviser, Head of Legal and Compliance
and Money Laundering Reporting
Officer 1991-1996.
▪ Jardine Lloyd Thompson plc –
Non-Executive Director 2008-2009
▪ Member of the Financial Services
Authority (UK) Practitioner Panel,
representing Life and General
Insurance, 2006-2008.
Committees: Remuneration
Committee, Risk Committee,
Regulatory Compliance Committee
(Chair), Audit Committee.
Director and Chair of Audit Committee
since 2013
▪ UnLtd – Audit Committee Member
2012–2014
▪ NHS Lothian – Non-Executive Board
Member and Chair of Audit & Risk
Committee 2012–2015
▪ Accountant in Bankruptcy –
Non-Executive Board Member and
Chair of Audit Committee 2012–2014
▪ Helvetia Wealth Management –
Strategy Consultant 2011-2012
▪ SL Investment Management Ltd –
Chief Executive 2006-2012.
Committees:
Remuneration Committee,
Risk Committee (Chair),
Regulatory Compliance Committee,
Audit Committee.
30 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
CORPORATE GOVERNANCE
REPORT
Governance Statement
IntegraFin Holdings Limited is not
required to comply with the UK
Corporate Governance Code (Code).
Nevertheless, the Company’s Board
considers the terms of the Code
in determining appropriate and
proportionate corporate governance
arrangements for the Company and
its Group of companies by reference
to the nature, scale and complexity
of its business. Accordingly, the
Group’s corporate governance
arrangements reflect the standards
of practice required by the Group
in relation to the management
of the Group and are designed to:
▪ promote business effectiveness,
efficiency, responsibility and
accountability
▪ assist the effective review and
monitoring of the Group’s activities
▪ help identify and mitigate significant
risks to the Group; and
▪ provide the disclosures to
stakeholders necessary to make
a meaningful analysis of the
Group’s business activities and its
financial position.
Board of Directors
The Role of the Board
Michael Howard
Executive Chairman
Ian Taylor
Chief Executive Officer
Alexander Scott
Group Director
Judith Davidson
Chief Operating Officer
Neil Holden
Independent Non-Executive Director
Jeremy Brettell
Independent Non-Executive Director
Stuart Bazley
Independent Non-Executive Director
Christopher Munro
Independent Non-Executive Director
A number of resignations and
appointments have taken place since
the financial year end in preparation
for listing IntegraFin on the London
Stock Exchange in 2018. On 1 October
2017 Michael Howard stood down
as Chairman of IntegraFin and the
Boards of IFAL, ILUK and ILInt.
On the same date, Patrick Snowball
was appointed as Non-Executive
Chairman of IntegraFin and IFAL.
Jeremy Brettell, Stuart Bazley and
Judith Davidson stepped down
from the IntegraFin Board on
1 October 2017 but continue to be
Directors of IFAL.
Board Leadership
The Board is responsible for the
leadership and management
of the Group. The Board oversees
the Company’s business affairs,
the maintenance of internal controls,
and compliance with statutory
obligations. Michael Howard
has chaired the Board since the
Company’s incorporation in January
2014. The Board comprises four
Executive Directors (including the
Chairman) and four NEDs.
Matters reserved to the Board
The Board’s remit is documented
in its terms of reference which
includes details of matters reserved
to the Board and matters delegated
by the Board. The terms of reference
including matters reserved to the Board
are reviewed and updated annually.
Board Meetings
The Board met each quarter,
in accordance with its terms
of reference. All members of the
Board attended all Board meetings
throughout the year.
Conflicts of interest
The Company’s articles of association
permit the Board to consider and
authorise situations where a Director
has an actual or potential conflict
of interest in relation to the Group.
The Company maintains a conflicts
of interest register which is reviewed
annually by the Board. In addition,
prior to each Board meeting, the
Directors are asked to declare any
conflicts they may have with regard
to the business meeting. Directors
who declare a conflict of interest
may be authorised by the rest of
the Board to participate in decision
making in accordance with section
175 of the Companies Act 2006.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 31
GOVERNANCE continued
Board effectiveness
Annual General Meeting
The Board undertakes a review of its
effectiveness each year. At the next
Board meeting the Directors discuss
the findings and agree any action
points arising.
Re-election of Directors
The Company’s articles of association
require Directors to retire by
rotation at each annual general
meeting (AGM) of the Company.
Directors required to retire and seek
reappointment are those who have
been appointed by the Board since
the last AGM and who were not
appointed or reappointed at one
of the preceding two AGMs.
Shareholder engagement
The Board provides a detailed annual
communication to shareholders
which includes a business update
and financial performance results.
The AGM provides shareholders with
a further opportunity to communicate
with the Board both during the AGM
and informally afterwards. Notice of
the AGM is sent in accordance with
the Companies Act 2006 and
made available on a dedicated
shareholder website along with any
other relevant documentation.
Group Committees
The Board delegates relevant
matters to the Audit, Strategy and
Risk Committees for consideration.
Independently, the Boards of
Integrated Financial Arrangements
Ltd, IntegraLife UK Limited and
IntegraLife International Limited
(the regulated companies in the Group)
have delegated relevant matters to
a Regulatory Compliance Committee
and a Remuneration Committee.
32 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
AUDIT COMMITTEE REPORT
Annual Statement by the
Chairman of the Audit Committee.
I am pleased to present the Audit
Committee’s report for 2017.
The Audit Committee has worked
closely with the Risk Committee and
Regulatory Compliance Committee to
ensure the Group maintains robust
controls. It has overseen the integrity
of the financial reporting process and
reviewed the work of both external
and internal auditors.
Role of the Audit Committee
The role and responsibilities of
the Audit Committee are set out
in its terms of reference and are
summarised below:
▪ monitoring the integrity of the
Group’s financial reporting process
▪ ensuring the integrity of our Annual
Report and Financial Statements
▪ reviewing the manner in which the
Group implements, and monitors
the adequacy of, internal financial
and operational controls
▪ monitoring and reviewing the
effectiveness of the Group’s Internal
Audit function
▪ reviewing external audit
arrangements and making
recommendations to the Board
regarding any changes to the
external auditor as well as review
and approval of their remuneration
and terms of engagement
▪ reviewing and monitoring the
independence and objectivity of
external auditors as well as the
effectiveness of the audit process,
taking into consideration relevant
professional and regulatory
requirements.
The Committee reports its findings
to the Board, identifying any matters
in respect of which it considers that
action or improvement is needed,
and makes recommendations as to
the steps to be taken. However, the
Board retains ultimate responsibility
for reviewing and approving financial
reports and other public statements.
Composition of the Audit
Committee
The members of the Audit Committee
at 30 September 2017 were:
Neil Holden
– Chairman (Chartered Accountant)
– appointed 9 February 2011
Jeremy Brettell
– appointed 16 July 2012
Stuart Bazley
– appointed 20 May 2015
Christopher Munro
– appointed 1 February 2017
All members of the Committee,
including the Chairman, are
independent Non-Executive Directors.
On an on-going basis, membership
of the Committee is reviewed by
the Chairman of the Committee
and any recommendations for new
appointments are made to the
IFAL Board.
In adherence with the UK Corporate
Governance Code requirement to
include at least one Committee
member with recent and relevant
financial experience, the Audit
Committee Chairman is a fully
qualified chartered accountant.
The Group also provides initial
and on-going training for new and
existing Committee members to
support them in carrying out their
duties effectively. This is delivered
by in-house technical staff, through
attendance at formal conferences,
and an online training programme.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 33
GOVERNANCE continued
Meetings and attendance
The Audit Committee meets at
least three times each year but
more frequently when required.
The Committee regularly meet in
private with external and internal
auditors. The Committee met eight
times during this financial year.
Attendance by each member of the
Committee at 30 September 2017 is
set out below.
MEETING ATTENDANCE
Eligible
to attend
Meetings
attended
Chairman
Neil Holden
Members
Jeremy Brettell
Stuart Bazley
Christopher Munro
8
8
8
5
8
8
8
3
The Group Chief Executive Officer,
Group Chief Financial Officer,
Group Counsel and Group Head of
Internal Audit are routinely invited
to, and attend, the majority of
meetings, although the Committee
reserves the right to request any
of these individuals to withdraw.
The external auditors for the Group
and Life Companies (BDO and KPMG
respectively) also attended specific
Committee meetings for external audit
planning and reporting purposes.
In between the formal schedule of
meetings the Committee Chairman
keeps in regular contact with the Group
Chief Executive Officer, Group Chief
Financial Officer, Group Head of Internal
Audit, and the Senior Engagement
Partners of the Group’s two external
audit firms (BDO and KMPG).
Overview of the actions taken by
the Audit Committee to discharge
its duties
The Audit Committee has focused
on four main areas during the year:
▪ Financial Reporting
▪ Internal controls and key risks
▪ Effectiveness of internal audit
▪ Effectiveness and independence
of the external auditor.
The Audit Committee has also
conducted a self-assessment of its
own effectiveness for the year and
was satisfied with the results achieved
and has agreed actions where
improvements were suggested.
Financial reporting
The financial reporting undertaken
by the Group has been reviewed and
challenged by the Committee, with
input and support from the Group’s
external auditors. It assessed whether
suitable accounting policies have
been adopted, whether management
have made appropriate estimates and
judgements and whether disclosures
in published financial statements were
fair, balanced and understandable.
As part of its work during the year,
the Committee, on behalf of the Board,
has examined the Annual Report
and Financial Statements, related
disclosures, consistency of accounting
policies and the financial reporting
process. This included the review and
approval of the Annual Report, and
consideration of the Income Statement,
Statement of Comprehensive Income,
Statement of Financial Position,
Statement of Changes in Equity,
Going Concern statement and the
Statement of Cash Flows, with an
emphasis on ensuring that these are
fair, balanced and understandable.
34 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
The Committee did this by
ensuring there was a thorough
process of challenge, including
challenge by the Committee itself.
The Committee’s own challenge
process included questioning the
Group Chief Executive Officer on
the overall messages and tone of
his review statement, examining
and challenging reports from both
management and the external
auditor relating to the Annual Report,
and reviewing consistency with
internal reports presented to the
Board by management, the Group
Chief Financial Officer, Group Head
of Internal Audit and Group Chief
Risk Officer during the year. Following
this assessment the Committee
recommended to the Board that the
2017 Annual Report and Financial
Statements are fair, balanced and
understandable.
Internal controls and key risks
The Audit Committee receives
reports at each meeting from the
Group Internal Audit function.
The content and accuracy of
these reports was assessed and
challenged by the Committee to
ensure that management takes
appropriate and prompt action
to address audit findings and we
monitor management’s progress in
implementing the agreed actions.
The Group will be audited for the
first time this year under the FRC’s
new standard regarding CASS
assurance reports. This Committee
has discussed the impact of the new
standards and is satisfied that they
have been dealt with appropriately.
Effectiveness of Internal Audit
The Audit Committee assists the
Board in determining the adequacy
of the resourcing and plans, and the
ongoing effectiveness, of the Internal
Audit function. The Internal Audit
function presents its Annual Audit
Plan, using a risk based approach,
to the Committee once a year
for prioritisation and approval.
The Annual Audit Plan is then
reported to the Audit Committee on
a quarterly basis for review against
changing risks to the Group and
for tracking its completion.
There are no contractual or similar
obligations restricting the Group’s
choice of external auditors and
the Group’s external auditors,
BDO and KPMG, have both
confirmed to the Committee that
they remain independent.
In line with the EU audit regulations
our UK life insurance subsidiary
(ILUK), as a Public Interest Entity,
was required to put its external audit
engagement to formal tender (as the
engaged auditors had been in place
for 10 years). Following a competitive
tender process carried out in 2017
KPMG were re-appointed as the
external auditor to ILUK, and also
to our Isle of Man life insurance
subsidiary (ILInt). The tender process
included assessing the auditor’s audit
approach and delivery, the composition
of the engagement team, audit
quality and fees and terms.
The Audit Committee met with both
external auditors privately this year
in order to discuss any matters directly
in the absence of management.
The Committee is satisfied with the
performance and effectiveness of
BDO and KPMG and has concluded
that they both continue to display the
necessary attributes of independence
and objectivity.
On behalf of the Audit Committee
Neil Holden
Chairman of the Audit Committee
12 December 2017
Having conducted a review of
the Internal Audit department
the Committee considers that its
resources and plans are appropriate
for both its resources and plans.
In line with the recommendation
by the Institute of Internal Auditors
whereby an external review of the
Internal Audit function should be
carried out no less than every five
years, our Internal Audit function had
a satisfactory external review carried
out in February 2017.
The Audit Committee met with the
Head of Internal Audit privately
this year in order to discuss any
matters directly in the absence
of management.
Effectiveness and independence
of the external auditor
The Audit Committee has primary
responsibility for the Group’s
relationship with the external
auditors (BDO and KPMG) and for
monitoring their independence,
objectivity and compliance with
ethical and regulatory requirements.
There were non-audit fees during
2017 paid to BDO of £105,800
(2016: £153,650). The non-audit
fees paid to BDO related to quarterly
reviews, pension reviews, the annual
CASS audit, and other assurance
assignments. Non-audit fees paid to
KPMG during 2017 were £100,300
(2016: £105,400). The non-audit fees
paid to KPMG related to quarterly
reviews, and a Solvency II audit.
Fees paid to BDO for the audit
for 2017 were £111,800 (2016:
£109,500), and audit fees paid to
KPMG were £98,800 (2016: £96,400).
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 35
GOVERNANCE continued
DIRECTORS’
REMUNERATION REPORT
Annual Statement
by the Chairman of the
Remuneration Committee.
I am pleased to present a report
relating to the activities of IFAL’s
Remuneration Committee in 2017.
During this year, as in previous years,
the Committee’s primary activities
have been to review, set or agree
(as detailed in the Committee’s terms
of reference), overall remuneration
and that of senior individual officers
as required by the Remuneration
Code. It has done so with
a view to aligning remuneration
with the successful achievement
of the Group’s long-term objectives
while taking into account relevant
regulatory requirements, market
rates and value for money.
The Group provides a simple
remuneration package for all staff
consisting of base salary, annual
bonus and a benefits package
(including pension contributions).
There is no long-term incentive plan.
The anticipated total bonus pool
is accrued during the year as a
percentage of the Group’s total base
salary costs based on forecasted
financial performance and post-tax
profits for the year.
After the end of the financial year
the Group’s financial performance is
reviewed before bonuses are awarded.
Individual payments are expressed as
a percentage of base salary. Individual
awards may be increased by reference
to individual performance but the
majority of the bonus payment is
determined by reference to the Group’s
financial performance.
A relatively low proportion of
remuneration is paid in the form of
bonus. Payments are generally made
in three tranches over a period of six
months after the year end. The Group’s
business model ensures that profit
is quickly translated to cash and
therefore the Committee deems that
these timescales are appropriate.
As part of the process of listing
IntegraFin’s shares, it is anticipated
that IntegraFin will establish its own
Remuneration Committee.
On behalf of the
IFAL Remuneration Committee
Neil Holden
Chairman of the IFAL
Remuneration Committee
12 December 2017
36 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
RISK COMMITTEE REPORT
Annual Statement by the
Chairman of the Risk Committee
I am pleased to present a report of
the Risk Committee’s activities in 2017.
During another busy financial
year the Risk Committee has
reviewed and considered a wide
range of topics including information
technology security and cyber risks,
client money management, risk
appetite frameworks (including
conduct risk) and the impact of
the UK voting to leave the EU.
Additionally, the Committee
recommended for approval the
IFAL Internal Capital Adequacy
Assessment Process (ICAAP) to the
IFAL Board, the ILUK Own Risk and
Solvency Assessment (ORSA) to the
ILUK Board and the ILInt Individual
Capital Assessment (ICA) to the
ILInt Board.
Role of the Risk Committee
The Committee is a committee
of the Board of IFAL and assesses
known and foreseeable risks seeking
to anticipate future issues, enabling
action to be taken to minimise the
impact should any of those risks
materialise. The Committee reviews
the manner in which the Group
implements, and monitors the
adequacy of, the Risk Management
Framework. It assists the regulated
companies’ Boards in fostering
a culture within the Group that
encourages good stewardship of risk
and emphasises and demonstrates
the benefits of a risk-based approach
to management of the Group.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 37
GOVERNANCE continued
▪ review the Group’s top risks and the
progress of identified management
actions to manage those risks that
are outside appetite
▪ review the Departmental Risk
Registers with the relevant Heads
of Department with top risks and
ensure that mitigating actions are
progressing to completion
▪ review the risk mitigation
techniques and approaches adopted
by the companies and ensure that
those mechanisms are appropriate
and are in line with the Group’s
overriding business principles at
least annually. This includes the
appropriateness of decisions which
have resulted in mitigation not
being put in place
▪ review the effectiveness of the
performance of the risk function
and the adequacy of its resources
▪ escalate matters of relevance
to the appropriate regulated
companies’ Boards.
The risk appetites of the Groups’
businesses are determined by the
regulated companies within the
IntegraFin Group. The Committees’
report their findings and any
recommendations to the regulated
companies’ Boards.
The role and responsibilities of the
Committee are set out in its terms of
reference and are summarised below:
▪ maintain oversight of the Group’s
risk management activities and
monitor their effectiveness
▪ review annually the Group’s
overarching risk appetite and each
company’s specific risk appetites
in relation to the Group’s strategy
▪ identify risk trends, exposures or
concentrations within the Group
or individual companies within
the Group that may necessitate
policy changes
▪ review annually the Group’s Risk
Management Framework
▪ review annually and recommend to
the regulated companies’ Boards,
for approval the Group’s policies in
relation to risk, including mitigation
of the risks identified as a result
of implementation of the Risk
Management Framework
▪ review and challenge as necessary,
at least half-yearly, management
information reporting the status
of the Group’s risk profile – by
reference to risk appetite, risk
trends and risk concentrations –
against the top risks as recorded
in the Group Risk Register
▪ review the ICAAP, the ICA and
the ORSA documents and Wind
Down Plan for the Group; capital
adequacy and regulatory capital
usage; external risk disclosures
including risk statements in the
Annual Directors’ Report and
Financial Statements and Pillar 3
Disclosures; annual Internal Audit
reports where they relate to the
effectiveness of risk management
operations
▪ review financial crime risk controls
and remedial action taken regarding
fraudulent activity
38 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Composition of the
Risk Committee
The members of the Risk Committee
at 30 September 2017 were:
Jeremy Brettell
– Chairman
– appointed 16 July 2012
Neil Holden
– appointed 9 February 2011
Stuart Bazley
– appointed 20 May 2015
Christopher Munro
– appointed 29 March 2017
On an annual basis, membership
of the Committee is reviewed by
the Chairman of the Committee
and any recommendations for new
appointments are made to the
IFAL Board.
Meetings and attendance
The Committee meets at least four
times each year, there were five
scheduled meetings during the
financial year and additional ad-hoc
meetings where required.
The attendance by each Director
is set out in the table below.
All members of the Committee,
including the Chairman, are
independent Non-Executive Directors.
The members of the Committee at
30 September 2017 who attended
the five scheduled Committees held
during the twelve month period were:
MEETING ATTENDANCE
Eligible
to attend
Meetings
attended
Chairman
Jeremy Brettell
Members
Stuart Bazley
Neil Holden
Christopher Munro*
*appointed to the Risk Committee on 29 March 2017.
5
5
5
2
5
5
5
2
The Chief Executive Officer, Chief
Financial Officer/Chief Risk Officer,
Group Counsel, Head of Quality
Control, Head of Actuarial and Risk
and Risk Manager are routinely
invited to attend meetings, although
the Committee may request any of
these individuals to withdraw or call
for additional attendees to provide
amplification on specific risk matters.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 39
GOVERNANCE continued
Overview of the actions taken by
the Risk Committee to discharge
its duties
Risk reporting and risk profile
discussions
The Risk Management function
provides reports to the Committee
at each meeting. During the
2016/2017 financial year the main
topics discussed included: top risks,
risk horizon scanning, risk appetite
statements and assessments, bank
account and custodian dashboard
review and updates on the external
environment following the UK’s vote
to leave the EU.
The Committee agrees that the
Group’s approach to risk continues
to be appropriate.
ICAAP, ORSA and ICA
The Committee recommended for
approval the ILUK ORSA to the
ILUK Board and the ILInt ICA to the
ILInt Board in November 2016 and
the IFAL ICAAP to the IFAL Board
in December 2016. As part of this,
the Committee provided risk
management challenge to key
underlying processes including
formulation of scenarios, stress
and scenario testing, reverse stress
testing and wind down plans.
Risk Management Policy
and Framework
The Committee received a report
from the Head of Actuarial and Risk
regarding the improvements in the
design and effectiveness of the Risk
Management Framework. This included
the expansion of related risk policies
and further linking the Group’s
business principles to the regulated
companies’ risk appetite frameworks.
Risk effectiveness
The Committee has ensured that
the Risk Framework has been
implemented successfully and
adhered to appropriately in the
2016/2017 financial year. In addition,
the Internal Audit function issued
an Annual Report on the overall
effectiveness of the governance and
risk and control framework of the
regulated companies. The Annual
Report concluded that overall the
regulated companies’ documented
risk and control governance
framework is effective at mitigating
the major risks to the Group.
On behalf of the Risk Committee
Jeremy Brettell
Chairman of the Risk Committee
12 December 2017
40 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
DIRECTORS’ REPORT
Indemnity provision
Auditors
The Directors present their report
and financial statements for the year
ended 30 September 2017.
The review of the business and
principal risks and uncertainties are
disclosed within the Strategic Report.
Directors
The Directors who served during the
year were as follows:
M Howard
I A Taylor
A Scott
N J Holden
C I C Munro
(appointed 1 February 2017)
P J R Snowball
(appointed 1 October 2017)
J M Davidson
(resigned 1 October 2017)
J Brettell
(resigned 1 October 2017)
S Bazley
(resigned 1 October 2017)
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.
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.
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.
Employee information
The Company has no employees
(2016: nil), but the Group has 467
employees (2016: 447). The Group
continues to promote a culture
whereby employees are encouraged
to develop and contribute to the
overall aims of the business.
Policy on disabled employees
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 (2016: £nil).
Each of the persons who is a Director
at the date of approval of this report
confirms that:
▪ so far as the Director is aware,
there is no relevant audit
information of which the Company’s
auditor is unaware; and
▪ 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
12 December 2017
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 41
GOVERNANCE continued
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.
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
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 (IFRSs)
as adopted by the European Union.
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:
▪ select suitable accounting policies
and then apply them consistently
▪ make judgements and estimates
that are reasonable and prudent
▪ state whether applicable accounting
standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements; and
▪ prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company and Group will continue
in business.
42 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S
REPORT TO MEMBERS OF
INTEGRAFIN HOLDINGS
LIMITED
Opinion
We have audited the financial
statements of IntegraFin Holdings
Limited (the Parent Company) and
its subsidiaries (the Group) for the
year ended 30 September 2017
which comprise the Consolidated
and Company Income Statement,
Consolidated and Company
Statement of Financial Position,
Consolidated and Company
Statement of Cash Flows,
Consolidated and Company
Statement of Changes in Equity
and notes to the financial statements,
including a summary of significant
accounting policies. The financial
reporting framework that has been
applied in their preparation is
applicable law and International
Financial Reporting Standards (IFRSs)
as adopted by the European Union.
In our opinion, the financial
statements:
▪ give a true and fair view of the
state of the Group’s and of the
Parent Company’s affairs as at
30 September 2017 and of the
Group’s profit and the Parent
Company’s profit for the year
then ended;
▪ have been properly prepared in
accordance with IFRSs as adopted
by the European Union; and
▪ have been prepared in accordance
with the requirements of the
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance
with International Standards on
Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities
under those standards are further
described in the Auditor’s
responsibilities for the audit of the
financial statements section of our
report. We are independent of the
Group and the Parent Company
in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in
the UK, including the FRC’s Ethical
Standard, and we have fulfilled
our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
Conclusions relating to going
concern
We have nothing to report in respect
of the following matters in relation
to which the ISAs (UK) require us
to report to you where:
▪ the Directors’ use of the going
concern basis of accounting in
the preparation of the financial
statements is not appropriate; or
▪ the Directors have not disclosed
in the financial statements any
identified material uncertainties that
may cast significant doubt about
the Group or the Parent Company’s
ability to continue to adopt the
going concern basis of accounting
for a period of at least twelve
months from the date when the
financial statements are authorised
for issue.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 43
FINANCIAL STATEMENTS continued
Other information
The Directors are responsible for
the other information. The other
information comprises the
information included in the annual
report, other than the financial
statements and our auditor’s report
thereon. Our opinion on the financial
statements does not cover the other
information and, except to the extent
otherwise explicitly stated in our
report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the
financial statements, our responsibility
is to read the other information
and, in doing so, consider whether
the other information is materially
inconsistent with the financial
statements or our knowledge
obtained in the audit or otherwise
appears to be materially misstated.
If we identify such material
inconsistencies or apparent
material misstatements, we are
required to determine whether
there is a material misstatement
in the financial statements or a
material misstatement of the other
information. If, based on the work
we have performed, we conclude
that there is a material misstatement
of this other information, we are
required to report that fact.
We have nothing to report in
this regard.
Opinions on other matters
prescribed by the
Companies Act 2006
In our opinion, based on the work
undertaken in the course of the audit:
▪ 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; and
▪ the Strategic report and Directors’
report have been prepared in
accordance with applicable legal
requirements.
Matters on which we are required
to report by exception
In the light of the knowledge and
understanding of the Group and the
Parent Company and its environment
obtained in the course of the audit,
we have not identified material
misstatements in the Strategic report
and Director’s report.
We have nothing to report in respect
of the following matters in relation
to which the Companies Act 2006
requires us to report to you if,
in our opinion;
▪ adequate accounting records
have not been kept by the Parent
Company, or returns adequate for
our audit have not been received
from branches not visited by us; or
▪ the Parent Company financial
statements are not in agreement
with the accounting records and
returns; or
▪ certain disclosures of Directors’
remuneration specified by law are
not made; or
▪ we have not received all the
information and explanations we
require for our audit.
44 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Responsibilities of Directors
As explained more fully in
the Statement of Director’s
Responsibilities, the Directors are
responsible for the preparation of the
financial statements and for being
satisfied that they give a true and fair
view, and for such internal control as
the Directors determines is necessary
to enable the preparation of financial
statements that are free from
material misstatement, whether due
to fraud or error.
In preparing the financial statements,
the Directors are responsible for
assessing the Group’s and the
Parent Company’s ability to continue
as a going concern, disclosing, as
applicable, matters related to going
concern and using the going concern
basis of accounting unless the
Directors either intend to liquidate
the Group or the Parent Company
or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the
audit of the financial statements
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.
Our objectives are to obtain
reasonable assurance about whether
the financial statements as a whole
are free from material misstatement,
whether due to fraud or error, and to
issue an auditor’s report that includes
our opinion. Reasonable assurance
is a high level of assurance, but
is not a guarantee that an audit
conducted in accordance with ISAs
(UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material
if, individually or in the aggregate,
they could reasonably be expected
to influence the economic decisions
of users taken on the basis of these
financial statements.
A further description of our
responsibilities for the audit of the
financial statements is located at the
Financial Reporting Council’s website
at: https://www.frc.org.uk/
auditorsresponsibilities.
This description forms part of our
auditor’s report.
Neil Fung-On
Senior Statutory Auditor
For and on behalf of BDO LLP,
statutory auditor
London
15 December 2017
BDO LLP is a limited liability
partnership registered in England
and Wales (with registered number
OC305127).
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 45
FINANCIAL STATEMENTS continued
CONSOLIDATED PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
2017
Note
£’000
2016
(Restated)
£’000
5
7
8
9
6
6
6
6
80,242
(599)
79,643
68,357
(488)
67,869
(42,837)
(42,122)
7,905
44,711
7,905
36,806
178
44,889
7,905
19,358
45,105
19,358
25,747
451
45,556
19,358
36,984
26,198
(7,819)
(19,445)
(7,181)
29,889
(5,296)
20,816
-
-
29,889
20,816
2639
2239
2639
2239
1841
1441
1841
1441
Revenue
Fee income
Cost of sales
Gross profit
Administrative expenses
Net income attributable to policyholder returns
Operating profit
Operating profit attributable to policyholder returns
Operating profit attributable to shareholder returns
Interest income
Profit on ordinary activities before taxation
Profit on ordinary activities before taxation attributable to
policyholder returns
Profit on ordinary activities before taxation attributable to
shareholder returns
Policyholder tax
Tax on profit on ordinary activities
Profit after tax
Other comprehensive income
Profit for the financial year
Earnings per share
Ordinary A, B and C shares – basic (pence)
Ordinary D shares – basic (pence)
Ordinary A, B and C shares – diluted (pence)
Ordinary D shares – diluted (pence)
All activities of the Group are classed as continuing.
Notes 1 to 33 form part of these financial statements
46 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
COMPANY PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
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 after tax
Other comprehensive income
Profit for the financial year
All activities of the Company are classed as continuing.
Note
7
8
9
2017
£’000
-
(-)
-
(1,015)
(1,015)
19,281
24
18,290
-
18,290
-
2016
£’000
-
(-)
-
(1,010)
(1,010)
39,649
2
38,641
(78)
38,563
-
18,290
38,563
Notes 1 to 33 form part of these financial statements
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 47
FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Non-current assets
Loans and receivables
Intangible assets
Property, plant and equipment
Deferred acquisition costs
Investments and cash held for the benefit of policyholders
Current assets
Financial assets at fair value through profit or loss
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
30 September
2017
£’000
30 September
2016
£’000
Note
10
11
13
14
15
16
17
18
22
19
14
20
23
24
25
26
27
1,873
12,986
1,858
38,295
11,947,652
12,002,664
-
13,006
2,072
31,792
11,316,471
11,363,341
8,895
10,252
1,456
-
105,829
126,432
15,208
2,803
18,011
8,976
9,842
1,597
199
90,571
111,185
14,289
1,685
15,974
11,831
38,295
11,947,652
10,781
12,008,559
15,550
31,792
11,316,471
8,495
11,372,308
102,526
86,244
57
5,722
2
308
42
501
95,894
102,526
57
5,722
2
308
32
501
79,622
86,244
These financial statements were approved by the Board of Directors on 12 December 2017 and are signed on their behalf by:
Ian Taylor, Director
Company Registration Number: 08860879
Notes 1 to 33 form part of these financial statements
48 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
COMPANY STATEMENT OF FINANCIAL POSITION
Non-current assets
Investment in subsidiaries
Loans and receivables
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
30 September
2017
£’000
30 September
2016
£’000
Note
12
20
17
18
23
14,213
1,873
-
16,086
7
20,081
20,088
1,156
1,156
14,213
-
-
14,213
9
16,422
16,431
388
388
35,018
30,256
57
34,961
35,018
57
30,199
30,256
These financial statements were approved by the Board of Directors on 12 December 2017 and are signed on their
behalf by:
Ian Taylor
Director
Company Registration Number: 08860879
Notes 1 to 33 form part of these financial statements
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 49
FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit before tax
Adjustments for:
Amortisation and depreciation
Interest
Decrease/(increase) in loans and 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 of tangible assets
Acquisition of subsidiary
Interest received
Net cash used in investing activities
Financing activities
Equity dividends paid
Net cash used in financing activities
2017
£’000
2016
£’000
44,889
45,556
571
(178)
(2,142)
920
81
-
(1,432)
42,709
(13,684)
29,025
(434)
-
178
(256)
(13,521)
(13,521)
1,932
(451)
4,213
5,579
(2,031)
392
(5,252)
49,938
(24,149)
25,789
(730)
(13,505)
451
(13,784)
(9,652)
(9,652)
Net increase in cash and cash equivalents
15,248
2,353
Cash and cash equivalents at beginning of year
Exchange gains on cash and cash equivalents
Cash and cash equivalents at end of year
90,571
10
105,829
88,186
32
90,571
Notes 1 to 33 form part of these financial statements
50 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
COMPANY STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit before tax
Adjustments for:
Interest
Decrease/(increase) in long term investments
Decrease/(increase) in loans and receivables
(Decrease)/increase in payables
Cash generated from operations
Investing activities
Interest received
Net cash used in investing activities
Financing activities
Equity dividends paid
Net cash used in financing activities
2017
£’000
2016
£’000
18,290
38,641
(24)
-
(1,872)
769
(2)
(13,764)
(9)
311
17,163
25,177
24
24
2
2
(13,528)
(13,528)
(8,978)
(8,978)
Net increase in cash and cash equivalents
3,659
16,201
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
16,422
20,081
221
16,422
Notes 1 to 33 form part of these financial statements
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 51
FINANCIAL STATEMENTS continued
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital
Share
premium
Other
reserve
Share
based
payment
reserve
Non-
distrib-
utable
reserve
Retained
earnings
Total
equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Balance at 1 October 2015
57
5,722
2
308
501
68,376
74,966
Comprehensive income for
the year:
Profit for the year
Other comprehensive income
Other movement
Total comprehensive income
for the year
Distributions to owners:
Dividends
Total distributions to owners
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 1 October 2016
57
5,722
Comprehensive income for
the year:
Profit for the year
Other comprehensive income
Other movement
Total comprehensive income
for the year
Distributions to owners:
Dividends
Total distributions to owners
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 30 September 2017
57
5,722
–
32
–
32
–
–
34
–
10
–
10
–
–
44
–
–
–
–
–
–
–
–
–
–
–
–
20,816
20,816
–
82
32
82
20,898
20,930
(9,652)
(9,652)
(9,652)
(9,652)
308
501
79,622
86,244
–
–
–
–
–
–
–
–
–
–
29,889
29,889
–
(96)
10
(96)
29,793
29,803
–
(13,521)
(13,521)
– (13,521)
(13,521)
308
501
95,894
102,526
Notes 1 to 33 form part of these financial statements
52 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
COMPANY STATEMENT OF CHANGES IN EQUITY
Share
capital
£’000
Share
premium
£’000
Capital
redemption
reserve
£’000
Share
based
payment
reserve
£’000
Balance at 1 October 2015
Comprehensive income for
the year:
Profit for the year
Total comprehensive income for
the year
Distributions to owners:
Dividends
Total distributions to owners
Balance at 1 October 2016
Comprehensive income for
the year:
Profit for the year
Total comprehensive income for
the year
Distributions to owners:
Dividends
Total distributions to owners
57
-
-
-
-
57
-
-
-
-
Balance at 30 September 2017
57
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Retained
earnings
£’000
Total
equity
£’000
614
671
38,563
38,563
38,563
38,563
(8,978)
(8,978)
(8,978)
(8,978)
30,199
30,256
18,290
18,290
18,290
18,290
(13,528)
(13,528)
(13,528)
(13,528)
34,961
35,018
Notes 1 to 33 form part of these financial statements
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 53
FINANCIAL STATEMENTS continued
NOTES TO THE FINANCIAL STATEMENTS
1. Basis of preparation and significant accounting policies
a) Basis of preparation
The financial statements have been prepared and approved by the Directors in accordance with Part 15 of the
Companies Act 2006, Schedule 3 of the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 and International Financial Reporting Standards (IFRSs) as adopted by the EU.
The financial statements have been prepared on the historical cost basis, except for the revaluation of certain financial
instruments, which are stated at their fair value, have been prepared in pound sterling, which is the functional
currency of the Company and are rounded to the nearest thousand.
There have been a number of presentational changes to the Consolidated Profit and Loss and Other Comprehensive
Income statement, leading to the restatement of certain prior year figures. The purpose of this is to make the
accounts more understandable to the user by splitting out policyholder income and expenses in a clear way.
These changes are all presentational, and there is no change to the profit for the financial year figure.
The financial statements have been prepared on a going concern basis following an assessment by the Directors.
The Company has a net asset position, strong solvency position, is currently profitable and, based on the latest
forecasts, expects to remain profitable. As a result, the Board has reasonable expectation that the Company has
adequate resources to continue in operational existence from at least 12 months from the date of approving these
financial statements.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries.
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee
if all three of the following elements are present: power over the investee, exposure to variable returns from the
investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any of these elements of control. 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 2017 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 IFRS 9 Financial Instruments to replace lAS 39 ‘Financial Instruments: Recognition and Measurement’
in its entirety. The project has three main phases:
▪ Phase I: Classification and measurement of financial instruments;
▪ Phase II: Amortised cost and impairment of financial assets; and
▪ Phase III: Hedge Accounting.
54 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
IFRS 9 includes requirements for the classification and measurement of financial assets and liabilities, liability
derecognition requirements and additional disclosure requirements. The main changes from IAS 39 include
the following:
▪ Financial assets are to be classified and measured based on the business model for managing the financial asset
and the cash flow characteristics of the financial asset, either at fair value or amortised cost;
▪ 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; and
▪ 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 has been endorsed by the EU and is effective for accounting periods beginning on or after 1 January
2018. An assessment of the impact of IFRS 9 has been conducted and there is no material impact on the Group on
its adoption.
IFRS 15 Revenue from Contracts with Customers
The standard provides a comprehensive new model for revenue recognition. The Company will 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 has been endorsed by the EU and is effective for accounting periods beginning on or after 1 January 2018.
An assessment of the impact of IFRS 15 has been conducted and there is no material impact on the Group its adoption.
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. An initial assessment of the impact of this standard has been conducted, which indicates that whilst there will be
a material adjustment to gross assets and liabilities as a result of bringing leased assets on balance sheet, there is
unlikely to be a material net impact at Group level.
IFRS 17 Insurance Contracts
IFRS 17 was issued in May 2017 and will replace IFRS 4 Insurance Contracts. IFRS 17 establishes the principles for
the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the Standard.
The Company would be required to provide information that faithfully represent those contracts, such that users of
the financial statements can assess the effect insurance contracts have on the entity’s financial position, financial
performance and cash flows. The standard is effective for accounting periods beginning on or after 1 January 2021.
The Group has performed preliminary assessment regarding the impact of IFRS 17 on the financial statements and,
due to all contracts written by the business being insurance contracts, it is deemed such impact will be negligible.
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.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 55
FINANCIAL STATEMENTS continued
d) Principal accounting policies
Revenue recognition
Revenue represents the fair value of services supplied by the Group. 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.
56 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Dividends
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid.
Liquid resources
For the purposes of the statement of cash flows, liquid resources are defined as current asset investments and short
term deposits.
Intangible non-current assets
Intangible non-current assets, excluding goodwill, 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.
Goodwill is held at cost and, in accordance with IFRS, is not amortised but is subject to annual impairment reviews.
Property, plant and equipment
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 profit and loss and other comprehensive income statement
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
Fixtures & Fittings
Equipment
Over 10 years/over the life of the lease
Over 10 years
Over 3-5 years
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. For more
detailed information in relation to this, please see Note 10.
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.
The assets and liabilities of foreign operations are translated to sterling using the year end closing exchange rate.
The revenues and expenses of foreign operations are translated to sterling at rates approximating the foreign
exchange rates ruling at the relevant month of the transactions. Foreign exchange differences arising on retranslation
are recognised directly in the reserves.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 57
FINANCIAL STATEMENTS continued
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.
Segmental reporting
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 2017, 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. Insurance risk is minimal as all contracts have been
classed as investment contracts.
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.
58 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
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.
At initial recognition, the Company classifies its financial instruments in the following categories:
(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 on the trade settlement date, and subsequently at fair
value. Purchases and sales of securities are recognised on the trade date. Transaction costs are expensed in the
consolidated profit and loss and other comprehensive income statement. Gains and losses arising from changes
in fair value are presented in the consolidated profit and loss and other comprehensive income statement
within “administrative expenses” for corporate assets and “net income attributable to policyholder returns” for
policyholder assets 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) 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, loans and cash and cash equivalents. These are included in current assets due to their short-term
nature, except for loans which are included in non-current assets. 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.
(iii) 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.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 59
FINANCIAL STATEMENTS continued
2. Critical accounting estimates and judgements
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 £128,073 (2016: £181,460) 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.
In addition to the above, an amount of £192,103 (2016: £155,839) relates to accrued fees that are past due but not
impaired. Management believes that these fees are likely to be received, and an impairment is therefore not required.
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.
60 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
3. Financial instruments
(i) Principal financial instruments
The principal financial instruments, from which financial instrument risk arises, are as follows:
▪ Trade and other receivables
▪ Accrued fees
▪ Cash and cash equivalents
▪ Investments in quoted debt instruments
▪ Listed shares and securities
▪ Trade and other payables
▪ Loans.
(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 profit and
loss and other comprehensive income statement. The following tables show the carrying values of assets and liabilities
for each of these categories.
Financial assets:
Fair value through profit or loss
Amortised cost
30 Sep
2017
£’000
30 Sep
2016
£’000
30 Sep
2017
£’000
30 Sep
2016
£’000
Cash and cash equivalents
Listed shares and securities
Loans and receivables
-
83
-
-
51
-
Investments in quoted debt instruments
8,812
8,925
Accrued income
Trade and other receivables
Investments and cash held for the
policyholders
Current tax asset
-
-
-
-
11,947,652
11,316,471
-
-
105,829
90,571
-
1,873
-
7,951
1,456
-
-
-
-
-
6,806
1,597
-
199
Total financial assets
11,956,547
11,325,447
117,109
99,173
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 61
FINANCIAL STATEMENTS continued
Financial liabilities:
Trade and other payables
PAYE and other taxation
Corporation tax
Accruals
Fair value through profit or loss
Amortised cost
30 Sep
2017
£’000
30 Sep
2016
£’000
-
-
-
-
-
-
-
-
30 Sep
2017
£’000
7,524
1,229
2,803
6,454
-
30 Sep
2016
£’000
5,800
1,621
1,685
6,867
-
Liabilities for linked investments contracts
11,947,652
11,316,471
Total financial liabilities
11,947,652
11,316,471
18,010
15,973
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash and cash equivalents, accrued fees, loans, trade and
other receivables, and trade and other payables. Due to their short-term nature and/or annual impairment review,
the carrying value of these financial instruments approximates their fair value.
(iv) Financial instruments measured at fair value – fair value hierarchy
The table opposite 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.
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.
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 Company’s assets measured at fair value and split into the three levels described below:
▪ Level 1: quoted prices (unadjusted) in active markets for identical assets;
▪ Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
▪ Level 3: inputs for the asset that are not based on observable market data (unobservable inputs).
62 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
1,091,744
351,308
12,378
11,716,405
8,895
-
94,521
399
132,113
227,033
-
-
1,091,744
1,541
5
2,668
4,214
-
447,370
12,782
10,395,756
11,947,652
8,895
11,725,300
227,033
4,214
11,956,547
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
- Holdings in collective investment schemes
10,260,975
At 30 September 2017
Investments and assets held for the
benefit of policyholders
- Policyholder cash
- Investments and securities
- Bonds and other fixed-income securities
Other investments
Total
At 30 September 2016
Investments and assets held for the
benefit of policyholders
- Policyholder cash
- Investments and securities
- Bonds and other fixed-income securities
802,924
306,461
11,035
-
65,480
12,743
-
1,885
1,606
2,235
802,924
373,826
25,384
10,114,337
- Holdings in collective investment schemes
8,069,840
2,042,262
Other investments
Total
Level 1 valuation methodology
9,190,260
2,120,485
5,726
11,316,471
8,976
-
-
8,976
9,199,236
2,120,485
5,726
11,325,447
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, based on its review of the prices used, the Company believes that any
change to the unobservable inputs used to measure fair value would not result in a significantly higher or lower fair
value measurement at year end, and therefore would not have a material impact on its reported results.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 63
FINANCIAL STATEMENTS continued
Changes to valuation methodology
There have been no changes in valuation methodology during the year under review.
Transfers between Levels
The Company’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.
The Company recognises transfers between Levels of the fair value hierarchy at the end of the reporting period
in which the changes have occurred. Changes occur due to the availability of (or lack thereof) quoted prices,
whether a market is now active or not, and whether there are indications of impairment.
Transfers between Levels between 30 September 2016 and 30 September 2017 are presented in the table below
at their valuation at 30 September 2017:
Transfers from
Transfers to
Level 1
Level 2
Level 2
Level 1
£’000
4,073
9,169
The reconciliation between opening and closing balances of Level 3 assets are presented in the table below
(all balances are in £’000s):
Opening balance
Unrealised gains or losses in the year ended 30 September 2017
Transfers in to Level 3 at 30 September 2017 valuation
Transfers out of Level 3 at 30 September 2016 valuation
Purchases, sales, issues and settlement
Closing balance
£’000
5,726
(1,890)
1,506
(622)
(506)
4,214
Any resultant gains or losses on financial assets held for the benefit of policyholders are offset by a reciprocal
movement in the linked liability.
64 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
4. Risk and risk management
This note supplements the details provided in the Risk and Risk Management section of this report on pages 19 to 26.
Risk assessment
Risk assessment is the determination of quantitative values and/or qualitative judgements 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.
(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.
Market risk from reduced income
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 clients’ portfolios.
IFAL mitigates the second order market risk by applying fixed per policy charges in addition to the charges determined
based on clients’ linked portfolio values, offering an element of diversification to its income stream.
Market risk from direct asset holdings
The Company has limited exposure to primary market risk as its 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.
(c) Inflation 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 client related index linked liabilities.
Expense inflation risk is mitigated through monitoring of expenditure and closely managing expenses in line with
the business plan.
(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:
▪ Corporate debt assets directly held by the Company; and
▪ exposure to other debtors.
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.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 65
FINANCIAL STATEMENTS continued
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.
(3) Liquidity risk
Liquidity risk is the risk that funds are not accessible such that the Company, although solvent, does not have sufficient
liquid 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. There are robust controls in place to mitigate liquidity risk, for example, through monitoring of expenditure
and closely managing expenses in line with the business plan.
Maturity schedule
The following table shows an analysis of the financial assets and financial liabilities by remaining expected maturities
as at 30 September 2016 and 30 September 2017.
Financial assets:
2016
Up to 3
months
£’000
3-12
months
£’000
1-5 years
£’000
Over
5 years
£’000
Total
£’000
Investments and cash held for the
policyholders
11,316,471
Investments
Accrued income
Trade and other receivables
Current tax asset
Cash
Total
2017
Investments and cash held for the
policyholders
Investments
Accrued income
Trade and other receivables
Loans
Cash
Total
51
6,806
1,576
-
90,571
-
8,925
-
21
199
-
11,415,475
9,145
-
-
-
-
-
-
-
-
-
-
-
-
-
11,316,471
8,976
6,806
1,597
199
90,571
- 11,424,620
Up to 3
months
£’000
3-12
months
£’000
1-5 years
£’000
Over
5 years
£’000
Total
£’000
11,947,652
-
-
8,812
7,906
1,557
-
105,829
-
20
-
-
-
-
7
-
1,040
-
-
-
-
-
833
-
11,947,652
8,812
7,913
1,577
1,873
105,829
12,062,944
8,832
1,047
833 12,073,656
66 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Trade and other payables
Current tax liabilities
Total
2017
Financial liabilities:
2016
Up to
3 months
£’000
3-12
months
£’000
1-5
years
£’000
Over
5 years
£’000
Total
£’000
Liabilities for linked investment contracts
11,316,471
14,289
(45)
11,330,715
-
-
1,731
1,731
-
-
-
-
-
-
-
11,316,471
14,289
1,686
- 11,332,446
Up to 3
months
£’000
3-12
months
£’000
1-5
years
£’000
Over
5 years
£’000
Total
£’000
Liabilities for linked investment contracts
11,947,652
Trade and other payables
Current tax liabilities
Total
15,208
-
11,962,860
-
-
2,803
2,803
-
-
-
-
-
-
-
11,947,652
15,208
2,803
- 11,965,663
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 clients’
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.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 67
FINANCIAL STATEMENTS continued
5. Segmental reporting
The revenue and profit before tax are attributable to activities carried out in the UK.
The Group has three classes of business as follows:
▪ provision of investment management services
▪ transaction of ordinary long term insurance and underwriting life assurance
▪ provision of consultancy services.
Analysis by class of business is given below:
Revenue
Investment administration services
Insurance and life assurance business
Consultancy services
Profit before tax
Investment administration services
Insurance and life assurance business
Consultancy services
Net assets
Investment administration services
Insurance and life assurance business
Consultancy services
2017
£’000
44,019
36,223
-
2016
£’000
37,854
30,403
100
80,242
68,357
17,224
27,121
544
44,889
51,176
50,397
953
102,526
11,393
34,024
139
45,556
38,100
47,456
688
86,244
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.
6. Earnings per share
Year ended 30 September
Profit
2017
£’000
2016
£’000
Profit for the year and earnings used in basic and diluted earnings per share
29,889
20,816
Number of shares
1,137,278
1,137,278
Weighted average number of A, B, C shares used in basic and diluted earnings per share
1,107,278
1,107,278
Weighted average number of D shares used in basic and diluted earnings per share
30,000
30,000
Earnings per share is calculated based on the share capital of IntegraFin Holdings Limited and the earnings of the
consolidated Group. Separate calculations have been performed for A, B and C shares, and for D shares, to reflect
the different dividend rate attached to D shares.
68 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
7. Expenses by nature
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:
2017
£’000
551
20
30,036
25
81
73
-
114
115
128
2016
£’000
494
1,438
25,059
10
92
99
78
73
83
574
1,812
8
1,783
8
- auditing of the financial statements of the Company pursuant to legislation
- other assurance services
- taxation services
Impairment losses
Wages and employee benefits expense
25
-
-
-
The average number of staff (including executive directors) employed by the Group during the financial year
amounted to:
10
10
78
392
2016
No.
194
54
50
85
35
23
1
2017
No.
201
54
49
84
37
25
1
451
442
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 69
Client Services staff
Finance staff
Technical and support staff
Software development staff
Sales, marketing and product development staff
Legal and compliance staff
CEO
The Company has no employees (2016: nil).
FINANCIAL STATEMENTS continued
Staff (including executive Directors) costs during the year, included within administrative expenses, were as follows:
Wages and salaries
Social security costs
Other pension costs
2017
£’000
25,474
2,268
2,294
2016
£’000
20,966
2,391
1,702
30,036
25,059
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
2017
£’000
1,645
37
1,682
505
8
3
2016
£’000
1,417
119
1,536
455
33
3
Interest income on bank deposits
Interest income on loans
Interest income on financial assets
at fair value through profit or loss
Other interest
Group
2017
£’000
Company
2017
£’000
Group
2016
£’000
Company
2016
£’000
64
16
98
-
178
8
16
-
-
24
145
-
306
-
451
2
-
-
-
2
70 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
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
Movement in deferred tax asset (Note 20)
Movement in deferred tax liability (Note 20)
Deferred tax charge/(credit)
Total
2017
£’000
7,234
9
7,243
(50)
(12)
(62)
2016
£’000
5,197
21
5,218
78
-
78
7,181
5,296
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
42,590
38,341
Profit on ordinary activities multiplied by effective rate of Corporation Tax
19.5% (2016: 20%)
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 19.5% (2016: 20%)
Profits not taxable, multiplied by effective rate of Corporation Tax 19.5%
(2016: 20%)
Corporation tax – under-provision in prior year
Profits charged at different rates to UK Corporation Tax rate
8,305
(62)
7,668
78
(834)
(2,191)
(292)
(285)
7
57
12
14
7,181
5,296
Changes in tax rates
The main rate of UK corporation tax reduced from 20% to 19% with effect from 1 April 2017 and will reduce to 17%
with effect from 1 April 2020. The reduction in corporation tax rates does not impact on the policyholder rate.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 71
FINANCIAL STATEMENTS continued
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
19.5% (2016: 20%)
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 19.5% (2016: 20%)
2017
£’000
-
-
2017
£’000
2016
£’000
78
78
2016
£’000
18,290
38,641
3,567
-
7,728
78
(3,567)
-
(7,728)
78
72 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
10. Intangible assets – Group
Cost
At 1 October 2016
At 30 September 2017
Amortisation
At 1 October 2016
Charge for the year
At 30 September 2017
Net Book Value
At 30 September 2016
At 30 September 2017
Cost
At 1 October 2015
Addition in the year
At 30 September 2016
Amortisation
At 1 October 2015
Charge for the year
Prior year adjustment
At 30 September 2016
Net Book Value
At 30 September 2015
At 30 September 2016
Software
and IP rights
£’000
Goodwill
£’000
12,505
12,505
12,951
12,951
12,450
20
12,470
-
-
-
Total
£’000
25,456
25,456
12,450
20
12,470
55
35
12,951
12,951
13,006
12,986
12,505
-
12,505
11,105
1,438
(93)
12,450
1,400
55
-
12,951
12,951
-
-
-
-
-
12,951
12,505
12,951
25,456
11,105
1,438
(93)
12,450
1,400
13,006
Amortisation of intangibles is recognised within administrative expenses in the profit or loss account.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 73
FINANCIAL STATEMENTS continued
Goodwill impairment assessment
The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable
amount is determined based on value in use calculations. The use of this method requires the estimation of future
cash flows and the determination of a discount rate in order to calculate the present value of the cash flows.
This the first year in which an impairment test has been performed. The goodwill was first recognised upon
acquisition of IAD in July 2016, and must be tested for impairment annually, so a test was not required in the
previous financial year.
The carrying amount of goodwill is allocated to the two cash generating units that are benefiting from the
acquisition as follows:
Investment management services
Insurance and life assurance business
Total
2017
£’000
7,449
5,501
12,951
The recoverable amounts of the above cash generating units have been determined from value in use calculations
based on cash flow projections from formally approved budgets covering a five year period to 30 September 2022.
The results of this showed that no impairment has taken place throughout the historical financial period.
No sensitivity analysis has been performed on the basis that there were no reasonable foreseeable changes in the
assumptions which would result in the recoverable amount falling below the carrying amount.
74 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
11. Property, plant and equipment – Group
Short
Leasehold
Land and
Buildings
£’000
Equipment
£’000
Fixtures
and
Fittings
£’000
Motor
vehicles
£’000
Cost
At 1 October 2016
Reclassification
Additions
Disposals
Foreign exchange
1,615
1,613
-
95
-
(2)
307
208
(50)
(6)
At 30 September 2017
1,708
2,072
Depreciation
At 1 October 2016
Reclassification
Charge for the year
Disposals
Foreign exchange
At 30 September 2017
Net Book Value
At 30 September 2016
At 30 September 2017
Cost
At 1 October 2015
Additions
Disposals
At 30 September 2016
Depreciation
At 1 October 2015
Additions
Charge for the year
Disposals
At 30 September 2016
Net Book Value
At 30 September 2015
At 30 September 2016
525
-
155
-
-
680
1,090
1,028
1,242
373
-
1,615
362
39
124
-
525
880
1,090
902
214
356
(35)
(4)
1,433
711
639
1,463
739
(589)
1,613
1,045
214
232
(589)
902
418
711
553
(307)
17
-
-
263
356
(214)
23
-
-
165
197
98
226
327
-
553
121
124
111
-
356
105
197
101
-
43
(43)
(1)
100
27
-
17
(37)
-
7
74
93
-
101
-
101
-
-
27
-
27
-
74
Total
£’000
3,882
-
363
(93)
(9)
4,143
1,810
-
551
(72)
(4)
2,285
2,072
1,858
2,931
1,540
(589)
3,882
1,528
377
494
(589)
1,810
1,403
2,072
The Company holds no property, plant and equipment.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 75
Total
£’000
14,213
14,213
14,213
14,213
449
14,156
(392)
14,213
449
14,213
FINANCIAL STATEMENTS continued
12. Investment in subsidiaries
Company
At 1 October 2016
At 30 September 2017
Net book value
At 30 September 2016
At 30 September 2017
At 1 October 2015
Additions
Impairment
At 30 September 2016
Net book value
At 30 September 2015
At 30 September 2016
76 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
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.
All the UK subsidiaries have their registered office address at 29 Clement’s Lane, London, EC4N 7AE.
IntegraLife International Limited’s registered office address is at 18-20 North Quay, Douglas, Isle of Man, IM1 4LE.
IntegraFin (Australia) Pty’s registered office address is at Level 4, 854 Glenferrie Road, Hawthorn, Victoria,
Australia 3122. Integrated Application Development Pty Ltd’s registered office address is 19-25 Camberwell Road,
Melbourne, Australia.
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.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 77
FINANCIAL STATEMENTS continued
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.
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.
IntegraFin (Australia) Pty Limited is currently non-trading.
Transact IP Limited licenses its proprietary software to other members of the IntegraFin 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.
78 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
13. Deferred acquisition costs
Opening balance
Capitalisation of deferred acquisition costs
Amortisation of deferred acquisition costs
Change in deferred acquisition costs
Closing balance
2017
£’000
31,792
12,950
(6,447)
6,503
38,295
2016
£’000
29,736
7,964
(5,908)
2,056
31,792
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
2017
Cost
£’000
2017
Fair value
£’000
2016
Cost
£’000
2016
Fair value
£’000
74,565
74,565
82,931
82,931
985,912
1,175,098
1,637,842
2,928,144
1,060,477
1,249,663
1,720,773
3,011,075
1,014,314
1,014,314
715,881
715,881
8,049,078
9,683,675
6,898,345
7,589,515
9,063,392
10,697,989
7,614,226
8,305,396
Total
11,947,652
11,316,471
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.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 79
FINANCIAL STATEMENTS continued
15. Financial assets at fair value through profit or loss
Listed shares and securities
Gilts
Investments are all UK and sterling based and 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
18. Trade and other payables
Trade payables
PAYE and other taxation
Due to Group undertakings
Other payables
Accruals and deferred income
80 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
Group
30 Sep
2017
£’000
-
5
1,451
1,456
Group
30 Sep
2017
£’000
265
1,229
-
7,259
6,455
15,208
Company
30 Sep
2017
£’000
7
-
-
7
Company
30 Sep
2017
£’000
-
31
11
21
1,093
1,156
Group
30 Sep
2017
£’000
83
8,812
8,895
Group
30 Sep
2017
£’000
7,951
2,301
10,252
Group
30 Sep
2016
£’000
-
8
1,589
1,597
Group
30 Sep
2016
£’000
364
1,621
-
5,437
6,867
14,289
Group
30 Sep
2016
£’000
51
8,925
8,976
Group
30 Sep
2016
£’000
6,806
3,036
9,842
Company
30 Sep
2016
£’000
9
-
-
9
Company
30 Sep
2016
£’000
-
12
8
5
363
388
19. Deferred income liability
Opening balance
Capitalisation of deferred income
Amortisation of deferred income
Change in deferred acquisition costs
Closing balance
20. Deferred tax
2017
£’000
31,792
12,950
(6,447)
6,503
38,295
2016
£’000
29,736
7,964
(5,908)
2,056
31,792
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19%
(2016: 19%). 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.
Liabilities – Group
Balance brought forward
Release in year at 19% (2016: 19%) future corporation tax rate in respect of:
- Accelerated depreciation
Deferred tax (credit)/charge
Movement in policyholder tax
Balance carried forward
Analysed as:
- Accelerated depreciation
- Policyholder deferred tax
The Company has no deferred tax liabilities.
Assets – Group and Company
Balance brought forward
Release in year at 19% (2016: 19%) future corporation tax rate in respect of:
- Unused capital losses
Accelerated depreciation
Balance carried forward
30 Sep
2017
£’000
30 Sep
2016
£’000
8,495
1,279
(12)
(12)
2,298
10,781
-
10,781
10,781
-
-
50
50
-
-
7,216
8,495
12
8,483
8,495
(78)
78
-
-
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 81
FINANCIAL STATEMENTS continued
21. Client monies and client assets
2017
Client monies
Client assets
2016
Client monies
Client assets
£’000
2,297,792
Amounts due to clients
25,629,954
Corresponding liability
1,836,756
Amounts due to clients
22,763,205
Corresponding liability
£’000
2,297,792
25,629,954
1,836,756
22,763,205
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
Balance brought forward
(Decrease)/increase in dilapidations provision
Increase in ILInt non-linked unit provision
Increase in ILUK tax provision
Balance carried forward
Dilapidations provisions
ILInt non-linked unit provision
ILUK tax provision
Rent provision
Group
30 Sep
2017
£’000
15,550
44
4
(3,767)
11,831
323
29
11,377
102
11,831
Group
30 Sep
2016
£’000
20,802
95
13
(5,360)
15,550
279
25
15,144
102
15,550
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 18/20 North Quay, on 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 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.
ILUK tax provision is made up of tax relief due to policyholders. It comprises claims received from HMRC that are yet
to be returned to policyholders and charges taken from unit-linked funds and claims received from HMRC to meet
future policyholder tax obligations.
82 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
23. Called up share capital – Company and 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
30 Sep
2017
Number
417,868
357,000
332,410
30,000
30 Sep
2016
Number
417,868
357,000
332,410
30,000
30 Sep
2017
£’000
30 Sep
2016
£’000
21
18
17
1
57
21
18
17
1
57
There has been no movement in called up share capital during the year.
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.
24. Share premium account – Group
Balance brought forward
Premium on shares issued during the year
Balance carried forward
25. Capital redemption reserve – Group
Balance brought forward
Purchase of own shares
Balance carried forward
2017
£’000
5,722
-
5,722
2016
£’000
5,722
-
5,722
2017
£’000
2016
£’000
2
-
2
2
-
2
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.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 83
FINANCIAL STATEMENTS continued
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:
Group
Within 1 year
Within 2-5 years
Over 5 years
2017
£’000
308
-
308
2017
£’000
32
10
42
2016
£’000
308
-
308
2016
£’000
-
32
32
Land and
Buildings
2017
£’000
Land and
Buildings
2016
£’000
2,398
9,304
1,396
2,365
9,468
3,490
The lease commitments relate to the current leasehold premises at 29 Clement’s Lane, the current ILInt leasehold
premises at 18/20 North Quay on the Isle of Man, and the current IAD Pty leasehold premises at 19-25 Camberwell
Road, Melbourne, Australia.
84 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
29. Related parties
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
2017
£’000
6
-
(11)
1
2016
£’000
8
(2)
(6)
(1)
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 2017 or 2016 regarding related party transactions.
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 2017 was £nil (2016: £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 £13,527,336 (2016: £8,978,224) to shareholders.
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 85
OTHER INFORMATION
DIRECTORS, COMPANY DETAILS, ADVISERS
Executive Directors
Ian Taylor
Michael Howard
Alexander Scott
Judith Davidson (resigned 1 October 2017)
Non-Executive Directors
Christopher Munro (appointed 1 February 2017)
Patrick Snowball (appointed 1 October 2017)
Jeremy Brettell (resigned 1 October 2017)
Neil Holden
Stuart Bazley (resigned 1 October 2017)
Company Secretary
David Johnson
Independent Auditors
BDO LLP London
Solicitors
Eversheds Sutherland, London
Principal Bankers
NatWest
Registrars
Neville Registrars
Registered Office
29 Clement’s Lane
London
EC4N 7AE
Website
www.integrafin.co.uk
Company number
08860879
86 INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017
GLOSSARY OF TERMS
AGM Annual General Meeting
IPO Initial Public Offering
CASS Client Assets Sourcebook
ISA Individual Savings Account
CEO Chief Executive Officer
ISAs (UK) International Standards on Auditing (UK)
CFO Chief Financial Officer
IT Investment Trust
COO Chief Operating Officer
MiFID II Second Markets in
COREP Common Reporting, as required by the
Financial Instruments Directive
Capital Requirements Directive IV
NED Non-Executive Director
COSO Committee of Sponsoring Organisation
OEIC Open Ended Investment Company
of the Treadway Commission
ETF Exchange-traded Fund
FCA Financial Conduct Authority
FRC Financial Reporting Council
FUD Funds under Direction
ORSA Own Risk and Solvency Assessment
SCR Solvency Capital Requirement
TCF Treating Customers Fairly
The Company IntegraFin Holdings Limited
The Group IntegraFin Holdings Limited
GDPR General Data Protection Regulation
and its subsidiaries
GIA General Investment Account
VCT Venture Capital Trust
HMRC Her Majesty’s Revenue and Customs
IAD Integrated Application Development Pty Ltd
ICA Individual Capital Assessment
ICAAP Internal Capital Adequacy
Assessment Process
IFAL Integrated Financial Arrangements Ltd
IFPRU Prudential Sourcebook for
Investment Firms
IFRS International Financial
Reporting Standards
ILInt IntegraLife International Limited
ILUK IntegraLife UK Limited
IntegraFin IntegraFin Holdings Limited
IP Intellectual Property
INTEGRAFIN ANNUAL REPORT YEAR ENDED 30 SEPTEMBER 2017 87
M137 September 2017
IntegraFin Holdings Limited, 29 Clement’s Lane, London, EC4N 7AE
Tel: (020) 7608 4900 Fax: (020) 7608 5300
(Registered offi ce: as above; Registered in England and Wales under number: 08860879)
The holding company of the Integrated Financial Arrangements Ltd group of companies.