IntegraFin Holdings
Annual Report 2023

Plain-text annual report

ANNUAL REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2023 Supportive HIGHLIGHTS Operational highlights Financial highlights Year-end Closing Funds Under Direction*: Revenue: £55.0bn 10% (2022: £50.1bn) £134.9m 1% (2022: £133.6m) Average Daily FUD*: IFRS Profit before tax: £53.6bn 2% (2022: £52.5bn) Net inflows*: £2.7bn 39% (2022: £4.4bn) Client numbers*: 230.3k 2% (2022: 224.7k) Client retention*: 95% 2% (2022: 97%) Adviser numbers*: 7.7k 2% (2022: 7.5k) £62.6m 15% (2022: £54.3m) Underlying Profit before tax: £63.0m 4% (2022: £65.8m) IFRS Earnings per shar e: 15.1p 13% (2022: 13.3p) Underlying Earnings per shar e: 15.2p 7% (2022: 16.3p) *Alternative performance measures (APMs) APMs are financial measures which are not defined by IFRS, these have been indicated with an asterisk. They are used in order to provide better insight into the performance of the Group. Further details are provided in the glossary, on page 235. CONTENTS STRATEGIC REPORT ...................2 CORPORATE GOVERNANCE REPORT ................................................... 73 Chair’s Statement .........................3 B oard Leadership and Company Purpose ................................................. 76 CEO Statement ............................6 S .172 Statement .................................................................................. 80 Market Overview ..........................10 S ection 172(1) Statement ..................................................................... 87 Strategy and Business Model ..........13 T he Role of the Board and its Responsibilities ........................................... 91 C omposition, Succession and Evaluation .................................................. 94 A udit and Risk Committee Report ........................................................... 97 N omination Committee Report................................................................ 107 D irectors’ Remuneration Report .............................................................. 113 D irectors’ Report .................................................................................. 144 S tatement of Directors’ Responsibilities ................................................... 150 Our Strategic Financial Objectives ...................................16 Key Financial Performance Indicators ....................................20 Task Force on Climate-Related Financial Disclosures .....................23 Responsible Business – Our People ..................................45 Financial Review ...........................53 Risk and Risk Management ............60 Going Concern and Viability Statement ...................................69 Non-Financial Information Statement ...................................72 FINANCIAL STATEMENTS ....................................................................152 OTHER INFORMATION ............ 234 Directors, Company Details, Advisers ................................... 234 Glossary of Terms ...................... 235 Independent Auditor’s Report to the Members of Integrafin Holdings plc .......152 Consolidated Statement of Comprehensive Income ....................................166 Consolidated Statement of Financial Position .............................................167 Company Statement of Financial Position ..................................................169 Consolidated Statement of Cash Flows .....................................................170 Company Statement of Cash Flows .........................................................172 Consolidated Statement of Changes in Equity ............................................173 Company Statement of Changes in Equity .................................................174 Notes to the Financial Statements ............................................................175 STR ATEGIC REPORT 2 2 CHAIR’S STATEMENT Overview I am pleased to introduce this year’s annual report. IntegraFin Holdings show Transact as the highest ranked for client service and functionality Over the last financial year, IHP Group has continued to be affected plc Group (IHP Group) has delivered amongst platforms with over £30.0 by the consequences of the cost- robust performance throughout FY23, billion in assets. with our investment platform offering of-living crisis, high levels of global inflation and increasing interest rates, – Transact – growing funds under This has resulted in net flows which have in turn unsettled equity direction (FUD) to a record high. onto the platform of £2.7 billion, markets. I am proud of our resilient representing resilient performance performance in the face of such We have remained focused on our whilst growing our market share. headwinds. underlying strategic objective: to be Over the financial year, advisers the number one provider of software registered on the platform increased Our financial and operational and services for our clients and by 2% and client numbers by 2%. performance has been robust, and their financial advisers. We have The integration of Time4Advice (T4A) our people have been instrumental pursued this by maintaining best-in- into the Group continues, whilst in delivering a high-quality service. class service levels and expanding sales of the existing CURO product Alexander Scott comments on the the functionality of our investment continue to grow, with 2.8k licenced results in more detail in his Chief platform. Industry surveys continue to users at the year-end. Executive Officer’s Review. 3 Developing our business Supporting our people Governance and culture The digitalisation of the Transact The varied hybrid models of office/ This is the fourth year that the platform continues apace, with a focus home working have all bedded in well. 2018 UK Corporate Governance on improving the user experience To better support our staff, we altered Code (the Code) has applied to the through enhanced, efficient processes. the balance of fixed versus variable Group. Confirmation of how we have Our investment in software developers pay across the London office, Isle complied with the Code for the year aims to continue delivering new of Man office and the regional sales under review is set out on page 118. functionality and strengthening forces. This has proved popular, as We continue to monitor and prepare our systems. Further detail on our the results of our second staff survey for signalled Corporate Governance digitalisation strategy can be found have shown. reform. in the Strategy and Business Model section of this report on page 13. The IHP board We take great care of our corporate culture and values, which are reflected Sustainability and social issues are a The membership of the IHP board both in our employee relations and in growing focus for our business. This has been stable throughout the our interactions with clients, advisers, year, we were pleased to sign up to year. We announced on 8 July 2023 and other key stakeholders. We believe the Women in Finance charter and to that we had recruited Euan Marshall our culture of putting clients first has receive the Living Wage accreditation to become Group Chief Financial been central to our compliance with for the Group. We also joined the Officer (CFO), and he will be joining the new Consumer Duty requirements. 10,000 Black Interns programme, in January 2024. I look forward to It is particularly pleasing that with our first cohort of interns starting working with Euan, he will be a strong we continue to rank so highly in in Summer 2024. We continue addition to the board and senior customer service polls undertaken by development of our sustainability management team. Investment Trends and CoreData. strategy, led by Victoria Cochrane in her role as Designated Non-Executive Christopher Munro, who has been Following the publication of our Director (DNED) for Environmental and a Non-Executive Director (NED) on financial year 2022 results in Social Sustainability. various Group boards and Committees December 2022 and financial year since 2017, has decided to step down 2023 interim results in May 2023, our from the board of the Company at the end of September 2024. We are Company Secretary, Helen Wakeford, and I offered meetings with our largest profoundly grateful for his input and shareholders. We held 17 meetings, expertise over the last seven years. meeting 14 of our largest investors, including three investors that we met twice. The meetings gave shareholders the opportunity to discuss topics of concern and were felt by us to be constructive and transparent. We plan to continue open engagement with our stakeholders outside of the boardroom and this forms a critical aspect of board-level activity. We have rigorous Audit and Risk, Nomination and Remuneration Committees, which meet regularly to review and challenge in-depth 4 Closing the work of the executive. Further I remain enormously impressed by detail on their activities over the year the professionalism and dedication can be found in this report. We are of our employees. Their continuing committed to enhancing our corporate commitment to putting our clients first governance processes and expect to is a vital component of our compliance see continued benefits from doing so. with the Consumer Duty. On pages 80 to 90, we present our Section 172 (s172) statement, which sets out how we consider our key stakeholders in our decision making and the key decisions we have made throughout the financial year. The members of the board would again like to thank all our colleagues for the hard work that they have put in over the last financial year. The board effectiveness review for These results, the published clients’ 2023 was undertaken by an external satisfaction surveys and our ranking firm, Independent Audit Ltd, who also within the platform sector are the conducted our last external review in product of their efforts. Richard Cranfield Chair 13 December 2023 2020. The results of that and review of the Chair is discussed on page 95 to 96. Remuneration The Directors’ Remuneration Report is set out on page 113. In particular there are changes noted in the incentive arrangements for executive management and employees more generally. These changes are detailed on pages 116 and 117. Dividend In line with our dividend policy and in recognition of our financial performance, we have declared a second interim dividend of 7.0 pence per ordinary share. Together with our first interim dividend paid in June of 3.2 pence per ordinary share, this takes the total dividend to 10.2 pence per ordinary share. 5 CEO STATEMENT Overview The Group has continued its record of resilient growth, with Transact towards year end led to a pause in the rate rises that characterised much technologies, seeking long-term efficiencies through scale and ensuring demonstrating robust performance of the year but the high cost of living we continue to attract investors to our in increasing funds under direction persisted. platform. (FUD), net inflows and client and adviser numbers. This financial year Under these challenging conditions, we has been marked by persistently high support our clients and their financial inflation and interest rates, with only advisers through our combination of modest economic growth. proprietary technologies – the Transact investment platform and CURO – and The first half of our financial year our industry-leading customer service. saw relatively solid equity market performance. Global equity markets We remain focused on our goal of were volatile but there was an upward making financial planning easier trend during the period from October and more efficient and, to this end, 2022 to March 2023. The latter we have continued our programme two quarters of financial year 2023 to deliver organic growth through saw less volatility. Slowing inflation investment in our people and our 6 Platform performance – Financial performance Transact overview Driven by the rise in FUD, revenue Throughout the period, Transact has grew during the year. Annual steadily grown both its adviser base commission on client funds remains Our people and client numbers. In the first half of the main contributor to revenue, whilst the year, we undertook a programme administration fees were the second We have continued with the IT and of portfolio rationalisation as part of largest component. T4A’s contribution software professional hiring plan preparations for the Consumer Duty also increased during this year. announced in mid-2022 and since then regulations, resulting in a one-time we have added 27 such employees. reduction. Underlying expenses rose in 2023, Based on this progress, we anticipate Platform inflows fell across the whole our increase in staff costs. This is in are already benefitting from the new advised retail sector due to the cost- line with our expectations, as the bulk expertise and scale, allowing us to of-living crisis, which diminished the of the IT software hires stipulated in accelerate our programme of platform with most of the uplift stemming from finalising the plan during 2024. We available income for investment. our growth strategy fell within this improvement. Consequently, our gross inflows fell year. Other cost increases were driven during the year. This nevertheless by both inflationary and scale-based Given the importance of our people to represents strong performance in factors, as the Group continues to the Group’s success, we have made a difficult market, being the third invest in its key competencies. their wellbeing a priority during the highest level of gross inflows in the year. Responding to feedback from industry which, coupled with high The Group’s IFRS profit before tax the previous employee engagement retention, delivered 22% of net has risen by £8.3m, a 15% increase survey, we have reworked our inflows within the advised platform over the prior year. However, there is remuneration approach. This has led to market. a decrease in underlying profit before a tiered pay rise, changes to the bonus tax from last year. The underlying system and enhanced maternity and Transact grew its market share as a figure excludes exceptional items, paternity benefits. result of these resilient net inflows. which were elevated in FY22 due to Nevertheless, owing to both macro- the impact of T4A post-combination We have selected a new CFO, Euan economic and industry factors, outflows were substantially higher in remuneration and the VAT decision. The reduction in underlying profit Marshall, who will be joining in January 2024. Euan brings with him significant the year. In contrast to FY22 – where before tax is driven by the increased experience in listed financial services sharply negative market movements investment in the business in this year companies and I look forward to in the second half reduced otherwise- and next year; we then anticipate the working with him to execute on our robust net inflows – market resultant improvements from scale Group strategy. movements this year were broadly and efficiency to start to come through positive. from 2025. The Group has made other key senior hires, specifically our first UK-based The Group maintains its focus on Chief Technology Officer (CTO), organic platform growth, which has Damien Francis, and a new Group continued to yield steady increases in Chief Risk Officer (CRO), Emma both FUD and revenue. Our aim is to Vernon, both of whom joined in achieve sustainable growth through January 2023. These new perspectives incremental improvements to our and skills will strengthen our strategy proposition, thereby allowing us to as well as helping the Group adapt continue providing the high quality of to key changes taking place in the service to which we are committed. industry. 7 Digitalisation programme Protecting our customers – Consumer Duty Led by our new CTO, our programme of platform digitalisation has delivered Consumer Duty represented perhaps does not take any client cash interest significant improvements. We have the largest regulatory change of earned and instead passes it all onto aimed to reduce as many paper the year, with the legislation taking our clients. At the time of writing, we routes as possible on the platform, effect in July 2023. Prioritising good are paying the highest interest rate especially those relating to account outcomes for our clients and advisers across the UK platform sector to our transfers, and we have introduced has always been at the centre of clients. efficient, intuitive digital alternatives. the Group’s activities. We were well The success of these initiatives means positioned to adapt to the new rules Throughout 2023, we have moved that now all new accounts opened on and have ensured the necessary forward with our sustainability our platform are paperless and the changes have been implemented. This initiatives including significantly majority of wrappers in portfolios are includes mandatory training for all increased monitoring of energy also opened on a paperless online employees and new joiners. usage and waste, as well as applying basis. tangible initiatives such as solar Our commitment to Consumer Duty is panels on our Melbourne office. Our adviser support team is now well embodied in our approach to interest established and has been making on client cash. With interest rates at use of new support functionality to their highest level in recent years, promptly address questions from our greater industry focus has been clients and advisers; through our live placed on the interest generated from chat feature we have achieved a 96% client cash. In accordance with our query resolution rate. In addition to ‘customer first’ principles, Transact the technical improvements to the platform, we have sought also to expand our service offerings. Our BlackRock Model Portfolio Service (MPS), launched in November 2022, has outperformed our expectations in terms of adviser and client interest. This service offers our clients access to flexible, diversified model portfolios investing in a broad range of markets. INVESTMENT APPROACH AND BELIEFS Capital at risk. The value of investments and the income from them can fall as well as rise and is not guaranteed. Investors may not get back the amount originally invested. BlackRock believe that superior investment outcomes are best achieved through an optimised and disciplined investment process. The Transact – BlackRock MPS investment process is underpinned by the following core beliefs. EXPERT RISK MANAGEMENT GLOBALLY DIVERSIFIED ESG COST EFFECTIVE Leveraging BlackRock’s investment Spreading investment risk expertise and global insight The underlying investments offer Central to the investment process is the exposure to a broad range of markets belief that asset allocation is the key across multiple asset classes to offer driver of returns. The service draws on a globally diversified solution. the deep level of investment and risk expertise across BlackRock to determine The models target between 60% and the optimal asset allocation for each 80% of the allocation in low-cost index model portfolio. mutual funds and Exchange Traded Funds (ETFs) operated by BlackRock. To further Dynamic asset allocation increase diversification the remainder will BlackRock monitors the models, invest in index funds from a range of maintaining a forward looking third-party, global investment managers view of investment returns and risk. selected by BlackRock. They will be adjusted periodically with the aim of maintaining optimal asset allocation balancing risk, return and cost. Asset allocation Diversification How BlackRock incorporates ESG Low ongoing fees, meaning factors in its investment process investors keep more of their returns BlackRock expects companies with better The models invest in a range of index ESG metrics to produce a better risk- tracking funds and ETFs. These provide a adjusted performance over the medium globally diversified solution with cost- to long term. It also thinks that the focus effective ongoing charges. on environmental concerns will be a catalyst for growth across the globe in The weighted ongoing charges figure the coming decades and it wants to position its portfolios to capture it. THE TRANSACT – BLACKROCK MPS MODELS Whilst the Transact models do not have the point of rebalance. BlackRock’s investment manager (IM) annual fee is 0.06%1. an explicit ESG objective, BlackRock is but will target a maximum of 0.20% at (OCF) for each model will vary over time permitted to invest in ESG aligned mutual funds and ETFs where it deems appropriate, subject to the objectives and constraints within the investment The Transact – BlackRock MPS guidelines which may, in some cases, The underlying investments are a blend of offers access to seven discretionary limit the ESG exposure. index mutual funds and ETFs which provide model portfolios which aim to provide transparency, offer exposure to a broad long-term capital growth whilst range of markets across multiple asset managing risk in accordance with ESG stands for: predefined risk ranges. classes and can be combined to offer a Index Funds diversified, cost-effective solution. ASSET ALLOCATION AS AT 30 JUNE 2023 Cash High Yield Bonds Corporate Bonds Government Bonds Alternatives Diversified Equities Emerging Market Equities Developed Market Equities Transact – BlackRock MPS Adviser Brochure For Adviser use only Produced by Integrated Financial Arrangements Limited Asset allocation describes how your In investment terms, diversification is the Environmental, Social and Governance Index funds and ETFs are investments 100% investments are spread across different concept of spreading your investment investment types, including equities, risk across a broad range of companies, bonds, alternative investments, such governments and countries rather than as commodities and cash. being exposed to a single investment. There can be no guarantee that the Diversification and asset allocation may investment strategy will be successful, not fully protect you from market risk. and the value of investments may go down as well as up. 4 and refers to criteria used to evaluate the Each model portfolio aims to target a robustness of a company’s governance different level of volatility which increases that aim to track the performance of a The weighted ongoing charges figure (OCF) specific index. An index represents the for each model will vary over time but will mechanisms and its ability to effectively across the range – higher volatility total return of a particular group of target a maximum of 0.20% at the point of manage its environmental and social represents higher risk. impacts. The model portfolio name represents the securities – usually equities or bonds. rebalance. BlackRock’s investment manager (IM) annual fee is 0.06%1. There is no guarantee that index funds ESG screening may adversely affect the expected long-term percentage equity For more information on the model or ETFs will achieve perfect tracking of value of a fund’s investments compared holding, although the actual position will to a fund without such screening. vary depending on current market portfolios including charges, holdings and their respective benchmark indices. to see the individual model factsheets conditions. Higher risk portfolios will please go to Transact Online: generally have a larger exposure to equities and lower exposure to bonds. 1BlackRock Investment Management (UK) Limited pay Integrated Financial Arrangements Ltd 0.02% Templates > Transact – BlackRock MPS to cover part of the costs associated with the Transact – BlackRock MPS. This payment is included in BlackRock’s IM Annual Payment fee. n o i t a c o l l A t e s s A f o % 5 80% 60% 40% 20% 0% M O DE L P O RTFO L IO G ROW TH 25 G ROW TH 40 G ROW TH 50 G ROW TH 60 G ROW TH 70 G ROW TH 80 G ROW TH 95 FE E S (O C F)1 0.15% 0.16% 0.18% 0.19% 0.19% 0.19% 0.19% VO L AT IL I T Y TA RG E T S 2 3.0%- 6.0% 4.5%- 7.5% 6.0%- 9.0% 7.0%- 11.0% 8.5%- 12.5% 10.0%- 15.0% >12.0% IN V E S TO R R IS K A PPE T I TE Lower willingness to take risk Potentially lower reward • • • More bonds and cash • Higher willingness to take risk • Potentially higher reward • More equites (shares) 8 1BlackRock Investment Management (UK) Limited pay Integrated Financial Arrangements Ltd 0.02% to cover part of the costs of the Transact – BlackRock MPS. This payment is included in BlackRock’s IM Annual Payment fee. 2 Source: BlackRock. Asset allocations as of 30 June 2023. Actual allocations may be different and change over time. Risk is measured as annual volatility (standard deviation) on a three year half-life basis which means the first three years have a 50% weighting. BlackRock includes more than 19 years of historic data in its risk modelling analysis. 10 11 1 Source: BlackRock. Ongoing charges figure (OCF) as at 30 June 2023. Outlook The market outlook for the coming software will commence roll out to the year is more optimistic than it was pipeline of adviser firms. We will seek at the start of FY23 but headwinds further innovation including a data are anticipated to persist. Inflation interface with the Transact platform. is expected to come down but at a pace that is as yet unknown, and In this period of ongoing economic the Bank of England base rate is and market volatility, clients rely predicted to remain at a higher level more than ever on their advisers for than has been seen in the past 10 high quality, personalised financial years. By investing in the key drivers planning and support. As we have of our competitive advantage – our always done, we’ll continue to support proprietary technology and our UK financial advisers and their clients industry-leading customer service – by providing our combination of in- the Group aims to continue to grow house technology and well-trained our adviser, client and FUD base. people delivering high quality service. Our holistic financial planning solution Throughout FY24, we will continue will serve clients and advisers alike in our work on the platform digitalisation managing their portfolios easily and project. Our digitalisation approach efficiently. will focus on further limiting paper-based forms and expanding I would like to thank all my colleagues straight-through processing. These across the Group for their diligent work technological developments will over the year. Their commitment and accelerate processing, making dedication have been crucial in working transfers quicker and easier for clients towards our strategic objective: to be and advisers. We also seek to add the number one provider of software additional data analysis functionality and services for our clients and their by making available to advisers more data on the transactions they financial advisers. I look forward to continuing to grow our business and perform. deliver on our strategy throughout FY24 and beyond. Consumer Duty is expected to remain one of the most prominent features of the regulatory environment. We Alexander Scott put positive consumer outcomes at IHP Group CEO the centre of our business model. To secure continued adherence to the 13 December 2023 new requirements, we will focus our training and development to ensure our people are well able to comply with the objectives of Consumer Duty. Following the successful beta client test during the year, T4A’s next generation Power Platform CURO 9 MARKET OVERVIEW 10 Financial adviser outlook Financial adviser dynamics The Group strategy focuses on Over the past three years, the average providing best in class services size of adviser firms has gradually and software that enable UK increased. There has been ongoing financial advisers to deliver financial private equity investment into medium plans for clients. The outlook and large firms to support organic and for UK financial advisers is very inorganic growth strategies. However, positive. Consumer demand for some advisers and paraplanners in advice continues to increase as acquired firms leave and re-start responsibility for retirement savings their own businesses, so the pace and income gradually shifts from of consolidation lags the rate of the UK government and employers acquisitions. to individuals. The complexity and ongoing changes to the tax system, Based on FCA data, the number of plus changing attitudes towards adviser firms reduced from 5,246 work and retirement are also driving in 2018 to 5,118 in 2021, only 128 demand for advice. Only 31% of fewer firms. Independent financial households with investable assets advisers continue to win clients from above £100,000 use a financial private banks and traditional wealth adviser, so there is scope for further managers, typically through a more growth. Financial adviser numbers objective, goals-based approach to are also important for T4A, where the financial planning. Transact and T4A primary revenue is derived from a enable these advisers. Many traditional licence fee per user. wealth managers now offer their discretionary investment management (DIM) services via Transact to financial advisers; we now have over 120 DIMs available on the platform. Outsourced DIM services are increasingly popular with advisers seeking to reduce risk and cost while also freeing up time for financial planning. Transact offers its platform services to small, medium and large financial adviser firms, whilst T4A is currently focused on medium and large financial adviser firms, including large consolidators and aggregators. Throughout the year, both Transact and T4A have increased their adviser numbers and licence numbers, respectively. FIGURE 1. HOW ADVISERS AND PL ATFORMS FIT INTO THE UK WEALTH MARKET Financial advisers are helping clients pass wealth to children and grandchildren and retaining the next generation of clients Many affluent customers seek financial advice pre/at retirement Advised Platforms ~£500bn H T L A E W Customers accumulate via workplace pensions & non advised products Workplace Pensions ~£500bn Non advised Products ~£1trn Less affluent customers annuitise or self-manage in retirement Private sector DB schemes in run-off ~£1trn AGE FIGURE 2. ADVISER PL ATFORM ASSET GROW TH FORECAST 2023-2028 CAGR 16% 11% 7% £1,300bn £1,200bn £1,100bn £1,000bn £900bn £800bn £700bn £600bn £500bn £400bn £300bn 2018-2023 CAGR 8% 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 HISTORICAL PESSIMISTIC REALISTIC OPTIMISTIC Source: Fundscape Q323 November Advised platform outlook Analysts estimate the total UK wealth management market at ~£3trn. Growth is dependent on macro factors such as asset returns, economic performance and the savings rate. The advised platform market is currently ~£600bn, a fast-growing sub-set of the UK wealth market. Fundscape forecasts advised platform growth at ~11% per annum over the next five years. Transact’s target market is growing because platforms provide access to a wide range of assets, consolidated reporting, investment and retirement income functionality across all tax wrappers. Workplace pensions, legacy life and pension products, direct to customer products are migrated onto platforms by financial advisers. The schematic in figure 1 illustrates the contestable market for platforms. This process often takes place when clients have accumulated some wealth as the benefits of consolidation are greater. Growth in platform assets is especially important for Transact where the primary revenue model is a tiered basis point fee. The schematic in figure 1 also demonstrates at a high level how financial advisers and the advised platform market fit into the broader UK wealth management market. Advisers and platforms are replacing private sector defined benefit schemes as the key channel for affluent clients pre-, at and post-retirement. Furthermore, advisers are helping clients pass wealth to children and grandchildren. More than 50% of client portfolios on Transact are within linked family groups. Advisers are improving how they engage the next generation and retain them as clients. 11 Adviser and client numbers Market outlook Transact’s target market consists of We continue to survey our advisers The advised platform market is the approximately 13,000 registered to better understand their needs expected to grow over the next UK financial advisers that are not and the needs of their clients. This few years, driven by rising adviser tied or restricted in their choice of survey shows that of our advisers, numbers and investor assets. platform. At the end of FY23, 7,683 the majority use Transact as their 1st such advisers were registered with the choice and 72.1% are “satisfied” or Transact remains well-positioned Transact platform, compared to 7,537 “very satisfied” with our service. within the market, with our compelling in the previous year. There remains business proposition. Our focus a large pool of around 5,000 UK Industry publications attest to the remains on organic growth through financial advisers in our contestable effectiveness of our platform, with continuous improvements to platform market. This constitutes a significant Transact as the highest-ranking functionality and maintaining our growth opportunity for us. platform above >£30bn FUD in the leading customer service. This strategy Our client growth comes from existing of platform improvements aims to client/adviser numbers, despite the registered advisers who introduce further develop platform functionality challenging conditions of the past year. more clients to Transact and from new and maintain our industry-leading Nevertheless, we continue to look for CoreData survey. Our programme has yielded robust growth in FUD and advisers registering with Transact. satisfaction scores. These two sources have led to our client numbers growing by over 5,000 to 230,294. ways to incorporate innovations in our technology to add further value to users of our platform. The market remains competitive. However, our proprietary technology and award-winning client service focus continues to distinguish our offering. We remain committed to providing high quality service and clear value- for-money for our clients and their advisers. Jonathan Gunby Transact CEO 13 December 2023 Note “Transact” is the operating name of the investment platform run by Integrated Financial Arrangements Ltd (IFAL). 12 STR ATEGY AND BUSINESS MODEL Our strategy and business model Transact strategy IHP Group has two core business and our shared clients. We deliver this by offering comprehensive platform propositions, which complement functionality and leading customer service at a competitive price. Transact's strategy is to make financial planning easier for financial advisers each other to make financial planning easier for clients and their UK financial advisers. We do this by harnessing technology, allied with high quality human service. We prefer to insource, Leading functionality and so we own and develop our own software. Transact – our We lead the market on wrapper choice, client reporting, retirement income investment platform - aims to functionality and investment choice for advisers and clients. This is supported make financial planning easier by independent adviser research from CoreData: and CURO – our adviser practice management solution - supports advisers through the financial advice process. “Do the right thing” This is our core value, which we believe ensures the right outcomes for all our stakeholders. FIGURE 3. MARKET LEADING PL ATFORM FUNCTIONALIT Y Schematic CoreData 2023 results (Large Platform Category >£30bn) First for Choice of Unit Trusts First for Choice of Tax Wrappers First for Choice of Discretionary Fund Management and Model Portfolio Services (MPS) 9.6/10 9.5/10 9.0/10 9.0/10 How? First for Impact of Cash Interest Through our market-leading investment platform which makes financial planning easier and CURO software that supports the financial advice process. The systems enable advisers to implement financial plans for our mutual clients, simply and efficiently, actively supported by skilled client service and adviser support teams. Our people provide responsive and proactive customer service support on a range of queries. Through our First for Range of Retirement Income Options 8.7/10 First for Overall Technical Support 8.5/10 First for Overall Satisfaction First for Flexibility of Reporting 8.3/10 8.3/10 two core offerings, we aim to Our functionality is enabled by our software development capability and our be the number one provider of focus on advisers. We have an expert in-house software development team in software and services for clients Melbourne, Australia where supply/demand dynamics for the specific skilled and UK financial advisers. developers that we need are superior to the UK. Our average developer tenure is ~9 years, well above industry standards. It also means we are invested in code quality and maintenance not just delivering new features and building long-term complexity. 13 Leading service Value for money We have a regional service model so We have implemented discounts and initiatives to simplify our charges. For advisers and their support team can example, in FY22 we removed wrapper fees on junior pensions and in FY23, we build long-term relationships with reduced our buy commission threshold, so no buy commission is payable by our operational staff. This helps us family group portfolios over £100,000. to be more responsive, take more ownership and solve problems faster We are competitive on price and lead on value for money, particularly with the than other platforms. Last year, we inclusion of interest on client cash. Our interest rates on client cash are market created specialist roles to improve leading as we have always passed on 100% of interest to the client, we do our service on the most complex not skim client interest or “double dip”. Transact pays out one of the highest adviser processes and create career effective rates on client cash in the industry. This has proven very popular with progression for our people. As we advisers and clients, particularly as interest rates have increased. FCA attention further digitalise the business, we around client cash interest has grown as interest rates have risen; we believe have invested in our online live chat our approach is more in the spirit of the recently implemented Consumer Duty and co-browse functionality which has regulation. proved very popular with advisers. Our service is enabled by our software Advisers value the sustainability of our pricing, our profitability and our financial capability and our ownership of all tax strength. This helps to differentiate us from unprofitable new entrants as well as wrappers. Owning tax wrappers means many incumbent platforms. the adviser and client experience is consistent and seamless across General Investment Accounts (GIAs), Individual Savings Accounts (ISAs), pensions, onshore and offshore bonds. 14 FIGURE 4. TR ANSACT’S STR ATEGY AND BUSINESS MODEL STRATEGY To make financial planning easier PROPOSITION Service Functionality Value for money PROPOSITION ENABLERS Software capability Adviser focus Tax wrapper ownership Financial strength STRATEGIC INITIATIVES Digitalisation Data services Transfers Consumer Duty The schematic in figure 4, above, illustrates our strategy and business model. In a recent independent adviser study, ~25% of advisers cited Transact as the platform leader, more than double any other player. In the same study, more advisers say they are considering switching to Transact than to any other platform. However, we will not be complacent. The key strategic initiatives for Transact are greater digitalisation, data services, transfers, and Consumer Duty. The first three initiatives are important elements of our platform functionality and service that we want to improve and stay ahead of competitors. T4A Strategy T4A’s goal is to enable UK financial advisers to run their businesses more efficiently by leveraging modern technology to help transform the way they work. Our final strategic initiative is the To facilitate this, we continue to provide CURO 3 – the current cloud-hosted FCA’s Consumer Duty. We have version – and have also developed CURO on Power Platform as a next generation, always put the clients at the heart Microsoft cloud-hosted solution. of our business. But we will take more responsibility for supply chain oversight and invest more in our non- advised proposition to meet the new Consumer Duty standards. In addition, we have made changes to our Comprehensive functionality Leading integrations governance, training, and reporting and commenced projects to address CURO is designed and built to support T4A works strategically with potential consumer harm risks. the entire advice process from the recognised and market-leading initial engagement, information software partners to help users avoid gathering and analysis, financial duplicated data entry, to remove needs assessment, solutions and error and time waste; it achieves this recommendations, implementation to through secure data sharing using ongoing review and monitoring. Microsoft’s Web API. CURO enables firms to leverage the In addition to this expansive range value of their data, which is centralised of integrations, T4A will build an and securely hosted on Microsoft’s integration between CURO and the Power Platform. Using Microsoft’s fully Transact platform. Through this integrated applications such as Power synergy, we aim to bring further BI, Excel, Word and Power Automate, efficiencies to those advisers who firms can extract invaluable business make use of both of our software insights and efficiencies through solutions. business and document automation. T4A employs a team that is highly experienced in the fields of software development and financial services. The business also surveys users extensively to understand their needs and to continue expanding the service offering, to better serve the goal of providing the best solution in the market. 15 OUR STR ATEGIC FINANCIAL OBJECTIVES Achievement of our strategic financial objectives comes through the continuing successful delivery of our Transact and CURO propositions. The key drivers are: INCREASING MARKET SHARE Increasing market share by growing and retaining the adviser users of both our investment platform and CURO software. Growing both platform and CURO users increases Group revenue; INVESTING Investing in our people and software in order that the Group can continue to provide best in class service and to enhance our offerings, but focusing on efficiency and making our financial investment work for us; STRONG CASH PROFITS Prudent expense management that ensures we continue to generate strong cash profits for the benefit of all our key stakeholders; and MINDFUL CAPITAL MANAGEMENT Mindful capital management, evidenced by robust cash reserves, which means we are well placed to weather and capitalise on any economic environment that prevails. Strategic financial objectives and key risks Our strategic financial priorities and the key risks to achieving them are below, they sit alongside risk management activities and controls, on pages 60 to 68. Sustainable FUD growth and CURO user growth How? We put client and adviser experience at the heart of our business model through superior service and software offerings. We believe this is key to attracting and retaining advisers, users of our investment platform and of our CURO software. Therefore, by continuously developing the service we offer, by prudently seeking to reduce, or simply maintain, charges and by considering investment opportunities that may enhance the Group proposition, we achieve growth and retention. FY23 progress Investment platform FUD has grown by 10% year on year to £55.0 billion. This is due to both positive net flows of £2.7 billion, plus positive stock market movements of £2.3 billion. Advisers using the Transact platform increased by 2% and CURO users increased by 22%. We have achieved resilient net inflows through the service that we continue to develop and invest in. 16 Invest How? FY24 outlook FY24 outlook We have a proven track record We will continue the IT and platform The global macro-economic outlook aspects of our technology, therefore is well underway, investing in is challenging and we recognise ensuring our service quality and additional headcount to support increasing competition in the market software remains award winning systems and investment platform place. and operationally resilient. development. of investing in our people and all developer recruitment plan that However, we will continue to target We aim to continue to generate We have systems developments advisers not yet using our services profits and generate the best that are already designed and that are in our identified core outcomes for all key stake holders, timetabled that will be implemented markets. We will continue to focus but investment decisions must not: and we look forward to making on service and retaining existing UK further enhancements that benefit advisers and their clients, in addition • Risk Group capital beyond and support the client and adviser to encourage adviser users to move reasonable levels; online experience in financial year additional clients onto Transact, as 2024, as well as driving efficiencies they have experienced the benefits • Bring the Group into through our operations. that our service brings. commercial conflict with our target market; Key risks T4A will focus on rolling out next generation CURO, and continue to • Make it difficult for us to meet • Diversion of development support the existing CURO3 software our regulatory responsibilities. resource away from proposition and users. Key risks FY23 progress technology enhancements • Fall in employee retention • Service standard failure invested in platform and CURO £17.1 million (FY22: £14.1 million) across the Group (and next generation CURO) Key financial performance • Stock market volatility development in the year. This is indicator impacting FUD comprised of platform developer • Strong, well capitalised market entrants leading to of new equipment and training costs. • Operating margin and management cost, acquisition • Profit before tax increased platform outflows and suppressed net inflows. We continued the investment Key financial performance FY23, due to the efficiencies and platform digitalisation initiative in indicator • Average FUD • Client growth improved service that it generates for clients and their advisers, it also generates efficiencies for us. T4A’s FY23 priority was continuing the live testing of next generation • Client retention CURO. • Adviser growth • Net inflows 17 Increase earnings Generate cash How? FY24 outlook How? Through growing client FUD and Again, the financial year closes on We are a highly cash generative wrappers on the investment a challenging economic outlook. business as all fees are received platform and by increasing T4A as cash, as they become due and CURO users, we increase revenue. To protect revenue, we will payable. We expect to continue continue to focus on investing in generating cash profits. We achieve the FUD and wrapper the investment platform, CURO and growth by retaining and increasing next generation CURO, so that we Shareholder cash has increased over penetration of our current adviser support and retain existing users time, enabling reinvestment and base and by attracting new adviser and increase market share. ensuring we remain well capitalised users. over and above our regulatory capital Key risks requirement. We aim to maintain our strong ratings amongst advisers and • Service standard failure We will continue our controlled increase our share of wallet from approach to expense management contestable advisers in the market. • Stock market volatility and we expect to continue generating impacting FUD resilient cash profits. We are mindful of competition in the market and are not complacent, • Strong, well capitalised FY23 progress hence we invest prudently and market entrants leading to maintain focus on what we do well. increased platform outflows IFRS profit before tax in FY23, and suppressed net inflows. generating profits from the cash FY23 progress received, was £62.6 million, which is Key financial performance an increase of 15% from £54.3 million Average FUD through the year indicator in FY22. increased by 2% from £52.5 billion in FY22 to £53.6 billion in FY23, • Average FUD this led to a £0.4 million increase in investment platform revenue • Net inflows to £130.1 million (2022: £129.7 million). T4A’s licence and consultancy fee income grew from £3.9 million for FY22, to £4.8 million for FY23. The growth is attributable to recurring revenue from existing CURO user licences. The rise in PBT is due to the net effect of: recognition and settlement of the backdated VAT liability of £9.4 million, plus interest of £0.8 million in FY22; and an increase in admin expenses, as forecast and detailed in the Financial review on page 53, in FY23. FY24 outlook We will continue to manage all Group expenses carefully and monitor against projections, whilst continuing to invest as necessary in our people and system development. It is expected the Group’s strong liquidity profile will be maintained. 18 Key risks Retain strong balance sheet Deliver on dividend policy • Service standard failure How? How? • Stock market volatility We maintain robust capital Our policy is to pay between 60% and impacting FUD resources, supported by 65% of full year profit before tax as • Strong, well capitalised market debt and our regulatory capital entrants leading to increased position remains resilient through FY23 progress platform outflows and suppressed the economic cycle. emerging profit. We have no two interim dividends. net inflows. • Uncontrolled expenses FY23 progress A first interim dividend was paid of 3.2p per ordinary share and a second interim dividend declared of 7.0 pence Key financial performance defined by Group net assets, dividend policy (after excluding non- indicator grew 9% and ended the year at underlying expenses). The Group capital position, as per ordinary share, in line with our • Average FUD million at the end of FY22. FY24 outlook £189.5 million, up from £163.2 • Profit before tax FY24 outlook Our dividend policy remains unchanged, however, our income • Operating margin We will continue to manage our may be impacted by continuing • Earnings per share to meet our regulatory capital invasion of Ukraine, the Israel war with capital prudently, to enable us market uncertainty due to the Russian requirements as the business Hamas, high inflationary pressure on grows. Key risks all costs, including recruitment, and political instability. • Stock market volatility Key risks impacting FUD • Stock market volatility impacting • Capital strain FUD • Uncontrolled expenses Key financial performance indicator • Capital strain • Shareholder funds Key financial performance indicator • Cash generation • Earnings per share 19 KEY FINANCIAL PERFORMANCE INDICATORS We have several quantifiable measures that we use to measure the performance of our business against our strategic financial objectives. Our key financial performance indicators and performance over the last three financial years are presented in the charts that follow. LINK TO STR ATEGIC FINANCIAL OBJECTIVES: Drive growth Invest Earnings Cash generation Strong balance sheet Dividend policy Average daily FUD* £53.6 billion (+2%) The value of average daily FUD is the primary driver of Group revenue, as it is the basis of the annual commission charge, which constitutes 86% of Group revenue. The value of average daily FUD generates cash and drives earnings growth. As markets have stabilised during the financial year, albeit with some day to day volatility, so average daily FUD has increased by 2% compared to FY22. Net inflows* of £2.7 billion (-39%) Net inflows are a crucial component of FUD growth and drive cash generation and earnings growth. Whilst net flows have decreased year on year, our market share has risen to 25%, demonstrating the strength of our proposition through challenging macro economic conditions. n b 2 . 7 4 £ n b 5 . 2 5 £ n b 6 . 3 5 £ FY21 FY22 FY23 n b 0 . 5 £ n b 4 . 4 £ n b 7 . 2 £ FY21 FY22 FY23 *Our KPIs include alternative performance measures (APMs) which are indicated with an asterisk. APMs are financial measures which are not defined by IFRS. They are used in order to provide better insight into the performance of the Group. Further details are provided in the glossary, on page 235. 20 230,294 clients* (+2%) Client numbers continue to grow at a steady rate, although a project to close portfolios with small residual balances impacted growth in FY23. Advisers bring new clients and new flows to the platform, as well as their existing clients bringing new flows. Clients are a driver of FUD and wrapper numbers, which generates cash through annual fees and wrapper charges, which grows earnings. Our client retention rate remains impressive. Client retention* 95% (-2%) k 9 0 2 k 5 2 2 k 0 3 2 FY21 FY22 FY23 FINANCIAL YEAR Levels of client retention 2021 96% 2022 97% 2023 95% Client retention is an important measure of satisfaction. It is also a driver of ongoing revenue and we attribute our strong client retention levels to satisfaction with our service and offering. The slight reduction in FY23 is due to the removal of clients with small residual balances. 7,683 advisers registered on the investment platform* (+2%) We continue to experience steady growth in the number of advisers using the platform, driving FUD, cash generation and earnings growth. As with client numbers, a project to close portfolios with small residual balances impacted growth in FY23. 1 6 1 , 7 7 3 5 , 7 3 8 6 , 7 FY21 FY22 FY23 *Our KPIs include alternative performance measures (APMs) which are indicated with an asterisk. APMs are financial measures which are not defined by IFRS. They are used in order to provide better insight into the performance of the Group. Further details are provided in the glossary, on page 235. 21 IFRS profit before tax £62.6 million (+15%) IFRS profit before tax has increased by £8.3m (15%) in FY23. The material factors driving the increase are: total revenue and interest income increasing by £7.0m, underlying expenses increasing by £9.4m and non-underlying expenses reducing by £11.1m. The drivers of the material movements are explained in the Financial Review m 6 . 3 6 £ m 3 . 4 5 £ m 6 . 2 6 £ on page 53. FY21 FY22 FY23 Operating margin 42% (+4%) Operating margin is operating profit over revenue, expressed as a %, representing the % of revenue that translates to profit. Operating margin has fallen over the last two years, relative to the highs of previous years, due to the planned increases to the expense base, primarily driven by increases in staff costs and also the impact of non- underlying expenses. Operating margin remains robust for the sector. IFRS Earnings per share 15.1p (+13%) % 1 5 % 1 4 % 2 4 FY21 FY22 FY23 Earnings per share is a measure of the amount of profit after tax the Group has generated for shares in issues and the value generated for shareholders. EPS has increased in FY23 as profit after tax has increased year-on-year. p 4 . 5 1 p 3 . 3 1 p 1 . 5 1 FY21 FY22 FY23 22 TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES Foreword from Victoria Cochrane – Designated Group Non-Executive Director for Environmental and Social Sustainability (ESS) Following our first report on the Task Force on Climate-Related Financial Disclosures (TCFD) last year, over the past 12 months we have made good progress in developing and enhancing our carbon reporting and climate change management. We are supportive of the UK government’s overall ambition to reach a net zero position by 2050 and continue to be committed to meeting or exceeding this goal. During the year we engaged Brite Green Limited, an independent sustainability consultancy, to assist us in better understanding the climate related risks to our business as well as the material strategic, tactical and operational opportunities we can leverage on our pathway towards net zero. There have been sensible and constructive recommendations and we will seek to make changes to reduce our controllable emissions as early as practically possible and to develop our strategic offering in a manner that promotes the development of our business as well as supports the needs of advisers, clients, and our people. To enhance our assessment and understanding of the impacts, risks, and opportunities climate change presents for our business, we have also conducted climate scenario analysis based on global-mean temperature rises of 1.5 degrees (the expected outcome of meeting net zero targets by 2050), 2 degrees (transition is delayed by 5-10 years) and 2.6 degrees (based on current national pledges for reducing emissions). The board has overseen the approach and activities being undertaken, providing review and challenge to the recommendations identified as and supporting the management team who are actively managing our material climate-related risks and opportunities. Informed by the insights from this work, our developing climate change strategy sets clear objectives, with initiatives to deliver in the short (up to 2025), medium (up to 2035) and longer term (up to 2050). Our search for new premises for the London head office presents a significant short-to-medium-term opportunity to reduce our carbon footprint. By incorporating sustainability criteria into the new premises selection process, in conjunction with the data and understanding we have gathered about our office space utilisation following our hybrid working model, we have the opportunity to considerably reduce our Scope 1 and 2 operational carbon emissions. During FY23, the board set specific targets for carbon reduction, our performance over FY24 will be measured and monitored against these targets and initiatives. 23 Our climate change journey We have made positive strides during the year in understanding and defining the next steps of our climate change journey. Key highlights include the following: Resource enhancements – we have strengthened our capability by appointing a dedicated resource covering our Group sustainability agenda. The individual has responsibility for: documenting Group standards and procedures; collating and measuring carbon emissions; monitoring progress on climate related strategies; working closely with the functional areas of the business to ensure that impacts of risks and opportunities are understood and timely and effectively captured and managed; ensuring that sustainability strategies are embedded into the business plans of the senior leadership team. 24 Independent consultancy review – we engaged Brite Green to undertake an independent review across several areas. This included a review of our approach Carbon reduction implementation initiative – an important initiative delivered this year has been the installation of solar panels on the roof of our office in Melbourne. This is and procedures towards the expected to provide up to 57 collection and reporting of our MWh annually of electricity for Scope 1, 2 and 3 greenhouse gas the business. This is equivalent emissions; recommendations on to 5% of the Group’s energy carbon reduction strategies as use, but 12% of the Group’s part of our journey towards our Scope 2 carbon emissions due net zero objective; assistance in to the higher carbon intensity defining strategic climate change of the Australian national grid opportunities for the business compared to the UK. We are and a roadmap towards more in the process of moving our robust and insightful reporting. London office-based data centre off-premise into more energy efficient premises. Both these initiatives will reduce Scope 2 emissions going forward. Approach improvements – the independent consultancy review has resulted in significant improvements to our carbon data collection approach and processes. As a consequence, we have broadened the boundaries of our Scope 3 data to include emissions from purchased goods and services and capital spend as well as to re-calibrate certain categories, e.g. wastewater, from the position previously reported. These are set out in detail under the metrics section of this report. As a result of improved Carbon reduction opportunities – the board has been presented with a range of opportunities that focus on four key themes: 1. Premises and flexible working 2. National differences in energy emissions 3. Site energy sources data collection and corrections 4. Data centre environments to some of the calculations, we will be restating the FY22 prior year data for Scope 1, 2 and 3 emissions which we will adopt as the revised baseline against which to measure future target reductions. By contrast, significantly more effort and consideration will be needed in areas categorised under Scope 3, typically our purchased goods and services and the asset owned investments. We recognise that despite the progress made this year, we still have a lot of work to do. Understanding and managing climate change impacts from, and on, the business is an iterative process and we are planning to address the following aspects next year: • Producing carbon emission reduction plans that align with science-based target best practice. • Committing to a climate transition plan to outline how we will become carbon net zero by 2050 or before. • Establishing a sustainability forum comprised of members of the senior management team who will drive forward the agreed strategy at an operational level. • Encouraging employee engagement through training, workshops, The basis of our approach to and employee forums. TCFD reporting • Establishing a climate-related risk on the corporate risk register. Our TCFD report follows the In addition to the above, we anticipate in the medium term looking into October 2021 covering the financial recommended guidance published in the following: disclosures, and as part of our obligations required under Listing Rule • Understanding and embracing the reporting and other requirements under 9.8.6R. The financial impacts have Taskforce for Nature-related Financial Disclosures (TNFD) and standards been assessed to the extent that we developed, but yet to be adopted by the UK, on sustainability reporting have been able to measure these by the International Accounting Standard Board (IASB) and International through the application of appropriate Sustainability Standards Board (ISSB). analytical assessments based on the available information to the Group. • Drafting a plan for transition to a lower-carbon economy using the Transition Plan Taskforce (TPT) disclosure framework published in October The Supplemental Guidance for the 2023 within our future reporting. • Looking at the emissions generated in our supply chain and drafting a Sustainable Supply Chain Charter. Financial Sector, in particular the guidance for the insurance sector and for asset owners, has been considered but has not been deemed relevant due to the nature of the • Keeping abreast of the quality of environmental, social and governance insurance contracts written by the (ESG) metrics for assets held on the Transact platform to potentially insurance companies in the Group and enable clients and financial advisers to make more informed investment the investment strategies not being decisions. under the control of the Group. Our TCFD report reflects the activities Underlying these initiatives, we will continue to measure and report our carbon undertaken by the Group during emissions and the progress towards the reductions achieved to ensure that we financial year 2023. All Group entities, meet the goal of being carbon zero in the decade leading up to 2050. including the regulated entities, have Victoria Cochrane been considered when identifying and measuring the climate-related financial impacts, risks and opportunities, Environmental and Social Sustainability Non-Executive Director and their impact, which have been 13 December 2023 incorporated on a consolidated basis within this report. 25 TCFD Disclosure Summary The TCFD’s recommendations were first launched in 2017 with disclosures structured around four themes, governance, strategy, risk management and metrics and targets. In support of these themes there are 11 recommendations that provide guidance for developing effective disclosure. Here we set out these requirements and the approach adopted in our disclosures. We have assessed our current disclosure against the recommendations and identified the areas where further opportunities exist for enhancing our Group activities and reporting. THEME DESCRIPTION Governance Disclose the organisations governance around climate-related risks and opportunities. TABLE 1. TCFD DISCLOSURE SUMMARY TCFD RECOMMENDED DISCLOSURE • Describe the board’s oversight of climate- related risks and opportunities. • Describe management’s role in assessing and managing of climate- related risks and opportunities. PAGES OUR DISCLOSURE 28-30 • We have set out in more detail the responsibilities and activities of the board and its committees with support from the ESS DNED. • We have explained how management has participated in defining risks and opportunities. Inclusion of a sustainability forum into the governance structure. FURTHER OPPORTUNITIES FOR IMPROVEMENT • Establish and embed the sustainability forum into operational practices. • Develop deeper climate change knowledge across the board, management team and broader people base. THEME DESCRIPTION TCFD RECOMMENDED DISCLOSURE PAGES OUR DISCLOSURE Strategy Describe the actual and potential impacts of climate- related risks and opportunities on the organisation’s businesses, strategy, and financial planning where such information is material. • Describe the climate- related risks and opportunities the organisation has identified over the short, medium, and longer term. • Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning. • Describe the resiliency of the organisation’s strategy taking into consideration different climate related scenarios, including a 2oC or lower scenario. 31-39 • Defined short, medium and longer- term time horizon strategies for the Group. • We have set out our assessment of how climate-related risk drivers affect our strategy and business objectives, operations, clients, and products. • Our Group-wide scenarios have identified risks and opportunities to our strategy. We have assessed the impact of these against business viability and resiliency. • We have explained that we have not yet incorporated the impact of risks and opportunities into our financial planning. FURTHER OPPORTUNITIES FOR IMPROVEMENT • Continue to refine scenario assessments. • Develop further strategies and procedures to manage risks and capture strategic opportunities. • Reflect climate-related risks and opportunities into the financial planning process as appropriate. 26 THEME DESCRIPTION TCFD RECOMMENDED DISCLOSURE PAGES OUR DISCLOSURE Risk management Disclose how the organisation identifies, assesses, and manages climate-related risks. • Describe the 40 • We have explained how the organisation processes approach toward the identification and management of climate-related risks is integrated into the Group Risk Management Framework. This includes a measurement basis consistent with other risks facing the Group. • We have set out our assessment of how climate-related changes impacts the Group and creates risks and opportunities. for identifying and assessing climate- related risks. • Describe the organisation processes for managing climate- related risks. • Describe how the processes for identifying, assessing, and managing climate- related risks are integrated into the organisations overall risk management FURTHER OPPORTUNITIES FOR IMPROVEMENT • Maintain appropriate corporate risk register entries to ensure climate-related risks remain on the agenda. • Embed into regular process management and functional review and assessment of climate-related risks. THEME DESCRIPTION TCFD RECOMMENDED DISCLOSURE PAGES OUR DISCLOSURE Metrics and targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. • Disclose the metrics 40-44 • We have reported our operational and targets used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. • Disclose Scope 1, 2 and 3 greenhouse gas (GHG) emissions, and related risks. scope 1, 2 and 3 emissions having reassessed the coverage and conversion factors this year. • We have restated our 2022 position and plan to use this as the revised baseline position. • Operational Scope 1 and 2 targets have been set. Scope 3 targets will be developed for disclosure in financial year 2024. FURTHER OPPORTUNITIES FOR IMPROVEMENT • Set operational emissions reduction targets. • Embed delivery performance metrics. • Develop further transition targets and plans. • Continue to monitor the availability of ESG related data for life company and platform held assets. • Assurance certification of data reported. 27 1. Governance Board and board committees Management’s role in assessing and managing climate-risks and The board provides leadership and Collectively these ensure that the opportunities direction and is accountable for the following responsibilities are met: long-term success of the Group. It Following a review of our climate sets the Group strategic objectives, • establishing clear strategic goals change management practices, we see pages 13 to 15, within a risk with appropriate supporting have expanded our climate governance appetite framework. The board is business plans and resources structure to support greater ownership ultimately responsible for risks and and accountability for climate issues opportunities facing the business, • monitoring strategy at all levels in the business. Building including those related to climate implementation, financial from this, we aim, over the course of change. performance and the integrity financial year 2024, to strengthen the The Group board has assigned of reporting ownership of climate issues across the entire business and develop focused a DNED, Victoria Cochrane, to • ensuring that effective audit, action plans aligned to reduction oversee our Environmental and risk management and compliance targets for key business functions to Social Sustainability (ESS) agenda. systems are in place and manage and progress. Victoria assists the board in monitored. ensuring the Group has appropriate environmental and social strategies The structure of our climate that are integrated with its core governance is set out in figure 1. business strategy and contribute to below, with details of roles and the long-term sustainability of the responsibilities for our climate-change Group; reviewing the strategies, approach reflected in table 2. FIGURE 1. GOVERNANCE STRUCTURE IHP Board Remuneration Committee (RemCo) Audit and Risk Committee (ARC) Subsidiary Boards Chief Executive Officer ARCs of subsidiary companies Senior Leadership Team (SLT) Sustainability Forum Business teams Colleagues policies and performance in relation to environmental and social matters, suggesting ways to drive improvement in these areas, and ensuring these strategies continue to evolve and are aligned to the culture and values of the Group. In support of the board and Victoria, key tasks have been assigned to two board committees: • the IHP Audit and Risk Committee (ARC) which has the responsibility for overseeing the process of identifying climate- related risks and opportunities and reviewing and challenging the assurance, where performed, over the Group’s TCFD reporting requirements; and • the IHP Remuneration Committee (RemCo) which is responsible for including climate-related and ESS factors into executive and company reward. 28  TABLE 2. ROLES AND RESPONSIBILITIES IHP board and ESS DNED The board provides leadership, setting the Group strategy, and is accountable for the long-term sustainability of the Group. It ensures likely risks and opportunities are reflected in the corporate strategy and budgets and ensures sound operating practices are embedded into the business. IHP board committees: Audit and Risk Committee (ARC), Remuneration Committee (RemCo) CEO – IHP Senior leadership team (SLT) Sustainability Forum and Sustainability Manager The Chair of the board ensures the board meets its responsibilities which includes climate change. Assisted by the ESS DNED, they ensure climate-related matters actions and strategies are included on the board meeting agendas at least three times during the financial year and are considered as part of the board decisions and strategy contributing to the long-term sustainability of IntegraFin. The ARC is responsible for oversight of risks to the business including those arising from climate- related scenarios. ARC challenges management on progress of actions identified to manage the risks and improve the overall control environment. The ARC has responsibility for monitoring the quality of reporting of the Group’s GHG emissions and future decarbonisation targets within the TCFD disclosure. The Group Chief Risk Officer (CRO) oversees the delivery, completeness, and quality of the full TCFD report. The Group Internal Audit team undertake thematic reviews of processes, procedures, and controls and suggest improvements. Both will utilise external consultants and expertise when needed. RemCo supports governance accountability by linking deliverables with remuneration. TCFD and ESS targets will be reviewed in 2024. The CEO, in conjunction with the board, defines the strategy, values and culture of the Group. The CEO sets the leadership tone and leads the senior leadership team in delivering the Group strategy and achievement of business targets. This includes responsibility for ensuring climate-related change is embedded into the Group’s business strategy and plans. The SLT apply the plans to their business operations in support of the CEO. They are responsible for business risk identification, including climate-related change and scenario risk and opportunities assessments. In this regard they support the ARC with risk management activities. They are responsible for embedding actions into their business plans, and support emissions data gathering and delivering against targets. We will be implementing a Sustainability Forum comprising members of the SLT who will be responsible for supporting and driving the implementation of the broader sustainability agenda. The forum will support the CEO and SLT in delivering the wider Group sustainability plans and initiatives and embedding a climate-aware Group culture. The forum will be supported by the Sustainability Manager who provides internal expertise to colleagues. Collectively the forum and Sustainability Manager project manage the TCFD reporting process. Business teams and Employees Business teams are responsible for identifying material climate change risks, opportunities and impacts and for owning and/or supporting the delivery of related actions. This may include the update and modification of processes operated within the business. The Group aspires to ensure that climate change and the wider sustainability agenda is embedded within the culture of our business. Over the coming year we will strive to ensure that our employees are engaged in understanding the issues and impacts. We recognise that employees are usually the first to see the change opportunities and we plan to utilise the employee engagement forum to engage colleagues in managing the risks and opportunities and supporting the implementation plans. 29 Progress during the year How climate-related risks and opportunities are considered During FY23, we set out to enhance across our Group our understanding of relevant climate risks and opportunities for We have continued to embed the the business, improve our carbon consideration of climate-related risks reporting and establish a roadmap and opportunities across our business towards setting a net zero carbon throughout the year. This includes target. The board has overseen engaging the business functions across progress of this programme across a range of activities, examples of which the year and we are in the process of are set out in the table below. developing a performance dashboard to provide the board with ongoing performance data. Our board and senior management team have also completed training on the legal, economic, and strategic aspects of climate change risks and opportunities during the year. Management conducted its first climate scenario analysis which provided further insight into climate- related risks and opportunities. These outcomes have been presented to the ARC and board. The risks and opportunities are considered by the board and management when setting and updating strategy, this includes any financial impacts and assessment through the Company’s viability testing. Remuneration In FY23, performance-based awards of executive directors were referenced against four key areas, one of these was risk, regulation and ESG. More detail on how these were measured can be found in the Remuneration section on pages 131 to 133. TABLE 3. EX AMPLES OF CLIMATE-REL ATED BUSINESS ACTIVITIES ACTIVITY CONSIDERATION Operations Monitoring and management of our buildings’ exposure to climate-related risks. Measurement and management of operational emissions. Procurement and Supply management (including IT services) Monitoring suppliers’ contribution to our GHG emissions and considering the resiliency of suppliers against potential climate-related risks. Actuarial and Risk Developed our approaches within our Group’s regulated entities ICARA and ORSA processes reflecting on the risks and impacts of climate-related changes. Internal Audit Incorporated the assessment of climate-related risks and management processes into our annual internal audit review plans. Compliance Ensuring we assess and meet our climate-related standards and obligations. Financial reporting Consideration of the potential impacts of climate-related changes on the financial statements. Investor Relations Managing our investor stakeholders and supporting voluntary disclosures through CDP (formerly known as Carbon Disclosure Project). Risk Management Embedding climate-related risks into our risk management framework. 30 2. Strategy Understanding the climate-related risks and opportunities is fundamental to shaping our strategy towards acting as a responsible business. We have considered the risks and impacts that climate-related change might present to our Group strategic objectives. TABLE 4. CLIMATE-REL ATED R ISKS TO GROUP STR ATEGIC OBJECTIVES CLIMATE RISK DRIVER CHALLENGES RISKS STRATEGIC OBJECTIVES POTENTIALLY IMPACTED1 Physical The immediate risks arising from weather- related events and slow onset climatic changes. Acute, e.g. Operational Sustainable growth • Change in frequency of weather Reputational Increase earnings Business Planning and Environment Retain strong balance sheet events e.g. flooding, wildfires, high winds. • Change in the severity of weather events e.g. heatwaves, lower temperatures. Chronic, e.g. • Sea level rises • Changing precipitation • Rising temperatures Transition The financial risks arising from the transition to a lower carbon economy. Liability/Regulatory Action The risk of actions initiated by claimants who have suffered loss and damage arising from climate change and non-compliance with regulations. • Arising from changes in policy (changes in emission reduction targets), technology (new low carbon technologies imposed), social pressures and consumer preferences (demand for lower carbon products and services). • Potential big shifts in the value of assets or costs of doing business. Market Sustainable growth Business Planning and Environment Retain strong balance sheet Reputational Generate cash Legal and Regulatory Increase earnings • Climate laws and regulations are Reputational Sustainable growth being developed across jurisdictions and lack of compliance could lead to fines and/or penalties. Legal and Regulatory Invest • Active litigation ranges from individuals and corporates, as well as class actions where damage has been caused and restitution sought. 1 Details of the risks and opportunities arising from the climate-related drivers to the group strategies, as well as the impacts of these risks are set out in table 8. 31 Understanding our emissions Where we are today and the impacts on strategy Operational emissions During this year we have achieved more insight and understanding of Our operational carbon footprint has been calculated and assessed across the sources and scale of emissions the last two financial years to enable us to understand the most material across our business. We have emission sources. The analysis, based on data from table 10 on pages 41 to assessed these as: 42, indicates that emissions from purchased goods and services represent the largest single source, at 48% (FY22: 43%) of the total. Business travel, • Operational emissions – these commuting and homeworking combined, representing 26% (FY22: 26%) is the cover Scope 1, 2 and 3 arising next largest source, with electricity use and gas use combined representing from running our operations e.g. 17% (FY22: 24%). leased premises, electricity and gas, and our goods and services supply chain. • Asset owner – this represents Scope 3 investments controlled by us through the employee pension fund or owned by the life companies. A review was performed of our operational emission categories, data collection procedures and the application of the GHG protocol conversion factors across our business activities. We believe that these categories fall more within our immediate control and, as such, will drive some of our short- and medium-term initiatives. In order for us to be able to set credible strategies and targets to meet our reduction aspirations, we needed to assess where we are today. This FIGURE 2. SUMMARY OF GHG EMISSIONS FOR IHP GROUP 2023¹ Employee commuting and homeworking: 14.0% Natural gas: 4.4% Electricity: 12.9% Business travel: 12.2% Waste generated in operations: 0.3% Fuel and energy related activities: 1.0% Capital goods: 7.6% Purchased goods and services: 47.6% 1 We have not yet included the emissions within our investment Scope 3 profile for the Insurance assets given the level of complexity and uncertainty on the consistency of published ESG profiles relating to these assets review provided valuable insights An independent site audit was performed, with the aim of helping us understand into our operational emissions and a areas of opportunity for delivering reductions in our operational GHG emissions. range of strategic and tactical steps The immediate focus fell on Scope 1 and 2 gas and electricity emissions. and initiatives we could adopt to reduce our Scope 1 and 2 emissions. Further work is still required across the broader Scope 3 elements which we will complete as part of our target setting for 2024. 32 TABLE 5. ANNUAL ENERGY USAGE ACROSS IHP GROUP SITES ENERGY USE (kWh) FY23 FY22 Site UK Gas Electricity Total 540,415 863,490 1,403,905 Australia 136,859 238,570 375,429 Proportion of total (%) 79% 21% Gas Electricity Total 800,092 860,201 1,660,293 108,655 255,757 364,412 Proportion of total (%) 82% 18% Total 677,273 1,102,060 1,779,333 908,747 1,115,958 2,024,705 Proportion of total (%) 38% 62% 45% 55% The largest energy-using site across our estate is the London Head Office on Clement’s Lane, which uses 68% (FY22: 72%) of the total energy, 75% (FY22: 83%) of the gas and 64% (FY22: 63%) of electricity. TABLE 6. ANNUAL CARBON EMISSIONS BY LOCATION ACROSS IHP GROUP SITES TONNES OF CARBON EMISSIONS (t CO2e) FY23 FY22 Site UK Australia Total Proportion of total (%) Scope 1 Scope 2 Total 99 25 124 25% 179 188 367 75% 278 213 491 Proportion of total (%) 57% 43% Scope 1 Scope 2 Total 146 20 166 166 217 383 312 237 549 30% 70% Proportion of total (%) 57% 43% In relation to carbon emissions, the almost-four-times higher carbon intensity of the national grid in Australia compared to the UK results in the carbon emissions from the Melbourne site being 51% (2022: 57%), whilst only using 22% (2022: 23%) of the electricity. Emissions from electricity use in Australia make up 38% (2022: 40%) of the Group’s Scope 2 emissions. As part of our 2022 initiatives, solar panels have been installed of our office in Melbourne. This is expected to provide up to 57 MWh annually of electricity for the business and reduce the Scope 2 emissions at our Melbourne office by 21% going forward. Based on the site audit we have set out a range of short- and medium-term themes and initiatives that will help us reduce our operational Scope 1 and 2 emissions. Strategic reduction themes – Scope 1 and 2 operational emissions There are several strategic levers which we plan to deploy to reduce carbon emissions, and these have either already been reflected or are now being assessed as part of our financial planning requirements. The table below shows strategies available to the Group. Some of the short-term initiatives may contribute to estimated savings in the medium-term initiatives, for example the site selection for the new London premises may capture some of the reductions of carbon emissions identified in moving away from natural gas. 33 TABLE 7. STR ATEGIC REDUCTION THEMES – SCOPE 1 AND 2 OPER ATIONAL EMISSIONS STRATEGIC REDUCTION THEME Site selection and specification Flexible working COMMENTARY When selecting our new London premises, the site selection criteria will include a requirement for efficient plant and equipment, a commitment to net zero from the landlord, zero carbon electricity, on-site renewable energy (if possible), and avoiding natural gas (if possible). On-site IT infrastructure will be assessed and where possible will be limited and placed in efficient off-site co-location premises or in the cloud. The use of flexible working offers the opportunity to appraise the size of office space required. Our own studies indicate that whilst flexible working practices have been adopted, the current space-management approach has resulted in a sub-optimal utilisation. In the time left on the lease at Clement’s Lane, we will be considering how to consolidate onto fewer floors and use the space to develop a new model workplace to test the office aspects of a new digital workplace: a set of technologies and policies to run a more efficient floorplan. ESTIMATED SAVING t CO2e TIMEFRAME SHORT (2023-25) MEDIUM (2025-35) 80 t CO2e Short term 175 t CO2e Short term Renewable energy - Estimated Carbon saving A major part of our carbon reduction strategy will be a move to renewable energy. This will largely be achieved from a new London site. However, in the short-term, opportunities on our current leased premises are more likely be achieved through power purchased agreements (PPAs) or green electricity tariffs. This has already commenced following the solar array which has been installed at the Melbourne site early this year, the benefits of which will be recorded in 2024. 396 t CO2e Short to Medium term Consolidate operations in high efficiency and low carbon environments There are opportunities to move energy intensive operations to higher-efficiency environments and lower carbon grids. This includes the remaining data centres and servers in office environments. 84 t CO2e Medium term Move away from natural gas Whilst there are a number of attractive renewable sources for electricity, there are no price competitive low carbon substitutes for natural gas. As such, moving away from the use of gas at all sites, should be a priority. 166 t CO2e Medium term Engage with landlords The company should seek to include green-lease clauses into leasehold agreements, placing obligations on the landlord to deliver a net zero carbon strategy. 28 t CO2e Medium term Asset owner Looking forward – Scenario Analysis Given the complexity and diversity of The risks and impacts associated with climate change for our Group will be the underlying data required, we have determined by the global governmental, social and technological approach to yet to establish our Scope 3 approach emissions reductions and projected temperature increase limits. as an asset owner for directly held assets within the life companies and This review examines three possible climate scenarios, drawing on the employee pension funds. We will be Intergovernmental Panel on Climate Change (IPCC) representative concentration developing our insight and strategic pathway (RCP) models and the Financial Stability Board (FSB) and Network for options with regard to these Scope 3 Greening the Financial System (NGFS) scenarios. Each scenario represents the emissions as part of our medium-term modelled increases in global average temperatures from pre-industrialised levels development plan. We aim to be no and the predicted mitigation approach that would deliver them. less than in line with our peers and to ensure that our policy as an asset owner matches our corporate agenda and targets in relation to climate change. We will be transparent in our approach in future reporting and disclosures. 34 The key facets of each scenario are summarised below. FIGURE 3. SUMMARY OF CLIMATE R ISKS IN SCENAR IOS Climate scenarios considered Net Zero by 2050 Delayed transition Assumed global temperature rise Aligned to RCP 2.6 Aligned to RCP 4.5 At least 50% chance does not exceed 1.5⁰C 67% chance to limit to 2⁰C Key assumptions Global annual emissions do not start to decrease until 2030. In the short- term fossil fuel is used to recover from economic challenges. From 2030 strong climate policies are implemented. Including a tax on carbon emissions, and emissions decline rapidly. Ambitious climate policies are introduced immediately. Innovation and fast technological changes, medium to high use of carbon dioxide removals. IntegraFin more impacted by policy and technology changes Nationally Determined Contributions (NDCs) Integrated with RCP 6.0 Likely to limit to 2.6⁰C Current pledged policies, even if not yet implemented and not aligned to UN ambition level, are met. Technology change is slow, and policy change is low. Moderate to severe physical risks but relatively low transition risks in short term, high in long term. IntegraFin more impacted by physical climate change impacts Physical impacts Acute Low Moderate High Chronic Moderate Moderate to high Very high Transition impacts Market & tech High Very high Very high Reputation Moderate to high Moderate to high Moderate Policy & legal High High Moderate Society Moderate Moderate High Scenario analysis We recognise that the profitability of our business is closely correlated to the fluctuations in both the global and particularly the UK economies from where our clients’ wealth predominantly originates. However, we have also considered a range of other climate-related boundaries and impacts on our business such as our ability to maintain operational capability, the resiliency of our supply chains, the financial markets and the social, political and economic factors affecting our stakeholders. These have been collated into what we consider to be the more significant climate-related risks which might affect the Group over the short, medium and long term. The exercise has also helped to highlight possible management actions available to mitigate the potential impacts. In addition, we have recognised that there are opportunities presented by transitioning towards a low carbon economy for the Group and our stakeholders over the longer-term. From a modelling perspective it should be noted that scenarios are not predictions and reflect a series of assumptions to assess a range of possible outcomes. Consequently, climate related scenarios are currently limited by factors such as simplifications in terms of data inputs and event outcomes which are likely to influence the range of potential future impacts. Given the limited level of certainty, we use scenario analysis as a useful input to assess potential risks and opportunities at this point. 35 Key risks and opportunities Drawing on the scenarios, we have identified the material risks and opportunities and assessed these for impact. Measuring risks and opportunities We have measured the impact of the climate risks using the Group’s To consider the impacts consistently on the business we used the Group’s risk business risk impact assessment methodology, which considers both quantitative impacts (e.g. changes to revenue matrix (BRIAM). This assesses or costs) and qualitative impacts (e.g. reputational and client impacts) and their the level of impact against five likelihood. categories: operational disruption, financial impact, reputational and In line with guidance, we have assessed the risks and opportunities across three media interest, regulation and duty operating categories: of care to clients. Individually and collectively, these are considered to • Entity level – reflects the Group-wide impact of climate related risks and be the significant drivers relevant to opportunities. the management and operation of the business in the context of all our • Portfolio level – distinguishing our platform service from that of the life stakeholders. companies and T4A. • Product level – reflection of the T4A and insurance product risks. Managing the risks The most significant scenario-based Given the operating structure of the Group and the level of interdependency of risks identified are set out in table 8 the Transact branded business, we considered the impact of each climate change below. scenario to potentially have an influence on all three operating categories. TABLE 8. SCENAR IO -BASED R ISKS, MATER IALIT Y AND AVAIL ABLE STR ATEGIC RESPONSES. IMPACT PROFILE HAS BEEN BASED ON THE GROUP RMF BUSINESS RISK IMPACT MATRIX (BRIAM) Low Medium High BRIAM impact score of less BRIAM impact score greater than nine BRIAM impact score greater than 15. than nine. and less than 15. POTENTIAL MATERIALITY OF IMPACT BY TIMEFRAME POTENTIAL IMPACT SCENARIO 2025 (SHORT TERM) 2035 (MEDIUM TERM) 2050 (LONG TERM) STRATEGIC RESPONSE AND RESILIENCE Potential disruption to technology and data centres and damage to offices at risk of flooding resulting in increased costs. Potential disruption to employee’s availability to work and ability to travel to office (transport, offices, caring responsibilities). Net Zero by 2050 Delayed Transition NDC’s Include climate in supplier risk assessments, develop contingency plans for all cloud and data services. Our ongoing investment in IT services will support further flexibility to location of working and efficiencies across the hybrid working model. Location of offices in London are being reviewed. CLIMATE-RELATED RISK Acute and Chronic (Physical) The risk of longer- term changes in climate patterns such as flooding, extreme weather and higher temperatures impacting our operations. Failed internal processes, people and systems. 36 CLIMATE-RELATED RISK Policy legal and regulatory (Transition) The risk that there is a need to comply with increasing legal, regulatory, and disclosure obligations. Market (Transition and physical) The risk that climate change or the transition to a lower-carbon economy negatively impacts the global economy, and therefore the value of assets on our platform and in our range of managed investment solutions. Reputational (Transition) The perceived risk that we are not contributing or developing an appropriate climate strategy. POTENTIAL MATERIALITY OF IMPACT BY TIMEFRAME POTENTIAL IMPACT SCENARIO 2025 (SHORT TERM) 2035 (MEDIUM TERM) 2050 (LONG TERM) STRATEGIC RESPONSE AND RESILIENCE Net Zero by 2050 Delayed Transition NDC’s Net Zero by 2050 Delayed Transition NDC’s Net Zero by 2050 Delayed Transition NDC’s A poor or deficient ESG strategy across the Group causing delays in compliance with regulation requirements leading to fines and severe reputational damage. Significant cost increases as supply chains e.g. IT, data centres and energy suppliers accelerate delivery of zero based services. Potential for some product offerings to be restricted or sanctioned by regulators for non-compliance. Assets on our platform are exposed to climate-related risks, which can lead to poor performance during the transition to a low carbon emissions economy, impacting customer returns, values of FUD and our fee income. Reduced net inflows to FUD as investors react to market volatility. Sustained levels of economic inflation impacting cost of living and available disposable income. Potential for earnings growth to decline or stall coupled with increase in costs putting pressure on Group profit margins. Poor public perception of the Group as a result of inadequate or misleading disclosure regarding the Group’s climate strategies. Customers become unhappy with the level of responsible investment offered by our IFA’s and move funds from the platform to more integrated solutions offered by peers. Deterioration in meeting stakeholder expectations. We take our regulatory responsibilities seriously. Our Risk and Compliance teams conduct regular horizon scanning and review regulatory publications on an ongoing basis. We are developing our TCFD reporting and have identified strategies in the short and medium term to reduce our operation emissions. We have developed our sustainability team and will be implementing policies that support our sustainability values with suppliers. We hold a diverse portfolio on the platform which helps to mitigate market shocks either in a region or specific investment sector. Our clients are advised and as a result are well informed about managing long-term investment growth and objectives when markets are volatile. We maintain and actively grow our IFA base and consequently fee generating clients. We proactively monitor market movements, inflows and outflows to ensure our operations are responsive. This supports our financial planning process to ensure income, costs and capital is managed in line with external factors. We are closely following regulatory developments to ensure that we reflect requirements in our business strategy. We have engaged with 3rd party subject matter experts to obtain a better level of insight and assessment of the climate related risk to the business. We have developed and agreed some challenging operational Scope 1 and Scope 2 reduction targets. We continue to be transparent and engage in reporting through TCFD and CDP on our climate related progress. We are open about the steps and actions that we still need to take towards meeting our commitment of meeting the Governments net zero targets by 2050. 37 Managing opportunities TABLE 9. OPPORTUNITIES Opportunities are identified and assessed slightly differently. Often, they emerge from first line ownership (see Governance structure above), via our Horizon Scanning Exercise, which is conducted no-less-than-quarterly or as a result of management action plans and remediations presenting opportunities as part of the mitigation process. For climate change specifically we have used the scenario planning exercise, as detailed above, to consider opportunities on a forward- looking basis up to 2050. These will be considered and embedded into our longer-term periodic horizon scanning process. As detailed in the Governance section, opportunities are also explored and identified by the senior leadership team, aided, were necessary, by engaging third party specialists, and teams around the business. through operational process re-engineering, whereby processes are regularly reviewed to identify possible improvements which include climate considerations; for example, our Software Development and Client Operations teams have been identifying opportunities to reduce the volume of paper applications received by digitalising the client onboarding process. 38 OPPORTUNITY DEFINITION TIMEFRAME PROGRESS IFA Engagement There is an opportunity for us to engage in more depth with our financial adviser base to understand the demands and expectations of clients in relation to climate-related investments. POTENTIAL IMPACT Short, medium, long Incorporated within the group’s strategic initiative pathway. • The retention of our financial adviser base is key to our strategy of growing FUD and the business. • Developing our Transact and T4A product ensures we continue to use our resources to create value for our stakeholders improving our reputation and longer-term market share. DELIVERY APPROACH: We have 7,683 (FY22: 7,537) financial advisers and 230,294 (FY22: 224,705) clients registered to use the Transact platform. This provides us with a unique opportunity to engage with our IFA base to obtain a good understanding of our clients’ expectations and demands in relation to climate-related investments and supporting services. We will continue to be responsive, where possible, for the inclusion of sustainable investments onto the platform and for these to be included within tax-efficient wrappers, as well as general investment portfolios. We recognise that all parties are embracing the need to reduce their carbon emissions. Through our in-house technology, we have the opportunity to develop processes with the financial advisers and clients that embrace sustainable practices e.g. paperless statements and digitalisation of on-line services. OPPORTUNITY DEFINITION TIMEFRAME PROGRESS Operational efficiencies and embedding a sustainable culture There is an opportunity for us to develop and deliver operational efficiencies across our business model. Short, medium, long Incorporated within the group’s strategic initiative pathway. POTENTIAL IMPACT • Developing carbon reduction strategies can lead to longer term cost efficiencies. • Avoiding potential carbon taxes. • Developing sustainable operational practices will increase the business resilience and eliminate potential climate-related shocks. • Improved reputation of the Group. DELIVERY APPROACH: We have identified a range of short-, medium- and longer-term opportunities to develop and incorporate sustainable practices within our operations. Implementation of the Sustainability Forum will engage senior leadership in embedding climate, and wider ESG practices, across the Group. Development of a sustainable culture, which is reflected in our strategy and engagement of staff, financial advisers, clients and other external stakeholders. Resilience of strategy and Our carbon and climate change transition plan viability assessment The current viability testing is based sets out the next steps to be taken over the short, medium and long term for the upon a three-year planning cycle. Group, as it transitions towards achieving its strategic goals of being net zero. The below illustrates the achievements of the Group in the last two years and environment that a delayed transition to net zero presents to our business SHORT TERM (2023-2025) We do not envisage any planning impacts in the current three-year cycle based on the scenarios set out above. Specific climate-related scenarios have a longer-term horizon and consequently we have not yet included any financial impacts based on strategic opportunities in our planning process for this financial year. We have, therefore, largely assessed the impacts of scenarios on a qualitative basis. We believe that the climate agenda across our financial adviser base and clients is developing but has yet to develop any maturity on shaping investment decisions. The scenarios present insight about the physical impacts to the operations. In addition, it provides the challenges we will face from a rapid and strong government policy and legislation implementation. We are not unique in this situation and consequently most companies are equally assessing their related financial and strategic impacts of climate change scenarios. By association we expect our platform, which holds a diverse portfolio of investments, to evolve as markets and investors, over time, select those companies whose economic value continues to grow because of embracing timely and opportunistic climate-related strategies. The Group’s preferred scenario is an orderly transition to net zero by 2050 as this aligns with the Group’s current strategy. This outcome has the least significant impact on key stakeholders, as defined on page 80. FIGURE 4. SUMMARY OF STR ATEGIC INITIATIVE PATHWAY YEAR 1 REPORTING 2022 ACHIEVEMENTS • Confirmed baseline year for • Recognised of climate emissions change risks & opportunities • Create Scope 1-2 inventory • Establishment of senior • Measured emissions and report governance responsibilities YEAR 2 REPORTING 2023 ACHIEVEMENTS • Revised baseline year for emissions • Updated Scope 1-2 and created Scope 3 inventory • Measured and reported emissions • Extended governance, started full risks & opportunities assessment • Engagement of business leadership • Set net zero target and • Climate change register of roadmap compliance • Measure, reduce emissions • Employee awareness and and report training • ESG materiality assessment • Supply chain climate change • Full Climate Change Risks standards register • Validation of net zero • Supply chain standards roadmap extended to sustainability • Measure, reduce and report • Sustainability strategy MEDIUM TERM (2025-2035) emissions and strategy • Climate Change Risks framework review and updating • Employee, investor, client engagement • New product development • Adoption of ISSB and TFND standards • Action delivery against net • Supply chain auditing zero roadmap • Sustainability strategy • Measure, reduce and report embedded emissions and strategy LONG TERM (2035-2050) • Asset owner engagement and influence • New product development • Platform ESG insights supporting IFA/Clients 39 3. Risk Management 4. Metrics and targets Risk management is a core part of The Group adopted the reporting requirements of the Streamlined Energy and our culture. Climate-related risks are Carbon Reporting (SECR) policy, as implemented by the UK Government in 2019. managed as part of our Group RMF We have been collating GHG emission data covering several financial years and which defines the Group’s systems this has allowed us to establish further insight into the areas of our Scope 1 and of governance, risk appetite and risk 2 emissions and estimates for our Scope 3 emissions covering our operational management processes. See pages 60 activities. to 68 for more information on our risk management processes. Carbon emissions calculation methodology and assumptions We have assessed the impacts of Scope 1 covers emissions from sources that an organisation owns or controls the three climate risk drivers against directly. For the Group, this comprises emissions from the use of gas to run the strategic objectives of the boilers. Group. These are set out on page 31 above. We have utilised the scenario Scope 2 covers emissions that an organisation makes indirectly, for example assessment to measure the resiliency when energy is purchased. For the Group, this comprises the purchase of of our business strategy and the electricity. This is reported using the location-based accounting method using the impact on the viability of our business UK and Australian Government’s GHG conversion factors for 2023. against the scenarios, as set out on pages 36 to 37. Both Scope 1 and 2 include emissions relating to entities and assets which the Group own or control. Where possible, primary energy-use data has been used. We have considered, in more detail, Where this is not available, estimations have been made based on average the risk and opportunities facing energy usage on other sites where primary data is available. Where sites are our business based on the scenario shared with other businesses, it is assumed that energy usage is proportionate parameters. Utilising our RMF with office space leased. methodology we have evaluated the business impacts of the risks Scope 3 comprises emissions which are a consequence of an organisation’s and opportunities identified and will business activities but that it does not directly control. For the Group these record these within the corporate risk activities, including the methodology for collecting the related emissions register. These profiles will be tracked data and any significant judgements or assumptions made to determine the periodically to assess whether any emissions, are shown in the table below. TABLE 10. SCOPE 3 DATA METHODOLOGY AND ASSUMPTIONS CARBON EMISSIONS CALCULATION METHODOLOGY SIGNIFICANT JUDGEMENTS OR ASSUMPTIONS SCOPE 3 CATEGORY Purchased goods and services and capital goods Emissions data calculated by annual spend using DEFRA UK Footprint results. Data for the top 30 suppliers of the Group (all UK-based) in terms of spend is used as this is where we think we can have the most influence on supplier behaviour. It is assumed that this is a percentage of electricity use. Fuel and energy related activities UK conversion factor for Transmission and Distribution losses applied to total purchased electricity use. material changes have arisen and to determine whether the forward-looking response remains appropriate for our strategy. Understanding and managing the risks Once risks are identified, our Risk Appetite Framework defines the maximum level of residual risk the board is willing to take in pursuit of its strategic objectives and in the normal course of business. Exceeding risk appetite limits potentially presents a financial or operational threat to the business which could cause harm to its customers or the firm. Whilst the Group has not set any specific climate- related appetites, it recognises that existing appetites for operational and financial thresholds maybe impacted by climate change matters and therefore considers root cause, of which climate maybe one factor, for any appetite breaches. 40 Waste generated in operations Business travel Employee commuting and homeworking Solid waste: Obtain waste weight data and disposal routes for all sites, or where not available, estimate based on sites where data is available. Water use: Water meter readings requested from landlord, or estimated based on sites where data is available. Wastewater: Calculate using GHG conversion factors based on total water usage. Expense claim data is used to collect distance travelled using type of travel multiplied by the relevant GHG conversion factors Emissions estimated from annual commuting and homeworking survey, which includes mode and distance of travel and typical number of days travelled to the office per week. Where primary data is not available, it is assumed that each Group location has similar levels of waste per employee despite the differences in geographical locations within different countries and differing rental situations of premises. Where distance of travel has not been recorded an estimation has been based on cost of travel. Results are based on extrapolating the responses of the annual commuting and homeworking survey from 88% of the staff. The data availability for Scope 3 emissions is not as accessible as for Scope 1 and 2 and therefore the data quality is not as high. We will continue to review and refine our methods for collecting data for all Scopes to ensure the accuracy of the reporting improves year-on-year. 41 Greenhouse gas (GHG) emissions data TABLE 11. SCOPES 1, 2 AND 3 UK AND ISLE OF MAN EMISSIONS (t CO2e) AUSTRALIA EMISSIONS (t CO2e) TOTAL EMISSIONS (t CO2e) FY23 FY22 FY23 FY22 FY23 FY22 SCOPE 1 AND 2 Scope 1 Scope 2 (Location-based) Total Scope 1 and 2 SCOPE 3 Purchased goods and services Capital goods Fuel and energy related activities Waste generated in operations Business travel Employee commuting and homeworking 99 179 146 166 25 188 20 217 278 312 213 237 1,353 215 15 7 226 348 979 106 15 3 52 451 0 0 14 1 121 52 188 401 0 9 18 0 15 73 115 352 124 367 491 1,353 215 29 8 347 400 166 383 549 979 115 33 3 67 524 2,352 1,721 2,843 2,270 Total Scope 3 2,164 1,606 Total Scope 1, 2 and 3 2,442 1,918 In FY23, energy use under Scopes 1 and 2 were down 11% due to a combination of factors. Firstly, an unplanned reduction in boiler use in the London office and, secondly, a decrease in electricity usage in Melbourne following the installation of solar panels in April 2023. Scope 3 carbon emissions are up 37%. This is largely due to increased expenditure with key suppliers and a return to pre-pandemic levels of business travel between the offices in Melbourne and the Isle of Man and London. Other material movements in Scope 3 include a decrease in employee commuting and homeworking emissions, as a consequence of obtaining more detailed data directly from employees and placing less reliance on using national estimated averages. By far the biggest source of Scope 3 emissions is purchased goods and services from our key suppliers. However, next year we hope to move from a purely spend-based methodology to a hybrid methodology. Obtaining better data from our suppliers about their emissions will improve the accuracy of our data and to allow us to work with our suppliers to reduce emissions. 42 Intensity metrics As with last year, we believe number of employees and office space remain appropriate business specific metrics for calculating the Emissions Intensity Ratio, as they are the main drivers of our energy consumption and, therefore, emissions. TABLE 12. INTENSIT Y METR ICS Emissions Intensity Ratio – t CO2 per employee Emissions Intensity Ratio – t CO2 per m2 of office space UK AND ISLE OF MAN AUSTRALIA TOTAL FY23 FY22 FY23 FY22 FY23 FY22 4.4 0.5 3.7 0.4 4.9 0.4 4.5 0.3 4.5 0.5 3.8 0.4 Restatement 2022 Validation of metrics We have restated the published 2022 figures, where relevant, to use the most The GHG data calculation methodology appropriate calculations, conversion factors and data collection methodology. This process for FY23 has been validated has resulted in substantial changes to the individual Scope 1, 2 and 3 emissions by external independent sustainability figures, however, total emissions are only 3 t CO2 (0.2%) higher than published. consultants, Brite Green Limited, to ensure it is appropriate and robust. In We have also updated the FY22 data to include additional metrics such as addition, Brite Green have reviewed emissions from purchased goods and services, capital goods, fuel and energy the calculations and figures for FY23 related activities and wastewater. and the restated figures for financial year 2022 based on the agreed The updates and restatements to the emissions metrics reflects the continuous methodology. improvements being made to the quality and completeness of data and data collection methodologies. Boundary of reporting We have not included any metrics for Scope 3 emissions relating to investments on our platform as we have no control over the selection of investments which is made by our clients and their independent financial advisers. 43 Targets We are committed to setting targets aligned with best practice and have decided to follow the SBTi (Science Based Targets initiative) Net Zero Standard framework. As a result, we are selecting FY22 as a base year against which to set targets, instead of FY19 as indicated in last year’s report, as this is the most recent year for which data is available. We commit to reaching net-zero GHG emissions across the value chain by 2050 from a 2022 base year. The following targets have been agreed: SHORT TERM In the short term our main target will be to improve the quality of our data and to engage with our key suppliers to see how we can work together to reduce supply chain emissions. This is critical as carbon emissions coming from the supply chain represent 43% of total carbon emissions in our base year. MEDIUM TERM We commit to reducing absolute Scope 1 and 2 emissions by 60% by the end of financial year 2033 from a 2022 base year. We will continue to collect data on our Scope 3 emissions to identify how we can reduce emissions and what we can realistically commit to reducing. We will look at offsetting emissions through high-quality carbon credits from the voluntary carbon markets or supporting nascent neutralisation technologies in order to achieve carbon neutral certification. LONG TERM As a minimum we commit to reducing absolute Scope 1, 2 and 3 GHG emissions 90% by 2050 from a 2022 base year. 44 RESPONSIBLE BUSINESS — OUR PEOPLE Our people have always been, and will continue to be, our priority. People and culture We know that our employees are Last year, the board approved an FY23 highlights fundamental to our success and we employee engagement framework have worked this year to continue and work has continued to ensure to evolve our collaborative and the activities within this framework supportive culture through our have been implemented. These people strategy, aiming to recognise, have enhanced existing practices motivate and develop our talent by: and provided employees with the opportunity to share their views: • Reinforcing our purpose, strategy and values; • Introduction of private sessions between the non-executive board • Enabling our employees to and senior managers; develop and grow through training, development and career • A people update from the Head of opportunities; HR at each Group board meeting enhanced to include progress • Enhancing our engagement against the commitments that activities; were made to employees further to the 2022 engagement survey; • Ensuring our practices support inclusivity and employee well- • Maturing of the people being. management information (MI)and narrative provided to the Group In the past year we have focused board to better understand people on enhancing the engagement of trends within the Group; our employees through the creation of a feedback loop with the IHP • Introduction of employee forums board, a primary focus on well-being at each employing company in the and ensuring our culture continues Group. to promote inclusion and belonging for all. We will continue to evolve these activities in 2024. We have continued to embed our strategy, purpose and values to Looking forward, we are committed to support our employees to work maintaining a culture which ensures towards this common purpose as employees are motivated, committed we believe having a clear sense of to their role and supporting the Group purpose is fundamental to success both of the individual and the in achieving its goals. We are proud of the culture we have created which organisation. We have achieved we will continue to strengthen so as this through initiatives such as the to retain and attract the best talent to annual town halls with the Group drive further success. CEO and IFAL CEO, regular Group wide communications from the Group CEO and transparency about the progress we have made against the commitments made as a result of the 2022 engagement survey. Obtained London Living Wage accreditation for the Group Carried out our second Group engagement survey Embedded our new performance management framework to underpin our performance related variable pay structure Built a well-being suite at our London office Created a feedback loop between the board and employees through the introduction of employee forums Enrolled all managers in mental health training Enhanced our occupational maternity and paternity pay schemes Signed up to the “Women in Finance” charter 45 FY24 priorities People engagement Continue to enhance employee engagement and motivation Progressing our diversity, equity, and inclusion initiatives Deepening the board oversight of culture and how it supports our strategy Embed our Training and Development strategy Implement a mentoring programme Embed our Social strategy 46 Engagement survey Health and well-being We strive to ensure employee We place great importance on engagement is at the core of what promoting the health and well-being we do as we know that employees of our employees. We have continued are at the heart of our success. This to encourage open communication year we held our second annual Group and the breaking down of stigmas engagement survey which enabled us across the business this year so that to identify the progress we have made our employees are comfortable talking since last year’s survey, what we are and listening to each other. doing well and future opportunities for improvement. We were pleased this continued to be recognised within our employee The survey was comprised of engagement survey, with 94% of twelve sections: role, training and employees feeling their manager development, leadership, reward supports and cares about their and recognition, wellbeing, inclusion, wellbeing (up from 91% in FY22). We communications, our Company, our will measure this again in next year’s clients, engagement, enablement, and survey and hope to maintain our empowerment. We were incredibly strong performance in this key metric. pleased with the results of this years’ survey, which showed high levels of To ensure we promote the health engagement in almost all areas. We and wellbeing of our employees, we scored particularly highly in relation to have zero tolerance of any form of employee wellbeing (94%), inclusion bullying and harassment and this is (94%) and our values being aligned underpinned by our Anti-Harassment to the way we do business (93%). and Bullying Policy, to which all Our results in these areas were higher employees are required to adhere. than the external benchmarks and the results we received last year. We understand the necessity in supporting our employees in We were also pleased to see that managing their mental health. there has been a positive impact on This year we took a multi-pronged the engagement scores of the areas we focused on this year, particularly approach by enrolling all managers at our London office on a mental that employees understand their health awareness course facilitated Company’s strategy and values (92%), by an external expert organisation, managers are communicating in a provided non-mandatory sessions timely manner (93%) and the ongoing which employees were able to attend belief that our Company actively looks and continued to raise the number for ways to improve and better our of mental health first aiders in the service for clients (95%). Group, encouraging employee access to support when needed. Employees In response to this year’s feedback, can contact the mental health first we have received from employees, we aiders if they are experiencing mental have been able to create new localised health issues and need someone to action plans for each subsidiary talk to. Additionally, we continue company, recognising this multi- to participate in mental health tracked approach best engaged our awareness week. We used this week people to deliver results last year. to promote internal and external resources to employees and to raise Internal communications Engagement forums money for Mind, the mental health Our executive team recognise To further enhance the feedback loop charity that aims to ensure no one the importance of effective between the board and the rest of the has to face mental health problems communication with our employees, to workforce and utilise the knowledge alone. maintain our culture, keep employees gained to improve on our employee These initiatives have been further identify opportunities for the future. Smith, Head of Human Resources, complemented by a suite of non- This year, we are pleased we have chaired the Group’s first engagement aligned in a hybrid environment and offering, Rita Dhut, DNED and Lucy salary benefits our employees and enhanced our variety and formats of forums this year. their families can utilise if they are communications. Our on-line updates struggling with their physiological or and internal monthly newsletter Employees from each subsidiary psychological health. Our employees ensure all employees across the company were invited to attend the and their families are eligible to join Group are aware of the key business sessions and the topics of discussion our company-funded private medical updates and feel included in the were derived from key feedback from insurance. They also have direct business and its successes. Our Group the employee engagement survey. access to our employee assistance CEO, Alexander Scott, sends regular We have evaluated the success of the programme, which is a confidential updates to the whole Group. forums and have created an action service and offers professional help plan to implement improvements and support on a wide range of life Alexander and Jonathan have in these areas. We will continue to and domestic concerns. continued to provide all-employee hold these sessions over the next Company updates in person. These year, using key topics from the latest To promote and protect the well- events update colleagues on our engagement survey. The feedback being of our employees we have financial results and our plans for the obtained within these sessions will also built a well-being suite at our future. In these sessions, attendees feed into our People strategy. London office, which is comprised of are provided with the opportunity a medical room, a multi faith room to ask questions of the senior and a well-being room. management team as well engage at the social events that follow. We understand the importance of continuing to shine a light on other Our NEDs host regular ‘manager important topics and this year we converse’ sessions with members of have published our first Menopause the senior management team. This Policy. We have also appointed Menopause Champions for employees forum allows the senior manager to provide an update on key if they require confidential support. departmental issues, future plans and team environment. These meetings Additionally, a well-being hub are invaluable as they provide the has been created on our intranet, directors with insight into the culture which provides access to tools and and operational detail of the business resources to support this and other in a structured format. areas of well-being. 47 Talent management Support for certifications We understand the importance of Ensuring that we have robust talent We recognise the importance of retaining our existing talent and maps and succession plans in place providing job-relevant training, both taking steps to ensure we are best is key to preparing ourselves for the in increasing our productivity and in placed to attract future talent. A key future. This year we have ensured increasing employee engagement component of this year’s progress is that talent maps are in place for all and job satisfaction. To this end, the provision of wider ongoing training employees and succession plans are we encourage all our employees to and development opportunities and in place for the senior management pursue professional qualifications to the expansion of our internal Training team. Over the next year we will strengthen their skills. and Development team to enhance continue to deepen our succession the resource available. The team plans and work towards providing the Our people are offered a range of also continue to work closely with appropriate training and support for approved qualifications in the areas the business to secure fulfilment of these successors. our internal and external training of investment, pensions and other relevant subjects; all employees obligations. Additionally, we have re-structured are eligible to undertake these our variable remuneration offering, qualifications. To support our This year we have taken steps to so the annual cash bonus is more employees, the Group offers financial evolve our Training and Development tangibly linked to performance. This support by funding the cost of exam strategy and identified Training has had a positive impact on our entry and the core study text, as priorities. The implementation of this ability to attract and retain talent well as time support in the form of strategy started this year and will this year. All managers have been additional study leave. continue into next year. The priorities supported through this change and the talent maps referenced above have ensured that employee performance has been regularly reviewed throughout the year, so the process is fair and equitable for all. Our performance management framework will continue to evolve over the next year and all managers will be provided with the appropriate training and support. A focus over the next year to support our talent will be to design, implement and embed mentoring programmes. One strand will ensure all new starters to the business have access to a mentor to support their integration into the Group. A further strand will consider how we introduce mentoring for Women in Leadership. 2. Regulatory training 4. Diversity, Equity and Inclusion identified are: 1. Performance management 3. New Manager development 5. Mental health 48 Diversity, Equity and Inclusion (DE&I) We firmly believe creating a culture of belonging will magnify our success and we recognise the value of a diverse workforce and an equitable and inclusive workplace. We continue to operate on the principle that greater diversity Community of thought and experience within our business will deliver a more robust performance for our stakeholders. We take pride that each year we pro-actively source opportunities The Group already has a number of people processes in place to ensure that to support charitable causes our its employees and potential employees are treated fairly and equitably, which employees care about. This year, is underpinned by our Equal Opportunities Policy and our DE&I strategy. We we provided employees with the regularly review and update our policy in order to fulfil more effectively our opportunity to partake in supporting DE&I goals. the Turkey-Syria earthquake appeal. The Company committed to matching We work with our external recruitment partners to ensure a fair, non- the employee donations and we raised discriminatory and consistent recruitment process to provide opportunity to all a total of £10,600. potential employees, irrespective of gender or any other characteristic. To continue to demonstrate the value we place on working parents, we invasion of Ukraine, we also jointly strengthened our company maternity pay and company paternity pay offering sponsored a ‘Rock for Ukraine’ event this year, our family friendly offering is now competitive within the financial in February 2023. The event was To mark one year on from Russia’s services industry. held in London to raise money for the refugees from the war in Ukraine. The We have augmented our collection of data on Group and company diversity. With Company purchased tickets to the deeper analysis of the data and clarity on achievable yet ambitious milestones we event and all employees at the London intend to progress our evidence-based DE&I strategy and framework. office were able to recognise the hard For 2024 our planned actions include: • Partner with 10,000 Black Interns initiative. work of their peers and nominate a colleague to attend. In a new initiative for the Group, we partnered with Kingston University to • Partner with universities to provide social education to students from provide some of their finance students underprivileged backgrounds. from underprivileged backgrounds with the opportunity to complete • Review the structure of succession plans through the lens of equal work experience at our London office. opportunity for all. The first cohort of work experience students joined us in September 2023 and the students were able to obtain experience of working within several of our departments. Over the next year we will continue to explore ways in which we can enhance our community support and the evolution of our social strategy. 49 Our workforce Gender pay gap Our workforce is located in the UK, Australia and the Isle of Man. The IntegraFin Services Limited (ISL), headcount per subsidiary company, as at 30 September 2023, is as follows: one of our Group subsidiaries, is GROUP HEADCOUNT IntegraFin Services Limited IntegraLife International Limited Time 4 Advice Ltd IAD – (UK & Australia) Total Group headcount The charts below detail the gender ratio at each of the Group’s subsidiary companies. These ratios are accurate as at 30 September 2023. Female 38% Male Female Male ILINT 11% 89% IAD Female 30% Male 21% Female Male 79% ISL 62% T4A 70% 50 required to publish its gender pay gap information on an annual basis. These results have always compared favourably to other companies in our sector and our 2022 results demonstrate the ongoing steps we have taken to support an equitable and inclusive workplace. 457 9 69 114 649 MEAN GENDER PAY GAP INCL. BONUS MEDIAN GENDER PAY GAP INCL. BONUS 12% 13% 14% 10% 18% 3% 5% 9% 4% 4% 2018 2019 2020 2021 2022 We are pleased to see the median has remained low, helping to evidence that our overall pay structure remains fair and equitable. It is acknowledged that there has been a notable increase in the mean gender pay gap this year. This is due to the proportion of males in more senior roles being adversely affected by the following: • The retirement of some senior female employees; • A higher proportion of senior female employees reverting to flexible working hours compared to our senior male employees and, as required by the rules, their actual pay is included not their full-time equivalent pay; Diversity data • Senior female employees being The Group employed 649 employees and 6 NEDs are officers of the Company. on maternity leave as at the The breakdown of our people by gender as at September 2023, was as follows: snapshot date and therefore excluded, as required by the rules, from our data; • The impact of senior females being on maternity leave having a disproportionate effect when compared to males on paternity leave. We keep our pay and benefits structure under review to ensure our salaries are equitable when compared to internal peers and the external market. Board directors Senior managers Direct reports All employees Total employees MALE FEMALE NUMBER % NUMBER 6 3 12 402 67 43 60 65 3 4 8 217 % 33 57 40 35 649 We will not exclusively advantage Ethical standards females but will continue to remove any actual or perceived barriers female The Group is committed to high standards of governance, ethical and moral employees could have been more likely standards. Our core value of ‘doing the right thing’ underpins all our operational to face than their male colleagues. practices and informs our people’s conduct. This is formalised in our internal policies which are made available to all employees on our intranet. We require our employees to undertake regular, mandatory training to ensure awareness and understanding of their provisions. Our ethical standards are comprised primarily of the policies that govern employee conduct, including the Equal Opportunities policy, Anti-Harassment and Bullying policy, Anti-Bribery and Corruption policy, Anti-Money Laundering policy and Whistleblowing policy. Anti-bribery and corruption The Group has a zero-tolerance approach to financial crime to protect ourselves, our clients and our stakeholders. We have laid out the controls and processes in place to prevent financial crime in Our Anti-Bribery and Corruption policy and our Anti-Money Laundering Policy, as well as the responsibilities of our staff, both generally and in key departments or roles. The Anti-Bribery and Corruption policy and the Anti-Money Laundering policy are both reviewed and updated annually by the Money Laundering Reporting Officer. Internal audit conducts audits of our operations, controls and processes based on risk; areas and policies identified as high-risk, that includes financial crime related polices, form part of the risk assessment exercise to produce the internal audit plan. For more information on our internal audit approach, the Group Internal Audit Charter is available on our website at: https://www.integrafin. co.uk/legal-and-regulatory-information/. 51 Whistleblowing policy Recognising that the ability to voice genuine concern without fear of reprisal is essential, the Group maintains a Whistleblowing policy applicable to all employees and available to view on our intranet. This reiterates our employees’ responsibilities in reporting suspicions, outlines the reporting lines for whistleblowing concerns and establishes that whistleblowers are protected from retaliation. As with all policies, we periodically audit the Whistleblowing policy in line with the risks in the annual risk plan. Human rights and modern slavery We continue to recognise the important role we have to play in the support of human rights and we do not tolerate modern slavery of any kind. The Group continues to underpin this support through the publication and enforcement of our modern slavery statement which applies to all Group companies and all suppliers. The statement can be found at https://www.integrafin.co.uk/ modern-slavery/. 52 FINANCIAL REVIEW Headlines Transact platform operational performance Group revenue remained broadly steady in FY23, increasing by 1% to £134.9 million. This was against another year of economic volatility, due to elevated inflation and rapidly increasing interest rates, both of which impacted the financial markets and client wealth. Despite ongoing global economic challenges, FY23 ended with a record 230,294 Transact platform clients (FY22: 224,705) and Opening FUD Inflows Outflows Net flows Market movements Other movements1 Closing FUD FY23 £m 50,070 6,406 (3,753) 2,653 2,272 (36) 54,959 FY22 £m 52,112 7,275 (2,873) 4,402 (6,248) (196) 50,070 1 Other movements includes fees, tax charges and rebates, dividends and interest. 7,683 registered advisers (FY22: Funds Under Direction closed the year up 10% on FY22 at £55.0 billion. 7,537). IHP Group has a strong liquidity economic pressure on our clients, are due to the reliability and quality of our FY23 gross inflows of £6.4 billion, in a competitive marketplace and with ongoing profile, largely due to regulatory advised investment platform. capital requirements, and therefore benefited from UK Whilst outflows have increased to £3.8 billion, the annualised rate is 7% of interest rates rising, with interest opening FUD (FY22: 6%) therefore they are still within the historical banding, received on cash increasing from as a percentage of FUD, that we expect. One factor driving outflows is clients £0.6 million in FY22 to £5.3 withdrawing savings as the cost of living has increased and also as the world has million in FY23. returned to normal post lockdown. Headline IFRS profit before Our net flows of £2.7 billion are strong for the sector and represent more than tax rose 15% to £62.6 million 50% of the increase in FUD in FY23. (FY22: £54.3 million), however underlying profit before tax T4A operational performance fell by 4% to £63.0 million (FY22: £65.8 million). The In the 12 months to September 2022, T4A has increased CURO licence users by reduction is due to an increase in 22%, from 2,253 at 30 September 2022, to 2,752 at September 2023. administration expenses, largely driven by the ongoing strategic programme of investment in software and IT infrastructure and offset by the increase in corporate interest income. Profit after tax rose 13% to £49.9 million (FY22: £44.0 million). EPS is 15.1p (FY22: 13.3p). After removing all non- underlying expenses in FY23, underlying EPS* is 15.2p, compared with 16.3p in FY22. *Alternative performance measures (APMs) which are indicated with an asterisk. APMs are financial measures which are not defined by IFRS. They are used in order to provide better insight into the performance of the Group. Further details are provided in the glossary, on page 235. 53 Group financial performance There are two streams of Group revenue: investment platform revenue (96% of total revenue) and T4A revenue (4% of total revenue). Investment platform revenue T4A revenue Investment platform revenue has increased by £0.4 million year-on-year to T4A’s revenue was £4.8 million for £130.1 million and comprises three elements, 99% (FY22: 98%) of which is FY23, compared with £3.9 million for from a recurring source. FY22, an increase of 23%. This was driven by an increase in recurring Annual commission income (an annual, ad valorem tiered fee on FUD) and revenue from additional CURO user wrapper administration fee income (quarterly fixed wrapper fees for each of the licences. tax wrapper types available) are recurring. Other income is composed of buy commission and dealing charges. Interest income on corporate cash Investment platform revenue Annual commission income (recurring) Wrapper fee income (recurring) Other income FY23 £m 116.1 12.3 1.7 FY22 £m 115.9 11.6 2.2 Total platform revenue 130.1 129.7 Interest income rose from £0.8 million in FY22 to £6.4 million in FY23. The average Group corporate cash balance was £186.3 million over the year and the Bank of England base rate rose 3% over the course of the financial year, ending the financial year at 5.25%. This resulted in interest income on Average daily FUD for the year, arising from the performance of the assets in corporate cash balances rising £4.7 client portfolios, increased by 2% in FY23 to £53.6 billion. Annual commission million, to £5.3 million. We also income increased to £116.1 million in FY23. The increase in annual commission received another £0.8 million, being revenue was moderated by the reduction in the annual commission rate from a combination of interest due from 0.27% to 0.26%, with effect from 1 July 2022, therefore only three months of the Vertus loan facility and interest the reduction impacted FY22, but a full 12 months impacted FY23. received from HMRC. Recurring wrapper administration fee income increased by £0.7 million (6%) year-on-year, reflecting the increase in the number of open tax wrappers for both existing and new clients. Buy commission, included in other income, has been deliberately reduced as a component of revenue each year. Buy commission was £0.7 million in FY23 (FY22: £1.5 million), falling due to the threshold at which clients receive a rebate of buy commission being reduced from £0.2 million which was the threshold from 1 March 2022, to £0.1 million with effect from 1 March 2023. The reduction in the buy commission threshold is another positive step in our responsible pricing strategy, as we seek to remove an increasing proportion of clients from the buy commission charge and simplify our fee structure. 54 Operating expenses Employee costs Occupancy Regulatory and professional fees Other income – tax relief due to shareholders Other costs Non-underlying expenses – backdated VAT and interest Non-underlying expenses – other Total expenses Depreciation and amortisation Total operating expenses FY23 £m 53.9 2.8 9.8 (1.6) 6.8 - 0.4 72.1 2.5 74.6 FY22 £m 47.1 2.4 9.8 (2.4) 6.3 8.8 2.7 74.7 3.0 77.7 Operating expenses on a statutory IFRS basis have reduced by £2.6 million, or 3%. Underlying expenses Employee costs £53.9 million (+£6.8 million, +14%) Costs have increased due to increased headcount and pay rises. Group employee numbers through the year increased by 6% (FY22: 8%) from an average of 594 in FY22 to an average of 631 in FY23, this accounted for £2.7 million of the increase in costs. Notable senior additions are a CTO and CRO. We have also recruited a further 26 people in IT through the year, as we continue to implement plans announced in FY22 to significantly increase system development capacity across the Group and drive future efficiencies. We continued to enhance salaries to reflect the inflationary environment, recognising the pressures being placed on our people due to the rise in the cost of living. We also want to ensure we retain talent and we monitor the market with regard to inflationary pressures and market-competitive salary levels. Inflationary pay rises, including resultant impact on share scheme costs and company pension contributions, increased costs by £3.7 million in FY23. Current year VAT, included in Other costs (£3.6 million (+£0.4 million (+13%)) Current year VAT has increased by £0.4 million, largely due to increased investment platform development software fees, charged by IHP’s wholly owned software development company and now subject to reverse charge VAT. 55 Occupancy costs £2.8 million (+£0.4 million, +17%), depreciation and amortisation costs £2.5 million (-£0.5 million, -17%) Occupancy costs increased by £0.4 million, and depreciation and amortisation reduced by £0.5 million. The increase in occupancy costs is due to the head office lease ending in June 2023 and the accounting impact of IFRS 16, the Leases accounting standard, no longer applying. This means depreciation of the right of use asset has been replaced by rent expense for the final three months of the financial year. The lease is being renewed for a limited period. Regulatory and professional fees £9.8 million (no change) Regulatory and professional fees did not increase in FY23, due to an uplift in professional fees being partially offset by regulatory fees that were lower than expected. Other income – tax relief due to shareholders £1.6 million (-£0.8 million, -33%) Tax relief due to shareholders relates to life insurance company tax requirements and thus is subject to valuations at year-end, which are inherently dependent on market valuations at that date. Non-underlying expenses Non-underlying expenses – other £0.4 million (-£2.3 million, -85%) In FY22, within non-underlying expenses, we recognised £3.0 million of ongoing expenses. This was attributable to the IFRS requirement that we recognise the post combination deferred and additional consideration payable to the original T4A shareholders in respect of the acquisition of T4A, as remuneration over the four years from January 2021 to December 2024. However, T4A has not met the minimum threshold for highly stretching targets to earn the additional consideration element of post combination remuneration. Therefore, the post combination expense in respect of the additional consideration element that was recognised in FY21 and FY22 of £1.6 million has been released, and we have not recognised any cost in FY23. This has led to the reduction in non-underlying post combination remuneration expense for FY23 from £3.0 million to £0.4 million. Moreover, the post combination consideration cost in respect of FY24 and FY25 is expected to reduce to £2.1 million and £0.5 million respectively, as only the deferred consideration element will now be recognised. 56 Tax Consolidated statement of financial position The Group has operations in three Net assets have grown 10% (FY22: 8%), or £16.7 million, in the year to £189.9 tax jurisdictions: UK, Australia and million, and the material movements on the consolidated statement of financial the Isle of Man. This results in profits position are as follows: being subject to tax at three different rates. However, 96% of the Group’s Cash and significant cash flows income is earned in the UK. Shareholder cash has decreased by £5.1 million year on year to £177.9 Shareholder tax on ordinary activities million (FY22: £183.0 million). This is due to the strong cash flows generated for the year increased by £2.5 from operating activities being used to invest in gilts to maximise returns, million, or 24%, to £12.8 million whilst maintaining minimal risk on assets supporting regulatory solvency (FY22: £10.3 million) due to the requirements. The gilt investments increased by £19.3 million from £3.1 million increase in taxable profit and the to £22.3 million. We also paid dividends of £33.7 million in the year (FY22: increase in corporation tax rate from £33.7 million). 19% to 25%, with effect from 6 April 2023. We continue to operate without any need for debt, so have not incurred an increase in financing costs from the increase in base rate through the year, Our effective rate of tax over the rather, we benefited due to our strong corporate cash reserves. period was 20% (FY22: 18%). The effective rate of tax in FY22 Deferred tax asset, non-current provisions and non-current deferred was dampened by the effect of tax liability the backdated, non-recurring VAT expense of £8.8 million, incurred The reduction in the deferred tax asset of £5.2 million to £0.8 million in September 2022, being tax (FY22: £6.0 million) the non-current provisions of £5.6 million to £40.5 million deductible. (FY22: £46.1 million), and the current provision of £3.0 million to £7.7 million (FY22: 10.7 million), plus the increase in non-current deferred tax liabilities of Our tax strategy can be found at: £6.4 million to £7.3 million (FY22: 0.9 million) are all a function of the realised https://www.integrafin.co.uk/ and unrealised gains that have arisen on policyholder assets, as the value of legal-and-regulatory-information/. linked funds has risen year on year. ILUK holds tax charges deducted from ILUK policyholders in reserve to meet future tax liabilities and the tax reserve may be paid back to policyholders if asset values do not recover such that the tax liability unwinds. Investments and cash held for the benefit of policyholders and liabilities for linked investment contracts (notes 17, 18 and 20) ILUK and ILInt write only unit-linked insurance policies. They match the assets and liabilities of their linked policies such that, in their own individual statements of financial position, these items always net off exactly. These line items are required to be shown under IFRS in the consolidated statement of comprehensive income, the consolidated statement of financial position and the consolidated statement of cash flows but have zero net effect. Cash and investments held for the benefit of ILUK and ILInt policyholders have risen to £24.4 billion (FY22: £22.2 billion). This increase of 10% is entirely consistent with the rise in total FUD on the investment platform. 57 Capital resources and capital Regulatory Capital as at 30 September 2023 management To enable the investment platform within the Group to offer a wide range of tax wrappers, there are three regulated entities within the Group: a UK investment firm, a UK life insurance company and an Isle of Man life insurance company. IFAL ILUK ILInt REGULATORY CAPITAL REGULATORY REQUIREMENTS CAPITAL RESOURCES £m £m 33.3 201.4 23.8 44.4 261.6 41.1 Each regulated entity maintains Regulatory Capital as at 30 September 2022 capital well above the minimum level of regulatory capital required, ensuring sufficient capital remains available to fund ongoing trading and future growth. Cash and investments in short-dated gilts are held to cover regulatory capital requirements and tax liabilities. IFAL ILUK ILInt REGULATORY CAPITAL REGULATORY REQUIREMENTS CAPITAL RESOURCES £m £m 32.6 186.9 23.7 39.7 244.0 42.0 REGULATORY COVER % 133 130 173 REGULATORY COVER % 122 131 177 The regulatory capital requirements The Company’s regulated subsidiaries continue to hold regulatory capital and resources in ILUK and ILInt are resources well in excess of their regulatory capital requirements. We will maintain calculated by reference to economic sufficient regulatory capital and an appropriate level of working capital. We will capital-based regimes. use retained capital to further invest in the delivery of our service to clients, pay dividends to shareholders and provide fair rewards to employees. IFAL is subject to Investment Firms Prudential Regime (IFPR) regulatory The following table shows the surplus capital held by the Group, after capital and liquidity rules introduced consideration of the Group’s risk appetite and future dividend payments. This is in January 2022, following the shown on a different basis to the above table, which is on a regulatory basis while implementation in the UK of the the below shows equity on an IFRS basis. MiFIDPRU rule book. These prudential rules require the calculation of capital requirements reflecting ‘K’ factor requirements that cover potential harms arising from business activities. The K factors are calculated using formulae for assets and cash under administration. 58 Capital as at 30 September Dividends Total equity Loans and receivables, intangible assets and property, plant and equipment Available capital pre dividend Interim dividend declared Available capital post dividend Additional risk appetite capital Surplus 2023 £m 189.9 2022 £m 173.2 (30.6) (30.6) 142.6 (23.2) 119.4 159.3 (23.2) 136.1 (72.7) 63.4 During the year to 30 September 2023, IHP (the Company) paid a second interim dividend of £23.2 million to shareholders in respect of financial year 2022 and a first interim dividend of £10.6 million in respect of financial year 2023. In respect of the second interim dividend for financial year 2023, the board has declared a dividend of 7.0 (76.2) pence per ordinary share (FY22: 7.0p). 43.2 The financial year 2023 total dividends paid and declared of £33.7 million Additional risk appetite capital is capital the board considers to be appropriate compares with full year interim for it to hold to ensure the smooth operation of the business such that it can dividends of £33.7 million in respect of meet future risks to the business plan and future changes to regulatory capital financial year 2022. requirements without recourse to additional capital – see the Going Concern and Viability Statement on pages 69 to 71. The board considers the impact of regulatory capital requirements and risk appetite levels on prospective dividends from its regulated subsidiaries. IFAL’s Public Disclosures document contains further details and can be found on our website at: https://www.integrafin.co.uk/legal-and-regulatory- information/. As stated in the Chair’s report, the board has declared a second interim dividend for the year of 7.0 pence per ordinary share, taking the total dividend for the year to 10.2 pence per share (FY22: 10.2p). 59 RISK AND RISK MANAGEMENT Understanding our risks is key to safeguarding our clients, shareholders and Governance employees. By maintaining an effective risk management framework we aim to achieve good outcomes that meet the Group’s strategic objectives within The IHP Audit and Risk Committee approved risk appetites. Overview (IHP ARC) supports the board and is responsible for reviewing and challenging the manner in which the Group implements and monitors the Effective risk management is critical for the delivery of the Group’s strategic adequacy of the RMF. The role and objectives and supports positive outcomes for our stakeholders. activities of the IHP ARC are set out on Risk management assists the board in understanding its current and future risks and provides appropriate information that is incorporated into our strategic The audit and risk governance decision making and business planning processes. It encompasses all strategic, arrangements of the Group’s regulated financial and operational risks that may prevent us from fulfilling our strategic entities are undertaken by audit objectives, as set out on pages 16 to 19. The inherent risk environment faced and risk committees (ARC) for each by the Group develops over time, the impact and mitigation of these risks are regulated entity. These regulated set out in the Principal Risks and Uncertainties section on pages 63 to 68. entity ARCs, which provide risk and pages 97 to 105. Risk management and ownership culture compliance challenge and oversight, along with Internal Audit assurance of the regulated entities, are made up Promoting a culture of awareness and ownership is essential for ensuring that of independent NEDs. The IHP ARC risk implications are considered and managed for our stakeholders, who are receives updates at each meeting from defined on page 80. the respective Chair of the regulated entity ARCs on key areas of escalation. The Group Risk Management Policy (RMP) establishes the requirement for risk to be considered across all the Group’s operations. The RMP is overseen by the Together, they assist the respective IHP CEO, supported by the senior management team. The IHP CEO, together boards and senior management in with the CRO, is accountable to the board for effective risk management across fostering a culture that encourages the Group. The RMP is reviewed at least annually. good stewardship of risk and an emphasis that demonstrates the The Risk Management Framework (RMF), which supports the RMP, defines the benefits of a risk-based approach to Group’s systems of governance, risk appetite and risk management processes. management of the Group. This framework drives a consistent approach to identifying, measuring and controlling risks, forming a continuous and disciplined part of the evaluation of business opportunities, uncertainties and threats in managing good stakeholder The “three lines” risk governance outcomes, within approved risk appetites. model Risks are captured through regular discussions with senior management and The Group’s RMF is implemented risk owners across the Group, using a robust and consistent measurement through a “three lines” model, to methodology, which is designed to ensure the capture of potential harms arising from business activities. enable delineation of responsibility and to ensure that the Company operates within the risk appetite defined by the The measurement includes the application of stress testing and scenario ARC and approved by the board. analysis and considers whether relevant controls are in place, along with available management actions. The ’first line’ business is responsible and accountable for managing risks We ensure an embedded and consistent risk management approach is adopted, on a day-to-day basis within appetite coupled with effective policies and procedures, designed to prevent, minimise and in line with risk policies. This is and/or detect any risk of failure to comply with regulatory obligations. The then combined with oversight from the extent of the risk is compared to board-approved risk appetites, as well as ’second line’ Group risk management specific limits and triggers. Reporting forms an integral part of the governance and compliance functions, and framework and breaches in limits or appetite thresholds are escalated through independent assurance is provided by the relevant Committees. There is also a clear process for the escalation of risk the ‘third line’ Group internal audit events. 60 function to form a ‘three lines’ model. RISK APPETITE Our risk appetite is the degree of risk that we are prepared to accept in pursuit of our strategic financial objectives. The board is responsible for establishing the risk strategy and approving the risk appetite statements. We define our risk appetite statements on a quantitative and qualitative basis, using the principal risk taxonomy set out in our RMF. This provides a consistent approach from which each of our operating companies set their own risk appetite statements to meet the common aims of the Group. We have generally adopted an overall conservative approach, which is reflected in our risk appetite preferences and in the overall approach to risk management. Our risk appetite preferences, aligned to our risk exposures, business strategy and our desire to ensure good outcomes for all our stakeholders, can be articulated as follows: RISK CATEGORY RISK APPETITE PREFERENCES Strategic and business risk We ensure that our business provides an acceptable level of return within the boundaries of the risks that are taken which are aligned with our strategic aims and approved appetites. We aim to manage market consensus to be in line with internal business planning forecasts. We proactively engage with external agencies including, analysts, media, regulators and industry groups. Our business model and investment supports our ambitions and strategy for delivering against climate related obligations. Operational risk We do not actively seek to take operational risk to generate returns. We accept a level of operational risk that means the controls in place should prevent material losses but should not excessively restrict business activities. We aim to have a zero-risk appetite for operational risk that creates harm to, or results in poor client outcomes; this includes any harm arising from systematic failures, from our cultural outlook or in any element of the client life cycle. We have a zero-risk appetite for material regulatory breaches. Market risk We prefer secondary market risk through charges determined on clients’ portfolio values. This is central to our proposition and we accept the potential impact of the volatility of market prices on financial performance. Capital and liquidity risk We have a prudent capital management approach and we currently invest shareholder assets in high quality, highly liquid, short-dated investments. We prefer savings and pension products with low capital requirements and without financial guarantees. Credit and counterparty risk We limit our exposures to credit institutions with a high credit quality score for bank deposits, trading debtors and trading related, pre-funding activity. We have limited appetite for intra- Group lending. Insurance risk As regards the writing and administration of insurance business, we have a preference for savings and pensions products with low levels of sums assured and no financial guarantees. Group risk We accept certain risks and ensure that these are appropriately identified, managed, mitigated and monitored through the Group risk register. Concentration risk The risks facing the Group are identified and recorded in the risk register. The inherent and residual risk profile is regularly reviewed to understand and assess any concentration of risks and to ensure these are appropriately managed and monitored through our risk appetites and governance arrangements. 61 Risk exposures are regularly assessed by the Group’s risk management function against risk appetite, using a comprehensive set of key risk indicators which are reported to senior management, the subsidiary ARCs, and the IHP ARC as appropriate. Risk capital frameworks The Company’s regulated subsidiaries fall under various risk capital regimes. The regimes are guided by similar underlying risk principles, albeit the results and reporting requirements are regime specific. The Company’s regulated subsidiaries maintain a sound and appropriate system of capital management in order to meet their strategic capital objectives, preferring a simple system of capital management, which reflects the nature of their businesses. At a legal entity level, the regulated subsidiaries are capitalised at the required regulatory minimum, plus an adequate buffer defined as part of their capital management, risk appetite and dividend policies. Our stakeholders expect us to be resilient in our operations. We actively manage our risk exposure against appetite across our defined principal risk categories, as well as the emerging risks derived from management insight and other reliable external sources to undertake stress and scenario testing. These are used to identify additional impacts on the ability of the Group and its regulated subsidiaries to meet capital and liquidity needs, due to changes in the external environment that are over and above the amount of capital held. More details of these are set out in the Principal Risks and Uncertainties statement, pages 63 to 68. Oversight is provided by management, ARCs and boards to ensure exposures are adequately identified and acted upon in a timely manner. We ensure, through our Risk Capital frameworks, that our regulated entities hold adequate capital to meet obligations. During the reporting period, each regulated subsidiary was fully compliant with the applicable risk capital regime and any applicable solvency capital requirement (SCR). Additionally, the balance sheets and SCRs are regularly monitored and, in line with regulatory requirements, reported to the applicable regulators as required. Regulatory capital requirements For information on our compliance with the relevant regulatory capital requirements, please see pages 58 to 59 in the Financial Review. 62 PRINCIPAL RISKS AND UNCERTAINTIES The directors, in conjunction with the board and ARC, have undertaken a review of the potential risks to the Group that could undermine the successful achievement of its strategic objectives, threaten its business model or future performance and considered non-financial risks that might present operational disruption. The tables below set out the Group’s principal risks and uncertainties to the achievement of the identified strategic objectives, risk trend for 2023 together with a summary of how we manage the risks. These have been referenced to the strategic objectives set out on pages 16 to 19. Business and strategic risks PRINCIPAL RISK AND UNCERTAINTY MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY We manage the risk by providing our client service teams with extensive initial and ongoing training, supported by experienced subject matter experts and managers. The challenges facing the business and the wider industry, have increased during the year, however monitoring service metrics has allowed us to identify the areas where there is deviation from expected service levels or where processing backlogs have arisen and to deliver targeted remediation plans to ensure client outcomes and service standards are maintained. We have substantially reduced backlogs relative to FY22 and are better able to address them when they occur. We also conduct satisfaction surveys to ensure our service levels are still perceived as excellent by our clients and their advisers. Service standards are also dependent on resilient operations, both current and forward looking, ensuring that risk management is in place. T4A continues to develop the delivery of next generation CURO. The risk of reduced investment in the platform is managed through a disciplined approach to expense management and forecasting. We horizon scan for upcoming regulatory and taxation regime changes and maintain contingency to allow for unexpected expenses e.g. UK Financial Services Compensation Scheme (FSCS) levies, which ensures we do not need to compromise on investment in our platform to a degree that affects our offering. The risk has increased over the year driven in large part due to preparation for, and the implementation of, the Consumer Duty regime for our regulated entities, both as manufacturers and/or distributors. We remain proactive in embedding all mandatory changes (e.g. Consumer Duty, Operational Resilience, HMRC changes to lifetime allowances) through our business-as-usual model. Our platform developers remain responsive to the business needs and have increased developer resources over the year. Service standard failure – our high levels of client and adviser retention are dependent upon our consistent and reliable levels of service. Failure to maintain these service levels would affect our ability to attract and retain business. There is a potential risk of greater outflows than expected and/or a net outflow of FUD impacting profitability and/ or the medium/long-term sustainability of the platform. Change over the year Stable Aligned to strategic financial objectives Sustainable growth Increase earnings Diversion of platform development resources – maintaining our quality and relevance requires ongoing investment. Any reduction in investment due to diversion of resources to other non-discretionary expenditure (for example, regulatory developments) may affect our competitive position. Change over the year Increase Aligned to strategic financial objectives Sustainable growth Invest Increase earnings 63 PRINCIPAL RISK AND UNCERTAINTY MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY Increased competition – cheaper and/or more sophisticated propositions – we operate in an increasingly competitive market, both for clients and their advisers. Consolidation in the adviser market makes it more challenging to attract and retain business. The consequences may be that greater outflows are experienced than expected and/or a net outflow of FUD impacting profitability and/or the medium/ long-term sustainability of the platform. Change over the year Increase Aligned to strategic financial objectives Sustainable growth Increase earnings The advised market remains our key target and competitor risk is mitigated by focusing on providing exceptionally high levels of service and being responsive to client and financial adviser feedback and demands through an efficient process and operational base. We also keep close to the landscape of our platform competitors, as well as the trends impacting the financial adviser market. Our platform service and developments remain award winning. We release a monthly update to our proprietary platform technology, incorporating improvements and new functionality. We continue to develop our digital strategy, expanding our Transact Online interface allowing advisers direct processing onto the platform. This is essential to remain relevant and competitive, improving both functionality and service efficiency and allows us to continue to increase the value-for-money of our service by reducing client charges, subject to profit and capital parameters when deemed appropriate. The Group continues to review its business strategy and growth potential. In this regard, it primarily considers organic opportunities that will enhance or complement its current service offerings to the adviser market. T4A continues to broaden our service offering to advisers. We also continue to support the diversification of the adviser market through the Vertus scheme which continues to be successful. Financial risks PRINCIPAL RISK AND UNCERTAINTY MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY The risk of depressed stock and bond market values, and the impact on revenue, has been and remains high. External economic, political and geopolitical factors continue to influence markets in 2023. The risk is mitigated through a wide asset offering which ensures we are not wholly correlated with one market, and which enables clients to switch assets in times of uncertainty. In particular, clients are able to switch into cash assets, which remain on our platform supported by our top quartile interest rates. In addition, our wrapper fees are not impacted by market volatility as they are based on a fixed quarterly charge. We can closely monitor and control expenses by continually driving efficiency improvements in our business processes including increasing online and digital processing. Strong investment platform service and sales and marketing activity ensures we attract new advisers and clients. Sustaining positive net inflows during turbulent times presents the potential for longer- term profitability. This value volatility is not expected to ease in the foreseeable future and while hedging options have been explored, they have been deemed expensive in terms of the revenue protection they afford. Stock and bond market value volatility (Market Risk) – our core business revenue is derived from our platform business which has a fee structure based, in large part, upon a percentage of the FUD. Depressed equity and bond values have an impact on the revenue streams of the platform business. Change over the year Increase Aligned to strategic financial objectives Sustainable growth Increase earnings Generate cash Retain strong balance sheet Deliver on dividend policy 64 PRINCIPAL RISK AND UNCERTAINTY MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY Uncontrolled expense risk – higher expenses than expected and budgeted for would adversely impact cash profits. Change over the year Increase Aligned to strategic financial objectives Generate cash Deliver on dividend policy Capital strain (including liquidity) – unexpected, additional capital or liquidity requirements imposed by regulators may negatively impact our solvency coverage ratio. Change over the year Stable Aligned to strategic financial objectives Retain strong balance sheet Deliver on dividend policy Credit risk – loss due to defaults from holdings of cash and cash equivalents, deposits, formal loans and reinsurance treaties with banks and financial institutions. Change over the year Stable Aligned to strategic financial objectives Retain strong balance sheet The risk has increased over the year as a direct result of sustained inflationary pressures on the UK and global economy. The most significant element of our expense base is employee costs. These are controlled through modelling employee requirements against forecast business volumes. The Group has made sustainable salary increases to employees over the year and built out its capability in several key areas across all three lines of risk governance to support the business. Planned investment in IT and software development deliver enhancements to our proprietary platform enabling us to implement enhanced straight through processing of operational activities. A robust multi-year costing plan is produced which reflects the strategic initiatives of the business. This captures planned investment expenditure required to build our operational capability and cost-effective scalability of the business. Cost base variance analysis is completed monthly with any expenditure that deviates unexpectedly from plan being rigorously reviewed to assess the likely trend with reforecasts completed accordingly. Occupancy and utility costs have also increased. Regulatory fees decreased slightly while professional fees have increased in line with expectations, as a result of the broad regulatory agenda. Also notable, and a growing issue, is that suppliers are wrestling with the requirements of climate initiatives in terms of disclosures, and with unit costs for sustainable or green energy and supplies likely to attract a premium as organisations stride toward a net zero carbon footprint. Such costs are difficult to control directly and may unexpectedly impact the base case budget. We continuously monitor the current and expected future regulatory environment and ensure that all regulatory obligations are or will be met. This provides a proactive control to mitigate this risk. Additionally, we carry out an assessment of our capital requirements, which includes assessing the regulatory capital required. We retain a capital buffer over and above the regulatory minimum solvency capital requirements. We await the detail of corporate tax changes resulting from the OECD Base Erosion and Profit Shifting project relating to our Isle of Man life company, ILInt. We anticipate that there will be a reduced level of retained income, which will impact the future coverage levels of regulatory capital. The Group seeks to invest its shareholder assets in high quality, highly liquid, short- dated investments. For the banks holding corporate cash, maximum counterparty limits are set in addition to minimum credit quality steps. The Vertus loan scheme has an agreed commitment level and the value of the drawn and undrawn balances are monitored regularly. Loans are made on approved business cases. 65 Non-financial risks PRINCIPAL RISK AND UNCERTAINTY MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY The Risk Management Framework provides the monitoring mechanisms to ensure that reputational damage controls operate effectively and reputational risk is mitigated. Mitigation includes a focus on internal operational risk controls, error management and complaints handling processes as well as root cause analysis investigations. Additionally, controls include training for key company staff on how to manage company reputation internally; regular management and monitoring of the company websites and social media; and engaging the services of an external PR firm to consult on reputational matters. Political and Geopolitical risk cannot be directly mitigated by the Group. However, by closely monitoring developments through its risk horizon scanning process, potential impacts are taken into consideration as part of the business planning process. The external geopolitical environment in 2023 has built on 2022 and become increasingly uncertain through a series of significant global events, including the continuing Russian invasion of Ukraine, the escalating conflict in the Middle East, trade tensions between USA and China, the global energy crisis and supply chain issues. Furthermore, domestic political instability exists within both the UK and the USA with elections due within the next 24 months. These dynamics and related events can cause disruption to markets and macroeconomics with a direct impact on FUD for the Group. Reputational risk – the risk that current and potential clients’ and their advisers desire to do business with the Group reduces due to a lower perception in the marketplace of the Group’s offered services covering the Transact platform and T4A adviser support software. Change over the year Stable Aligned to strategic financial objectives Sustainable growth Political and Geopolitical risk – the risk of changes in the political landscape within the UK and between countries or geographies, disrupting the operations of the business or resulting in significant development costs. Change over the year Increase Aligned to strategic financial objectives Sustainable growth Invest Increase earnings Generate cash Retain strong balance sheet Deliver on dividend policy The Group aims to minimise operational risks at all times, through a strong and well-resourced control and operational structure. Note that operations form an integral part of the ESG and sustainability agenda. Operational risk (including operational resilience and the sustainability agenda) – the risk of loss arising from inadequate or failed internal processes, people and systems, or from external events. In terms of our progress in this area, please see the TCFD section, which details our progress to reduce the Group’s carbon emissions and enhance our reporting on pages 23 to 44, and the Responsible Business section on pages 45 to 52 to see how the Group is ensuring diversity, equity and inclusion is actively embedded across all areas of the business. We note below the principal types of operational risk below and provide the change over the year for each. Change over the year Increase Aligned to strategic financial objectives Sustainable growth Invest Increase earnings Generate cash 66 PRINCIPAL RISK AND UNCERTAINTY MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY People – the inability to attract, retain and motivate performing and values-aligned employees within the business. Significant attrition rates of such employees or an inability to attract such new employees can have a detrimental impact on the service provided as well as poor adherence to regulatory procedures and requirements resulting in reputational damage and potential compliance breaches. Change over the year Decrease IT Infrastructure and software – ageing and underinvested IT infrastructure and software has the potential to cause the Group disruption through systems outages, a failure to plan and maintain operational capacity and create vulnerabilities to operational resilience and loss of a competitive market share as newer technology emerges. Change over the year Stable The business operates both performance management and talent recognition programmes to reward high performing employee members, identify future leaders, and retain and attract talent within the business. We maintain a comprehensive career and training development programme and provide a flexible working environment that meets our employees’ and business needs. These are supported by robust Group HR policies and practices. Our benefits package is competitive. No less than annually, the Group undertakes a staff engagement survey and addresses any identified areas for improvement to drive high engagement. Since the “great resignation” of 21/22 difficulties with the retention of employees and the ability to attract new recruits in our UK and Australian operations have significantly improved. The continuous and evolving sophistication of the cyber threat to our IT infrastructure environment means risk within this space remains high. Wars and conflict contribute to a global technology environment that is constantly under attack. Protecting our services against this continues to be a core focus. We continue to carry out cyber penetration testing and evolve our cyber security capabilities. Awareness training is provided to ensure employees understand and recognise threats to our business systems. Investment in IT and software development continues, with modernisation of our digital workplace capabilities presenting opportunity for improved security controls. There is a full programme of digitalisation work to be delivered over the business planning period for our proprietary investment platform, focussing on the provision of online, straight through processes for common financial planning practices, which will benefit our UK advisers and their clients. This will also significantly increase the scalability of our investment platform. Integration between adviser software applications is paramount, with data access and synchronisation between systems being key requirements. Our Application Programming Interfaces (APIs) are already integrated with many third-party software providers, and we will continue to enhance our data services to meet the demands of our clients in a secure manner. 67 PRINCIPAL RISK AND UNCERTAINTY MANAGEMENT OF THE PRINCIPAL RISK AND UNCERTAINTY Data and continuity of services are critical focus areas for us given the increase of risk in channels like cybersecurity. Ensuring that our core services are resilient and that our controls around business and client data are robust is a constantly evolving focus area. Resilience testing of the Transact platform, for example, takes place every two months. In particular, the Group has a dedicated financial crime team and an on-going fraud and cyber risk awareness programme. Additionally, the Group carries out regular IT system vulnerability testing. The crisis management team (CMT) reviews the Group’s business continuity plans during the course of the year. Key changes in the last year are the establishment of dedicated first and second line Cyber Security teams, the heads of which are due to start in early 2024. This will provide an improved governance and operational framework for Cyber Security. Beyond IT and cyber security, the Company also has a function led by the Company’s Data Protection Officer (DPO) to manage information security risk and compliance with UK GDPR. The DPO carries out monitoring and works with the business to ensure the risks from its evolving physical and digital workplace and business operations are managed. The Group has an established compliance function that analyses regulation and advises on and monitors how our financial services regulatory standards are met. The financial services regulated entities in the group ensure regulatory standards are met through a framework of policies, procedures, governance, training, horizon scanning, monitoring and engagement with our regulators. Cross-departmental projects are established to deliver for significant regulatory changes, with Group internal audit undertaking reviews during the project phases and/or post-implementation thematic reviews. During the period such projects included preparation and implementation of the FCA’s Consumer Duty, which requires ongoing work to ensure it is embedded within operations, and work to meet FCA PS21/3 Operational Resilience requirements. Meeting the regulatory agenda is an imperative for the operation of our core platform business. The regulatory agenda remains challenging, particularly in light of the demands of the new Consumer Duty. IT Resilience and Information Security - the Group creates, obtains, stores, processes and retrieve significant volumes of commercial and corporate matters, some of which is highly sensitive. Change over the year Increase Regulatory risk - the financial services regulated entities within the Group have a full and stretching regulatory agenda. Expanding law, regulation and guidance need analysing and transitioning effectively into business as usual to avoid failing to comply with regulatory rules or standards. Change over the year Increase Emerging risk focus Through regular conversations and more formal quarterly risk review Emerging risks discussed during 2023 have included: The directors have carried out a robust assessment of the principal meetings with risk owners and other business stakeholders, attending industry events and reviewing external sources, emerging risks are identified. These emerging risks by their nature have uncertainty of likelihood and • Changing expectations of the UK and Isle of Man regulators. • Increasing regulatory scrutiny or focus impacting our platform business model. and emerging risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. Details of the results and conclusions of this assessment can be found in the “Going impact on the business. Emerging • Shift in tax regime which may Concern and Viability Statement” section on pages 69 to 71. risks are categorised as near- (next 12 months), medium- and longer- term (more than 3 years) and are regularly reported and assessed, both at the executive level and, no less than quarterly, at ARCs and boards where appropriate. alter the tax benefits of pensions and ISAs including the abolition of inheritance tax. • The aging population of the UK, the platform client base and the advisers using our platform and/or the CURO software and the generational shift in wealth to different generations with differing preferences and needs. 68 GOING CONCERN AND VIABILIT Y STATEMENT In accordance with the Code, the directors have assessed whether the Group is considered a going concern over the following 12-month period, as well as the prospects and viability of the Group over a period of three years. Going concern Viability The Strategic Report sets out the Group’s business model, its strategic The key factors affecting the Group’s objectives and the associated risks, and the annual financial review on pages viability and prospects are its market 53 to 59. position and recurring revenue. Going concern is assessed over the 12-month period from when the Annual Market position Report is approved, and the board has concluded that the Group has adequate resources to continue in operational existence for the next 12 months. As Market position can be assessed detailed in the going concern disclosure in the financial statements in note 1, as follows: independent research this is supported by: • The current financial position of the Group; • Detailed cash flow and working capital projections; and consistently rates Transact as the top platform in the market (page 13); and, the number of advisers using the platform and the number of clients on the platform both increased by 2% during the year. • Stress-testing of liquidity, profitability and regulatory capital, taking account of possible adverse changes in the economic climate The above measures all demonstrate adviser and client satisfaction with the When making this assessment, the board has taken into consideration both the service provided. Group’s current performance and the future outlook, including the impact of the cost-of-living crisis, sustained levels of high inflation, increasing interest rates Recurring revenue and volatile equity markets. The environment has been challenging during the year, but our financial and operational performance has been robust, and the The absolute level of revenue is Group’s fundamentals remain strong. dependent on market values, but key to the recurrence is the retention of Having conducted detailed cash flow and working capital projections, and FUD. The T4A business also has a appropriate stress-testing on liquidity, profitability and regulatory capital; taking level of recurring business through account of the economic challenges mentioned above; the board is satisfied that repeat and long-term contracts to the Group is well-placed to manage its business risks. The board is also satisfied provide the CURO service. Maintaining that it will be able to operate within the regulatory capital limits imposed by the recurring revenue base across regulators, being the FCA, PRA, and IoM FSA. these activities is achieved through retaining client and advisers through The board has concluded that the Group has adequate resources and there our service delivery. 98% of revenue are no material uncertainties to the Group’s ability to continue to operate for is of recurring nature (page 54). the foreseeable future, being a period of at least twelve months from the date this Annual Report is approved. For this reason, they have adopted the going concern basis for the preparation of the financial statements. Our approach is to focus on organic growth of FUD through positive net flows to the platform. We aim to generate growth in revenue, and to control costs, to ensure that the Group’s profit margin is resilient over the medium term. 69 Assessment period and measures It is the board’s view that a three- The key scenarios considered for the financial year are as follows: year time horizon is an appropriate period over which to assess its Cyber-attack viability and prospects and to execute its business plan. This assessment A hacker exploits a loophole in security allowing them to gain network access period is consistent with the Group’s and extract data and information which is used for fraudulent purposes, current business plan projections attracting significant media attention as well as a requirement to pay and the Internal Capital and Risk compensation to clients and fines. Assessment process (ICARA) and Own Risk and Solvency Assessments Undetected bug after system development (ORSA) of the Group’s regulated entities. Consideration is also given to A bug introduced within a system release goes undetected for a period of time projections beyond this period, though which causes client trades to be executed incorrectly. This causes reputational this does not form part of the formal damage, and remediation plans require significant resource along with assessment. compensation payments to clients. The strategy and business plan are Persistent high inflation and continued market uncertainty reviewed and discussed annually by the board and updated as appropriate. Continued market uncertainty and an extended period of high inflation results It considers the Group’s profitability, in a loss of confidence in capital and investment markets that has a detrimental cash flows, capital requirements, effect on revenues. dividend payments, and other key variables such as liquidity and the Supplier failures cause a severe impact to Transact’s service standards solvency requirements of the regulated entities. These are considered under Multiple suppliers cause Transact to be unable to fulfil its contractual obligations stress and scenario tests, to ensure to clients and the business is therefore overwhelmed by queries, exacerbated the business has sufficient flexibility to by an outage of communication systems. This causes reputational damage, withstand such impacts by adjusting and remediation plans require significant resources along with compensation its plans within the normal course of payments to clients. business. Unforeseen customer harms as a result of a systemic process failure The stress and scenario tests applied are severe, yet plausible, at both an Failure by our UK regulated entities to appropriately identify, implement or individual and combined level. We embrace appropriate conduct standards, which causes consumer harm. This recognise the importance that climate causes reputational damage, as well as a requirement to pay compensation to change may have on our business and clients and fines. our approach for the current financial year towards climate related scenarios is set out in our TCFD disclosures on Policyholder protection scheme levy event pages 23 to 44. An Isle of Man-authorized life company becomes insolvent, triggering arrangements under the Life Assurance (Compensation of Policyholders) Regulations 1991. ILInt makes the decision to pass through the levy to policyholders to avoid becoming insolvent itself. A large number of policyholders surrender their policies to avoid payment of the levy, and ILInt is therefore required to top up the amount due. As a result, management determines that ILInt is no longer viable. 70 To illustrate the severity of the scenarios modelled, the following table sets out some of the key changes in parameters made in the scenarios. The most severe scenarios modelled assumed a number of these changes occurred within the same scenario during the business planning period. ASSUMPTIONS UNDERLYING THE STRESS SCENAR IOS RISK FACTOR STRESS APPLIED TO BASE CASE ASSUMPTION Market downturn A market fall of 33% over a one month period. Mass lapse 30% drop in the number of clients over three months. Increase in outflows 65% increase in outflow rates for up to twelve months. Decrease in inflows 30% decrease in inflow rates for twelve months. One-off spikes in operating costs Up to £12.0m one-off spike in operating costs depending on the underlying stress scenario. Expense increase Expense increase over business planning period 10%. The results of the above stress and scenario tests led to the following conclusions: • Under a range of stressed scenarios, no expected profit or liquidity issues are expected to arise in the Group over the three-year business planning period and beyond; • Each of the regulated entities has sufficient available capital to cover its regulatory solvency requirements, and this is expected to continue over the three-year business planning period and beyond; and • Under a range of stressed scenarios, the entities are still able to meet their capital and liquidity requirements over the three-year business planning period and beyond. The directors’ assessment has been made with consideration and reference to: the Group’s current position and three year business plan; the Group’s risk appetite; the Group’s financial projections; and, the Group’s principal risks and uncertainties, including uncertainty caused by the economic climate globally and in the UK as well as the geopolitical uncertainty. In accordance with the Code, the directors have assessed the Group’s prospects by reference to the three-year planning period to September 2026. The directors have a reasonable expectation that the Group will continue to meet its liabilities as they fall due, and that it will be able to operate within the regulatory capital limits imposed by the regulators over the period of this assessment and beyond. 71 NON-FINANCIAL INFORMATION STATEMENT The Strategic Report includes non-financial information required in accordance with section 414CB of the Companies Act 2006. The most directly relevant non- financial information is signposted below; however, the Strategic Report does touch on these topics briefly in other sections: S414CB REQUIREMENT RELEVANT STRATEGIC REPORT SECTION Environmental matters Employees Taskforce on Climate-Related Financial Disclosures (TCFD) Statement, pages 23 to 44 Responsible Business – Our People, pages 45 to 52, Nomination Committee Report, pages 107 to 112 Social and community Responsible Business – Our People, pages 45 to 52 Human rights Responsible Business – Our People, page 52 Anti-bribery and corruption Responsible Business – Our People, page 51 Business model Strategy and Business Model, pages 13 to 15 Principal risks and how they are managed Risk and Risk Management, pages 60 to 68 Non-financial key performance indicators Strategy and Business Model, pages 13 to 15, Key Financial Performance Indicators, pages 20 to 22 Approval of the Strategic Report A statutory requirement of the Annual Report is that the directors produce a Strategic Report. Section 172 of the Companies Act states that the purpose of the report is to inform members of the Company and help them assess how the directors have performed their duty. To fulfil this, directors must act in a way they consider, in good faith, would be most likely to “promote the success of the Company for the benefit of its members as a whole”. The Strategic Report should provide shareholders with a comprehensive and balanced overview of the Group’s business model, strategy, development, performance, position and future prospects. The Strategic Report should be clear, concise and unambiguous, and should demonstrate how the Company has considered the interest of employees, and the impact of the Company’s operations on the community and environment. The directors believe that the Strategic Report on pages 2 to 72 meets all relevant statutory objectives and requirements. By order of the board, Helen Wakeford Company Secretary 13 December 2023 72 CORPOR ATE GOVERNANCE REPORT 73 73 INTRODUCTION 74 On behalf of the board, I am pleased to present the report setting out the Group’s corporate governance arrangements, which reflect the standards required by the 2018 UK Corporate Governance Code (the ‘Code’). The Group’s purpose is to enable clients to easily manage their financial plans with the help of their financial advisers though the provision of high-quality financial software and customer service. Proportionate and effective governance facilitates the Group in the overall delivery of that purpose whilst providing assurance and accountability to all our stakeholders that their interests are paramount. We continue to abide by the overriding principles of the 2018 Code which are designed to: • Promote the long-term sustainable success of the Company, generating value for shareholders and contributing to wider society. Further details relating to this are set out in the long-term consequences of decisions section in the Companies Act Section 172 statement, on page 87; • Provide suitable opportunity for employee engagement in the business. Further details relating to this are set out in the interests of the Group’s employees section in the Companies Act Section 172 statement, on page 87; • Assist the effective review and monitoring of the Group’s activities; • Help identify and mitigate significant risks to the Group, as set out in our Risk Report on pages 60 to 68; and • Provide the necessary disclosures to stakeholders to make a meaningful analysis of the Group’s business activities and its financial position. To enable easy navigation our governance report has been structured to reflect the composition of the Code. Where there are links to the content in our strategic report, these are highlighted for the reader. 1. Board Leadership and Company Purpose 2. Division of Responsibilities and the Role of the Board 3. Board Composition, Succession and Evaluation 4. Audit Risk and Internal Control 5. Remuneration Statement of compliance The Code sets out the principles and provisions relating to good governance of UK listed companies and can be found on the Financial Reporting Council’s (FRC) website at www.frc.org.uk. The Company has, throughout the year ended 30 September 2023, applied the principles, and complied with the provisions, of the Code except in relation to the following: Provision 36: The Company’s remuneration structure has adopted a vesting period for deferred bonus shares of three years, rather than the Code’s recommended five years. Minimum shareholding and post- employment shareholdings requirements are in place for executive directors as recommended by the Code. The Company believes that the executive directors are sufficiently invested in the Company’s long-term success and that further restrictions are not currently required. We will however keep this under review. Provision 38: The Company’s remuneration policy allows all employees, including executive directors, the option annually to have a portion of their cash bonus paid as a contribution into their pension. This does not comply with the Code’s requirement for directors that only basic salary should be pensionable. However, none of the executive directors currently take advantage of this provision in the remuneration policy. The Company plans to review the policy on pension sacrifice for the directors in the next iteration of the remuneration policy. Richard Cranfield Chair 13 December 2023 75 BOARD LEADERSHIP AND COMPANY PURPOSE BOARD OF DIRECTORS Richard Cranfield, Non-Executive Chair Appointed to the board: 26 June 2019 Skills and expertise: Richard is a qualified (no longer practicing) Solicitor and has an MA in Economics and Law from Cambridge University. His previous experience includes working for Allen & Overy LLP (and its predecessor firm) between 1978 and 2022, being a partner from 1985 to 2021. External appointments: • Henderson High Income Trust Plc – Director, 2020 to present Alexander Scott, Chief Executive Officer Appointed to the board: 11 February 2014 Skills and expertise: Alexander joined the Group as Actuary and Head of Group Technical Operations in October 2009. From November 2010 he was Chief Financial Officer and Head of Risk, becoming a director in July 2011. Alexander became Chief Executive Officer in March 2020. Alexander has a BSc in Actuarial Science from City University and is a Fellow of the Institute of Actuaries. Alexander has spent thirty years in the insurance market, quantifying and assessing risk and has held the Chief Risk Officer function for both investment and insurance companies as well as holding the Chief Actuary function. His previous experience includes various roles at Criterion Assurance Group, including: Non-Executive Director (2003-2010); Director (1999- 2003); and Actuary (1997-1999), and Life Director and Chief Actuary at Sterling Insurance Group between 2004 and 2009. Jonathan Gunby, Executive Director Appointed to the board: 2 March 2020 Skills and expertise: Jonathan joined the Group in 2011 as Chief Development Officer and was appointed to the board of Integrafin Financial Arrangements Limited (Transact) in 2018. He became an Executive Director of IHP in March 2020 and Chief Executive Officer of Transact. Jonathan has a BA in Business Studies from De Montfort University, Leicester, and is a Fellow of the Chartered Institute of Marketing. He held senior marketing roles at Royal Insurance Group across Life, Pensions and Fund Management and at National and Provincial (N&P) Building Society. He served as a director in N&P’s life assurance business, a joint venture with Aviva. Jonathan started a consulting firm which, in 1999, was moved into NMG Holdings where Jonathan remained as an Executive Director until 2011. 76 Audit and Risk Committee Nomination Committee Remuneration Committee Michael Howard, Executive Director Appointed to the board: 11 February 2014 Skills and expertise: Michael co-founded the Group in 1999, was Executive Chair of the Group from 2001 until stepping down in October 2017 and becoming an Executive Director. He founded ObjectMastery in Australia in April 1992, which developed the software which underpinned the creation and development of the Transact platform. Michael holds a BA in Economics from York University and is qualified as a chartered accountant. His previous experience includes working for Touche Ross in the audit division in London (1980-1984) and Melbourne (1984-1986) and working for Norwich Union Life Insurance, where he was responsible for marketing and administration of investment funds including the launch of the platform Navigator in 1990. Caroline Banszky, Independent Non-Executive Director Appointed to the board: 22 August 2018 Skills and expertise: Caroline is a qualified Chartered Accountant, having originally trained at what is now KPMG. Her previous experience includes being Chief Executive of The Law Debenture Corporation plc between 2002 and 2016, COO of SVB Holdings PLC (now Novae Group plc) between 1997 and 2022 and Finance Director of N M Rothschild & Sons Limited between 1995 and 1997. External appointments: • Gore Street Energy Storage Fund plc - Chair of Audit Committee, 2018 to present • Benefact Trust Limited– Director and Trustee, 2018 to present • The Open University - Member of the Investment Committee, 2016 to present • 3i Group plc – Chair of Audit and Compliance Committee, 2014 to 2023 77 Victoria Cochrane, Senior Independent Non-Executive Director and Designated Non-Executive Director for Environmental and Social Sustainability Appointed to the board: 28 September 2018 Skills and expertise: Victoria is a qualified (non-practicing) Solicitor, with over twenty years’ experience as General Counsel and held various executive roles with Ernst & Young between 2006 and 2013, including Global Head of Risk, where she created the global enterprise risk management framework. Victoria’s previous roles include: Non-Executive Director of Perpetual Income and Growth Investment Trust plc between 2015 and 2020; Non-Executive Director of Gloucester Insurance Limited between 2008 and 2013; Senior Adviser at Bowater Industries Limited between 2014 and 2015; and Non-Executive Director at HM Courts and Tribunal Service from 2014 to 2023. External appointments: • Ninety one plc – Chair of the Audit and Risk Committee, 2019 to present • Euroclear Bank SA/NV – Non-Executive Director, 2016 to present • CBI – Senior Independent Director and Audit and Risk Committee and Nominations Committee Chair, 2023 to present Rita Dhut, Independent Non-Executive Director and Designated Non-Executive Director for Employee Engagement Appointed to the board: 22 September 2021 Skills and expertise: Rita has a BSc in Business Studies from City University. Her previous experience includes: various positions at Aviva Investors between 2001 and 2012, including Head of European Equities and Head of Pan-European Equity Value Investing; and various positions at M&G between 1994 and 2000, including Director of European Equities. External appointments: • Financial Times Foundation for Financial Literacy – Founder Trustee and Non-Executive Director, 2021 to present • JP Morgan European Investment Trust Plc – Non-Executive Director, 2019 to present and Chair from 2022 to present • Ashoka India Equity Investment Trust Plc – Non-Executive Director, 2018 to present 78 Robert Lister, Independent Non-Executive Director Appointed to the board: 26 June 2019 Skills and expertise: Robert has a BA in Classics from Oxford University. His previous experience includes: Non-Executive Director of Credit Suisse Asset Management (UK) Limited, between 2012 and 2022; Director of Aberdeen Smaller Companies Income Trust PLC, between 2012 and 2022, Non-Executive Director of Investec Wealth and Investment Limited between 2010 and 2020; Director of Rensburg Sheppards PLC, between 2008 and 2010, as well as working for Dresdner Kleinwort Wasserstein between 1998 and 2008 and Barclays de Zoete Wedd between 1983 and 1998. External appointments: • Cavendish Financial – Director, 2021 to present • The Salvation Army International Trustee Company – Director, 2016 to present Christopher Munro, Independent Non-Executive Director Appointed to the board: 1 February 2017 Skills and expertise: Christopher is a qualified Chartered Accountant and has an LLB from Edinburgh University. Christopher’s previous experience includes being Founding Partner of London and Continental Partners LLP from 2016 to 2021, Director of Pacific Capital Partners from 2004 to 2021, Director of Jupiter Enhanced Income Trust from 1996 to 2009, CEO of River & Mercantile Investment Management from 1994 to 1996, Director of Robert Fleming Holdings Limited between 1988 and 1994 and Director of Jardine Fleming Holdings between 1983 and 1986. All directors were in office throughout the financial year up to the date of the report. 79 S.172 STATEMENT S.172 of the Companies Act (“the Board leadership and Company purpose Act”) requires each director to act in the way they consider, in good faith, Our purpose, values and strategy are set out on pages 13 to 15 and describe would be most likely to promote the Company’s focus. The board’s focus is to ensure that the Group delivers the success of the Company for long-term sustainable value for all stakeholders. the benefit of its members as a whole, and in doing so have regard To deliver this the board oversees the maintenance of a sound system of (amongst other matters) to: internal controls and continually reviews the overall effectiveness of the Group’s (a) the likely consequences of any risk management systems. decision in the long term, The board also oversees the Group’s culture to ensure it is aligned with the (b) the interests of the Company's employees, Measuring performance against strategic objectives Company’s purpose, values and strategy. (c) the need to foster the Performance against the Company’s strategy, objectives, business plans and Company's business relationships budgets is considered at each board meeting. Working in co-ordination with with suppliers, customers and the Audit and Risk Committee the board maintains oversight of the Company’s others, operations and ensures the Company fulfils its business objectives. (d) the impact of the Company's Considering stakeholders operations on the community and the environment, The board’s role in promoting the long-term success of the Group requires consideration of the balance of interests between all stakeholders – those (e) the desirability of the Company being our clients and advisers, employees, regulators, shareholders, suppliers, maintaining a reputation for high and the community. Details of how the board has delivered its responsibilities standards of business conduct, and under s.172(1) of the Act during the financial year are outlined on pages 87 to 90. In addition, our s.172 statement outlines how the board has considered (f) the need to act fairly as stakeholders in its principal decision-making processes. between members of the Company. The following table supports our s.172 statement by setting out how we have engaged and considered our key stakeholders during the year, the outcomes and any highlights of such efforts. 80 Engaging with our stakeholders – what we did in the year OUR STAKEHOLDER HOW WE ENGAGE AND CONSIDER OUR STAKEHOLDERS Our clients and advisers Transact OUTCOMES AND HIGHLIGHTS Transact • Speaking/presenting to advisers and paraplanners at ‘Connect day’ and regional ‘breakfast briefing’ events across the UK. • Comprehensively reviewed our products and pricing to ensure full compliance with the requirements of Consumer Duty. • Engaging with advisers and paraplanners at annual Personal Finance Society and Chartered Institute for Securities and Investment events and other conferences during the year. • Implemented new controls and communication systems to ensure that clients and advisers are kept fully apprised of changes to their portfolio/assets, especially pertaining to fees and risk. • Distribution of annual client and adviser surveys to gain feedback on common development requests from clients and advisers, in an effort to tailor and enhance our services and functionality. • Liaising and coordinating with our user firms as part of our Account Management Programme to gain feedback on how best we can develop our proposition for use by user firms and their end clients. • Increased the flow of information between Transact and the manufacturers of other financial services products, largely fund managers, fulfilling our requirements as distributor to have oversight of whether products are providing the end client value for money and meeting intended outcomes. • Following feedback from clients, advisers and firms we have made changes to our offering including: • Monthly newsletter to adviser firms to provide updates and support on our platform offering. T4A ◦ e-signature capability with multiple providers ◦ Increased security authentication via two- step verification • High-touch, pre-commitment engagement ◦ New online ‘transfer tracker’ has been with prospective clients to ensure suitability between our software capability and the needs of the firm. • Implementation consultants ensure that all aspects of service delivery are planned and delivered to clients until handed over to an appointed account manager. • Proactive engagement with clients and online training sessions to increase understanding and use of technology and to ensure best customer service is provided. • T4A has engaged an independent third- party to facilitate and chair quarterly user groups to seek client feedback. introduced ◦ The launch of our BlackRock-backed Model Portfolio Service ◦ Comprehensive ‘Investor Reports’ that can be sent by the adviser to the client in the ‘Pick-Up-Page T4A • Client feedback helps T4A to continually improve the training and information it provides to clievnts on the full range of functionality that CURO can provide. • Clients are supported to customise specific elements of CURO software to best support the processes and services of the particular adviser firms. • Client influence on Product Providers and Platforms also helps drive up the availability of data feeds from these external parties such as valuations. 81 OUR STAKEHOLDER HOW WE ENGAGE AND CONSIDER OUR STAKEHOLDERS OUTCOMES AND HIGHLIGHTS Employees • Employee engagement and pulse surveys. • IHP has moved up to 11th place in the • A ‘People Platform’ was implemented for the London and Isle of Man offices. FTSE Women Leaders report for FTSE 250 companies, which recognises our diverse workplace. • At IAD, team leader/project lead meetings • The Training and Development function and all-employee sessions are held fortnightly. • The DNED for Employee Engagement, in conjunction with the Head of HR, facilitates quarterly employee forums. was reviewed, with further resource being agreed, to help support the overall HR and training/development strategies for the UK/ Isle of Man offices. • Maternity and paternity pay was enhanced. • Multiple in-person town halls led by • A Menopause Support Policy has been executive directors showcasing Group performance and a business update. approved and we have appointed a staff- volunteered Menopause Champion. • ‘Manager Converse’ sessions with the NEDs are held during the year to give the NEDs a deeper understanding of the Group and generate interaction with managers beyond the executive. • Monthly Transact newsletters and bi-annual Group CEO email updates are distributed to employees. • ISL has received London Living Wage accreditation and IAD UK has now applied for it as well. • We are continuing to develop our Diversity and Inclusion Strategy, policy and framework for the Group. • Employee participation in the 2023 employee survey was 60% and feedback indicated satisfaction with communication of company objectives and manager investment in employee wellbeing. Improvements to internal communications was highlighted as an area for development. • All managers were required to complete a mental health training session. • The London office held various initiatives to promote ‘Mental Health Awareness Week’, including providing healthy breakfasts, offering staff to attend externally facilitated mental health seminars, and a charity raffle collecting donations to support MIND charity. 82 OUR STAKEHOLDER HOW WE ENGAGE AND CONSIDER OUR STAKEHOLDERS OUTCOMES AND HIGHLIGHTS Regulators • The IHP CEO provided regular updates at the IHP board and IHP ARC meetings on topics either discussed with, or that are important to, the regulators during the year including Consumer Duty, IT infrastructure, best execution, diversity and inclusion, and non-standard assets. • The boards and ARCs of IFAL and ILUK are regularly briefed on regulatory developments and expectations. • All staff completed a Consumer Duty training module in May 2023. All UK executives and NEDs have received multiple Consumer Duty training sessions in preparation of the Consumer Duty regulation coming into force. • We have interacted proactively with the relevant regulators when planning and executing decisions affecting the boards of the Group and companies within the Group • The ILInt board and ARC are regularly briefed on regulatory developments and expectations. • NEDs participated in, and contributed to, a session on the development of the Group’s climate change strategy. • IHP’s remuneration committee, whose remit covers the Group, is also regularly informed of relevant regulatory developments and expectations. • In January 2023, the PRA updated its supervisory priorities for ILUK and other life insurers and the compliance team is keeping these under review. • In February 2023, both ILUK and IFAL (and their peers) received letters from the FCA setting out priorities for implementing the Consumer Duty. The Consumer Duty team undertook a gap analysis and made slight adjustments to the project plan where considered necessary. • The boards of IFAL and ILUK receive updates in relation to specific matters, such as areas of interest to the FCA and PRA including operational resilience; climate change and diversity and inclusion. • The ILInt board receives updates on IoM FSA initiatives. • The ILInt managing director and compliance team maintains contact with the FSA and the IFAL and ILUK’s compliance team maintains regular contact with the FCA and the PRA on behalf of IFAL and ILUK, to ensure awareness of their respective concerns, expectations and priorities. • The IFAL and ILUK compliance team actively participates in the UK Platforms Group, which engages with the FCA. ◦ ILInt’s managing director sits on the executive committee of the Isle of Man Insurance Association which meets quarterly with the FSA. 83 OUR STAKEHOLDER HOW WE ENGAGE AND CONSIDER OUR STAKEHOLDERS OUTCOMES AND HIGHLIGHTS Shareholders • Institutional shareholder roadshows hosted by the CEO for half-year and year-end results. • Extensive meetings have been held by IHP’s CEO with major shareholders to explain the Group’s strategy, financial plans, and operational enhancements. • Ad hoc meetings with investors after key information updated to the market. governance teams at major institutional investors to share thoughts on a range of topics including ESG, succession planning and remuneration. • The Chair and Company Secretary met with the • In-person Annual General Meeting at our London headquarters with the Chair and all NEDs in attendance to take questions from shareholders. • Proactive consultation by the Board’s Chair, and the Company Secretary with major shareholders on various governance matters, with 17 meetings held during the year. • Board members receive a quarterly Investor Relations report. • CEO and Head of Investor Relations provide updates at each board meeting on investor engagement and market movements. • Ad hoc briefings to the board on shareholder feedback • We have engaged directly with MSCI ESG rating agency (which provides guidance to institutional shareholders on ESG data compliance) in order to enhance IHP’s rating (now increased to BB), and to understand how we can gain a higher score going forward. • Feedback from shareholders has, in part, contributed to the following outcomes: ◦ We have recruited a Group Chief Financial Officer who is expected to take up the role in early 2024; ◦ We are reviewing executive and senior management reward to ensure that their incentives are based upon our four anchors and focused towards sustainable growth of the Group over the long-term; ◦ We have enhanced IHP’s website information and disclosures; and ◦ We have compiled (in-house) HY and FY Company consensus reporting to ensure there is more information available for sell-side analysts to use for their estimates for IHP Group performance. • We have enhanced our FY22 and HY23 reporting presentations to analysts and investors given by IHP’s CEO and IFAL’s CEO, by using an external media company for producing and recording the live presentation. • IHP’s CEO and Head of Investor Relations have attended various investor conferences. • We have delivered a programme of IR video meetings with potential investors in the US, UK and rest of Europe. 84 OUR STAKEHOLDER HOW WE ENGAGE AND CONSIDER OUR STAKEHOLDERS OUTCOMES AND HIGHLIGHTS Suppliers • We do not seek to disadvantage, or • We endeavour to pay all suppliers within compromise, suppliers with whom we conduct business, in line with one of our core principles of ethical behaviour. • We have refocused our efforts on supplier management as we continue to enhance our due diligence with regard to cyber- security and business resilience. As we evolve our ESG strategy, we will collaborate with our suppliers in order to achieve our ESG goals. • We remain focused on the correct onboarding of all new suppliers ensuring correct due diligence and contract reviews are carried out. This is managed by our dedicated supplier management manager. • Information is shared with management and board committees where appropriate, in order to provide assurance regarding supplier selection and management. agreed payment terms. • We work with suppliers to ensure no modern slavery or enforced labour exists in the supply chain. We include specific clauses in supplier contracts that their employees must be paid National Minimum Wage. • We undertake health checks on suppliers highlighting areas that need more information or where specific information is missing, giving the business full transparency of all suppliers. • We require annual cyber attestations to be completed by our significant and material suppliers. • We continue to focus on our Business Continuity Plan and developing clear exit strategies for material outsourcing suppliers and significant suppliers. 85 OUR STAKEHOLDER HOW WE ENGAGE AND CONSIDER OUR STAKEHOLDERS OUTCOMES AND HIGHLIGHTS Communities • We provide staff with an opportunity to be involved in company-led charity initiatives and consider feedback on charity suggestions when they are submitted to the People Platform. • The DNED for Environmental and Social Sustainability is supporting the board and management in developing the Group’s social strategy. • Annual Christmas initiative: all London and Isle of Man employees given £10 each to donate to one of five selected charities. • Transact sponsored event to raise money for Ukrainian refugees and • Disaster Emergency Committee (DEC): Turkey-Syria Earthquake Appeal, the Company matched employee donations, resulting in £10,596 being donated to the DEC. • Company matched employee donations to MIND Charity during Mental Health Awareness Week. 86 SECTION 172(1) STATEMENT Understanding the views and Long-term consequences of decisions interests of our stakeholders helps the Group make responsible and IHP Group’s strategic objectives are stated on page 16 to 19. The Group’s balanced decisions. In doing so, we implementation of its strategy and our assessment of forward-looking risks aim to generate long-term value affecting its delivery in the future are set out within the strategic objectives. The for the Company’s shareholders directors make strategic decisions on future direction, investment and stakeholder whilst contributing to wider society value based on the clear, sustainable, long-term objectives. by building strong and lasting relationships with our other key By successfully achieving strategic objectives, which result in the ongoing and stakeholders. For our key stakeholders, increased success of the offering, the directors are able to take decisions which see those listed on page 80. share the Group’s success with its key stakeholders. You can read more about how we Interests of our employees engage with and consider the needs of our key stakeholders on pages 81 to We value our people. They are the core of our high-quality service delivery to our 86 of the Governance Report. clients and advisers, so our employees’ well-being is paramount to the business’s long-term sustainable success. Details on employee well-being and the culture of the Group are outlined in the Responsible Business section on page 45. In addition, the Directors’ Remuneration Report on page 113 sets out the Group’s approach to remuneration which is intended to ensure equitable remuneration across the Group and which improves value for employees. Fostering business relationships The Group’s business model and strategic objectives are set out on pages 16 to 19 and make clear the focus of the business on delivering high-quality service to clients and advisers through investment in infrastructure and employees. An integral part of our service offering is the provision of regular relationship management to clients and advisers as they are our target market. Fostering good relationships with our suppliers is an important factor in ensuring we can continue to service our clients and advisers effectively. To help embed good supplier management processes, we engage regularly with our suppliers and ensure ongoing relationship management throughout the term of engagement. We also ensure suppliers are paid within payment terms and do not seek to disadvantage or compromise suppliers with whom we do business. 87 Impact on the community and the environment The directors recognise that we have both a corporate and ethical responsibility to minimise the impact of the Group’s business conduct on the environment and community; this is considered during any principal decision-making processes by the board. The TCFD section on page 23 and the Responsible Business section on page 45 set out the impact of our operations on the environment and outline our community activities that occurred during the year. High standards of business conduct The directors recognise that our service is only as good as the technology and people behind it and that the Group’s reputation is built on high standards of business conduct which must be maintained in order for the business to thrive and grow. The board supports the CEO in embedding a culture that encourages employees to act with integrity and to ‘do the right thing’, in line with the Group’s values. The Group maintains a number of policies governing employee conduct. These are covered in detail in the People section on page 45. The directors also recognise that as the business is regulated by three separate regulators, as detailed on page 69, maintaining strong, open and productive relationships with the respective regulators is also business critical. Acting fairly between shareholders All shareholders are treated equally, with information being made available to all shareholders in a consistent manner. The board, supported by the Chair and CEO, actively engages with the Group’s largest shareholders regularly and feedback received is shared with the entire board. 88 PRINCIPAL DECISIONS AND CONSIDER ATIONS OF STAKEHOLDER INTERESTS The table below summarises how the board and the wider Group have had regard to the duties under Section 172(1) when considering specific matters during the year. PRINCIPAL DECISION STAKEHOLDERS IMPACTED OUR CONSIDERATIONS Price reductions for the Transact Platform Clients Advisers Shareholders Regulators Reframe of workforce compensation and benefits Employees Communities In December 2022, the IHP board considered the impact of price reductions approved by IFAL, ILUK and ILInt for Transact, furthering the simplification of our fee model and increasing transparency and accessibility. As part of this process, the impacts on company profitability and, therefore, shareholder value, were assessed. This decision was in line with the Group’s strategic objectives to benefit advisers and clients by reducing cost to client. The simplification is also expected to attract new flows to Transact as the new model promotes the accessibility of financial products to a wider community, which ultimately supports the long-term sustainability of the business. A capital and liquidity risk assessment was undertaken to ensure the Group’s regulated entities continue to have sufficient capital to cover their respective solvency risk appetites. In 2022, employees were consulted on their views of their work environment and reward structure. As a result of the feedback received the structure of reward for London- and Isle of Man-based employees was restructured to enable greater flexibility in the variable reward to facilitate recognition of exceptional performance. The Company also responded to feedback on the shape of our family friendly benefits by enhancing maternity, paternity and adoption pay. More information is provided in the people section and the remuneration section of this report. Appointment of CFO Clients Advisers Shareholders Employees Regulators During FY22, the board determined that the Group would benefit from the addition of a CFO. The appointment will facilitate the greater diversity of thought at executive level and at the board and will reinforce the skills amongst the management team, providing additional and valuable support to the CEO. This move was partially in response to feedback from stakeholders and the reception of the decision from the relevant groups has been positive. 89 90 THE ROLE OF THE BOARD AND ITS RESPONSIBILITIES The role of the board Key board activities during the year The board recognises the importance of a clear division of responsibilities between executive and non-executive roles and, in particular, a clear delineation of the Chair’s responsibility to run the board and the CEO’s responsibility for running the Group’s business. The roles of Chair, CEO and Senior Independent Director (SID) are clearly defined and have been approved by the board. The allocation and division of responsibilities is available on our website here: https:// www.integrafin.co.uk/corporate- governance/. Matters reserved for the board The board is the main decision making and review body for the Company. It determines the overall strategic direction of the Company and is responsible for the overall management of the Company and the business operations for its subsidiaries. The board’s remit is documented in its terms of reference which include details of matters reserved for the board and matters delegated by the board. The terms of reference are reviewed and updated annually. Matters which are reserved for the board include strategy and management, structure and capital, financial reporting and controls, internal controls, material contracts, communication, board membership and appointments, remuneration and corporate governance matters. The Business performance and strategy • Consider current and future business initiatives • Discuss Group strategy including review of business plans and pricing strategy • Monitor Group performance against strategy • Review Transact, T4A and wider industry market performance updates • Review quarterly investor relations updates including analyses of Company share price performance • Receive updates on and discuss IT infrastructure and systems and IT strategy Finance and reporting • Review quarterly and half-year results • Monitor performance and capital position board determines which matters are • Approve annual report and delegated to committees of the board financial statements and the management team. • Approve two interim dividends • Review HMRC VAT decision and approve subsequent action • Review Group tax strategy • Review and monitor business plans and projections, including ongoing review of business performance and comparison to market consensus on business performance Risk management controls • Review quarterly risk reports • Approve Group’s Risk Appetite Framework and Risk Management Policy • Receive cyber security and Consumer Duty training Sustainability and stakeholder engagement • Deep dive sessions on environmental, social and employee engagement strategies • Review Board Diversity Policy • Receive HR updates including monitoring culture and employee survey feedback • Review shareholder feedback from engagement sessions with Chair, SID, Remuneration Committee Chair and Company Secretary Governance • Review board evaluation results and progress of prior year’s evaluation actions • Review board and management succession plans • Receive board committee updates • Approve AGM documentation • Approve Modern Slavery Statement • Review and approve changes to various Group policies 91 Independence and time commitment Conflicts of interest All of the NEDs are considered to be independent and the Chair was considered The Company’s Articles of Association to be independent on being appointed to the role. There are a number of ways permit the board to consider and in which the independence of NEDs is safeguarded and in which their time authorise situations where a director commitments are considered: has an actual, or potential, conflict of interest in relation to the Group. • Meetings between the Chair and NEDs without management present occur The Company maintains a conflicts regularly; • The SID meets at least annually with each NED to discuss feedback on the Chair’s performance; of interest register, which is reviewed annually by the NomCo and the board. In addition, prior to each board meeting, the directors are asked to • NEDs’ tenure on the board is reviewed annually by the Nomination declare any conflicts they may have Committee (NomCo) as part of board succession planning; with regard to the business meeting. Directors who declare a conflict of • Any external commitments must be disclosed to the board as and when they interest may be authorised by the rest arise for consideration and approval before accepting; and of the board to participate in decision making in accordance with section 175 • When making new director appointments, the board takes into account other of the Companies Act 2006. demands on directors’ time. The board considers and, if The board has reviewed the other commitments of the NEDs and concluded it is appropriate, authorises any conflicts satisfied that each NED remains able to commit sufficient time to dedicate to their or potential conflicts of interests of role as a director. directors and imposes any limitations, qualifications or restrictions as required or as recommended by the NomCo. 92 Subsidiary governance The Group’s regulated principal operating subsidiaries carry out their business of providing investment and life insurance activities. Each of the boards of Integrated Financial Arrangements Ltd (IFAL), IntegraLife UK Limited (ILUK), and IntegraLife International Limited (ILInt) is comprised of a mix of executive and NEDs in line with UK (IFAL and ILUK) and Isle of Man (ILInt) regulatory requirements. In each case the membership of the board is made up of a mix of skills and experience relevant to the board, resulting in membership composed of both members with cross directorships within the Group, and members who are independent of any other Group appointment. We believe that this delivers the optimum governance to each entity. The board and committee governance framework of the main regulated operating subsidiaries is outlined below: IHP board IHP Remuneration Committee IHP Nomination Committee IHP Audit and Risk Committee IFAL board ILUK board ILInt board IAD board ISL board T4A board IFAL Audit and Risk Committee ILUK Audit and Risk Committee ILInt Audit and Risk Committee Each operating subsidiary Audit and Risk Committee (ARC) is responsible for overseeing the internal controls and risk management systems for their respective subsidiary and reporting assurances up to the IHP ARC annually that these systems remain effective. More details of how the board fulfilled its s.172(1) duties in relation to this decision is noted in the “Principal Decisions” section on page 89. Further information on how the Nomination Committee has been involved in subsidiary board composition and succession planning under the new structure is outlined on page 109. 93 COMPOSITION, SUCCESSION AND EVALUATION Board composition The Company has three executive directors and six independent NEDs (including the Chair). The Company has recently announced the selection of a CFO who will join the executive team bringing the composition of the board to four executive directors and six NEDs. The board will still meet the Code requirement that at least fifty per-cent of the board (excluding the Chair) is comprised of independent NEDs. Committees There are three committees of the board: Audit and Risk, Nomination, and Remuneration. The ARC and the Remuneration Committee (RemCo) are wholly non-executive committees and the members are all independent NEDs. The Chair of the board is a member of, and Chairs, the NomCo. The other members of the NomCo comprise the SID), the CEO and two other independent NEDs, meaning the committee has a majority of independent directors. The membership and terms of reference of these board committees are reviewed annually. The terms of reference for each committee is available on the Company’s website https://www.integrafin.co.uk/corporate-governance/. Board and committee meetings and attendance BOARD MEETINGS AUDIT AND RISK COMMITTEE NOMINATION COMMITTEE REMUNERATION COMMITTEE ELIGIBLE ATTENDED ELIGIBLE ATTENDED ELIGIBLE ATTENDED ELIGIBLE ATTENDED 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6 6 - - 6 - - - 3 6 6 - - 6 - - - 3 - 9 9 - 5 9 9 - - - 8 9 - 4 8 9 - - - - 10 - 10 10 - - 8 - - 10 - 10 10 - - 8 Caroline Banszky Victoria Cochrane Richard Cranfield Michael Howard Robert Lister Christopher Munro Alexander Scott Jonathan Gunby Rita Dhut Note: the Nomination Committee meeting missed by three NEDs was to shortlist candidates for subsidiary boards for interview. The absences were due to the short notice of the meeting; all NEDs had reviewed and commented on the list of candidates beforehand. Board succession During FY22, the board agreed that the appointment of a CFO would enhance the board, as well as providing additional and valuable support to the CEO. The NomCo appointed an independent search firm to commence the selection process, as a result of which the Company has announced that Euan Marshall will be appointed to the role. A further announcement has been made giving details of Euan’s commencement date in January. Christopher Munro has indicated his intention to step down from the board in FY24. The board will continue to assess the composition of the board and its ongoing suitability throughout the year. 94 Directors’ induction A tailored induction programme is prepared for each new director, based on their individual needs. The programme comprises the following areas: • Information and materials: a comprehensive library of materials is provided electronically, including prior board and committee papers and minutes, information on Company values and culture, strategy materials, regulatory information, and statutory and governance documentation and policies. • Scheduled meetings: individual meetings are arranged with key stakeholders and employees to explore in more detail significant aspects of the business and to assist with relationship building between the director and management. During the financial year, no new directors joined the IHP Board. Directors’ development and training Each board member is responsible for identifying training appropriate to their needs, and the NEDs maintain individual annual training logs. The Chair and Company Secretary ensure continuing training and development for all directors based on individual requirements. The board carries out periodic ‘deep dives’ into specific areas of the business in order to broaden the board’s understanding of the Group’s business and the opportunities and challenges it faces. During the financial year, training and deep dive sessions were facilitated for the directors, covering the following topics: • market abuse and disclosure obligations • employee engagement strategy and monitoring culture • investor sentiment and market reaction • external market and macro-economic factors • Consumer Duty including FCA’s approach to supervision and firm evaluation model In addition, open Q&A sessions between the directors and management are held periodically to facilitate engagement with the layer below the board. Election and re-election of directors The Company’s Articles of Association require all existing directors to retire from office at each AGM and be eligible for re-election. 95 Board effectiveness review In line with best practice and the requirements of the Code, the board and its committees undertake an external evaluation every three years. With the assistance of Independent Audit Ltd, the Company undertook an external evaluation in FY23. Independent Audit Ltd were selected to support this year’s review as having undertaken the first external evaluation in FY20, it was felt that the most value would be gained by understanding how the board had developed in the intervening years. FY22 board evaluation – progress update AREA OF ASSESSMENT AGREED ACTION PROGRESS Designated strategy session The board would reinstate, post-COVID, an annual deep dive strategy session to allow for more time to discuss longer-term strategy and performance horizon scanning. The board discussed strategic opportunities throughout the year and deep dive sessions were reinstated immediately after year end. Stakeholder engagement and ESG The board has improved its oversight of stakeholder engagement in 2022, in particular that of employees. The board will continue to increase its understanding of the Group’s stakeholder engagement and ESG strategies. ESG is now a standing agenda item, with quarterly updates to the board. Information flows between parent and subsidiaries With the recent governance restructure, continue to improve the framework of information flow between the operating and other subsidiaries and the parent company. Refinement of reporting between subsidiary and parent ARCs has been established and improvement of information flow is a continuous focus of the boards. FY23 board evaluation Independent Audit Ltd presented their report to the Chair and subsequently to the board in September 2023. The areas identified for the board to focus on in FY23 and beyond are summarised below: AREA OF ASSESSMENT AGREED ACTION Improved communication to and from subsidiary boards, as well as within the IHP board Improved timeliness of board papers IHP board members, subsidiary chairs and committee chairs commit to prioritising improvements to the subsidiary reporting up to the board. There will also be a renewed focus on improving communications outside of formal board meetings Too many board papers are arriving after the cut off for submission, thereby reducing directors’ ability to properly review. Writers and reviewers therefore commit to more regimented scheduling when drafting papers. Improved conciseness of papers to the board Papers are to be shortened and will all include executive summaries. The size of board packs will be reduced to encourage the distillation of key information. Chair evaluation The SID led the performance evaluation of the Chair by meeting separately with each of the executive and NEDs, and the Head of Legal and Company Secretary. The SID then met with the Chair to discuss the directors’ feedback and agree actions for 2024 and beyond. 96 AUDIT AND RISK COMMIT TEE REPORT Statement from the Chair I am pleased to present the Audit and Risk Committee’s report for the year ended 30 September 2023. The report provides insight into our work undertaken this year. I would like to welcome Rita Dhut to the committee following her appointment in March and to thank all members for their work throughout the year. The ARC has continued to consider the potential impact of the BEIS consultation on Corporate and Audit Reform, and the emerging statements and consultation from the FRC. Management continue to closely monitor developments and report to the committee on the impact of the proposed changes on the committee’s activities. The committee continues to scrutinise management reporting on internal controls, financial reporting and risk management. During FY23 the committee commenced its oversight of the delivery of the Group’s agreed objectives. This work is still in its infancy as we develop our strategy. For the environmental aspects of this strategy, we have engaged the support of Brite Green, sustainability consultants to enhance our disclosures. In addition, the committee reviewed the Company’s development of the IT general controls and the enhancement of the Group’s IT security framework. I will be available to answer any questions at the AGM. Further details will be set out in the Notice of AGM. Further information on the activities of the Audit and Risk Committee is provided below. In FY24, the committee will continue to challenge management’s assessment of and controls around the principal risks facing the business, both internally and externally. The committee will continue to focus on the delivery of the ESG objectives, the identification of the Group’s principal internal and external risks and the development of the Group’s risk management framework, including with respect to IT controls, continuously assessing whether the Group remains within the risk appetite and to ensure that the Group is resilient to the ever changing economic and social environment within which we operate. We also look forward to welcoming Euan in the role of CFO and working with him to deliver high quality financial reporting for the Group. Caroline Banszky Chair, Audit and Risk Committee 13 December 2023 97 Membership and attendance The members of the committee as at 30 September 2023 were: MEMBER DATE OF APPOINTMENT Caroline Banszky (Chair) 22 August 2018 Victoria Cochrane 28 September 2018 Robert Lister Rita Dhut 4 September 2019 16 March 2023 The committee meets at least four times each year and may meet at other times, as requested by the Chair. The committee met six times during this financial year. The committee’s attendance is outlined on page 94. All committee members are independent NEDs, as required by the Code, with the ARC Chair being a qualified accountant. The board is satisfied that the committee as a whole has an effective balance of skills and experience to perform its responsibilities. Details of each member’s skills, education and experience are outlined in the Directors’ Biographies on pages 76 to 79. In FY23, Rita Dhut was appointed to the committee. The committee membership is kept under review by the Chair of the committee, in collaboration with the NomCo. All committee members are provided with initial and ongoing training to support them in carrying out their duties effectively. During the year, the committee received training on the external platform market and the competitive environment; directors’ s172 duties, market abuse and disclosure obligations; and Consumer Duty. Regular attendees at committee meetings include the board’s Chair, IHP CEO, the IFAL CEO, Group Chief Financial Controller, Chief Actuarial Officer, CRO, Group General Counsel, Group Head of Internal Audit, Company Secretary and the Group’s external auditor. Other NEDs are invited to attend meetings. The committee Chair meets privately with the Group Chief Financial Controller, Head of Internal Audit, Chief Actuarial Officer, CRO, external Audit Partner and Independent Quality Assurance Partner at EY to discuss issued reports and relevant financial and risk reporting and regulatory developments. 98 Role of the Committee The primary role of the committee is to ensure the integrity of the financial and non-financial reporting and auditing processes and monitor the effectiveness of the Group’s internal control and risk management systems to ensure there are continuing, appropriate levels of external and internal audit and risk assessment to cover all material risks (including fraud) and controls, including financial, operational and compliance processes and procedures and non-financial reporting, including in particular, assurance over the Company’s reporting under TCFD requirements. The committee is also responsible for oversight of the Group’s relationship with the external auditor. This includes making recommendations to the board in relation to the (re)appointment of the external auditor, approving its scope of work, fees and terms of engagement, as well as regularly reviewing its independence, objectivity and effectiveness. The detailed responsibilities of the committee are set out in its terms of reference which can be found at https://www.integrafin.co.uk/corporate- governance. Details of the work of the committee in discharging its responsibilities during the financial year are outlined further below. Key committee activities through the year AREA OF CONSIDERATION COMMITTEE REVIEW AND CONCLUSION Financial reporting During the financial year, the committee: • Reviewed and challenged the financial reporting undertaken by the Group, with input and support from the Group’s external auditor; • Reviewed and considered the disclosures in the entire Annual report and financial statements, recommended to the board the published Annual report and financial statements and Half-year report and concluded that the reports were fair, balanced and understandable; • Considered the consistency of accounting policies, the financial reporting process and the disclosure of key accounting and financial risks. Further information on the key financial and non-financial risks can be found on page 63; and • Reviewed the External Auditor report. The report confirmed that the External Auditor identified the requirement to disclose a related party transaction under IAS24. Accounting judgements and estimates The committee assessed and challenged the appropriateness of the judgements and estimates applied by management in the preparation of the Annual report. This included consideration of the following: • ILUK tax provisions • Goodwill • T4A post combination remuneration These areas have been discussed with the external auditor to satisfy them that the Group makes appropriate judgements and provides the required level of disclosure. Following consideration of the above, the committee concluded that the accounting treatment of the ILUK tax provisions should be classified as a significant judgement and there are no items that should be classified as critical accounting estimates in the Annual report and financial statements. 99 Group wide financial crime controls • Reviewed the progress made on the implementation of the recommendations made by the Legal team to expand the Financial Crime team’s remit to T4A and IAD and to add and enhance the wider Group controls. Whistleblowing Champions assurance re whistleblowing arrangements • Reviewed the Whistleblowing policy and the Whistleblowing framework for reporting and confirmed that each are appropriate to the Group structure and organisation. • Jeremy Brettell, as a member of the IFAL Audit & Risk Committee, is a key contact in the Whistleblowing Policy and fulfils the role of “whistleblower’s champion” under the Senior Managers’ Regime whilst Caroline as Chair of the Audit and Risk Committee has oversight of Whistleblowing for the Group. The induction and transition of responsibilities to the incoming Chief Financial Officer • The Chair worked with the CEO and NomCo during the selection process of the preferred candidate. • Following recommendation made by management and the NomCo, the Chair of the committee reviewed the credentials and experience of the incoming CFO and endorsed the appointment. The same process applied to the selection of the CRO, whose appointment was reviewed by the NomCo. TCFD reporting • The Company has published climate-related reporting in its Annual report and financial statements based on the TCFD’s recommendations. Details on this disclosure can be found on page 23. • In preparing the Annual report and financial statements, the committee was provided with information on the methodology used by management for collecting climate-related data for publication in the Annual report and financial statements. • The committee was made aware of the restatement of the FY22 emissions data. The committee concluded that the impact of climate-related matters does not have a material effect on the Group’s financial statements. Committee evaluation • The committee underwent an external evaluation provided by Independent Audit Ltd. We continued to improve the performance of the committee. Going concern and viability The directors are required to make individual Company and consolidated of the assessment of the Group’s a statement in the Annual report Group level, forecast outcomes of stress testing results, the committee on IHP’s long-term viability. The the business plan under the stress agreed to recommend the Viability committee provided the board with scenarios agreed with the committee, statement and three-year viability advice on the form and content of that detailing capital and liquidity period to the board for approval. statement. In advance of the year end, performance against an assessment of the committee reviewed the Group’s risk appetite. The report was produced The committee concluded that proposed stress test scenarios and the on financial data to 30 September the Group has sufficient financial assumptions underlying them, used to 2023 and included consideration of resources and liquidity and is well- support the Viability statement. various scenarios as set out on page placed to manage business risks in 70, both individually and combined. the current economic environment, At the year-end, management provided having considered the potential a report to the committee setting out The committee discussed whether the impacts of various risks, and can its view of IHP’s long-term viability and choice of a three-year period remained continue operations for the foreseeable the proposed Viability statement, based appropriate. It concluded that this future. The committee has therefore on the Group’s three-year business remained appropriate due to the concluded that the going concern basis plan. This report included, at both an nature of the business. Taking account is appropriate. 100 Fair, balanced and understandable assessment The committee also undertakes a wider review of the content of the Annual report and Financial Risk management Statements to advise the board as to whether, taken as a whole, it is fair, The committee oversees risk and balanced and understandable and control matters at a Group level, provides the information necessary with matters which are regulated for shareholders to assess the Group’s entity-specific overseen by the performance, business model and three regulated subsidiary ARCs. strategy. This supports the board in Consistency is achieved through the providing the confirmations set out application, across all entities, of the on page 151 of the Statement of Group Risk Management Policy and Directors’ Responsibilities. Framework. In considering the wider content Each subsidiary ARC has terms of the Annual report and financial of reference outlining their statements, the committee pays responsibilities and the committee particular attention to ensuring the receives updates at each meeting on narrative sections provide context key areas for escalation from each for, and are consistent with, the committee Chair including Consumer financial statements, and that Duty, service risk, and non-standard an appropriate balance is struck assets. between the articulation of successes, • considered the climate-related risks and opportunities facing opportunities, challenges and risks. During the financial year, the the Group and how the regulated committee: entities have assessed the impact; The committee concluded that, taken as a whole, the interim and • oversaw the risk appetite • reviewed and assessed the Group’s annual reports were fair, balanced statements and risk management principal risks, uncertainties and and understandable and provided framework and reviewed its emerging risks and updated them the information necessary for effectiveness in relation to IHP, as appropriate; shareholders, and other stakeholders, and how Group companies have to assess the Group’s position and implemented the framework; • assurance was sought from the performance, business model and strategy. • reviewed Group Risk Chairs of the IFAL, ILUK and ILInt ARCs that management points Management’s development of raised have been addressed T4A’s and IAD’s risk profiles; through appropriate management • reviewed the regular quarterly actions; risk reports presented by Group • assisted the board in maintaining Risk Management to ensure the an appropriate culture within the business continues to operate Group, which emphasises and effectively with the appropriate demonstrates the benefits of the risk profile under the hybrid risk-based management of the working model; Group; and • reviewed and challenged the Risk • considered the points escalated Reports presented by Group Risk from the Group Company boards Management, and considered or committees which affect IHP, or the progress of management the Group as a whole. action taken in order to address management points raised on IHP More details on the Group’s risk specific risks; management processes are outlined on page 60. 101 Internal controls Internal audit The committee provides assurance to • reviewed the Group Head of The Group Internal Audit department the board on the effectiveness of the Internal Audit’s annual assessment is focused on the delivery of high- Group’s system of internal controls. of the Group’s internal control quality internal audit services to the A key aspect of this is the review of framework that included thematic Group. all material/ key controls, including internal control observations reporting, operational and compliance and risk and control culture Its mission is to protect and controls, that identify, assess, manage enhancements. and monitor top risks, which are an enhance the value, reputation and sustainability of the Group, and important aspect of ensuring the Over the course of the year, to help the Board and executive integrity of the Group’s financial management made significant progress management of the Group to meet statements as a whole. to enhance the design and operating its strategic objectives centred effectiveness of IT General Controls on making financial planning and The Group’s internal controls comprise to address improvement areas as investment easier for UK financial elements that together provide an highlighted by the external auditors in advisers and their clients. effective and efficient framework, the prior year financial statements. At enabling the Group to prepare for, and the end of FY23, the external auditors To do this, the Group Internal Audit if necessary, respond, to a variety of concluded, to the extent controls department performs independent, operational, financial and commercial could be assessed at that time, that objective assurance and advisory risks. the design of IT General Controls services designed to add value During the financial year, the The operation of these controls will governance and internal controls. committee: continue to be assessed in FY24. The committee monitors the scope, appears to be designed effectively. and enhance risk management, activity and resource of the Group • received reports from The committee also continued Internal Audit department formally management on the effectiveness to discuss with management the on a quarterly basis, and regularly of internal controls including over preparation needed to comply with meets with the Group Head of critical IT and information security those provisions of the proposed UK Internal Audit without executive risks and financial crime risks Corporate Code changes published in management present. encompassing the detection and May 2023 that will remain when the prevention of fraud, bribery and updated Code is published in January During the financial year, the corruption, money laundering and 2024. which, if approved in the current committee: market abuse; form, will apply to the Company from • reviewed annual control self- out a revised framework of prudent Audit Charter setting out attestations received from senior and effective controls to provide a the Group Internal Audit management; stronger basis for reporting on and departments purpose, authority, 1 October 2025. This includes setting • approved the Group Internal evidencing their effectiveness. scope and responsibility; • received quarterly reports from the Group risk management function on the risk management framework which monitors top risks against risk appetite and target risk scores; • received regular reports from the Group Internal Audit function on the sufficiency and effectiveness of the internal controls in those areas of the business included in the Group Internal Audit Plan for the period. Actions identified through internal audits are regularly monitored and challenged throughout the process until the required action has been achieved; and 102 • approved the rolling 12-month Group Internal Audit Plan, including proposed changes to the plan each quarter to ensure alignment with the Group’s key risks. In setting the plan, Group Internal Audit consider the business strategy, regulatory priorities and its independent view of current, emerging and systematic risks; • received and reviewed Group Internal Audit reports at committee meetings including detailed review of any recommendations made to management, management’s Delivery of internal audit plan Effectiveness and independence of Group internal audit function response, and views over There were several internal audit risk and control culture and engagements completed during FY23, During the financial year, the consumer outcomes; in line with the approved Group committee performed its annual Internal Audit Plan. The results of assessment on the independence and • monitored the status of any these internal audit engagements were effectiveness of the Group Internal open management action plans reported and discussed and follow up Audit function. Based on the scale including receiving updates from actions were reviewed or requested and focus of the work conducted by the Chair of the IFAL, ILUK and where necessary. The internal audit Group Internal Audit during the year ILInt ARCs on the management engagements included, but were not and considering the results of Group actions in response to the limited to, the following: Internal Audit’s report in respect to findings and recommendations of its effectiveness and independence internal audit reports pertaining • client assets and client money completed during the year, the to those entities; compliance; committee concluded that the Group Internal Audit function is working • challenged management on • financial projections model; effectively and independently in line action delivery; with relevant professional standards • Consumer Duty implementation; and that the team is appropriately • reviewed all Group Internal Audit qualified and staffed. reporting escalated by either • platforms IT infrastructure; the IFAL, ILUK, or ILInt ARCs, or A private session also took place activities within other companies • user access management and between each of the four ARCs (see in the Group, which represent a monitoring; significant risk to the Group as a whole; • TCFD reporting; structure on page 93) and the Group Head of Internal Audit. The subsidiary sessions took place in August 2023 and the IHP ARC session took place in • noted the conclusion of the • operational resilience September 2023. annual Internal Audit report requirements; that there were no significant deficiencies that would need • Internal Capital and Risk to be disclosed in the Annual Assessment (ICARA); report; • complaints handling; and • received reports on matters relevant to the financial • asset onboarding. reporting processes including assurances on internal controls, The Group Internal Audit function also processes and fraud risk; and completed its annual assessment of • assessed the effectiveness and the Group’s risk management and key internal controls relating to the Group’s independence of the Group major business processes and top Internal Audit function. risks that included an evaluation of the Group’s annual fraud risk assessment. Furthermore, using external IT security testing experts, penetration testing was completed across the Group’s sites and IT environments including T4A and IAD. 103 External auditor Tenure External auditor independence Effectiveness of external audit and non-audit services process The last tender for the external auditor was conducted in 2021, when EY was In order to safeguard the The ARC is responsible for assessing appointed as the Group’s External independence and objectivity of the the qualifications, expertise and Auditor. EY’s re-appointment was external auditor, the ARC is responsible resources of the external auditor and ratified by shareholders at the 2023 for the development, implementation for reviewing the effectiveness of the AGM. Michael Gaylor has been the lead and monitoring of the Group’s external audit process. As part of this audit partner for two years. policy on the provision of non-audit process, the views from executive services and oversight of the hiring of management, including leadership at Scope of the external audit plan personnel from the external auditor, ISL, IAD and T4A, ARC members, and and fee proposal should this occur. The committee must the Chairs of the three subsidiary ARCs During the financial year, the in line with the requirements of the committee: FRC’s Revised Ethical Standard 2019. • the efficiency of the year-end pre-approve any non-audit services, are sought on the following: • reviewed EY’s overall work plan; each meeting analysing fees paid for The committee received a report at process; • advised EY, through regular auditors. EY did not perform any non- and team; communication, of any specific audit services during the 2023 financial matters which the committee was year. EY did provide Other Assurance • the planning and execution of the any non-audit work by the external • the quality of the audit partner considering from previous audits Services, in line with the Revised audit; and current operations; Ethical Standard 2019. These services were required by regulation and are • quality of audit reporting and • approved EY’s remuneration and further disclosed under Note 8. delivery; terms of engagement, taking into consideration feedback from the Full details of EY’s remuneration are • extent and nature of challenge three operating subsidiary ARCs; set out in Note 8 of the Financial demonstrated by EY in its work Statements. and interaction with management; • assessed EY’s independence and objectivity; • reviewed and approved external auditor fees; • approved revisions to the External Auditors Policy in relation to the provision of non-audit services and hiring of ex-employees; • considered quarterly reporting on non-audit services and audit-related non-audit services provided by EY; and • assessed the effectiveness of the external audit. 104 and • EY’s independence and objectivity. The committee also reviews the FRC’s annual Audit Quality Inspection and Supervision Report of EY and receives a report from EY on its own internal quality control procedures. The responses indicated that, overall, EY was performing in line with expectations and has demonstrated challenge and professional scepticism in performing its role. The ARC concluded that the external audit process was effective, and the committee remains satisfied that EY continues to display the necessary attributes of independence and objectivity. Accordingly, the committee has recommended to the board a proposal for the reappointment of EY as external auditor at the next AGM. Committee self-evaluation The following provides an update on progress against those areas agreed as priority areas of focus for the committee in 2023: AREA OF FOCUS PROGRESS Schedule a risk identification deep dive session. The induction and transition of responsibilities to the incoming Group CFO. The CFO will join the Group in FY24. This action will therefore carry forward into the new financial year. Monitor developments in relation to the BEIS corporate governance and audit reform and ESG reporting. Management continue their analysis of the changes and reported to the committee throughout the year. The following areas were agreed as priority areas of focus for the committee in 2024: • Schedule a risk identification deep dive session • The induction and transition of responsibilities to the incoming Group CFO Monitor developments in relation to the BEIS corporate governance and audit reform and ESG reporting. 105 106 NOMINATION COMMIT TEE REPORT Statement from the Chair of the Nomination Committee I am pleased to present the Nomination Committee’s report for 2023. We welcomed Robert Lister to the committee in March and I would like to extend my thanks to all members for their work throughout the year. Membership and attendance The members of the Nomination Committee at 30 September 2023 were: MEMBER DATE OF APPOINTMENT Richard Cranfield (Chair) 1 August 2019 Victoria Cochrane 28 September 2018 Robert Lister Christopher Munro Alexander Scott 16 March 2023 2 February 2018 2 March 2020 The committee meets at least once each year and may meet at other times as requested by the Chair. The committee met nine times during the financial year, due to the committee’s wider remit of oversight of subsidiary board succession planning and increased senior management succession planning. The committee’s attendance is outlined on page 94. Composition In adherence with the Code, the majority of members of the NomCo are independent NEDs. The Chair of the board chairs the committee. However, he is not permitted to chair when the committee is dealing with nominating a successor to the Chair. The CEO is a member of the committee, as permitted by the Code. We note that some proxy advisory companies advise a vote against the Chair of the Committee at AGM in circumstances where the CEO is a member of the Committee. However, we believe that the CEO contributes valuable insight into the composition of the management team, interaction of the board with management and cultural fit of candidates to the board and senior management team and that his membership of the committee does not affect the independent decision making by the committee. The CEO recuses himself from any discussion or recommendation about him. During the year, the Company reviewed advice from the Company Secretary regarding feedback from the proxy advisers in advance of the AGM on the composition of the committee. The feedback did not indicate any significant concerns with the composition however it is clear that for some investors the balance of independent non-executives did not align with their expectations. As a result, and upon considering the mix of skills and experience of the members, the board appointed Robert Lister to the committee. Training The Group provides initial and ongoing training for committee members, to support them in carrying out their duties effectively. This is delivered through in-house technical employees, through the attendance at formal conferences as required, and an in-house training programme. 107 Role of the committee The primary purpose of the committee is to develop and maintain a formal, rigorous and transparent procedure, and to lead the process for, board and committee appointments and reappointments, including making recommendations to the board. To achieve a balanced board, the committee considers the board’s size and composition, the extent to which skills, experience and attributes are represented and the need to maintain high standards of corporate governance. The role and responsibilities of the NomCo are set out in its terms of reference which can be found at www.integrafin.co.uk/corporate-governance. Key committee activities through the year AREA OF FOCUS WORK CONDUCTED Board composition and succession planning • Considered the skills, tenure and independence of the NEDs and made recommendations to the board for reappointment. • Reviewed the composition of the IHP board including reviewing the mix of skills, experience and expertise, identifying any gaps and ensuring diversity, including of thought and ideas. Management succession planning • Reviewed the emergency and long-term management succession plans. • Interviewed a short-list of candidates and recommended to the board a candidate for CFO. Operating Subsidiaries board succession planning • Discussed succession plans for the IFAL board Chair. • Reviewed board and committee member composition. • Supported the selection of NEDs to the IFAL and ILUK boards on rotation of incumbents who had reached the end of their tenure. Diversity and Inclusion • The committee discussed the Group’s diversity and inclusion strategy. • The committee reviewed proposals from the Head of HR with regard to the collection and reporting of diversity data within the Group. • The committee reviewed the board’s Diversity Policy. • Board composition in relation to tenure, skills and diversity at operating subsidiary level was also reviewed. Committee evaluation • The committee did not conduct a self-assessment of the effectiveness of the committee, the individual members and the committee Chair in FY23 as the board and its committees were part of the wider external board evaluation process. 108 Succession planning IHP board succession planning Subsidiary board and committee succession planning The IHP board composition remained stable during FY23. There were no During the financial year, the resignations or appointments made committee assisted the regulated during the year. operating subsidiaries. IFAL and ILUK both required support with the The committee reviewed the size, process of appointing new NEDs as composition and skill set of the board existing board members reached the and its committees. The committee end of their tenure. In the Spring, we considered the composition of the supported the process of recruiting a board in the context of Christopher new NED, Mary Gavigan, as a member Munro’s indicated intention to step of the ILUK board and Chair of the down from the board in FY24 and IFAL ARC upon the retirement of Neil of the selection of Euan Marshall Holden. Jeremy Brettell replaced as CFO and his additional skills and Neil Holden as Chair of ILUK. In the experience. summer months, a further search was undertaken for two new non- The committee also considered the executives in anticipation of the skills and tenure of the NEDs. We retirement of Jeremy Brettell. We were continue to keep in mind the profile of pleased to be able to assist with the our board members and formulate our search for a new Chair of the ILUK ARC succession planning accordingly. and a new NED of the IFAL board. Senior management succession planning Senior management succession planning continues to be a key focus of shareholders and the committee. With the appointment of the CRO, CTO and the upcoming appointment of the CFO, the committee is satisfied that the management succession plan is strengthened but maintains oversight of developments to ensure a resilient pipeline which will support the future success of the business. 109 Diversity and inclusion Inclusivity throughout the business is Board diversity policy Equal opportunities policy important to us and we continue to focus on this by developing our diverse The board has a Diversity Policy which The Group has an Equal Opportunities talent pipeline. The board supports is reviewed and assessed annually. Policy which applies to all employees. the Hampton-Alexander Review on We are proud to have a culture of gender diversity and the Parker Review New appointments to any Group or developing our workforce to provide on ethnic diversity. I am pleased to subsidiary board are made on merit, opportunities for promotion within say that we have 33% representation taking into account the different skills, the organisation, alongside recruiting of women on our board (FY22: 33%) industry experience, independence, external talent to enhance diversity and 57% female representation in knowledge and background required of thought. Internal opportunities roles which we define internally as our to achieve a balanced and effective not only include traditional vertical senior management equivalent (FY22: board. When identifying suitable promotions, but in many cases 67%). In addition, one member on our candidates for appointment to any opportunities to move to different board is ethnically diverse (FY22: one) Group board, we consider candidates departments within the Group and our SID is female. on merit against objective criteria and and learn new skills or undertake with due regard for the benefits of professional development. This We recognise that developing diverse diversity on the board. talent at the executive, senior management and direct report levels is important and this is being considered in the Group’s ongoing leadership succession plans. approach ensures that we develop a pool of talented individuals who may have the potential for succession into senior roles. We support employees by providing relevant training, assistance and resources to help them succeed in their new roles. In the last year, 72 employees accepted internal job opportunities (FY22: 118). In contrast, 112 job opportunities were filled by employees hired externally (FY22: 132). 110 Composition of the board The board’s membership comprises a mix of long-standing and more recent appointments who collectively deliver a balance of historical knowledge and industry experience. Age profile of the board (number of directors) Tenure of board (number of directors) 1 3 2 3 50-55 60-65 65-70 70+ 2 1 1 5 0-3 years 3-6 years 6-9 years 9+ years Board gender split (%) Ethnic diversity of the board (%) Women 11% 33% Men Caucasian Ethnically diverse 67% 89% Board skills matrix disclosure (number of directors) Accounting/Finance Actuarial Asset/Fund Management Audit Compliance ESG Executive Management Financial Services Insurance IT/Technology Legal/Governance Marketing People Risk Management 111 Renewal of existing NED Committee self-evaluation appointments The NomCo conducted a self-assessment of the effectiveness of the The committee reviewed the profile committee, the individual members and the committee Chair in FY23. In of board tenure of our NEDs in light addition to considering the composition of the committee as described above, of its future needs. As part of this, it the internal evaluation considered the performance of the committee and considered the renewal of Christopher concluded that the committee continues to be effective. Munro’s term as a NED, his second three-year term of which was due The following provides an update on progress against those areas agreed as to expire in FY23. The committee priority areas of focus for the committee in FY23: agreed, taking account of the current cycle of board development and succession and Christopher’s knowledge of and contribution to the business, to recommend to the board for approval the renewal of his appointment for a further three-year term, subject to annual re-election by shareholders which was approved at the AGM. This decision was taken in the February AGM. Board effectiveness An external board evaluation AREA OF FOCUS PROGRESS Continue to strengthen oversight and input into the Group’s operating subsidiary NED appointments. The committee has participated in the selection process for the non-executive hires in the subsidiary firms. Further oversight into executive’s pipeline and talent development. The committee continues to review proposals for building a pipeline of talent into the succession planning process. The following areas were agreed as priority areas of focus for the committee in 2024: effectiveness review was conducted • Further oversight into executive’s pipeline and talent development during the year. The review was conducted by Independent Audit Ltd who conducted our first review in Richard Cranfield 2020. The board considered that using Chair, Nomination Committee the same firm would provide insight into how the board had developed 13 December 2023 in the intervening three years. Full details are set out on page 95 above. Victoria Cochrane, our SID, also met with the directors to appraise my own performance, and Victoria and I have discussed the feedback received. 112 DIRECTORS’ REMUNER ATION REPORT Annual statement by the Chair of the Remuneration Committee (unaudited) Remuneration Overview As Chair of the Remuneration Whilst we remain committed to Committee I am pleased to present the ensuring that employees participate Directors’ Remuneration Report for the in our success on broadly the same year ended 30 September 2023. terms as our executive directors and senior managers, where we take steps In keeping with prior years the report to drive exceptional performance is set out in four sections. amongst our management team, we do so in a way that focuses delivery • This letter which summarises not on short-term outcomes but on our remuneration ethos and the sustainable long term future objectives and how the success of the Group. Our objective is committee has worked to to align their financial interests with deliver those during the year; the interests of our investors, whilst keeping their reward measured and • A summary of our remuneration proportionate, and avoiding a “them policy “at a glance” along with and us” culture within the workforce. the outcomes for our executive directors can be found on page Recognising the challenges of the 120; external economy, the Company awarded meaningful but responsible • A summary of our approach to pay-rises in June, weighting pay directors’ remuneration can be rises in favour of those on the lowest found on page 122; salaries, for whom the cost of living • Our annual directors’ result pay rises of 8% or more were remuneration report which can awarded to lower earners whilst the be found on page 124 and sets most senior leaders received more has had the greatest impact. As a out how the committee has prudent rises. delivered its responsibilities throughout the year. During the year, we welcomed Rita Dhut as an additional member of the • A summary of how we have committee, broadening the skills and applied the policy can be found experience of the membership. on page 127. Our current Directors’ Remuneration The committee continues to review the structure and composition of Policy (DRP) was approved by over remuneration for directors and senior 92% of shareholders at the 2022 AGM. leaders. The committee’s work so far indicates that the overall limits Our remuneration philosophy is on variable reward set out in the underpinned by a responsible and FY21 DRP, approved by shareholders sustainable remuneration structure, at the AGM in 2022, are no longer recognising that employees are one of sufficient to facilitate the flexibility our key stakeholders. However, as we required to deliver a model which both develop and diversify our management attracts and retains the talent that will team to support the demands of effectively support the business over the business, our structure has to the longer term. Instead, a wide- be adaptable to attract and retain ranging restructure of the DRP will be talent, and to reward delivery of our required. objectives and corporate goals. 113 The committee is not seeking to Executive Directors’ remuneration increase the incentive limits set out in the 2021 DRP in this annual report, It remains one of our key principles however, the committee engaged and to create, maintain and improve will engage with shareholders on any value provided to our customers, proposed changes during FY23 and shareholders and employees and early FY24, before tabling a change to share profits between all three Distinctive approach to performance of policy for approval at a General of these stakeholders. This reward measurement – Historically we have Meeting. philosophy remains unchanged. We not had mechanical performance Further details of all these themes are provided in the Director’s are committed to sharing our success targets which apply to variable evenly across the workforce through pay awards, because we believe the use of responsible, sustainable and that applying formulaic measures Remuneration Report below. proportionate variable remuneration. can lead to undesirable behaviours Board and senior management for our approach to executive director recognise that there is a need to changes remuneration on pages 122 to 123. hold management responsible and We have set out further the rationale and / or outcomes. We do however The key features of our reward accountable for the long-term success There were no changes to the framework are as follows: and stability of the business. The board composition during the year. However, the board has recruited a CFO to further enhance the skills of the executive team. The RemCo has reviewed the proposed reward and committee will therefore continue to exercise independent judgement and discretion when authorising cash bonus and deferred bonus remuneration outcomes, taking into confirmed that it meets the framework Base salary – Our ethos is to pay account both company and individual of the DRP. base salaries which are set at a performance. Variable remuneration level to attract and retain talented awards are now more closely linked to In addition, a CRO joined the senior and valued employees. Salaries are pre-set target deliverables, including management team in January. benchmarked externally but the ESG outcomes. We continue to external market is only one factor develop performance metrics for the Together with the Senior Independent taken into consideration when exercise of the deferred element of NED, the Chair of the board and assessing appropriateness of salaries. any awards however this is linked to the Company Secretary, I attended Internal parity and the desire to the development of a more flexible a number of investor meetings maintain an inclusive, sustainable and variable reward structure which will throughout the year to understand responsible reward framework are be the subject of a revised Directors’ investor sentiment on, amongst other equally important. matters, executive reward. I am pleased to report that the messages we received were in line with our own views on the link between reward and performance. Remuneration Policy. Investors will be engaged in the development of that new Policy in due course. Our performance measurement framework will still consider the same Relatively modest additional four anchors – financial performance; incentives – Above basic salary, our stakeholder outcomes; risk, regulation maximum total additional incentive and ESG; and strategy delivery, but opportunity is currently 100% of within those criteria specific target salary per annum. In accordance deliverables will be set. with our approach of keeping staff and executive award aligned, it is rare for any executive director’s total annual variable remuneration award to exceed 65% of salary. As a result, remuneration for senior roles currently sits in the lower quartile of the FTSE 250. We recognise that this has an impact on our ability to attract and retain the highest quality talent and that therefore for some roles, a more flexible approach to variable reward is required. 114 Alignment with wider workforce employees with the assurance of The pension policy for executive whilst rewarding the long term competitive rates of fixed reward, directors is equivalent to that of the sustainable and responsible total compensation which is workforce but both Jonathan and business mode – Our approach equivalent to the outcome prior to Alexander have elected to cap their to remuneration for executive the reframe, but with the possibility contributions at the HMRC annual directors is consistent with that for of enhanced bonuses to reward allowance which at the beginning of all employees. It has always been our excellence. culture that we do not use reward the financial year was £4,000, rising to £10,000 following the budget to grow the wealth of our executives At the same time, we recognise changes. As a result, at 1.49% for and senior managers at the expense the importance of focusing senior Alexander and 1.49% for Jonathan, of our wider workforce. Our reward management on the long-term the actual employer pension framework is designed to drive sustained performance of the contributions made in respect of equitability in the remuneration business. Adjusting reward for the executive directors are well below the outcomes in order to drive alignment most senior managers to reduce the 12.3% of salary contribution available in the high performance of all our scope for variable reward would be to all employees. Our current pension employees. We recognise that our inconsistent with this approach. As arrangements therefore align with the proposition relies upon our workforce a result, we have maintained the new Corporate Governance Code as performing to the highest standard to cash bonus element of reward for the regards the alignment of executive deliver the best service proposition most senior employees at 30% and pensions with the wider workforce. to the market and support all our retained the ability for all members stakeholders in their success. Our of the management team, including Employees (including the executive variable cash bonus and Share executive directors, to be considered directors) may also elect to sacrifice Incentive Plan (SIP) reward incentive for an additional bonus award a percentage of their cash bonus structure reflects this ethos because deferred into shares. As a reflection award and receive additional employer it is aligned across the workforce and of our measured reward structure the contributions. This diverges from the all employees (excluding T4A) are quantum of these deferred awards Code provision, but neither Alexander awarded cash bonuses and invited to currently remains capped at 33%. nor Jonathan take advantage of this participate in the SIP under the same opportunity. performance framework. As its next step to transforming the reward framework, the committee is At the commencement of this considering the mix of cash, medium, performance year and in response and long-term incentives available to to feedback from the work force senior management, whilst retaining provided by way of our annual employee engagement survey, the the overall alignment of interests with the wider workforce. Whilst committee endorsed a restructure the design of a new proposal is at of the fixed and variable reward for an advanced stage, further details the ISL, ILInt and IAD UK employees, of these plans will be presented to recognising that fixed reward is shareholders in due course and in of fundamental importance to our advance of seeking approval at a people, particularly during these General Meeting. times of extraordinary inflation and cost of living pressures. The rebalancing of reward resulted in all employees below the most senior managers receiving a higher fixed salary and a lower target cash bonus of 10%, but with the potential to receive a cash bonus award of up to 20% for performance recognised as excellent. The out-turn of this approach has been to provide 115 Share ownership – Our executive • We operate an HM Revenue & directors are significant shareholders Customs tax-advantaged Share in the Company with Alexander and Incentive Plan (SIP) for UK and Jonathan having a direct or indirect Isle of Man employees (excluding interest in 1,305,570 shares and T4), as well as a parallel scheme 960,189 shares, respectively. Michael for our Australian employees. Howard as founder executive director has a direct or indirect interest in • The Group’s deferred bonus share 32,000,000 shares. With the exception option plan has a maximum award of employees of T4A, all UK and Isle opportunity of 33% of salary. of Man based employees with the required accrued service are invited • For executive directors, we to become shareholders by way of the reference performance against all staff SIP which we are delighted four key areas – financial to report, during financial year 2023, performance; stakeholder has once again had a 100% uptake outcomes; risk, regulation and for Free Shares and has had a 69.79% ESG; and strategy delivery. uptake for Partnership and Matching The committee takes a shares. All IAD employees based in holistic approach to reviewing Australia are invited to participate in a performance, linking the award parallel scheme created in accordance and the out-turns of the award with local remuneration rules. to defined performance metrics. Malus and clawback provisions In summary, we retain our belief are available to the committee to in simple and transparent reward use in the event of non-delivery, which is linked to Group success and should the committee wish to individual personal performance; long exercise their discretion to do so. term engagement amongst the more senior management; and which is • We will develop our variable delivered in a way that is sustainable, reward framework for our and does not drive a them-and- most senior managers to align us reward culture, undesirable with these foundations whilst behaviours or encourage excessive driving long term, sustainable risk taking: • We have designed our and responsible growth of the business. remuneration structure to be We believe our approach to inclusive and to align executive remuneration supports both remuneration with that of the the objectives of the Group, workforce. our shareholders and our other stakeholders, and is aligned to the key • We encourage share ownership principles shared between us. by all staff to align the success of the business with their own and support this by way of company- operated share ownership plans. 116 Remuneration outcomes for year ended 30 September 2023 Alignment with shareholders The Company achieved robust and resilient financial results with profit before We are mindful of our shareholders’ tax of £62.6 million (15% increase on prior year). Directors’ salary and bonus interests and are keen to ensure a awards were made in accordance with the Policy. demonstrable link between reward and value creation. We remain committed The Company restructured the reward framework for ISL and ILInt employees to an open and ongoing dialogue with to reflect employee sentiment shared by way of employee engagement survey. our shareholders regarding executive The restructuring did not result in an increase to overall reward but rebalanced remuneration and we welcome compensation to increase fixed reward, reduce target cash bonuses whilst feedback. building greater personal performance measures into variable reward out-turns. To this end I, along with other non- The Company and the committee then reviewed salaries in June and determined executive members of the Board that against a backdrop of inflationary and talent pressures it would be and our Company Secretary met appropriate to structure fixed remuneration awards in a way that directed the with a selection of our investors to available resources to those who needed them most. The average award to understand their views and consider all employees who were eligible for an increase was 7.3%. Salary increases feedback around our reward structure. for executive directors were also considered, carefully taking into account the We have listened to those views and competitive positioning of their packages as against the market. As a result, hope that this report clearly articulates awards were made of 4% for Alexander and Jonathan, which was lower than the our ethos whilst also demonstrating average for all employees. the connection of reward out-turns to individual performance. Directors’ bonuses were awarded within the parameters of the Policy. Alexander was awarded a cash bonus of 30% and a target bonus award deferred into I hope that you find this year’s report shares of 31.5%. Jonathan was awarded a cash bonus of 30% and a target informative and look forward to bonus award deferred into shares of 31.5%. Michael Howard did not receive a receiving your continued support at bonus. The committee considered that these bonus awards were a fair reflection the forthcoming AGM. of the Company’s overall performance. In order to further align incentives with performance, the deferred share awards Signed on behalf of the IHP for our more senior managers, including Alexander and Jonathan, have this year Remuneration Committee been assessed by reference to individual and Group performance. Christopher Munro In making these awards the Remuneration Committee considered the Chair of the IHP Remuneration quantitative and qualitative anchors. In particular, the committee considered Committee the performance of the Company over the financial year against its strategic objectives; the business plans approved by the Board; market consensus; 13 December 2023 regulatory requirements; the current state of financial markets and the recruitment market. The focus throughout the financial year has been the delivery of organic growth, improvement in service delivery and systems enhancements and variable awards have been assessed against the extent to which these deliverables have been achieved. 117 AREA OF FOCUS OUR APPROACH Clarity Our approach to remuneration supports the strategic objectives of the Company, and we seek to maintain a simple remuneration model which is communicated to stakeholders, including shareholders and employees in a clear and transparent way. We consider that our remuneration framework is simple and effective. Our incentive framework comprises only a cash bonus award, an all-employee share incentive plan and a deferred bonus share option award. We believe our approach to performance measurement supports appropriate consideration of risk management and a long-term view of the business based on sustainable growth. Total remuneration is structured in a way which does not encourage short-term risk taking in order to deliver financial outcomes for executives. The annual bonus rewards performance against four anchors for the business, ensuring a holistic view of business performance. The Report describes how the board has complied with the provisions set Simplicity Risk This report has been prepared in accordance with the provisions of the Companies Act 2006 and the Large and Medium-Sized Companies and Groups Regulations 2013, as amended. out in the UK Corporate Governance Code 2018 relating to remuneration matters. The Remuneration Committee confirms throughout the financial year that the Company has complied with these governance rules and best practice provisions. UK Corporate Governance Code – Provision 40 When developing the DRP and considering its implementation, the committee was mindful of the UK Corporate Governance Code and considers that the Predictability The maximum opportunities are outlined in the Remuneration Policy. Taking into account our approach to incentives, total remuneration is predictable in comparison with other listed companies. executive remuneration framework Proportionality appropriately addresses the following considerations: Our executive director remuneration is aligned with that of the wider workforce and the result is a total reward structure that for the most senior executives is low in comparison to the wider FTSE 250. Alignment to culture Our overall approach to remuneration and the associated remuneration policy for executive directors is consistent with that for all employees. Our remuneration structure is designed to be responsible, inclusive and to ensure that we reward on merit. Our pension policy is aligned across the workforce. However, out-turns for the most senior management currently fall below those of the wider workforce, given the effect of HMRC funding limits. We consider that our approach is fully aligned with our culture. We do however recognise that investors wish to see reward tied to long- term managed and sustainable growth of the business. We do not believe that a traditional LTIP will best achieve these objectives. We will consult with shareholders regarding our plans to achieve greater alignment with investor sentiment by way of a DRP which will be tabled for shareholder consideration in early FY24. 118  119 1. DRP ‘at a glance’ ELEMENT OPERATION OUT-TURNS FY23 AND IMPLEMENTATION IN FY24 Base salary • Increases will take into account The salary increase awarded was 4% for Alexander a number of factors including the and 4% for Jonathan which was below the UK and scale of the role and the individual’s IoM workforce increase of 7.3%. experience and wider workforce increases. Salary with effect from 1 June 2023: • Alexander Scott, CEO: £481,700 • Jonathan Gunby, Executive Director: £481,700 Benefits1 • Includes, for example, death in • Benefits for Alexander and Jonathan comprise service, private medical insurance private healthcare, death in service and PMI. and a discount to the fees for use of the Transact Platform. • Alex, Jonathan and Michael Howard benefited from the discounted platform charges. • Executive directors are eligible to receive the same benefits on the same terms as the wider workforce. Pension • The pension policy is equivalent to • Alexander received a £7,000 pension that of the wider workforce. contribution (1.49%). • The executive directors’ current • Jonathan received a £7,000 pension contribution pension arrangements are lower (1.49%). than those of the workforce. Variable reward • Total maximum opportunity is 100% • Ordinarily, we do not expect awards to be in comprising of salary. excess of 65% of salary. i) an annual cash bonus element; and ii) a deferred bonus award of • The committee retains flexibility to • Awards are made by reference to delivery adjust the balance between cash against defined metrics which are based on a and deferred bonus awards within mixture of individual and Group performance. the parameters set out in this policy and the scheme rules. • The committee uses judgement and discretion when determining outcomes under the annual shares • The deferred bonus awards will bonus and deferred bonus awards. usually vest on the third anniversary of the grant date. • Outcomes are made by reference to the four anchors – financial performance; stakeholder • Deferred bonus awards granted outcomes; risk, regulation and ESG, and under the company’s PSP are strategy delivery. subject to malus and clawback provisions as described below. • For 2022 Alexander was awarded a cash bonus of 30% and a bonus award deferred into shares of 31.5%. Jonathan was awarded a cash bonus of 30% and a bonus award deferred into shares of 31.5%. All employee The plan is operated in line with HMRC Executive directors are eligible to participate in share incentive guidance. the all-employee SIP on the same terms as all plan 120 employees. ELEMENT OPERATION OUT-TURNS FY23 AND IMPLEMENTATION IN FY24 Shareholding • Executives are expected to build up and hold 100% of salary in shares over four years, for guidelines in-employment shareholding guidelines. • Post-employment, these guidelines will apply in full (i.e. 100% of salary) for the first year post departure and taper down to half (i.e. 50% of salary) for the second year post departure. This policy does not apply to shares purchased with an Executive’s own funds and applies only to awards that vest after the approval of the 2021 Remuneration Policy. Non-Executive Fees are paid quarterly Fees with effect from 1 October 2021: Director fees • Board Chair: £140,000 • Base fee for Non-Executive Director: £70,000 • Additional fee for chairing a Committee: £10,000 • Additional fee for role of Senior Independent Director: £7,500 • No changes for 2022/2023 FY23 remuneration outcomes for our executive directors Alexander Scott, CEO Total remuneration Fixed – £469,400 Cash bonus – £144,510 Deferred bonus – £151,761 Other – £7,688 £773,359 Jonathan Gunby, Executive Director Fixed – £469,400 Cash bonus – £144,510 Deferred bonus – £151,761 Other – £7,400 £773,071 121 2. DRP summary - The IntegraFin approach to executive remuneration Our approach to executive director remuneration is, we believe, aligned to our culture, our strategy and our success to date. In 2021 we considered it afresh as part of our triennial Policy review and whilst we still believe that it supports our success, we recognise the need to develop our approach to reflect the need to attract and retain the best possible talent who will be instrumental in building and developing the proposition over the coming years. Modest incentive quantum Our approach to Senior Management incentives We currently operate only an annual bonus with a portion deferred into shares, and the level normally does not exceed 65% of salary. This approach has aligned Our current reward structure has to our values and culture such that our executives and the wider workforce delivered the flexibility required to are rewarded on the same terms, with only the addition of the deferred bonus enable the committee to effectively element being available to the more senior managers, the purpose of which is to recognise management performance drive forward and strategic thinking and resilience of the Group. A comparison for the period since listing. with a more typical FTSE 250 package is illustrated below. ILLUSTR ATIVE F TSE 250 PACK AGE INTEGR AFIN APPROACH TO EXECUTIVE PAY Salary • Market rate Salary • No more than market rate Bonus max 150% of salary • Deferral of half for 3 years • Targets set up front Performance shares max 175% of salary • Performance period of 3 years + 2-year holding period • Targets set up front Bonus max 100% of salary • Maximum of 100% of salary, but ordinarily not expected to exceed 65% of salary No long term incentive • Typical deferral of half for 3 years (33% of salary max) • Performance assessed on “look-back” basis We do however recognise that as we refresh our senior leadership and build our pipeline of talent to take the Group forward, there is a need to structure our reward to recognise that those individuals do not have shareholdings in the Group of a quantum which significantly enhance those individuals’ income or wealth, and that a more flexible structure with the potential for higher reward in the form of equity is appropriate to properly link incentives to desired out-turns. We are therefore undertaking a review of the structure and composition of variable remuneration to recognise past, short-term and long-term delivery of the Group’s objectives. We believe that an appropriately structured model will continue to drive the right behaviours whilst enabling the Group to attract and retain talent in a competitive market. 122 Approach to performance measurement Historically we have used a “look- back” approach when it comes to assessing performance and determining bonus outcomes. This year we have continued to award cash and deferred bonuses based on the look-back approach but the awards themselves are more closely linked to the delivery of metrics agreed by the committee during the performance year. Those metrics are still aligned with the four anchors that underpin our business success. PERFORMANCE ASSESSMENT — OUR FOUR QUANTITATIVE ANCHORS Financial performance Stakeholder outcomes Risk and regulation (including ESG) Strategy delivery Approach to performance assessment is underpinned by the Remuneration Committee considered qualitative and quantitative actual performance within this framework (individual performance is also considered). We believe that this design continues Through this approach we look to drive The committee considers that this to promote long-term thinking, and sustainable long-term value for all is a controlled, responsible and to promote actions which deliver our stakeholders. We believe that our proportionate approach to executive long-term success whilst maintaining performance measurement framework pay in the round in the context of alliance with workforce reward and is the best way to achieve this and low overall quantum and internal reflecting our culture of not creating support our culture. alignment. wealth for our directors at the expense of our workforce. Performance is assessed within a A critical contributor to the success of individual and company performance of the Group is the high standard of against four anchors and, for individual client service delivered, collectively, performance, pre-set metrics. framework which includes consideration by our staff. Our approach allows the committee to assess performance in the round, taking into account all relevant factors in order to ensure that outcomes are appropriate and aligned with the experience of our wider stakeholder but guided by the objectives under each anchor. As a result, our Executives’ strategic focus is on growing inflows on a controlled and responsible trajectory, in order to maintain the level of customer satisfaction through delivery of the best platform, supported by exceptional service and the provision of associated ancillary services which make it easier for our clients and advisers to plan and manage their financial affairs. 123 3. Annual Remuneration Report This report details the remuneration Governance arrangements in place for people who were directors of the Company Committee membership during the year during the financial year. There have been no changes to Directors’ remuneration throughout the year save for the annual bonus award made in December 2022 and The members of the Remuneration Committee at 30 September 2023 were: Christopher Munro (Chair) 19 January 2018 DATE OF APPOINTMENT the annual pay award made in Richard Cranfield June 2023. Wider workforce - IAD and T4A Rita Dhut Robert Lister Note that throughout this report, Role of the RemCo there are various references and/or 17 December 2019 22 March 2023 1 September 2021 comparatives to the wider workforce The purpose of the committee is to review, set and agree aspects of the overall or the wider UK workforce. The remuneration policy and strategy for the Group and the total compensation structure of reward for T4A employees package for certain officers and employees within the Group. It does so with a continues to be gradually integrated view to aligning remuneration with the successful achievement of the Group’s into the IntegraFin business model. long-term objectives while taking into account the Code, relevant regulatory Whilst basic pay rise awards have requirements, market rates and value for money. been benchmarked and aligned, variable remuneration continues By delegation from IFAL and ILUK, the committee monitors the content and to differ reflecting the different application of the Company’s remuneration policy to individuals whose roles incentives applicable to the T4A bring them into scope of the FCA and PRA remuneration codes and the Corporate business. Therefore references to Governance Code. To the extent that the committee does not approve their wider workforce currently excludes individual remuneration, the committee considers whether the total reward T4A employees save where expressly for each of those employee remains compliant with the provisions of the included. In some instances it also relevant code. The committee is also responsible for reviewing an annual excludes our Australian employees statement prepared by IFAL setting out how IFAL complies with FCA regulatory in IAD as Australian employment requirements on remuneration. arrangements differ from those in the UK. In all its activities, the committee gives due consideration to laws and regulations, the provisions of the Code, the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure Guidance and Transparency Rules and other applicable rules, as appropriate, and to shareholder feedback. Composition of the Remuneration Committee The board appointed Rita Dhut to the RemCo in FY23. The committee is now comprised of three independent NEDs and the Chair of the Board and therefore the composition continues to comply with the requirements of the Code. Following the implementation of MiFIDPRU, IFAL is required to comply with the provisions of SYSC19G. When reviewing the composition of the committee, consideration was given to the requirements under SYSC19G and the ongoing obligations for ILUK under the Solvency II regime. The committee composition continues to comply with both requirements. The committee ensures that members take individual responsibility for identifying training appropriate to their needs and for keeping appropriate records of such training. Each committee member provides copies of their training record to the Company Secretary annually and undertakes all regulatory training requested by the Group. 124 Committee meetings and The Committee’s work throughout attendance the year The committee meets at least twice The committee has performed annually and more frequently when its duties with a view to aligning required. The committee has met remuneration with the successful ten times during this financial year. achievement of the Group’s long- Attendance by each member of the term objectives while taking into committee as at 30 September 2023 account the Code, relevant regulatory is set out in the Board and Committee requirements, market rates and value attendance table on page 94. for money. The Head of Legal and Company The committee has undertaken the Secretary and the Head of Human following this financial year: Resources attend all meetings and other individuals such as the CEO, the Group Counsel, and external advisers may be invited to attend for all or part of any meeting. AREA OF FOCUS WORK CONDUCTED Governance • Reviewing the Committee Terms of Reference to ensure their continuing appropriateness. • Considering the membership of the Committee and the provisions of the Code and recommending the appointment of Rita Dhut to the Committee to enhance the skills on the Committee and to demonstrate the importance of remuneration considerations in the context of our employee engagement strategy. • Considering the FCA and PRA remuneration requirements in respect of employees who hold Senior Management Functions within the business or who have been identified as Remuneration Code Staff. Awards • Reviewing the appropriateness of the proposed annual staff pay award by reference to the FCA, PRA and FRC expectations, and the DRP. • Approving the proposed remuneration for the executive directors and senior managers. • Considering proposals for the remuneration of the CFO. • Considering the appropriateness of remuneration for Code staff and the staff pay award. • Reviewing and approving the making of deferred bonus awards to executive directors and senior managers. • Approving the grant of the Free Share Award. • Considering and developing proposals for a restructure of variable remuneration. 125 Committee self-evaluation The committee continued to develop its performance in the context of the feedback from the 2022 self-evaluation. In particular the Chair of the committee and the Chair of the board have met with institutional investors to share insight into and receive feedback on our remuneration model. The committee has continued its work to more closely align the linkage of variable remuneration to individual as well as Company performance and to introduce clearer objectives and measures of performance and is developing the framework further to align with stakeholder interests. Feedback regarding the interaction between the committee and the regulated subsidiary boards continues to be considered and there is a structure in place for cascade of information from the committee Chair to the chairs of the UK regulated subsidiary ARCs. DRP The DRP was approved by ordinary resolution at the Company’s AGM held on 24 February 2022 and can be found on pages 94 to 102 of the Company’s Annual Report and Financial Statements for the year ended 30 September 2021, which is available in the Investor Information section of the Company’s website integrafin.co.uk. Statement of voting at the AGM The Company remains committed to ongoing shareholder dialogue and takes a close interest in voting outcomes. The following table sets out voting outcomes in respect of the resolutions relating to approving directors’ remuneration matters at the Company’s AGM for the last three annual meetings: YEAR RESOLUTION VOTES FOR / DISCRETIONARY % OF VOTE VOTES AGAINST % OF VOTE VOTES WITHHELD 2023 Approve the Director’s Remuneration Report 221,114,781 92.18 18,760,062 7.82 0 2022 Approve the Director’s Remuneration Policy 216,703,830 91.90 19,098,977 8.10 1,361,995 2022 Approve the Director’s Remuneration Report 214,085,945 90.89 21,456,381 9.11 1,622,476 2021 Approve the Remuneration Report 181,687,872 81.57 41,040,519 18.43 4,742,263 126 4. Application of the Policy How the Policy was applied in FY23 Summary of total remuneration – executive directors (audited) GROSS BASIC SALARY BENEFITS1 PENSION TOTAL FIXED PAY CASH BONUS DEFERRED SHARES LTIP OTHER2 ANNUAL BONUS TOTAL VARIABLE PAY TOTAL DIRECTOR YEAR £'000 £'000 £'000 £'000 £'000 £'000 £’000 £’000 £’000 £'000 Alexander Scott Jonathan Gunby Michael Howard 2023 2022 2023 2022 2023 2022 469 443 469 443 0 0 1 1 1 1 0 0 7 4 7 4 0 0 477 448 477 448 0 0 145 93 145 116 0 0 152 146 152 146 0 0 0 0 0 0 0 0 8 8 7 8 0 0 305 247 304 270 0 0 782 704 781 703 0 0 1 Benefits for Alexander Scott were £922 for 2023 and £842 for 2022 Benefits for Jonathan Gunby were £922 for 2023 and £842 for 2022 2 Other remuneration relates to Share Incentive Plan awards and the employee discount on platform charges. Michael Howard receives nil remuneration from the Company, but his employer, ObjectMastery Pty Ltd, receives a fee of AUD80k for his executive appointment to IAD Pty Ltd, a company within the Group. Base salary (audited) The basic annual salaries for Alexander Scott and Jonathan Gunby were reviewed in June 2023 in accordance with the Company’s all-employee pay review resulting in the following changes to the annualised salary figures: BASIC ANNUAL SALARY AS AT 1 JUNE 2022 SALARY EFFECTIVE AS AT 1 JUNE 2023 £’000 463 463 £’000 481 481 DIRECTOR Alexander Scott Jonathan Gunby Benefits Executive directors do not receive any benefits which are not available to all employees. Benefits for the executive directors comprise private health care, death in service benefits and an employee discount on platform charges. 127 Incentives IntegraFin has a culture focused on ii) Employer funded Proportionate incentive opportunity our principal stakeholders – customers, contractual-enrolment shareholders and employees. Our company pension scheme Our maximum total variable incentive structure has been developed Employer contributions are 9% of remuneration opportunity for to support this culture: post-pension-sacrifice salary but executive directors is 100% of salary, participants may elect to reduce and ordinarily in practice we do Alignment across all staff that if contributions would exceed not expect awards to exceed 65% HMRC tax free contribution of salary. This relatively modest All staff are eligible for an annual cash allowance. If an employee does incentive level (compared to normal bonus award and to participate in the not sacrifice into (i) above, the UK practice) supports the alignment of all staff SIP. Our incentive structure employer contribution to the executive and workforce reward. is designed to align across the contractual enrolment company workforce and all employees are made pension scheme will be 9% of Variable reward comprises Cash awards under the same performance basic or lower. bonus and deferred shares awards framework. This ensures that the executive team and the workforce iii) Employees (including The company operates a directors’ share in the success of the business directors) are eligible to discretionary bonus arrangement with and drives a culture of inclusivity in sacrifice a maximum of 25% of the anticipated award of 65% of basic the reward structure. any variable cash bonus award salary arranged as follows: into their pension Aligned pension provision Any such contribution will receive i) Immediate Cash bonus 30% employer contribution. The Anticipated 10% of salary awarded The majority of UK and Isle of Man committee continues to review in November and settled in employees, including executive the appropriateness of this December. directors have access to three pension arrangement The Company’s arrangements which interrelate. directors’ pension funding ii) Deferred cash bonus It is key that, save with respect to arrangements are not excessive Anticipated 20% of salary awarded employees of T4A, the Company’s and align completely with those in November with 10% settled in executive directors are not eligible available to the wider workforce. February and a further 10% in for pension benefits which differ April provided the director remains from or exceed those available to Australian based employees of in service and not in their notice other UK staff. IAD participate in a comparable period by reason of being a “bad i) Salary Sacrifice pension with the Australian tax rules. arrangement structured to comply leaver”. Employees (including directors) Each element is only payable if the can fund as much as they wish. T4A operates an employer and employee remains employed on The Company will match 1% of employee funded auto-enrolment the payment date. We believe that basic annual salary for every 2% of basic annual salary sacrificed, scheme. All employees of T4A, including executive directors who do this both rewards performance and encourages loyalty. up to a maximum of 4% employer not hold executive office elsewhere contributions. in the Group, are able to participate iii) Deferred bonus into shares on equivalent terms. We continue The company operates a to look at the synergies between discretionary deferred bonus the T4A remuneration structure and share option plan by which cash that of the wider workforce but will bonuses of up to 33% of salary, not make any significant changes to less employer funded Free and the arrangements currently in place without due consideration of the Matching SIP shares, are deferred into share options. The holding interests of both the Company and period is three years and there is the employees. no post vesting holding period. The plan therefore does not comply with the components specified in the Code relating to a phased release of awards and a five year holding period. 128 At present we believe that a three- year vesting period is adequate. We maintain flexibility on the proportion of each element of the awards. The Company is focused on the long-term delivery of outcomes which balance the interests of customers, employees and shareholders and this is best served by ensuring that executive behaviour is focused on investment in the platform and ancillary activity in accordance with the Group’s strategy and purpose. Four qualitative and quantitative Annual bonus (cash and deferred anchors share) awards for FY23 (audited) The Committee considers company and individual performance against DIRECTOR four qualitative and quantitative Alexander Scott anchors: Jonathan Gunby CASH AWARD £’000 DEFERRED AWARD £’000 145 145 30% of salary 30% of salary 152 152 31.5% of salary 31.5% of salary • Financial performance The cash and deferred award • Stakeholder outcomes percentages are by reference to the basic salary on 30 September 2023. • Risk and Regulation (including This is aligned to the approach taken Environmental, Social and for all employees. Governance) The bonus for Alexander is • Strategy delivery recommended by the board Chair. The bonus for Jonathan is recommended Each director’s delivery of their by Alexander. The committee considers objectives is assessed against each detailed information which covers anchor, as well as the Group’s delivery factors such as financial performance, in the round. Whilst the committee risk, compliance, conduct, internal has not set targets for apportionment of variable awards against each controls, client and client adviser metrics, and delivery of strategy. anchor, the awards are assessed by reference to delivery of those anchors This year, as in past years, we and awards are adjusted for non- reviewed the board Chair’s and the delivery. CEO’s proposals in that context, and considered whether the executive Within those anchors, the RemCo directors had delivered appropriate considers a wide variety of stakeholder, financial and strategic management information available to performance, whilst also managing risk the Board and its committees. Whilst and maintaining internal controls. the committee considers metrics linked to each anchor, the essence of the process is to use the metrics to arrive at a balanced judgement as to whether an award is warranted and, if so, at what level. 129 For FY23 the assessment of whether cash and deferred bonus awards were justified was in particular informed by the following metrics and performance in the year: Quantitative anchor (metrics and performance) Financial performance Stakeholder outcomes Ensure effective financial Out-turns performance of the Group by: In FY23: • Delivering financial performance Create, maintain and improve value to our four groups of stakeholders – customer, shareholders, suppliers and against forecast, in accordance • Financial performance fell below employees by: with projections and market original projections but, in the expectations. main, this was due to negative • Identifying and executing market movements outside the opportunities for consistent • Sustaining service excellence Company’s control. within the context of managed growth in gross and net inflows and sustained or improved market expenses. • Profit margin has reduced as share of net inflows. • Managing costs and headcount charges and interest thereon; • Sustaining our platform’s adviser- effectively. and the removal of T4A post voted industry awards. a result of the historical VAT • Managing the dividend flow and Normalised profit results in a • Ensuring adviser satisfaction with distributable reserves/regulatory reduced profit of just 6.5%. the Company’s propositions. combination remuneration. capital from subsidiaries. Measures of success • Net inflows • Earnings per share • Expense ratio • Profit margin • Share price • Market cap • T4A user licences • Payment of a dividend • External factors outside of the Company’s control, e.g. sudden FTSE and global movements. • Service delivery, whilst subject • Creating a culture which to stretch, continued to be encourages openness, honesty, regarded as market leading prevents harm and results in by our Financial Advisers and behaviours that are consistent has not impacted on financial with the Group’s values. performance. • Maintaining a staff attrition rate • Dividend flow and distributable that remains within appetite. reserves/regulatory capital from subsidiaries to support • Ensuring that the Group does not Group dividend were managed risk capital beyond reasonable effectively and dividends to levels, does not create any shareholders have been paid in commercial conflict or make line with policy. it difficult to meet regulatory responsibilities. • Forward-looking projections indicate that the Company is well placed to sustain performance over the coming year taking into account stress-tested scenarios. 130 Measures of success Out-turns • Net inflows In FY23, the Company delivered • The Employee emphasised • Adviser + user/client retention • Market share of inflows the following: Clients and advisers employee focus on the delivery of enhancements to the work environment London based employees. • Adviser voted awards received remained above 10% and net Shareholders flows make up approximately 22% • Market share of gross inflows • Market research results (internal of the market. • The Company distributed and external) dividends in accordance with its • Staff attrition rates UK Investment Platform study • Staff engagement survey results Platform award 2023 “Platform of stable throughout the year. 2023 and won Schroders UK • The share price has remained • Transact rated first in CoreData dividend policy. the Year”. • Under performance rates • In order to add strength and • Clients benefited from further depth to our Group financial • Shareholder engagement price reduction on buy reporting and financial commission, removal of wrapper management the Board has • Performance and management of fees on junior pensions and the selected a CFO to start in third-party suppliers reduction in fee for non-advised January 2024. clients. • Clients and advisers benefit from Suppliers continued investment in the development of digital onboarding • The Group settled around 95% of its invoices within 30 days of tools. Employees receipt in the last fiscal year. No one stakeholder is prioritised over the others and the Committee • Changes to performance related considers the balance of the pay for London and Isle of Man outcomes for stakeholders when staff has addressed concerns over determining the appropriateness of basic pay levels and strengthened variable remuneration awards. the basis on which performance is measured and rewarded. • 100% of eligible employees took up the SIP free share award and 69.79% took up the Partnership Share award. 131 Risk, regulation and ESG • Effective leadership of risk Measures of success TCFD reporting reviewed and management by reference to enhanced. The above achievements all capital liquidity, operational • Complaint and error metrics are also underpinned by the following: resilience and compliance with regulatory requirements • Review of non-compliance or • The Group has shown appropriate applicable to the Group, including sanctions affecting the Group adherence to internal, legal and those applicable to the Company as a UK listed plc and those • Customer satisfaction applicable to our UK investment regulatory policies, laws and rules and board reports demonstrate appropriate understanding and firm, UK insurance firm and Isle of • Internal audit reports and implementation of regulatory Man insurance firm. findings, and the resolution change projects. thereof • Demonstrable adherence to • Monitoring, auditing and other internal, legal and regulatory • Performance against Risk control assurance activities demonstrate policies, law and rules. self-assessment appropriate attention to maintaining the internal control • Effective management of internal • Progress on environmental environment. governance of the Group both response plan at Board level and through the subsidiaries and management Out-turns structure and the interrelationship The committee considers all of these aspects when determining the appropriateness of a variable with the delivery of the strategy In FY23 the Company delivered: remuneration award. No individual and financial performance. weighting is applied to one or more of • Ongoing engagement with the these aspects so that the committee • Making moral decisions and FCA, the PRA and the IoM FSA on has the flexibility to adjust the award demonstrating a values-driven matters such as board succession by reference to the impact of internal approach that seeks to prevent and non-standard assets. and external constraints on the rather than cure. delivery of each. • Effective delivery of the completed. environmental response plan. • Risks including regulatory The committee considers the steps taken to recruit and retain talent within the organisation. In doing • Internal Audit programme compliance managed within so, the committee receives reports appetite. Minor risk appetite on staff numbers, recruitment and breaches promptly identified and retention, and internal development addressed. opportunities by way of promotions and movement between departments and business functions. The committee considers the appropriateness of executive reward in the context of these measures. 132 Strategy delivery Ensuring that the Group and Measures of success Out-turns each of its subsidiary companies achieves its strategic goals • Assessment of the ancillary In FY23, the key strategic deliverables through: services offered to clients and by the Company were: advisers • Continuous improvement of • Delivery of organic growth. the platform functionality, • Management of expenses responding to customer feedback. • Enhanced resilience of the • Number of retained advisers and clients • Improvement in service delivery. • Continuing the development of the enhanced CURO proposition core platform and associated • Number of new advisers and on Power Platform software. services. clients • Continued delivery of system • Increased number of advisers • Number of advisers and clients enhancements. and clients using CURO. using CURO • Growth of ancillary services to enhance the adviser and client experience. 133 How the Committee’s discretion was applied In determining the award for the In considering the anchors we vest after three years and will be executive directors, we considered reviewed the performance of the subject to malus and clawback the Group’s performance against its external market and the impact of provisions as detailed in the DRP. strategic objectives, the business factors that the Group could not plans approved by the Board, control, alongside the delivery of the In certain circumstances, the market consensus, regulatory platform and stakeholder outcomes Committee has the right to reduce or requirements, the current state of that it could. financial markets and the recruitment withhold the deferred bonus award. This includes but is not limited to market. The committee weighed up We considered the impact of stock where there has been a material the performance of the Company in market volatility on the Company’s misstatement and/or significant FY23 and the future projections for financial performance. downward revision in the financial FY24. Consideration was given to results, where the calculated number the extent to which we delivered the We considered the ongoing investment of shares awarded to an individual superior customer service to which in T4A, their delivery of their business director is determined to be too we aspire and to the Group’s financial plan, and the Company’s steps to align high, or where the Award Holder has performance. Financial performance the independent businesses to deliver engaged in misconduct justifying the was considered by reference to the optimum outcomes for customers. director’s summary dismissal. business plan shared with the board at the beginning of the financial year Based on a holistic assessment Going forward the committee is and to the delivery of stakeholder of Group performance, including giving consideration to applying expectations. Having balanced these consideration of the 2023 outcomes performance conditions to the deliverables the committee then set out in the table above, and deferred share award. considered whether the proposed individual performance, the committee awards were sustainable given the granted the following awards: current projections and future plans and deliverables within the Group. Alexander Scott was granted an overall award (cash and deferred bonus We sought assurance that the shares) equal to 61.5% of salary. In recommendations were made in making this award, the committee accordance with a balanced view of had particular regard to the financial future profitability and in the interests performance of the Group, the delivery of all stakeholders, not just based on of the shareholder experience and backward looking performance, and progress towards climate related that the awards were consistent with commitments. The committee the expectations of our regulators allocated the award as 30% cash and and our other stakeholders regarding 31.5% deferred into shares. proportionate reward that focused executive remuneration on sustainable Jonathan Gunby was granted an delivery over the medium to long overall award (cash and deferred term whilst discouraging inappropriate bonus shares) equal to 61.5% of risk taking or focus on driving up salary. In making this award, the share price at the expense of other committee had particular regard to the stakeholder outcomes. financial performance of the Group, the delivery of new and retention of The committee concluded that existing business through the platform payment of an award was appropriate proposition, enhancement of the given the Group’s delivery in the technology offering and management financial year and sustainable in light of the delivery ancillary services in of the forward-looking projections support of our strategic objectives. The and the forecast performance of the committee allocated the award as 30% Company over the coming year. The cash and 31.5% deferred into shares. committee discussed the quantum of the proposals and evaluated the The deferred bonus award is granted appropriate level of awards to the following the announcement of the Directors. 134 Group’s annual results. Awards will LTIPs SIP Pension contributions The Company does not currently Executive directors can participate Pension contributions for Alexander operate a traditional LTIP and, in FY22, in the SIP. The board may make an Scott and Jonathan Gunby are no award was made to executive award to participants of Free Shares currently made by reference to directors that was dependent on up to the value of 3% of salary or the relevant personal allowance. performance conditions relating to £3,600 (whichever is lower) and may In the FY23 performance year, the more than one year. Awards made to permit participants to subscribe for employer’s pension contribution for executive directors in respect of FY23 Partnership Shares up to the value of both Alexander Scott and Jonathan were assessed against the delivery 1.5% of salary or £1,800 (whichever Gunby was £2,000 for the period 1 of performance conditions; however, is lower). For every Partnership Share October 2022 to 31 March 2023 and they are not under the framework of purchased, two Matching Shares were £5,000 for the period 1 April 2023 to an LTIP. awarded. The £3,600 and £1,800 limits 30 September 2023. are set by applicable legislation and will be revised automatically in the In line with our remuneration event of any changes to the legislation. principles, pension contributions for executive directors are aligned with During FY23, the maximum SIP award those available to the wider workforce. was granted to qualifying employees In FY23, at 1.49% of basic salary, both (including Alexander Scott and Alexander Scott and Jonathan Gunby Jonathan Gunby). The Partnership received pension contributions below and Matching Share Award was made the minimum level contributed in on an evergreen basis and therefore respect of the wider workforce. all qualifying employees will be able to continue to participate in the plan The minimum employer contribution unless it is revoked by the committee. available to all employees in FY23 Based on the Group’s performance in was 9%. For employees other than FY23 the board has not revoked that executive directors the Group has award. The board has considered the made contributions to personal Group’s performance in FY23 and, pension arrangements for those with the approval of the Remuneration employees who have sacrificed Committee, has approved the making salary. Whilst this benefit is available of a further maximum SIP Free to executive directors, none of the Share award to qualifying employees current executive directors has (including Alexander Scott and sacrificed salary. Jonathan Gunby) when the Company is not in a closed period. This will be following the announcement of the Group’s financial results. 135 Shareholding guidelines In-employment Post-employment In the 2021 DRP, the Company The Company has adopted post- adopted in-employment shareholding employment shareholding guidelines guidelines pursuant to which a serving pursuant to which an executive executive director must build up and director must retain for 12 months maintain a holding of IntegraFin shares following cessation of employment with a value (as determined by the such of their “relevant shares” committee) at least equal to 100% as have a value (as determined of salary over a period of four years. by the committee) equal to the Unvested share options awarded under in-employment guidelines most deferred bonus arrangements and recently applicable to them, and for shares subject to other share awards a further 12 months such of their which are no longer subject to any “relevant shares” as have a value (as performance condition (including any determined by the committee) equal to exercisable but unexercised awards) 50% of the in-employment guidelines count towards the requirement, on most recently applicable to them. a net of assumed tax basis where Shares which the executive director relevant. has purchased or which they acquire pursuant to share plan awards granted Individual shareholdings for each of before this Policy came into effect Alexander Scott, Jonathan Gunby and are not “relevant shares” for these Michael Howard are set out below and purposes. all meet the minimum requirements under the policy. The committee retains discretion to vary the shareholding guidelines to take account of compassionate circumstances. No executive directors have left office since the implementation of the policy and therefore there is no report to provide in this respect. 136 Percentage change in remuneration of directors compared to the average employee The table below shows the percentage movement in the salary, benefits and annual bonus for the Directors compared to that for the average Group employee over the past five years. The SIP scheme is provided to all UK and Isle of Man employees, including executive directors, but excluding T4A and is not included above. FY23 FY22 FY21 FY20 FY19 SALARY / FEES % BENEFITS % BONUS % SALARY / FEES % BENEFITS % BONUS % SALARY / FEES % BENEFITS % BONUS % SALARY / FEES % BENEFITS % BONUS % SALARY / FEES % BENEFITS % BONUS % 4 4 31.25 11.71 31.25 1.76 n/a n/a n/a - - - - - - - - - - - - - - - - - - 7 7 - 33.3 29.2 40 0 28.3 45 26.6 (10.1) 2.5 19.5 (-0.7) 56.4 0.0 63.8 3.8 26.6 (1.4) 2.51 19.5 0.6 - - - - - - - - - - - - - - - 0 0 0 0 0 (14.3) - - - - - - - - - - - - - - - - 0.0 0.0 0.0 - 0.0 (30.0) - - - - - - - - - - - - - - - - - - 119.1 0.0 - - - 25.8 - - - - - - - - - (9.4) - - - - - - - - 7.3 31.25 (37.46)2 7.3 26.6 16.75 3.2 19.5 17.98 2.9 5.5 12.8 3.6 26.8 1.1 DIRECTOR Alexander Scott Jonathan Gunby Michael Howard Caroline Banszky Victoria Cochrane Richard Cranfield Rita Dhut Robert Lister Christopher Munro Average employee (exc. T4A) Notes to the table: Alexander Scott’s basic remuneration increased in 2020 upon appointment as CEO. Jonathan Gunby was appointed in 2020 and there is therefore no comparable data for 2019. 1Jonathan’s basic salary increased 2.5% year on year, however in 2020 Jonathan purchased annual leave and therefore received lower basic and variable remuneration in 2020 than Alexander. 2The reduction in the average employee bonus award is reflective of the restructure of employee reward to increase basic and reduce the variable proportion to a targets met out-turn of 10% (2022 - 20%). Michael Howard receives nil remuneration from the Group but his employer, ObjectMastery Pty Ltd, receives a fee of AUD80k for his executive appointment to IAD Pty Ltd, a company within the Group. This fee remained consistent until FY23. Christopher Munro was appointed to interim chair in 2019 and then stood down from this position in 2020 which is why there is a fee differential year on year. In 2021 the NED fees were restructured resulting in a reduction in the fee payable to Christopher Munro. The change in salary/ fees for the directors is based on the salary as at 30 September for each financial year. Some staff received a deferred share bonus award in 2020, 2021, 2022 and 2023 which is why there is a significant increase from 2019. The table does not include salary and benefits movement for IAD employees employed in Australia as their employment benefit package differs from the UK staff package in recognition of different compensation and benefit rules in Australia. It has therefore been deemed inappropriate to include their remuneration in this comparison. Similarly, the “average employee” calculation in the table excludes T4A due to slight differences in the remuneration structure. 137 CEO pay ratio table The following table sets out the ratio of the CEO’s pay to each of the Group’s median, lower quartile and upper quartile pay for UK employees for the last five years. METHOD PAY RATIO RATIO PAY RATIO 25TH PERCENTILE MEDIAN PAY 75TH PERCENTILE FY23 FY22 FY21 FY20 FY19 Salary Method A Total remuneration Salary Method A Total remuneration Salary Method A Total remuneration Salary Method A Total remuneration Salary Method A Total remuneration 11:1 17:1 14:1 16:1 14:1 16:1 17:1 18:1 n/a 18:1 8:1 13:1 10:1 12:1 11:1 13:1 13:1 15:1 n/a 15:1 7:1 9:1 6:1 8:1 7:1 9:1 9:1 10:1 n/a 10:1 The salary and total remuneration ratios for 2023 above are based on the following figures: FY23 Salary Total remuneration 25TH PERCENTILE MEDIAN PAY 75TH PERCENTILE CEO PAY RATIO RATIO PAY RATIO 469,367 780,839 41,641 47,273 58,492 61,764 70,133 89,028 The CEO pay ratios were calculated using ‘Option A’, set out in the Companies (Miscellaneous Reporting) Regulations 2018. Under this method, the full pay and benefits of each UK employee were used to identify those employees that represented the Group’s median, lower quartile and upper quartile pay for UK employees. The full pay and benefits of these employees were then used to calculate the ratios as at 30 September 2023. The Group elected to use Option A as its method of calculation as it felt that using the full pay and benefits of all employees was the most accurate method of identifying those employees that represented the Group’s mean median, lower quartile and upper quartile pay for UK employees. To determine the full-time equivalent pay and benefits of non-standard workers, part-time workers’ remuneration was grossed up to the equivalent full time pay. The ratio for the median and 75th percentile has decreased in FY23. There has been no overall change to the reward structure or benefits provision in the year. The Company has however experienced higher turnover in FY23 compared to prior years, resulting in a net reduction in the number of employees included in the comparative calculation. In addition, the remuneration used to calculate the gap is based upon remuneration awarded in respect of the reference year and therefore the reduced bonus awarded for the IHP CEO in FY22 has resulted in a decreased pay gap. 138 Executive director remuneration compared to wider workforce Our approach to remuneration for executive directors is consistent with that for all employees. • Incentives – our incentive structure is aligned across the workforce, excluding T4A, and all employees are made awards under the same performance framework. For more senior employees a portion is deferred into shares. • Pension – for all employees the maximum company contribution available in FY23 was 22%. Whilst executive directors are eligible to receive the same level as (but no more than) all employees, the pension currently provided to executive directors is 1.49% of salary, considerably lower than the pension provided to the workforce. • SIP – all-employees receive SIP shares based on company performance. This year the maximum of 3% of salary (up to a maximum of £3,600) was awarded, with additional partnership and matching shares available. Relative importance of spend on pay The following table sets out the percentage change in profit, dividends paid and overall spend on pay in the year ending 30 September 2023, compared to the year ending 30 September 2022. FY23 £m FY22 £m PERCENTAGE CHANGE IFRS profit after tax Dividends Employee remuneration costs 49.9 33.7 46.0 44.0 33.7 38.3 13% 0% 20% Payments to past directors (audited) There were no payments to past directors Payments for loss of office (audited) No director received payment for loss of office in FY23 139 Share Awards made during the year (audited) TYPE OF INTEREST AWARDED BASIS ON WHICH AWARD MADE 2 Deferred bonus Conditional share award 33% salary less award of SIP Free and Matching shares DATE OF AWARD FACE VALUE AWARDED 3 PERCENTAGE RECEIVABLE FOR MINIMUM PERFORMANCE NUMBER OF SHARES AWARDED END OF DEFERRAL PERIOD 20.12.2022 £145,656 100% 48,187 20.12.2025 Alexander Scott SIP Free Shares Partnership Shares Matching Shares Dividend Shares 3% (Free and Matching shares) of Salary subject to maximum of £3,600 each per annum and 1.5% (for Partnership Shares) subject to a maximum of £1,800 per annum 06.01.2023 £3,598 23.01.2023 £1,800 23.01.2023 £3,600 100% 27.01.2023 30.06.2023 1,205 675 1,350 178 142 N/A* Deferred bonus Conditional share award 33% salary less award of SIP Free and Matching shares 20.12.2022 £145,656 100% 48,187 20.12.2025 Jonathan Gunby SIP Free Shares Partnership Shares Matching Shares Dividend Shares 3% (Free and Matching shares) of Salary subject to maximum of £3,600 each per annum and 1.5% (for Partnership Shares) subject to a maximum of £1,800 per annum 06.01.2023 £3,598 23.01.2023 £1,800 23.01.2023 £3,600 100% 27.01.2023 30.06.2023 1,205 675 1,350 178 142 N/A* 1 Deferred share awards form part of the annual incentive, for which awards were determined based on performance to 30 September 2022. 2 SIP Free Share awards were determined based on Group performance to 30 September 2022. SIP Partnership and Matching awards are loyalty awards. The awards are evergreen and are purchased monthly and will continue unless revoked by the Remuneration Committee. The award date shown is the first purchase date following publication of the Company’s annual report and financial statements but the amount reflects the award for the full financial year. 3 The face-value of the deferred bonus share award is calculated using average share price from 15 December 2022 to 19 December 2022 which was £3.02. The face value of the Free Shares is calculated using the share price paid by the SIP administrator on the date of purchase which was £2.99. The face value of the Partnership and Matching Share award is calculated using the total number of Partnership and Matching Shares bought on behalf of the relevant individuals during the financial year and an average share price for matching share purchases. 4 The SIP is operated in line with HMRC guidance. 140 Shareholding requirements and directors’ share interests (audited) No share awards other than the all staff SIP and the deferred bonus Share Option Plan award were awarded to executive directors during the financial year. During the FY21 policy review, the Company implemented a requirement that executive directors are required to build up a holding of one year’s salary equivalent in shares within four years of appointment. In assessing whether an individual director meets this requirement, the Company will include shares held in the director’s own name, those held in any pension over which the director directs the investment profile, and those unvested shares held in an employee share plan. We recognise that the Investment Association guidance recommends that executive directors hold two year’s basic salary equivalent in shares within two years of appointment, however the Company believes that it is incompatible with social diversity to require a new director to acquire any more than one year’s salary equivalent in shares in a period any less than four years from appointment. To do so would require the director to be so economically advantaged that it would exclude individuals from wider, more diverse backgrounds from taking up an appointment with the board. The Company believes that by limiting the requirement to one year’s basic salary, permitting the inclusion of a wider range of shares and providing a period of four years for the accrual of those shares, the appropriate balance is struck between inclusion, and directors’ personal investment in the long-term outcomes of the Company. DIRECTOR/ CONNECTED PERSON 1P ORDINARY SHARES TOTAL 2018 SIP SHARES1 DEFERRED BONUS SHARE SCHEME (NO PERFORMANCE CONDITIONS) VESTED BUT UNEXERCISED OPTIONS EXERCISED Alexander Scott 1,148,260 11,413 145,897 47,152 Jonathan Gunby2 803,665 11,413 145,111 46,677 Michael Howard3 32,000,000 Christopher Munro 1,003,324 Caroline Banszky Victoria Cochrane 7,500 3,750 Richard Cranfield4 20,000 Rita Dhut Robert Lister 15,000 6,015 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 (1) Includes dividend reinvestment shares relating to SIP shares. (2) Includes Cheryl Gunby shareholdings and family trusts controlled by Jonathan. 0 0 0 0 0 0 0 0 0 SHARES HELD AT 30.09.2023 TOTAL PERCENTAGE OF BASIC PAY / FEE HELD IN SHARES SHARES HELD AT 30.09.2022 TOTAL PERCENTAGE OF BASIC PAY / FEE HELD IN SHARES 1,305,570 652% 1,253,833 960,189 479% 908,452 629% 441% 32,000,000 175,449% 32,000,000 175,532% 1,003,324 1,003,324 7,500 3,750 20,000 15,000 6,015 7,500 3,750 10,000 15,000 6,015 (3) Michael Howard’s shareholding is shown as a percentage of the fee paid to ObjectMastery for his services to the IHP board. (4) Includes Gillian Cranfield shareholdings. The value of each director’s shareholding has been calculated by reference to the average of the share price over the final three months of the financial year. The value of unvested and unexercised share options is shown net of Income Tax at the additional rate and Employee’s NI. The rate for Michael Howard has been calculated by reference to the exchange rate on 30 September of the relevant financial year. No Directors have any other vested or unvested share options as at the end of the FY23. 141 Shareholder return performance graph and CEO pay over the same period This graph shows the Company’s total shareholder return performance from Admission to 30 September 2023 The Company has chosen to show total shareholder return against the FTSE 250 total return over the same period, as the Board considers this to be the most appropriate comparator. TOTAL SHAREHOLDER RETURN PERFORMANCE VS F TSE 250 SINCE 2 MARCH 2018 250 200 150 100 50 0 8 1 - b e F 8 1 - y a M 8 1 - g u A 8 1 - v o N 9 1 - b e F 9 1 - y a M 9 1 - g u A 9 1 - v o N 0 2 - b e F 0 2 - y a M 0 2 - g u A 0 2 - v o N 1 2 - b e F 1 2 - y a M 1 2 - g u A 1 2 - v o N 2 2 - b e F 2 2 - y a M 2 2 - g u A 3 2 - b e F 3 2 - y a M 3 2 - g u A IHP FTSE 250 TR The following table shows the history of the Chief Executive Officer’s remuneration since admission: CEO SINGLE PAYOUT (AS A OUT-TURN (AS A ANNUAL BONUS LTIP VESTING CEO FIGURE OF % OF MAXIMUM % OF MAXIMUM REMUNERATION REMUNERATION OPPORTUNITY) OPPORTUNITY) FY23 FY22 FY21 FY20 FY19 FY18 £782k £695k £704k £639k £751k £769k 61.5% 52.4% 62% 72% 82% 83% N/A N/A N/A N/A N/A N/A Note to the table The figures for FY18 and FY19 relate to the previous CEO, Ian Taylor. The figures for FY20 to date relate to the current CEO, Alexander Scott. 142 Fees for the Chair and Non-Executive Directors (audited) There has been no increase to the remuneration paid to the Chair and NEDs during the financial year. In respect of the financial year ending 30 September 2023 the amounts are as follows. ELEMENT OF REMUNERATION BY DIRECTOR Chair Base Fee Senior Independent NED Committee Chair (excl NomCo) Advisers FY23 (£) 140,000 70,000 7,500 10,000 PERCENTAGE INCREASE ON FY22 0 0 0 0 Deloitte LLP (Deloitte) is retained as adviser to the Remuneration Committee. Deloitte was appointed by the committee, and the committee is satisfied the advice provided by Deloitte is objective and independent. Deloitte is a founding member of the Remuneration Consultants Group and voluntarily operates under the Code of Conduct in relation to executive remuneration consulting in the UK. Deloitte has provided advice on the content of this Directors’ Remuneration Report. For FY23, total fees were £23k, with fees on a time and materials basis. Deloitte has provided no other services to the Company during the financial year. Korn Ferry LLP provided information to support the benchmarking of remuneration for executive directors and senior managers. In addition to Deloitte, the following people have provided material advice or services to the committee during the year: • Alexander Scott – CEO • Helen Wakeford – Head of Legal and Company Secretary • Lucy Smith – Head of Human Resources 143 DIRECTORS’ REPORT The directors present their report and financial statements for the year ending 30 September 2023. The content of the ‘Management Report’ required by the FCA Disclosure and Transparency Rule DTR4.1 is in the Strategic Report and the Governance section of the Annual report and financial statements, which also contains details of likely future developments identified by the board. This information is shown in the Strategic Report rather than in the Directors’ Report under sections 414 C (11) of the Companies Act. The Corporate Governance Report on page 7 forms part of the Directors’ Report. Information disclosed in accordance with the requirements of the applicable sections of the FCA Listing Rule LR9.8 (Annual Financial Report) can be found here: Details of Long-Term Incentive Schemes The Directors’ Remuneration Report Directors’ Interests in the Company’s Shares The Directors’ Remuneration Report Major Shareholders’ Interests Directors’ Report Non-Executive Directors’ terms of appointment Directors’ Report Directors’ transactions in the Company’s Shares Director’s Report Details of non-financial reporting Corporate Social Responsibility Report Principal risks and uncertainties The review of the business and principal risks and uncertainties are disclosed in the Strategic Report at pages 2 to 72. Internal control and risk management systems A description of the Group’s internal control and risk management systems in relation to the financial reporting process is set out on pages 60 to 68 of the Strategic Report. Directors The executive directors who served during the financial year were Alexander Scott, Jonathan Gunby and Michael Howard. The NEDs who served during the financial year were Richard Cranfield, Caroline Banszky, Victoria Cochrane, Rita Dhut, Christopher Munro and Robert Lister. All of the current directors are standing for re-election at the upcoming AGM. The appointment and replacement of directors is governed by the Company’s Articles of Association, the UK Corporate Governance Code, the Companies Act 2006 and related legislation. The directors may exercise all the powers of the Company. 144 Service contracts and letters of appointment All executive directors have written service contracts in place with an employing Company in the Group. Although the executive directors’ service contracts do not have fixed end dates, they may be terminated with six months’ notice from either side. In the event that notice is given to terminate the executive director’s contract, the Company may make a payment in lieu of notice or place the individual on garden leave. Entitlement to any variable remuneration arrangements will be determined in accordance with the relevant plan rules and the DRP. Executive directors’ service contracts do not make any other provision for termination payments. NEDs do not have service contracts but are bound by letters of appointment which are available for inspection on request at the Company’s registered office. NEDs are appointed for a three-year term, subject to confirmation by shareholders at the following annual general meeting and annual re-election at each subsequent annual general meeting. Details of Non-Executive Directors’ terms of appointment Details of the NEDs’ terms of appointment are set out below: NON-EXECUTIVE DIRECTOR DATE OF FIRST APPOINTMENT DATE OF LATEST RENEWAL TERM DATE FOR FURTHER RENEWAL TERM Christopher Munro 1 February 2017 13 February 2023 N/A Caroline Banszky 22 August 2018 22 August 2021 22 August 2024 Victoria Cochrane 28 September 2018 28 September 2021 28 September 2024 Richard Cranfield 25 June 2019 25 June 2022 25 June 2025 Robert Lister 26 June 2019 26 June 2022 26 June 2025 Rita Dhut 22 September 2021 N/A 22 September 2024 Directors’ interests Details of the directors’ interests in the Company’s ordinary shares can be found on page 141, within the Remuneration Report. During the financial year, rights for share options were granted to Alexander and Jonathan under the Company’s deferred bonus Share Option Plan. Throughout the financial year, no director had any material interest in a contract to which the Company or any of its subsidiary undertakings was a party (other than their own service contract) that requires disclosure under the requirements of the Companies Act 2006. Directors’ indemnities The Company has made qualifying third-party indemnity provisions for the benefit of its directors. These provisions were for the purposes of section 234 of the Companies Act 2006 and were in force throughout the financial year and remain so at the date of this report. In addition, the Company maintains Directors’ and Officers’ Liability insurance which gives appropriate cover for legal action brought against its directors. 145 Status of Company Share capital The Company is registered as a Structure of the Company’s capital Restrictions on share transfers public limited Company under the Companies Act 2006. As at 30 September 2023, the There are restrictions on share Company’s issued and fully paid- transfers, all of which are set out Stakeholders up share capital was 331,322,014 in the Company’s Articles. The ordinary shares of £0.01 each. The board may decline to register: a The Group considers its principal Company does not hold any treasury transfer of uncertificated shares in stakeholders to be clients, advisers, shares. The ordinary shares have the circumstances set out in the employees, regulators, shareholders, attached to them equal voting, Uncertificated Securities Regulations suppliers, and communities. Details on dividend and capital distribution 2001; a transfer of certificated shares the Group’s stakeholder engagement rights. is outlined on page 81. Voting rights Diversity and inclusion that are not fully paid; a transfer to more than four joint holders; a transfer of certificated shares which is not in respect of only one class At any General Meeting, on a show of share; a transfer which is not The Company recognises the benefits of hands, any member present in accompanied by the certificate for of companies having a diverse board person has one vote and every the shares to which it relates; a and sees diversity at board level proxy present, who has been duly transfer which is not duly stamped as important in maintaining good appointed by a member entitled to and deposited at the Transfer Office corporate and board effectiveness. vote on a resolution, has one vote. (or such other place in England and The Group has an established On a poll vote every person present Wales as the directors may from time board Diversity Policy dealing with in person or by proxy has one vote to time decide); or a transfer where appointments to the board. for every share held. All shares carry in accordance with section 794 of equal voting rights and there are no the Companies Act 2006 a notice The objective of the Group’s board restrictions on voting rights. (under section 793 of that Act) has Diversity Policy is to ensure that new been served by the Company on a appointments to any board within the Two employee benefit trusts (EBTs) shareholder who has then failed to Group are made on merit, taking into operate in connection with the Group’s give the information required within account the different skills, industry deferred bonus share option plan. The the specified time. experience, independence, knowledge Trustees of the EBTs may exercise and background required to achieve all rights attaching to the shares in Purchase of own shares a balanced and effective board. The accordance with their fiduciary duties Policy also states that the Company other than as specifically restricted At the 2023 AGM, shareholders will only use executive search firms in the relevant Plan governing authorised the Company to buy back that have signed up to the Voluntary documents. The Trustees of the EBTs up to 10% of its own ordinary shares Code for Executive Search Firms. have informed the Company that by market purchase at any time prior their normal policy is to abstain from to the conclusion of the AGM to be When determining the composition of the board, consideration is given voting in respect of the Company’s shares held in trust. The Trustees of held in 2024. to the diversity of board members the Company’s two Share Incentive Whilst such authority would only be and, when possible, appointments Plans (SIPs) will vote as directed by used if the board was satisfied that are made with a view to achieving a SIP participants in respect of the to do so would be in the interests of balance of skills with diversity. More allocated shares but the Trustees will shareholders, the board considers it information on the Group’s approach not otherwise vote in respect of the desirable to have the general authority to Diversity and Inclusion is outlined unallocated shares held in the SIP in order to maintain compliance with in the People section on page 45. Trusts. 146 the regulatory capital requirements or targets applicable to the Group. The Company did not purchase any of its own shares during the financial year. However, the Employee Benefit Trusts purchase the Company’s shares from time to time as authorised under the Trust Deeds in respect of awards granted under the Company’s employee share schemes. Substantial shareholders As at 13 December 2023, the Company had been notified of the following interests in 3% or more of the Company’s issued ordinary share capital disclosed to the Company under Rule DTR 5. The information provided below was correct as at the date of notification. It should be noted that these holdings are likely to have changed since being notified to the Company. However, notification of any change is not required until the next applicable threshold is crossed. SHAREHOLDER Michael Howard BlackRock Inc. NATURE OF HOLDING Direct Indirect Indirect Securities Lending Contracts for difference Liontrust Investment Partners LLP Montanaro Asset Management Limited Direct Direct NUMBER OF ORDINARY SHARES AT 30 SEPTEMBER 2023 % OF VOTING RIGHTS AT 30 SEPTEMBER 2023 NUMBER OF ORDINARY SHARES AT 13 DECEMBER 2023 % OF VOTING RIGHTS AT 13 DECEMBER 2023 25,911,753 6,088,247 24,634,941 7.82% 1.84% 7.43% 25,911,753 7.82% 6,088,247 1.84% 21,651,470 6.53% 121,115 0.03% 570,804 0.17% 2,147,909 0.64% 2,169,066 0.65% 16,910,112 5.10% 16,910,112 5.10% 10,040,000 3.03% 10,040,000 3.03% The percentage provided was correct Directors’ interests at the date of notification. Save for the shareholding details set The interests of the directors, and out in the Directors’ Remuneration any persons closely associated, in the Report, there has been no change to issued share capital of the Company the interests of any of the directors or are shown on page 141. their Persons Closely Associated during the financial year. 147 Dividends In FY23, the Company paid two interim dividends. Both dividends were paid by reference to the Company’s issued and allotted share capital on the record date. An interim dividend of 7.0 pence per share - £23.2 million - was paid on 27 January 2023. An interim dividend of 3.2 pence per share - £10.6 million - was paid on 30 June 2023. An interim dividend of 7.0 pence per share - £ 23.2 million - has been declared by the board and will be paid in January 2024. The Trustees of the EBTs have each waived dividends on shares declared in the Company shares held by those trusts and the Trustees of the SIP have waived dividends on unallocated shares in the Company shares held by it. 148 Employee information and engagement The Company has no employees (FY22: nil), but the Group had 649 employees at year end (FY22: 595). The Group continues to promote a culture whereby employees are encouraged to develop and to contribute to the overall aims of the business. The Company has considered the requirements of s.172 of the Companies Act on page 80, to ensure that the interests of employees are considered by the board in discussions and decision making, and the associated provisions of the 2018 Corporate Governance Code regarding the method of engagement with the workforce. Details of how the Company has engaged with its employees are outlined on page 82 of the Governance Report and in the Responsible Business section on page 45. Significant agreements and change of control All the Company’s share plans contain provisions relating to a change of control. In the event of a change of control, outstanding awards and options may be lapsed and replaced with equivalent awards over shares in the new company, subject to the Remuneration Committee’s discretion. Engagement with suppliers The Group monitors its relationships with key suppliers and relationship meetings are held with suppliers of critical business services. The Group monitors its payment performance with suppliers and further details are set out in the Stakeholder Engagement section on page 85 above. Articles of Association The Articles of Association may be amended by special resolution of the shareholders. Emissions Auditor For commentary on emissions, please Resolutions to reappoint EY as see the TCFD section on page 42. external auditor of the Company Political donations and to authorise the Audit and Risk Committee to determine its remuneration will be proposed at the The Group does not make political AGM to be held on 29 February 2024. donations. Employment of disabled people 2024 AGM The AGM will be held in person at the The Company’s policy regarding Company’s headquarters in London employment, training, career on 29 February 2024. Details of the development and promotion of resolutions to be proposed at the disabled employees, and employees AGM are set out in the separate who become disabled whilst in circular which has been sent to all employment, is to make reasonable shareholders and is available on adjustments as required. the Company’s website at https:// www.integrafin.co.uk/shareholder- Post year end events information/. As detailed in note 34, there were no reportable events after the reporting By order of the board, date, apart from the declaration of the second interim dividend (FY22: Alexander Scott none, apart from the declaration of the Chief Executive Officer 13 December 2023 second interim dividend). Disclosure of information to external auditor 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 they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. This confirmation is given in accordance with the provisions of section 418 of the Companies Act 2006. 149 STATEMENT ON DIRECTORS’ RESPONSIBILITIES The directors are responsible for preparing the Annual report and financial statements in accordance with applicable United Kingdom law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the Group and parent Company financial statements in accordance with UK-adopted international accounting standards (IFRSs). Under Company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period. In preparing these financial statements the directors are required to: • select suitable accounting policies in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group and Company financial position and financial performance; • in respect of the Group financial statements, state whether IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements; • in respect of the parent Company financial statements, state whether IFRSs 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/ or the Group will continue in business. 150 The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s and Group’s transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and the Group and enable them to ensure that the Company and the Group financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Under applicable law and regulations, the directors are also responsible for preparing a strategic report, directors’ report, directors’ remuneration report and corporate governance statement that comply with that law and those regulations. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Directors’ responsibilities pursuant to DTR4 The directors confirm, to the best of their knowledge: • that the consolidated financial statements, prepared in accordance with IFRSs give a true and fair view of the assets, liabilities, financial position and profit of the parent Company and undertakings included in the consolidation taken as a whole; • that the annual report, including the strategic report, includes a fair review of the development and performance of the business and the position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and • that they consider the annual report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy. By order of the board, Helen Wakeford Company Secretary 13 December 2023 151 FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INTEGR AFIN HOLDINGS PLC Opinion In our opinion: • IntegraFin Holdings plc’s Group financial statements and Parent Company financial statements (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 2023. and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; • the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards as applied in accordance with section 408 of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 152 We have audited the financial statements of IntegraFin Holdings plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended 30 September 2023 which comprise: GROUP PARENT COMPANY Consolidated Statement of Comprehensive Income for the year ended 30 September 2023 Company Statement of Financial Position as at 30 September 2023 Consolidated Statement of Financial Position as at 30 September 2023 Company Statement of Cash Flows for the year ended 30 September 2023 Company Statement of Changes in Equity for the year ended 30 September 2023 Notes 1 to 36 to the financial statements Consolidated statement of Cash Flows for the year ended 30 September 2023 Consolidated Statement of Changes in Equity for the year ended 30 September 2023 Notes 1 to 36 to the financial statements The financial reporting framework that has been applied risks identified by management. We evaluated in their preparation is applicable law and UK adopted management’s analysis by testing the clerical international accounting standards and as regards the Parent accuracy and challenging the conclusions reached in Company financial statements, as applied in accordance with the stress and reverse stress test scenarios; section 408 of the Companies Act 2006. Basis for opinion • performing enquiries of management and those charged with governance to identify risks or events that may impact the Group’s ability to continue as a We conducted our audit in accordance with International going concern. We also reviewed the management Standards on Auditing (UK) (ISAs (UK)) and applicable paper presented to the board, minutes of meetings of law. Our responsibilities under those standards are further the board and regulatory correspondence; and described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe • assessing the appropriateness of the going concern that the audit evidence we have obtained is sufficient and disclosures by comparing the consistency with the appropriate to provide a basis for our opinion. Directors’ assessment and for compliance with the Independence relevant reporting requirements. Based on the work we have performed, we have not We are independent of the Group and Parent Company in identified any material uncertainties relating to events accordance with the ethical requirements that are relevant or conditions that, individually or collectively, may cast to our audit of the financial statements in the UK, including significant doubt on the Group and Parent Company’s the FRC’s Ethical Standard as applied to listed public ability to continue as a going concern for a period of 12 interest entities, and we have fulfilled our other ethical months from when the financial statements are authorised responsibilities in accordance with these requirements. for issue. The non-audit services prohibited by the FRC’s Ethical In relation to the Group and Parent Company’s reporting Standard were not provided to the Group or the Parent on how they have applied the UK Corporate Governance Company and we remain independent of the Group and the Code, we have nothing material to add or draw attention Parent Company in conducting the audit. to in relation to the directors’ statement in the financial Conclusions relating to going concern it appropriate to adopt the going concern basis of statements about whether the directors considered In auditing the financial statements, we have concluded that accounting. the Directors’ use of the going concern basis of accounting Our responsibilities and the responsibilities of the directors in the preparation of the financial statements is appropriate. with respect to going concern are described in the relevant Our evaluation of the Directors’ assessment of the Group sections of this report. However, because not all future and Parent Company’s ability to continue to adopt the going events or conditions can be predicted, this statement is concern basis of accounting included: not a guarantee as to the Group’s ability to continue as a going concern. • obtaining an understanding of the Directors’ going concern assessment process and obtaining the Directors’ going concern assessment covering the period 12 months from the date of authorisation of the financial statements; • assessing and challenging the assumptions used in management’s forecast and determining the model are appropriate to enable the Directors to make an assessment on the going concern; • testing the clerical accuracy of the model; • evaluating the capital and liquidity position of the Group; • assessing the appropriateness of the stress and reverse stress test scenarios that consider the key 153 Overview of our audit approach An overview of the scope of the Parent Company Audit scope Key audit matters Materiality • We performed an audit of the complete financial information of seven components and audit procedures on specific balances for a further one components. • The components where we performed full or specific audit procedures accounted for 100% of Profit on ordinary activities before taxation attributable to shareholders, 100% of Revenue and 98% of Total assets. and Group audits Tailoring the scope Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment, the potential impact of climate change and other factors such as recent Internal audit results when assessing the level of work to be performed at • Recognition of revenue. each company. • Overall Group materiality of £3.1m which represents 5% of profit on ordinary activities before taxation attributable to shareholders. In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage of significant accounts in the financial statements, we selected eight components covering entities within the United Kingdom, Isle of Man and Australia. Of the eight components selected, we performed an audit of the complete financial information of seven components (‘full scope components’) which were selected based on their size or risk characteristics. For the remaining one components (‘specific scope components’), we performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts or their risk profile. The charts below illustrate the coverage obtained from the work performed by our audit teams. Profit on ordinary activities before taxation attributable to shareholders Revenue 100% Full scope components 0% Specific scope components Total assets 100% Full scope components 0% Specific scope components 98% Full scope components 2% Specific scope components 154 Involvement with component teams Climate change In establishing our overall approach to the Group audit, we There has been increasing interest from stakeholders as determined the type of work that needed to be undertaken to how climate change will impact the Group. The Group at each of the components by us, as the primary audit has considered the physical and transition risks from engagement team, or by component auditors from other EY climate change and has identified this as an emerging global network firms operating under our instruction. risk, but has concluded that these do not currently pose Of the seven full scope components, audit procedures were financial statements on page 175. Climate change risk is performed on one of these by both the primary audit team further assessed on pages 23 to 44 in the Task Force for and component audit team based on where the procedures Climate related Financial Disclosures and on page 66 in were performed from a client perspective. For the remaining the principal risks and uncertainties, which form part of six components all procedures were performed by the the “Other information,” rather than the audited financial a material risk to the Group, as described in note 1 to the primary team. statements. Our procedures on these disclosures therefore consisted solely of considering whether they are materially The primary team interacted regularly with the component inconsistent with the financial statements or our knowledge teams where appropriate during various stages of the audit, obtained in the course of the audit or otherwise appear to reviewed relevant working papers and were responsible for be materially misstated. the scope and direction of the audit process. This, together with the additional procedures performed at Group level, Our audit effort in considering climate change was focused gave us appropriate evidence for our opinion on the Group on evaluating management’s assessment of the impact of financial statements. physical and transition risk, and management’s resulting conclusion that there was no material impact from climate change on the recognition and measurement of the assets and liabilities in these financial statements as at 30 September 2023 and the adequacy of the Group’s disclosures in the financial statements which explains the rationale. We also challenged the Directors’ considerations of climate change in their assessment of going concern and viability and associated disclosures. Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key audit matter. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters. 155 Risk Recognition of revenue (£134.9 million, 2022: £133.6 million) Refer to the accounting policies (pages 178 to 179); and There is therefore a risk that revenue may be materially Note 5 of the Consolidated Financial Statements (page 200) misstated due to errors in the underlying data inputs into Revenue is material to the Group and is a key focus IAS. of stakeholders. As disclosed in note 5 of the financial There is also the risk that stakeholder expectations place statements, the Group categorise revenue into five sub- pressure on management to manipulate the recognition of categories: revenue. This may result in an overstatement of revenue to • Annual commission income (£116.1m, PY £115.98m) is charged for the administration of products on the In relation to License and Consultancy Income there is a risk Transact platform. that revenue is not recognised in line with the terms of the underlying contracts and agreements. meet targets and expectations. • Wrapper fee income (£12.3m, PY £11.6m) is charged for each of the tax wrappers held by clients. • Advisor back-office technology (comprising license income and consultancy income) (£4.8m, PY £4.0m) is the rental charge for use of access to T4A’s CRM software and the charge for consultancy services provided by T4A. • Other income (£1.7m, PY £2.2m) are charges levied on the acquisition of assets which comprises buy commissions and dealing charges. Annual commission income, wrapper fee income and other income account for 96% of total fee income. These revenues are automatically calculated by the Integrated Administration System (‘IAS’) IT platform. There is a risk therefore that revenue may be misstated due to failure or manipulation of the calculation methodology within IAS. The principal data inputs into the automated fee calculations include the quantity and pricing of underlying positions and commission percentages. 156 Our response to the risk For all material revenue streams, we have: 2. Testing to address the risk of data inputs being • confirmed and updated our understanding of the procedures and controls in place throughout the • agreed inputs to the underlying agreements for revenue process at the Group through walkthrough onboarding clients onto the platform; incorrect. On a sample basis, we have: procedures; and • performed enquiries of management and performed to the published Transact Commission and Charges • agreed the fee terms used in the revenue calculation journal entry testing in order to address the risk of Schedule; management override. In the prior year audit we identified design deficiencies in portfolio value used within the fee calculations based relation to IT General Controls. These deficiencies were on the daily pricing per IAS; remediated by management during the current year and we concluded the IT General Controls were designed effectively • for annual commissions, agreed the quantity from the point of remediation. of positions per portfolio back to the custodian • for annual commissions recalculated the average statements per IAS; As the IT General Controls were not considered to be effective for the full year, we performed additional tests • agreed fees paid back to bank statements; and of detail and tests over information prepared in respect of the functionality of the IAS system and the accuracy of the • as part of cut off testing, performed analytical reviews inputs to the system. over pre year end and post year end journals to ensure these relate to the correct period by agreeing Our testing of annual commissions, wrapper fee income and to IAS reports. buy commissions income was split into two elements: For licence income, consultancy income and other income, 1. Testing to address the risk of failure or manipulation on a sample basis we have: within the calculation. We have: • recalculated all revenue sub-categories (annual agreements; and commissions, buy commissions and wrapper fees) using the criteria and logic per the underlying • agreed the fees to underlying agreements and agreements with investors; invoices and vouched balances to the bank • agreed the fee terms used in the calculation to statements. • performed a variance analysis between the EY recalculated revenue balance per each sub-category and the amounts per the general ledger, investigating any material differences; • performed completeness checks between the IAS Key observations communicated to the Audit and Risk Committee reports and general ledger; and Based on the procedures performed, we have no matters to report in respect of revenue recognition. • on a sample basis, reperformed calculations that are automatically performed in IAS and form part of the inputs into the revenue calculations. For example, the daily average value of the portfolio which forms part of the annual commission calculation. 157 Our application of materiality In the prior year, our auditor’s report included the We apply the concept of materiality in planning and following key audit matters which we do not consider to performing the audit, in evaluating the effect of identified be key audit matters for the 2023 audit: misstatements on the audit and in forming our audit • ‘Valuation of assets held for the benefit of the policyholders to cover unit-linked liabilities’ due to Materiality the low quantum of level 3 investments; opinion. • ‘Impairment of goodwill and intangibles in Group and individually or in the aggregate, could reasonably be investments in subsidiaries in Parent Company’ due expected to influence the economic decisions of the users to the significant headroom available; and of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures. • ‘First year audit transition’ which is no longer applicable for the current year. We determined materiality for the Group to be £3.1 The magnitude of an omission or misstatement that, million (2022: £3.1 million), which is 5% (2022: 5%) of profit on ordinary activities before taxation attributable to shareholders. We believe that profit on ordinary activities before taxation attributable to shareholders is the most relevant performance measure to the stakeholders of the Group. 158 We determined materiality for the Parent Company to be £0.58 million (2022: £0.63 million), which is 1% (2022: 1%) of net assets. The Parent Company primarily holds the investments in Group entities and, therefore, net assets is considered to be the key focus for users of the financial statements. During the course of our audit, we reassessed initial materiality based on 30 September 2023 financial statement amounts and adjusted our audit procedures accordingly. Performance materiality The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that performance materiality was 75% (2022: 50%) of our planning materiality, namely £2.3 million (2022: £1.5 million). We have set performance materiality at 75% due to a lower expectation of misstatement following our first year audit. Reporting threshold Other information An amount below which identified misstatements are The other information comprises the information included considered as being clearly trivial. in the Annual Report, including the Strategic Report, Governance Report and Other Information sections, other We agreed with the Audit Committee that we would than the financial statements and our auditor’s report report to them all uncorrected audit differences in excess thereon. The Directors are responsible for the other of £0.15 million (2022: £0.15 million), which is set at information contained within the Annual Report. 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on Our opinion on the financial statements does not cover qualitative grounds. We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon. and in light of other relevant qualitative considerations in Our responsibility is to read the other information and, forming our opinion. in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. 159 Opinions on other matters prescribed by the Matters on which we are required to report by Companies Act 2006 exception In our opinion, the part of the Directors’ Remuneration In the light of the knowledge and understanding of the Report to be audited has been properly prepared in Group and the Parent Company and its environment accordance with the Companies Act 2006. obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the In our opinion, based on the work undertaken in the course Directors’ Report. of the audit: • the information given in the Strategic Report and the matters in relation to which the Companies Act 2006 Directors’ Report for the financial year for which the requires us to report to you if, in our opinion: financial statements are prepared is consistent with the financial statements; and • adequate accounting records have not been kept by We have nothing to report in respect of the following • the Strategic Report and the Directors’ Report have have not been received from branches not visited by the Parent Company, or returns adequate for our audit been prepared in accordance with applicable legal us; or requirements. • the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. 160 Corporate Governance Statement Responsibilities of Directors We have reviewed the directors’ statement in relation to As explained more fully in the Statement of Directors’ going concern, longer-term viability and that part of the Responsibilities set out on page 150, the Directors are Corporate Governance Statement relating to the Group and responsible for the preparation of the financial statements Parent Company’s compliance with the provisions of the UK and for being satisfied that they give a true and fair view, Corporate Governance Code specified for our review by the and for such internal control as the directors determine is Listing Rules. necessary to enable the preparation of financial statements that are free from material misstatement, whether due to Based on the work undertaken as part of our audit, we fraud or error. have concluded that each of the following elements of the Corporate Governance Statement is materially consistent In preparing the financial statements, the directors are with the financial statements or our knowledge obtained responsible for assessing the Group and Parent Company’s during the audit: ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using • Directors’ statement with regards to the the going concern basis of accounting unless the Directors appropriateness of adopting the going concern basis either intend to liquidate the Group or the Parent Company of accounting and any material uncertainties identified or to cease operations, or have no realistic alternative but set out on page 69; to do so. • Directors’ explanation as to its assessment of the Parent Company’s prospects, the period this assessment covers and why the period is appropriate Auditor’s responsibilities for the audit of the set out on page 71; financial statements • Director’s statement on whether it has a reasonable Our objectives are to obtain reasonable assurance about expectation that the Group will be able to continue in whether the financial statements as a whole are free from operation and meets its liabilities set out on page 71; material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. • Directors’ statement on fair, balanced and Reasonable assurance is a high level of assurance, but is understandable set out on page 151; not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement • Board’s confirmation that it has carried out a robust when it exists. Misstatements can arise from fraud or assessment of the emerging and principal risks set out error and are considered material if, individually or in the on page 68; aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these • The section of the Annual Report that describes the financial statements. review of effectiveness of risk management and internal control systems set out on page 101; and • The section describing the work of the Audit and Risk Committee set out on page 97. 161 Explanation as to what extent the audit was judgements, complex transactions and economic or considered capable of detecting irregularities, external pressures and the impact these have on the including fraud control environment. Where the risk was considered to be higher, we performed audit procedures to address Irregularities, including fraud, are instances of non- each identified fraud risk. compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, • Based on this understanding we designed our audit to detect irregularities, including fraud. The risk of not procedures to identify non-compliance with such laws detecting a material misstatement due to fraud is higher and regulations. Our procedures involved journal entry than the risk of not detecting one resulting from error, as testing, with a focus on manual journals and journals fraud may involve deliberate concealment by, for example, indicating large or unusual transactions based on our forgery or intentional misrepresentations, or through understanding of the business; enquiries of senior collusion. The extent to which our procedures are capable of management and the Group’s legal adviser, including detecting irregularities, including fraud is detailed below. those at full and specific scope; and focused testing, as referred to in the key audit matters section above. However, the primary responsibility for the prevention We also enquired about the policies that have been and detection of fraud rests with both those charged with established to prevent non-compliance with laws and governance of the Parent Company and management. regulations by officer and employees and the Parent Company’s methods of enforcing and monitoring • We obtained an understanding of the legal and compliance with such policies. We inspected significant regulatory frameworks that are applicable to the correspondence with the PRA and FCA. Group and determined that the most significant are those that relate to the reporting framework (UK- A further description of our responsibilities for the audit adopted international accounting standards, the of the financial statements is located on the Financial Companies Act 2006 and UK Corporate Governance Reporting Council’s website at https://www.frc.org.uk/ Code) and relevant tax compliance regulations. auditorsresponsibilities. This description forms part of our In addition, we concluded that there are certain auditor’s report. significant laws and regulations which may have an effect on the determination of the amounts and disclosures in the financial statements being the Listing Rules and relevant Prudential Regulation Authority (‘PRA’) and Financial Conduct Authority (‘FCA’) rules and regulations. • We understood how IntegraFin Holdings plc is complying with those frameworks by making enquiries of management, internal audit, those responsible for legal and compliance matters and those charged with Governance. We also reviewed correspondences between the Parent Company and UK regulatory bodies; reviewed minutes of the Board, and the Audit and Risk Committee; and gained understanding of the Group’s approach to governance framework. • We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by meeting with management to understand where they considered there was susceptibility to fraud. We have considered performance targets and their potential influence on efforts made by management to manage or influence the perceptions of analysts. We considered the controls that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud, including in a remote-working environment and how senior management monitors these controls. We also considered areas of significant 162 Other matters we are required to address Use of our report • Following the recommendation from the audit This report is made solely to the Parent Company’s committee, we were appointed by the Parent Company members, as a body, in accordance with Chapter 3 of Part on 24 February 2022 to audit the financial statements 16 of the Companies Act 2006. Our audit work has been for the year ending 30 September 2022 and undertaken so that we might state to the Parent Company’s subsequent financial periods. members those matters we are required to state to them in an auditor’s report and for no other purpose. To the • The period of total uninterrupted engagement including fullest extent permitted by law, we do not accept or assume previous renewals and reappointments is two years, responsibility to anyone other than the Parent Company and covering the years ending 30 September 2022 to 30 the Parent Company’s members as a body, for our audit September 2023. work, for this report, or for the opinions we have formed. • The audit opinion is consistent with the additional report to the Audit and Risk Committee. Michael Gaylor (Senior statutory auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London 13 December 2023 163 164  165 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Note 5 8 16, 22 9 25 18 10 Revenue Cost of sales Gross profit Expenses Administrative expenses Expected credit losses on financial assets Operating profit Interest income Interest expense Net policyholder returns Net income/(loss) attributable to policyholder returns Change in investment contract liabilities Fee and commission expenses Policyholder investment returns Net policyholder returns Profit on ordinary activities before taxation attributable to policyholders and shareholders Policyholder tax (charge)/credit Profit on ordinary activities before taxation attributable to shareholders Total tax attributable to shareholder and policyholder returns 11 Less: tax attributable to policyholder returns Shareholder tax on profit on ordinary activities 2023 £m 134.9 (3.9) 131.0 (74.6) (0.1) 56.3 6.4 (0.1) 2022 £m 133.6 (2.1) 131.5 (77.7) (0.2) 53.6 0.8 (0.1) 12.1 (1,056.0) (193.3) 1,249.3 12.1 (38.5) 2,770.3 (192.6) (2,577.7) (38.5) 74.7 (12.1) 62.6 (24.8) 12.1 (12.7) 15.8 38.5 54.3 28.2 (38.5) (10.3) Profit for the financial year 49.9 44.0 Other comprehensive (loss)/income Exchange (losses)/gains arising on translation of foreign operations Total other comprehensive (losses)/income for the financial year (0.1) (0.1) 0.1 0.1 Total comprehensive income for the financial year 49.8 44.1 Earnings per share Earnings per share – basic Earnings per share – diluted All activities of the Group are classed as continuing. Notes 1 to 36 form part of these Financial Statements. 166 7 7 15.1p 15.1p 13.3p 13.3p CONSOLIDATED STATEMENT OF FINANCIAL POSITION Non-current assets Loans receivable Intangible assets Property, plant and equipment Right-of-use assets Deferred tax asset Current assets Investments Prepayments and accrued income Trade and other receivables Current tax asset Cash and cash equivalents Current liabilities Trade and other payables Provisions Lease liabilities Non-current liabilities Provisions Contingent consideration Lease liabilities Deferred tax liabilities Policyholder assets and liabilities¹ Cash held for the benefit of policyholders Investments held for the benefit of policyholders Liabilities for linked investment contracts Net assets Note 16 12 13 14 26 21 22 23 19 24 27 25 27 28 25 26 20 17 18 2023 £m 6.3 21.4 1.1 1.0 0.7 30.5 22.4 17.2 3.6 14.3 177.9 235.4 19.5 7.7 0.3 27.5 40.5 - 0.8 7.2 48.5 2022 £m 5.5 21.8 1.2 2.1 6.0 36.6 3.1 17.2 2.0 15.0 183.0 220.3 21.5 10.7 1.9 34.1 46.1 1.7 0.9 0.9 49.6 1,419.2 23,021.7 1,458.6 20,715.8 (24,440.9) (22,174.4) - 189.9 - 173.2 167 Equity Called up equity share capital Share-based payment reserve Employee Benefit Trust reserve Foreign exchange reserve Non-distributable reserves Retained earnings Total equity Note 29 30 31 31 2023 £m 3.3 3.4 (2.6) (0.1) 5.7 180.2 189.9 2022 £m 3.3 2.6 (2.4) - 5.7 164.0 173.2 These Financial Statements were approved by the Board of Directors on 13 December 2023 and are signed on their behalf by: Alexander Scott Director Company Registration Number: 08860879 Notes 1 to 36 form part of these Financial Statements. 168 COMPANY STATEMENT OF FINANCIAL POSITION Non-current assets Investment in subsidiaries Loans receivable Current assets Prepayments Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Loans payable Non-current liabilities Contingent consideration Loans payable Net assets Equity Called up equity share capital Share-based payment reserve Employee Benefit Trust reserve Profit or loss account Brought forward retained earnings Profit for the year Dividends paid in the year Profit or loss account Note 2023 £m 2022 £m 15 16 22 23 24 16 28 16 29 30 35.3 6.3 41.6 - 0.1 26.0 26.1 2.5 1.0 3.5 - 6.0 6.0 33.3 5.5 38.8 0.1 0.2 33.1 33.4 2.4 1.0 3.4 1.7 7.0 8.7 58.2 60.1 3.3 2.7 (2.4) 56.7 31.6 (33.7) 54.6 3.3 2.2 (2.1) 50.7 39.8 (33.8) 56.7 Total equity 58.2 60.1 The Company has taken advantage of the exemption in section 408 (3) of the Companies Act 2006 not to present its own income statement in these Financial Statements. These Financial Statements were approved by the Board of Directors on 13 December 2023 and are signed on their behalf by: Alexander Scott Director Company Registration Number: 08860879 Notes 1 to 36 form part of these Financial Statements. 169 CONSOLIDATED STATEMENT OF CASH FLOWS 2023 £m RESTATED 2022 £m Cash flows from operating activities Profit on ordinary activities before taxation attributable to policyholders and shareholders 74.7 15.8 Adjustments for income statement non-cash movements: Amortisation and depreciation Share-based payment charge Interest charged on lease (Decrease)/increase in contingent consideration (Decrease)/increase in provisions 2.5 2.1 0.1 (1.7) (8.6) 3.0 2.0 0.1 0.9 38.5 Adjustments for cash effecting investing and financing activities: Interest on cash and loans (6.4) (0.8) Adjustments for statement of financial position movements: (Increase)/decrease in trade and other receivables, and prepayments and accrued income (Decrease)/increase in trade and other payables Adjustments for policyholder balances: (Increase)/decrease in investments held for the benefit of policyholders Increase/(decrease) in liabilities for linked investment contracts Increase/(decrease) in policyholder tax recoverable Cash generated from operations Income taxes paid Interest paid on lease liabilities Net cash flows generated from operating activities Investing activities Acquisition of property, plant and equipment Purchase of financial instruments Redemption of financial instruments Increase in loans Interest on cash and loans Net cash generated from/(used in) investing activities 170 (1.6) (2.0) (2,305.9) 2,266.5 10.0 29.7 (22.4) (0.1) 7.2 (0.7) (22.3) 3.0 (0.8) 6.4 (14.4) 0.5 4.0 1,071.3 (879.0) (6.0) 250.3 (13.5) (0.1) 236.7 (0.3) (3.0) 5.0 (2.1) 0.8 0.4 Financing activities Purchase of own shares in Employee Benefit Trust Purchase of shares for share scheme awards Equity dividends paid Payment of principal portion of lease liabilities Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange losses on cash and cash equivalents Cash and cash equivalents at end of year Cash and cash equivalents consist of: Cash and cash equivalents Cash held for the benefit of policyholders Cash and cash equivalents Notes 1 to 36 form part of these Financial Statements. See note 36 for details on 2022 restated balances. 2023 £m (0.4) (1.1) (33.7) (1.9) (37.1) (44.3) 1,641.6 (0.1) RESTATED 2022 £m (0.5) (1.3) (33.7) (2.4) (37.9) 199.2 1,442.4 - 1,597.1 1,641.6 177.9 1,419.2 1,597.1 183.0 1,458.6 1,641.6 171 COMPANY STATEMENT OF CASH FLOWS Cash flows from operating activities Loss before interest and dividends Adjustments for non-cash movements: 2023 £’000 RESTATED 2022 £’000 (2.0) (4.9) (Decrease)/increase in contingent consideration (1.7) 0.9 Adjustment for statement of financial position movements: Decrease/(increase) in trade and other receivables Increase in trade and other payables Net cash flows used in operating activities Investing activities Dividends received Interest received Increase in loans receivable Net cash generated from investing activities Financing activities Purchase of own shares in Employee Benefit Trust Purchase of shares for share scheme awards Repayment of loans Interest expense on loans Equity dividends paid Net cash used in financing activities 0.2 0.1 (3.4) 33.3 0.9 (0.8) 33.4 (0.3) (1.3) (1.0) (0.6) (33.7) (37.1) (0.2) - (4.2) 45.0 0.2 (2.0) 43.2 (0.5) (1.3) (1.0) (0.2) (33.8) (36.8) Net (decrease)/increase in cash and cash equivalents (7.1) 2.2 Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 33.1 26.0 30.9 33.1 Notes 1 to 36 form part of these Financial Statements. See note 36 for details on 2022 restated balances. 172 CONSOLIDATED STATEMENT OF CHANGES IN EQUIT Y NON- DISTRIBUTABLE INSURANCE AND FOREIGN EXCHANGE RESERVES CALLED UP EQUITY SHARE CAPITAL SHARE- BASED PAYMENT RESERVE EMPLOYEE BENEFIT TRUST RESERVE RETAINED EARNINGS TOTAL EQUITY £m £m £m £m £m Balance at 1 October 2021 Comprehensive income for the year: Profit for the year Movement in currency translation Total comprehensive income for the year Share-based payment expense Settlement of share based payment Purchase of own shares in EBT Excess tax relief charged to equity Exercised share options Release of actuarial reserve Other movement Distributions to owners - Dividends paid £m 3.3 - - - - - - - - - - - Balance at 30 September 2022 Comprehensive income for the year: 3.3 3.3 Profit for the year Movement in currency translation Total comprehensive income for the year Share-based payment expense Settlement of share based payment Purchase of own shares in EBT Excess tax relief charged to equity Exercised share options Distributions to owners - Dividends paid - - - - - - - - - 6.2 - 0.1 0.1 - - - - - (0.5) (0.1) - 5.7 5.7 - (0.1) (0.1) - - - - - - 2.4 (2.1) 153.5 163.3 - - - 2.0 (1.5) - - - - - - (0.5) - 0.2 - - - 44.0 - 44.0 0.1 44.0 44.1 - - - - (0.2) 0.5 2.0 (1.5) (0.5) (0.3) - - (0.1) (0.2) (33.7) (33.7) (2.4) (2.4) 164.0 173.2 164.0 173.2 - - - - - (0.4) - 0.2 49.9 - 49.9 (0.1) 49.9 49.8 - - - - - 2.1 (1.5) (0.4) 0.2 0.2 - (33.7) (33.7) (0.3) - - - - 2.6 2.6 - - - 2.1 (1.5) - 0.2 - - Balance at 30 September 2023 3.3 5.6 3.4 (2.6) 180.2 189.9 Notes 1 to 36 form part of these Financial Statements. 173 COMPANY STATEMENT OF CHANGES IN EQUIT Y CALLED UP EQUITY SHARE CAPITAL SHARE- BASED PAYMENT RESERVE EMPLOYEE BENEFIT TRUST RESERVE RETAINED EARNINGS TOTAL EQUITY £m £m £m £m £m Balance at 1 October 2021 Comprehensive income for the year: 3.3 1.7 (1.8) Profit for the year Total comprehensive income for the year Share-based payment expense Settlement of share-based payments Purchase of own shares in EBT Distributions to owners - dividends - - - - - - - - 2.0 (1.5) - - - - - - (0.3) 50.7 39.8 39.8 - - - 53.9 39.8 39.8 2.0 (1.5) (0.3) - (33.8) (33.8) Balance at 30 September 2022 3.3 2.2 (2.1) 56.7 60.1 Comprehensive income for the year: Profit for the year Total comprehensive income for the year Share-based payment expense Settlement of share-based payments Purchase of own shares in EBT Distributions to owners - dividends - - - - - - - - 1.9 (1.4) - - - - - - (0.3) 31.6 31.6 - - - 31.6 31.6 1.9 (1.4) (0.3) - (33.7) (33.7) Balance at 30 September 2023 3.3 2.7 (2.4) 54.6 58.2 Notes 1 to 36 form part of these Financial Statements. 174 NOTES TO THE FINANCIAL STATEMENTS 1. Basis of preparation and significant accounting policies General information IntegraFin Holdings plc (the “Company”), a public limited Company incorporated and domiciled in the United Kingdom (“UK”), along with its subsidiaries (collectively the “Group”), offers a range of services which are designed to help financial advisers and their clients to manage financial plans in a simple, effective and tax efficient way. The registered office address, and principal place of business, is 29 Clement’s Lane, London, EC4N 7AE. A) BASIS OF PREPARATION The consolidated Financial Statements have been prepared Going concern and approved by the directors in accordance with IFRSs. The Financial Statements have been prepared on the concern basis, following an assessment by the board. historical cost basis, except for the revaluation of certain financial instruments, which are stated at their fair value, Going concern is assessed over the 12-month period from have been prepared in pound sterling, which is the when the Annual Report is approved, and the board has functional currency of the Company and are rounded to the concluded that the Group has adequate resources, liquidity nearest thousand. and capital to continue in operational existence for the next The financial statements have been prepared on a going Climate risks have been considered where appropriate in the preparation of these Financial Statements, with • The current financial position of the Group: particular consideration given to the impact of climate risk on the fair value calculations and impairment assessments. ◦ The Group maintains a conservative balance This has concluded that the impact of climate risk on the sheet and manages and monitors solvency and 12 months. This is supported by: financial statements is not material. liquidity on an ongoing basis, ensuring that it always has sufficient financial resources for the foreseeable future. ◦ As at 30 September 2023, the Group had £177.9 million of shareholder cash on the statement of financial position, demonstrating that liquidity remains strong. • Detailed cash flow and working capital projections; and • Stress-testing of liquidity, profitability and regulatory capital, taking account of possible adverse changes in trading performance. When making this assessment, the board has taken into consideration both the Group’s current performance and the future outlook, including the impact of the cost-of-living crisis, sustained levels of high inflation, increasing interest rates and volatile equity markets. The environment has been challenging during the year, but our financial and operational performance has been robust, and the Group’s fundamentals remain strong. 175 1. Basis of preparation and significant accounting policies (continued) Basis of consolidation As detailed in the Going Concern and Viability Statement The consolidated Financial Statements incorporate the (page 69), stress and scenario testing has been carried Financial Statements of the Company and its subsidiaries. out, in order to understand the potential financial impacts Where the Company has control over an investee, it of severe, yet plausible, scenarios on the Group. This is classified as a subsidiary. The Company controls an assessment incorporated a number of stress tests covering investee if all three of the following elements are present: a broad range of scenarios, including a cyber attack, system power over the investee, exposure to variable returns and process failures, and persistent high inflation with from the investee, and the ability of the investor to use its continued market uncertainty. power to affect those variable returns. Control is presumed to exist where the Group owns the majority of the voting Having conducted detailed cash flow and working capital rights of an entity. Control is reassessed whenever facts projections, and stress-tested liquidity, profitability and circumstances indicate that there may be a change in and regulatory capital; taking account of the economic any of these elements of control. challenges mentioned above; the board is satisfied that the Group is well placed to manage its business risks. The board Subsidiaries are fully consolidated from the date on which is also satisfied that it will be able to operate within the control is obtained by the Company and are deconsolidated regulatory capital limits imposed by the Financial Conduct from the date that control ceases. Acquisitions are Authority (FCA), Prudential Regulation Authority (PRA), and accounted for under the acquisition method. Intercompany Isle Man Financial Services Authority (IoM FSA). transactions, balances, income and expenses, and profits and losses are eliminated on consolidation. The board has concluded that the Company has adequate resources and there are no material uncertainties to the The Financial Statements of all of the wholly owned Company’s ability to continue to operate for the foreseeable subsidiary companies are incorporated into the future, being a period of at least twelve months from consolidated Financial Statements. Two of these the date the financial statements are approved. For this subsidiaries, IntegraLife International Limited (ILInt) reason, they have adopted the going concern basis for the and IntegraLife UK Limited (ILUK) issue contracts with preparation of the financial statements. 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 IFRS 9, 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. 176 1. Basis of preparation and significant accounting policies (continued) Changes in accounting policies i) There have been no new standards, amendments to prospectively to future transactions and events, but changes standards or interpretations adopted during the financial in accounting policies are applied retrospectively to past year that had a material effect. transactions and events. ii) Future standards, amendments to standards, and The Group has assessed the impact of this amendment and interpretations not yet effective are noted below. does not note any significant impact. The following amendments are effective for periods Deferred Tax Related to Assets and Liabilities arising beginning on or after 1 January 2023: from a Single Transaction (Amendments to IAS 12) IFRS 17 Insurance Contracts In May 2021, the IASB issued amendments to IAS 12 which In June 2022, the IASB issued amendments to IFRS transactions which, on initial recognition, give rise to equal 17 which will replace IFRS 4 Insurance Contracts. amounts of taxable and deductible temporary differences. will require recognition of deferred taxes on particular IFRS 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance The Group has assessed the impact of this amendment and contracts within the scope of the Standard. The Group does not note any significant impact. would be required to provide information that faithfully represents those contracts, such that users of the financial Amendments to IAS 12: International Tax Reform statements can assess the effect insurance contracts have Pillar Two Model Rules on the entity’s financial position, financial performance and cash flows. Amendments to IAS 12 Income Taxes have been introduced in response to the OECD’s BEPS Pillar Two Model Rules. The The Group has performed an assessment regarding the amendments include a temporary mandatory exception impact of IFRS 17 on the Financial Statements and, while from accounting for deferred taxes arising from the Pillar the insurance companies in the Group do administer Two model rules and a requirement to disclose that the insurance business and hold capital relating to the risks exception has been applied immediately and retrospectively. associated with this, there is no significant insurance IHP has taken up this exemption for FY23. risk in any of the contracts. Therefore all contracts are investment contracts under IFRS 9, and IFRS 17 has no The Group is continuing to assess whether it will be in scope impact. of the Pillar Two model Rules. If so, the rules would be expected to apply to the Group from 1 October 2024 and Disclosure of Accounting Policies (Amendments to give rise to a financial impact. However, the Group does IAS 1 and IFRS Practice Statement 2) not anticipate that any tax liabilities that may arise from its overseas operations will be material to the Group, as most In February 2021, the IASB issued amendments to IAS of its revenue and profits are generated in the UK and taxed 1 to assist in determining which accounting policies at a rate of 25%. to disclose, with reference to materiality and how to determine which policies fall into this category. IFRS The following amendments are effective for periods Practice Statement 2 includes guidance to support this. beginning on or after 1 January 2024: The Group has assessed the impact of this amendment Classification of Liabilities as Current or Non-Current and does not note any significant impact. (Amendments to IAS 1) Definition of Accounting Estimates (Amendments to IAS 8) In February 2021, the IASB issued amendments to IAS 8 to clarify how to distinguish changes in accounting policies from changes in accounting estimates. That distinction In October 2022, the IASB issued amendments to IAS 1 regarding how conditions with which an entity must comply within twelve months after the reporting period, affect the classification of a liability. The Group has assessed the impact of this amendment being that changes in accounting estimates are applied and does not note any significant impact. 177 1. Basis of preparation and significant accounting policies (continued) B) PRINCIPAL ACCOUNTING POLICIES The following amendments are effective for the Revenue from contracts with customers period beginning 1 January 2025: The Effects of Changes in Foreign Exchange Rates the Company. All fee income is recognised as revenue on an (IAS 21) accruals basis and in line with the provision of the services. Revenue represents the fair value of services supplied by In August 2023, the IASB issued amendments to IAS Fee and commission income is recognised at an amount 21 to provide guidance to specify when a currency is that reflects the consideration to which the Group expects exchangeable and how to determine the exchange rate to be entitled in exchange for providing the services. when it is not. The Group has assessed the impact of this amendment and satisfaction, are identified, and determined, at the inception The performance obligations, as well as the timing of their does not note any impact as the only non-Sterling currency of the contract. in use is Australian Dollars. No other future standards, amendments to standards, or consideration is generally due immediately upon satisfaction interpretations are expected to have a material effect on of a service provided at a point in time or at the end of the When the Group provides a service to its customers, the financial statements. 178 contract period for a service provided over time. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the services before transferring them to the customer. The Group has discharged all of its obligations in relation to contracts with customers, and the amounts received or receivable from customers equal the amount of revenue recognised on the contracts. All amounts due from customers are therefore recognised as receivables within accrued income, and the Group has no contract assets or liabilities. Fee income comprises: Annual commission income Annual commission is charged for the administration of products on the Transact platform, and is levied monthly in arrears on the average value of assets and cash held on the platform. The value of assets and cash held on the Platform is driven by market movements, inflows, outflows and other factors. Wrapper fee income Wrapper fees are charged for each of the tax wrappers held by clients and are levied quarterly in arrears based on fixed fees for each wrapper type. Annual commission and wrapper fees relate to services provided on an on-going basis, and revenue is therefore recognised on an on-going basis to reflect the nature of the performance obligations being discharged. As the benefit to the customer of the services is transferred evenly over the 1. Basis of preparation and significant accounting policies (continued) Administrative expenses service period, these fees are recognised as revenue evenly recognised in the Consolidated Statement of Comprehensive over the period, based on time elapsed. Income on an accruals basis. Administration expenses relate to overhead costs and are Accrued income on both annual commission and wrapper Fee and commission expenses fees is recognised as a trade receivable on the statement of financial position, as the Group’s right to consideration is Fee and commission expenses are paid by ILUK and ILInt conditional on nothing other than the passage of time. policyholders to their financial advisers. Expenses comprise Licence income annual commission which is levied monthly in arrears on the average value of assets and cash held on the platform in the month and upfront fees charged on new premiums on Licence income is the rental charge for use of access to the platform. T4A’s CRM software. The rental charge is billed monthly in advance, based on the number of users. Revenue is Investments recognised in line with the provision of the service. Consultancy income less any provision for impairment. Fixed asset investments in subsidiaries are stated at cost Consultancy income relates to consultancy services Other investments comprise UK Government gilts held provided by T4A on an as-needs basis. Revenue is as shareholder investments. The Group held a gilt in the recognised when the services are provided. prior year that matured in the current year, which was Other income held at fair value through profit or loss as it fell under the ‘other’ business model, and was stated at quoted bid price which equates to fair value, with any resultant gain or loss This comprises buy commission and dealing charges. These recognised in profit or loss. are charges levied on the acquisition of assets, due upon completion of the transaction. Revenue is recorded on the New gilts were acquired in the current financial year, which date of completion of the transaction, as this is the date were assessed upon purchase and deemed to meet the the services are provided to the customer. As the benefit criteria to classify as amortised cost under IFRS 9 Financial to the customer of the services is transferred at a point Instruments, namely: in time, these fees are recognised at the point they are provided. Interest income • they are held within a business model whose objective is to hold assets in order to collect contractual cash flows; and, Interest on shareholder cash, policyholder cash, loans and • the contractual terms of the financial assets give coupon on shareholder gilts are the sources of interest rise on specified dates to cash flows that are solely income received. These are recognised in the Consolidated payments of principal and interest on the principal Statement of Comprehensive Income in interest income amount outstanding. and within policyholder returns. Under IFRS 9, interest income is recorded using the effective interest method Investment contracts – investments held for the for all financial assets measured at amortised cost benefit of policyholders and is recognised in the Consolidated Statement of Comprehensive Income. Cost of sales Investment contracts held for the benefit of policy holders are comprised of unit-linked contracts. Investments held for the benefit of policyholders are stated at fair value and reported on a separate line in the statement of financial Cost of sales relate to costs directly attributable to position, see accounting policy on financial instruments for the supply of services provided to the Group and fair value determination. Investment contracts result in are recognised in the Consolidated Statement of financial liabilities whose fair value is dependent on the fair Comprehensive Income on an accruals basis. value of underlying financial assets. They are designated at 179 1. Basis of preparation and significant accounting policies (continued) inception as financial liabilities at ‘fair value through profit Goodwill is held at cost and, in accordance with IFRS, is not or loss’ in order to reduce an accounting mismatch with the amortised but is subject to annual impairment reviews. underlying financial assets. Gains and losses arising from changes in fair value are presented in the Consolidated Property, plant and equipment Statement of Comprehensive Income within “Policyholder investment returns”. Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment Investment inflows received from policyholders are invested losses. Cost includes expenditures that are directly in funds selected by the policyholders. The resulting attributable to the acquisition of the asset. Subsequent liabilities for linked investment contracts are accounted for costs are included in the asset’s carrying amount or under the ‘fair value through profit or loss’ option, in line recognised as a separate asset, as appropriate, only when with the corresponding assets as permitted by IFRS 9. it is probable that future economic benefits associated As all investments held for the benefit of policyholders are measured reliably. Repairs and maintenance costs are matched entirely by corresponding linked liabilities, any charged to the Consolidated Statement of Comprehensive gain or loss on assets recognised through the Consolidated Income during the period in which they are incurred. Statement of Comprehensive Income are offset entirely by the gains and losses on linked liabilities, which are The major categories of property, plant, equipment are with the item will flow to the Group and the cost can be recognised within the “change in investment contract depreciated as follows: liabilities” line. The overall net impact on profit is therefore £nil. Investment contracts are measured at fair value using quoted mid prices that are available at the reporting date and are traded in active markets. Where this is not available, valuation techniques are used to establish the fair value at inception and each reporting date. The ASSET CLASS ALL UK AND ISLE OF MAN ENTITIES AUSTRALIAN ENTITY Leasehold improvements Straight line over the life of the lease Straight line over 40 years Fixtures & fittings Straight line over 10 years Straight line over 10 years Company’s main valuation techniques incorporate all factors that market participants would consider and are based on Equipment Straight line over 3 to 10 years Straight line over 3 years 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. Motor vehicles N/A 25% reducing balance Residual values, method of depreciation and useful lives of the assets are reviewed annually and adjusted if Dividends appropriate. Equity dividends paid are recognised in the accounting Goodwill and goodwill impairment period in which the dividends are declared and approved. Goodwill represents the excess of the cost of an acquisition Intangible non-current assets over the fair value of the Group’s share of the identifiable net assets of the acquired entity at the date of acquisition. Intangible non-current assets, excluding goodwill, are Goodwill is recognised as an asset at cost at the date when stated at cost less accumulated amortisation and comprise control is achieved and is subsequently measured at cost intellectual property software rights. The software rights less any accumulated impairment losses. were amortised over seven years on a straight line basis, as it was estimated that the software would be rewritten every Goodwill is allocated to one or more cash generating seven years, and therefore have a finite useful life. The units (CGUs) expected to benefit from the synergies of software rights are now fully amortised, but due to ongoing the combination, where the CGU represents the smallest system development and coding updates no replacement is identifiable group of assets that generates cash inflows required. 180 that are largely independent of the cash inflows from 1. Basis of preparation and significant accounting policies (continued) Impairment of non-financial assets other assets or group of assets. Goodwill is reviewed for Property, plant and equipment, right-of-use assets and impairment at least once annually, and also whenever intangible assets are tested for impairment when events or circumstances or events indicate there may be uncertainty changes in circumstances indicate that the carrying amount over this value. The impairment assessment compares the may not be recoverable. Recoverable amount is the higher of carrying value of goodwill to the recoverable amount, which an asset’s fair value less costs to sell and value in use (being is the higher of value in use and the fair value less costs of the present value of the expected future cash flows of the disposal. Any impairment loss is recognised immediately in relevant asset). the Consolidated Statement of Comprehensive Income and is not subsequently reversed. The Group evaluates impairment losses for potential reversals when events or circumstances warrant such Intangible assets acquired as part of a business consideration. combination Intangible assets acquired as part of a business combination impairment is recognised this cannot be reversed. For more are recognised where they are separately identifiable and detailed information in relation to this, please see note 12. Goodwill is tested for impairment annually, and once an can be measured reliably. Acquired intangible assets consist of contractual customer Pensions relationships, software and brand. These items are The Group makes defined contributions to the personal capitalised at their fair value, which are based on either the pension schemes of its employees. These are chargeable to ‘Relief from Royalty’ valuation methodology or the ‘Multi- Consolidated Statement of Comprehensive Income in the period Excess Earnings Method’, as appropriate for each year in which they become payable. asset. Subsequent to initial recognition, acquired intangible assets are measured at cost less accumulated amortisation Foreign currencies and any recognised impairment losses. Amortisation is recognised in the consolidated statement of the functional currency at the exchange rate in effect at comprehensive income within administration expenses on the date of the transaction. Foreign currency monetary a straight line basis over the estimated useful lives of the assets and liabilities are translated to sterling at the year Transactions in foreign currencies are translated into assets, which are as follows: ASSET CLASS USEFUL LIFE Customer relationships 15 years Software Brand 7 years 10 years end closing rate. Foreign exchange rate differences that arise are reported net in the Consolidated Statement of Comprehensive Income 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 retranslated to sterling at rates approximating the foreign exchange rates ruling at the relevant month of The method of amortisation and useful lives of the assets the transactions. Foreign exchange differences arising on are reviewed annually and adjusted if appropriate. retranslation are recognised directly in the reserves. 181 1. Basis of preparation and significant accounting policies (continued) Taxation Current income tax The taxation charge is based on the taxable result for Unrecognised deferred tax assets are re-assessed at each the year. The taxable result for the year is determined in reporting date and are recognised to the extent that it has accordance with enacted legislation and taxation authority become probable that future taxable profits will allow the practice for calculating the amount of corporation tax deferred tax asset to be recovered. payable. Policyholder tax comprises corporation tax payable at the Group relies on the same forecast assumptions the policyholder rate on the policyholders’ share of the used elsewhere in the financial statements and in other taxable result for the year, together with deferred tax at management reports, which, among other things, reflect the policyholder rate on temporary differences relating to the potential impact of climate-related development on the policyholder items. business, such as increased cost of production as a result of In assessing the recoverability of deferred tax assets, measures to reduce carbon emissions. Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to The Group offsets deferred tax assets and deferred tax the taxation authorities. The tax rates and tax laws used liabilities if and only if it has a legal enforceable to compute the amount are those that are enacted or right to set off current tax assets and current tax liabilities substantively enacted at the reporting date in countries and the deferred tax assets and deferred tax liabilities relate where the Group operates and generates taxable income. to income taxes levied by the same taxation authority on Management periodically evaluates positions taken in the either the same taxable entity or different taxable entities tax returns with respect to situations in which applicable which intend to either settle current tax liabilities and tax regulations are subject to interpretation and establishes assets on a net basis, or to realise the assets and settle provisions where appropriate. the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are Deferred tax expected to be settled or recovered. Deferred tax assets and liabilities are recognised where the Policyholder Tax carrying amount of an asset or liability in the statement of financial position differs from its tax base. HMRC requires ILUK to charge basic rate income tax on its life insurance policies (FA 2012, s102). ILUK collects this The amount of the asset or liability is determined using tax quarterly, by charging 20% tax (FY22: 20%) on gains tax rates that have been enacted or substantively enacted from assets held in the policies, based on the policyholder’s by the reporting date and are expected to apply when the deferred tax assets/liabilities are recovered/settled. acquisition costs and market value at each quarter end. Additional charges are applied on any increases in the previously charged gain. The charge is adjusted by the With regard to capital gains tax on policyholders’ future fourth financial year quarter so that the total charge for the tax obligations, management has determined that reserves year is based on the gain at the end of the financial year. should be held to cover this, based on a reserve charge When assets are sold at a loss or reduce in market value rate of 20%. The deferred capital gains upon which the by the financial year end, a refund of the charges may be reserve charges are calculated are reflected in the closing applied. Policyholder tax is recorded as a tax expense/(tax deferred tax balance. credit) in the statement of comprehensive income, with a corresponding asset/(liability) recognised on the statement We are aware of the proposed BEPS Pillar 2 changes which of financial position (under IAS 12). might impact the tax rate in some jurisdictions in future years and continue to monitor for updates. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient tax profit will be available to allow all or part of the deferred tax asset to be utilised. 182 1. Basis of preparation and significant accounting policies (continued) Segmental reporting Operating segments are reported in a manner Short-term leases consistent with the internal reporting provided to the The Group defines short-term leases as those with a lease chief operating decision-maker. The chief operating term of 12 months or less and leases of low value assets. decision-maker is responsible for allocating resources and For these leases, the Group recognises the lease payments assessing performance of the operating segments and as an operating expense on a straight line basis over the has been identified as the Chief Executive Officer of the term of lease. Company. Client assets and client monies Cash and cash equivalents Integrated Financial Arrangements Ltd (IFAL) client assets instant access and notice accounts, call deposits, and and client monies are not recognised in the parent and other short-term deposits with an original maturity of consolidated statements of financial position as they are three months or less. The carrying amount of these assets owned by the clients of IFAL. approximates to their fair value. Cash and cash equivalents comprise cash balances from Lease assets and lease liabilities Cash and cash equivalents held for the benefit of the policyholders are held to cover the liabilities for unit linked investment contracts. These amounts are 100% matched to corresponding liabilities. Right-of-use assets The Group recognises right-of-use assets on the date the leased asset is made available for use by the Group. These assets relate to rental leases for the office of the Group, which have varying terms clauses and renewal rights. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any re-measurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date. Depreciation is applied in accordance with IAS 16: Property, Plant and Equipment. Right-of-use assets are depreciated over the lease term. See note 13 and 14. Lease liabilities The Group measures lease liabilities in line with IFRS 16 on the balance sheet as the present value of all future lease payments, discounted using an incremental borrowing rate at the date of commencement. After the commencement date, the amount of lease liabilities is increased to reflect the addition of interest and reduced for the lease payments made. The Group’s incremental borrowing rate is the rate at which a similar borrowing could be obtained from an independent creditor under comparable terms and conditions. See note 25. 183 1. Basis of preparation and significant accounting policies (continued) Financial instruments Financial assets and liabilities are recognised when the is to hold assets to collect contractual cash flows and Group becomes a party to the contractual provisions of their contractual cash flows represent solely payments of the instrument. Financial assets are derecognised principal and interest. when the rights to receive cash flows from the assets have expired or have been transferred and the Group The carrying value of assets held at amortised cost are has transferred substantially all risks and rewards of adjusted for impairment arising from expected credit losses. ownership. Financial liabilities are derecognised when the obligation specified in the contract is discharged, (iii) Financial liabilities at amortised cost cancelled or expires. At initial recognition, the Group classifies its financial other payables and loans payable. These are initially instruments in the following categories, based on the recognised at fair value. Subsequent measurement is at business model in which the assets are managed and amortised cost using the effective interest method. Trade Financial liabilities at amortised cost comprise trade and their cash flow characteristics: and other payables are classified as current liabilities due to their short-term nature. The loan is split between current (i) Financial assets and liabilities at fair value and non-current liabilities, based on the repayment terms. through profit or loss This category includes financial assets and liabilities acquired principally for the purpose of selling or Expected credit losses are required to be measured through repurchasing in the short-term, comprising of listed a loss allowance at an amount equal to: Impairment of financial assets shares and securities. Financial instruments in this category are recognised losses from possible default events within 12 months on the trade date, and subsequently measured at fair after the reporting date); or • the 12-month expected credit losses (expected credit value. Purchases and sales of securities are recognised on the trade date. Transaction costs are expensed • full lifetime expected credit losses (expected credit in the Consolidated Statement of Comprehensive losses from all possible default events over the life of Income. Gains and losses arising from changes in fair the financial instrument). value are presented in the Consolidated Statement of Comprehensive Income within “investment returns” A loss allowance for full lifetime expected credit losses for corporate assets and “net income attributable to is required for a financial instrument if the credit risk of policyholder returns” for policyholder assets in the period that financial instrument has increased significantly since in which they arise. Financial assets and liabilities at fair value through profit or loss are classified as current initial recognition, as well as to contract assets or trade receivables, where the simplified approach is applied except for the portion expected to be realised or paid to assets that do not contain a significant financing beyond twelve months of the balance sheet date, which component. are classified as long-term. (ii) Financial assets at amortised cost are measured at an amount equal to the 12-month For all other financial instruments, expected credit losses expected credit losses. These assets comprised of accrued fees, trade and other receivables, loans, investments in quoted debt Impairment losses on financial assets carried at amortised instruments and cash and cash equivalents. These are cost are reversed in subsequent periods if the expected included in current assets due to their short-term nature, credit losses decrease. except for the element of the loan payable to subsidiary which is to be settled after 12 months, which is included in non-current assets. Financial assets are measured at amortised cost when they are held within the business model whose objective 184 1. Basis of preparation and significant accounting policies (continued) Provisions Share-based payments Provisions are recognised when the Group has a present Equity-settled share-based payment awards granted obligation (legal or constructive) as a result of a past to employees are measured at fair value at the date of event, it is probable that an outflow of resources grant. The awards are recognised as an expense, with a embodying economic benefits will be required to settle corresponding increase in equity, spread over the vesting the obligation and a reliable estimate can be made of the period of the awards, which accords with the period for amount of the obligation. which related services are provided. If the effect of the time value of money is material, The total amount expensed is determined by reference to provisions are discounted using a current pre-tax rate the fair value of the awards as follows: that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the (i) Share Incentive Plan (SIP) shares provision due to the passage of time is recognised as a finance cost. The fair value is the market price on the grant date. There are no vesting conditions, as the employees receive the The ILUK policyholder reserves, which are part of the shares immediately upon grant. provisions balance, arises from tax reserve charges collected from life insurance policyholders, which are held (ii) Performance share plan (PSP) share options to cover possible future tax liabilities. If no tax liability arises the charges are refunded to policyholders, where The fair value of share options is determined by applying possible. As these liabilities are of uncertain timing a valuation technique, usually an option pricing model, or amounts, they are recognised as provisions on the such as Black Scholes. This takes into account factors such statement of financial position. as the exercise price, the share price, volatility, interest Balances due to HMRC are considered under IAS 12 Income Taxes, whereas balances due to policyholders are At each reporting date, the estimate of the number of considered under IAS 37 Provisions, Contingent Liabilities share options expected to vest based on the non-market rates, and dividends. and Contingent Assets. vesting conditions is assessed. Any change to original estimates is recognised in the statement of comprehensive income, with a corresponding adjustment to equity reserves. 185 2. Critical accounting estimates and judgements Critical accounting estimates are those where there is a significant risk of material adjustment in the next 12 months, and critical judgements are those that have the most significant effect on amounts recognised in the accounts. 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. Management uses its knowledge of current facts and applies estimation and assumption techniques that are aligned with relevant accounting policies to make predictions about the future. Actual results may differ from these estimates. Estimates and judgements are reviewed on an ongoing basis and revisions are recognised in the period in which the estimate is revised. There are no assumptions made about the future, or other major sources of estimation uncertainty at the end of the reporting period, that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Judgements which do not involve estimates The assessment to recognise the ILUK policyholder provision comes from an evaluation of the likelihood of a constructive or legal obligation, and whether that obligation can be estimated reliably. The provision required has been calculated based on an assessment of tax payable to HM Revenue & Customs (HMRC) and refunds payable back to policyholders. 186 3. Financial instruments (i) Principal financial instruments (ii) Financial instruments by category The principal financial instruments, from which financial instrument risk arises, are as follows: • Trade and other receivables • Accrued fees • Investments – Gilts • Investments – Listed shares and securities • Trade and other payables • Loans receivable and loans payable As explained in note 1, financial assets and liabilities have been classified into categories that determine their basis of measurement and, for items measured at fair value, whether changes in fair value are recognised in the statement of comprehensive income. The following tables show the carrying values of assets and liabilities for each of these categories for the Group: FINANCIAL ASSETS: FAIR VALUE THROUGH PROFIT OR LOSS AMORTISED COST Cash and cash equivalents Cash and cash equivalents policyholder Investments - Listed shares and securities Investments - Gilts Loans receivable Accrued income Trade and other receivables Investments held for the policyholders Total financial assets 2023 £m - - 0.1 - - - - 2022 £m - - 0.1 3.0 - - - 23,021.7 23,021.8 20,715.8 20,718.9 Assets which are not financial instruments Prepayments Current tax asset Trade and other receivables – repayment interest due from HMRC Total financial assets See note 36 for details on 2022 restated balances. 2023 £m 177.9 RESTATED 2022 £m 183.0 1,419.2 1,458.6 - 22.3 6.3 12.5 3.2 - - - 5.5 12.1 2.0 - 1,641.4 1,661.2 2023 £m 4.7 14.3 0.4 19.4 RESTATED 2022 £m 5.1 15.0 - 20.1 187 3. Financial instruments (continued) FINANCIAL LIABILITIES: FAIR VALUE THROUGH PROFIT OR LOSS AMORTISED COST Trade and other payables Lease liabilities Other payables 2023 £m - - - 2022 £m - - - 2023 £m 0.7 1.1 5.9 Liabilities for linked investments contracts Total financial liabilities 23,021.7 23,021.7 20,715.8 20,715.8 1,419.2 1,426.9 RESTATED 2022 £m 1.6 2.8 5.4 1,458.6 1,468.4 RESTATED 2022 £m 8.3 2.2 2.3 1.7 1.7 2023 £m 7.8 2.6 0.9 1.6 - 12.9 16.2 Liabilities which are not financial instruments Accruals and deferred income PAYE and other taxation Other payables – due to HMRC Deferred consideration Contingent consideration See note 36 for details on 2022 restated balances. The following tables show the carrying values of assets and liabilities for each of these categories for the Company: FINANCIAL ASSETS: FAIR VALUE THROUGH PROFIT OR LOSS AMORTISED COST Cash and cash equivalents Trade and other receivables Loans receivable Total financial assets 2023 £m - - - - 2022 £m - - - - 2023 £m 26.0 0.1 6.3 32.4 FINANCIAL LIABILITIES: FAIR VALUE THROUGH PROFIT OR LOSS AMORTISED COST 2023 £m - - - - 2022 £m - - - - 2023 £m 0.4 7.0 - 7.4 Other payables Loans payable Due to Group undertakings Total financial liabilities 188 2022 £m 33.1 0.2 5.5 38.8 RESTATED 2022 £m 0.3 8.0 0.1 8.4 3. Financial instruments (continued) Liabilities which are not financial instruments Accruals and deferred income PAYE and other taxation Deferred consideration Contingent consideration (iii) Financial instruments not measured at fair value 2023 £m 0.3 0.1 1.6 - 2.0 RESTATED 2022 £m 0.3 0.1 1.7 1.7 3.8 Financial instruments not measured at fair value include The following table shows the three levels oaf the fair value cash and cash equivalents, accrued fees, investments hierarchy: held in gilts, loans, trade and other receivables, and trade and other payables. Due to their short-term nature and/ • Level 1: quoted prices (unadjusted) in active markets or expected credit losses recognised, the carrying value of for identical instruments; these financial instruments approximates their fair value. (iv) Financial instruments measured at fair provide regular observable prices; and value – fair value hierarchy The table below classifies financial instruments that are data, but for which the last known price is over a year • Level 3: inputs that are based on Level 1 or Level 2 • Level 2: instruments which are not actively traded but recognised on the statement of financial position at fair old (unobservable inputs). value in a hierarchy that is based on significance of the inputs used in making the measurements. The levels of The following table shows the Group’s financial instruments hierarchy are disclosed on the next page. measured at fair value and split into the three levels: 2023 Assets Term deposits Investments and securities Bonds and other fixed-income securities LEVEL 1 LEVEL 2 LEVEL 3 TOTAL £m £m £m £m 182.0 740.3 16.5 - 181.9 1.0 - 0.5 - 182.0 922.7 17.5 Holdings in collective investment schemes 21,754.5 143.3 1.7 21,899.5 Investments held for the benefit of policyholders 22,693.3 326.2 2.2 23,021.7 Investments – listed shares and securities 0.1 - - 0.1 Total Liabilities 22,693.4 326.2 2.2 23,021.8 Liabilities for linked investments contracts 22,693.3 326.2 2.2 23,021.7 Total 22,693.3 326.2 2.2 23,021.7 189 3. Financial instruments (continued) 2022 Assets Term deposits Investments and securities Bonds and other fixed-income securities LEVEL 1 LEVEL 2 LEVEL 3 TOTAL £m £m £m £m 63.9 - 631.9 137.9 10.9 1.2 - 0.3 - 63.9 770.1 12.1 Holdings in collective investment schemes 19,730.4 137.7 1.6 19,869.7 Investments held for the benefit of policyholders 20,437.1 276.8 1.9 20,715.8 Investments Total Liabilities 3.1 - - 3.1 20,440.2 276.8 1.9 20,718.9 Liabilities for linked investments contracts 20,437.1 276.8 - - 1.9 1.7 20,715.8 1.7 20,437.1 276.8 3.6 20,717.5 Contingent consideration Total Level 1 valuation methodology Level 3 valuation methodology Financial instruments included in Level 1 are measured at Financial instruments included in Level 3 are measured at fair value using quoted mid prices that are available at the fair value using the last known price and for which the price reporting date and are traded in active markets. These are is over a year old. These are mainly OEICs and Unit Trusts. mainly Open-Ended Investment Companies (OEICs), Unit These instruments have unobservable inputs as the current Trusts, Investment trusts and Exchange Traded Funds. observable market information is no longer available. Where these instruments arise management will value them based The price is sourced from our 3rd party provider, who on the last known observable market price. source this directly from the stock exchange or obtain the price directly from the fund manager. The prices are sourced as noted in Level 1 and Level 2 Level 2 valuation methodology above. Financial instruments included in Level 2 are measured at For the purposes of identifying Level 3 instruments, unobservable inputs means that current observable market fair value using observable mid prices traded in markets information is no longer available. Where these instruments that have been assessed as not active but which provide arise management will value them based on the last known regular observable prices. These are mainly Structured observable market price. No other valuation techniques are products and OEICs. applied. The price is sourced from the structured product provider or from our 3rd party provider, who obtain the price directly from the fund manager. 190 3. Financial instruments (continued) Level 3 sensitivity to changes in unobservable measurements For financial instruments assessed as Level 3, based on Level 3 assets are presented in the table below: The reconciliation between opening and closing balances of its review of the prices used, the Group 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. Review of prices As part of its pricing process, the Group regularly reviews whether each instrument can be valued using a quoted price and if it trades on an active market, based on available market data and the specific circumstances of each market and instrument. Opening balance Unrealised gains or losses in the year ended 30 September 2023 Transfers in to Level 3 at 30 September 2023 valuation Transfers out of Level 3 at 30 September 2023 valuation Purchases, sales, issues and settlement 2023 2022 £m 1.9 £m 1.9 (0.1) (0.4) 0.4 0.4 - - - - The Group regularly assesses instruments to ensure they Closing balance 2.2 1.9 are categorised correctly and Fair Value Hierarchy (FVH) levels adjusted accordingly. The Group monitors situations that may impact liquidity such as suspensions and Any resultant gains or losses on financial assets held for the liquidations while also actively collecting observable market benefit of policyholders are offset by a reciprocal movement prices from relevant exchanges and asset managers. in the linked liability. Should an instrument price become observable following the resumption of trading the FVH level will be updated to reflect this. Changes to valuation methodology There have been no changes in valuation methodology during the year under review. Transfers between Levels The Group’s policy is to assess each financial instrument it holds at the current financial year end, based on the last known price and market information, and assign it to a Level. The Group 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 and whether a market is now active or not. Transfers between Levels between 01 October 2022 and 30 September 2023 are presented in the table below at their valuation at 30 September 2023: TRANSFERS FROM TRANSFERS TO Level 1 Level 2 Level 2 Level 1 £M 32.3 20.9 191 3. Financial instruments (continued) (v) Capital maintenance The regulated companies in the Group are subject to capital requirements imposed by the relevant regulators as detailed below: LEGAL ENTITY REGULATORY REGIME IFAL ILUK ILInt IFPR Solvency II Isle of Man risk based capital regime Group capital requirements for 2023 are driven by the regulated entities, whose capital resources and requirements as detailed below: IFAL 30 SEPTEMBER ILUK 30 SEPTEMBER ILINT 30 SEPTEMBER 2023 £m 269.2 215.8 125% 2022 £m 244.0 186.9 131% 2023 2022 £m 46.6 27.1 £m 42.0 23.7 172% 177% Capital resource Capital requirement 2023 2022 £m 44.4 33.3 £m 39.7 32.6 Coverage ratio 133% 122% The Group has complied with the requirements set by the regulators during the year. The Group’s policy for managing capital is to ensure each regulated entity maintains capital well above the minimum requirement. Further information is detailed in the Risk and Risk Management section of this report on page 60 and in the Financial Review on page 53. 192 4. Risk and risk management This note supplements the details provided in the Risk and Risk Management section of this report on page 60. Risk assessment The board has overall responsibility for the determination of the Group’s risk management objectives and policies Market risk is the risk of loss arising either directly or and, whilst retaining ultimate responsibility for them, it indirectly from fluctuations in the level and in the volatility has delegated the authority for designing and operating of market prices of assets, liabilities and other financial (1) Market risk processes that ensure the effective implementation of the instruments. objectives and policies to the Group’s risk function. (a) Price risk Risk assessment is the determination of quantitative values and/or qualitative judgements of risk related to a Market price risk from reduced income concrete situation and a recognised threat. Quantitative risk assessment requires calculations of two components The Company’s dividend income from its regulated of risk, the magnitude of the potential impact, and the subsidiaries, IFAL, ILUK and ILInt, is exposed to market likelihood that the risk materialises. Qualitative aspects of risk. The Group’s main source of income is derived from risk, despite being more difficult to express quantitatively, annual management fees and transaction fees which are are also taken into account in order to fully evaluate the linked to the value of the clients’ portfolios, which are impact of the risk on the organisation. determined by the market prices of the underlying assets. The Group’s revenue is therefore affected by the value of assets on the platform, and consequently it has exposure to equity market levels and economic conditions. The Group mitigates the second order market price risk by applying fixed charges per tax wrapper in addition to income derived from the charges based on clients’ linked portfolio values. These are recorded in note 5 as wrapper fee income and annual commission income, respectively. This approach of fixed and variable charging offers an element of diversification to its income stream. The risk of stock market volatility, and the impact on revenue, is also mitigated through a wide asset offering which ensures the Group is not wholly correlated with one market, and which enables clients to switch assets, including into cash on the platform, in times of uncertainty. Sensitivity testing has been performed to assess the impact of market movements on the Group’s Profit for the year. The sensitivity is applied as an instantaneous shock at the start of the year, and shows the impact of a 10% change in values across all assets held on the platform. IMPACT ON PROFIT AND EQUITY FOR THE YEAR 10% increase in asset values 2023 2022 £m 8.7 £m 8.5 10% decrease in asset values (8.7) (8.5) 193 4. Risk and risk management (continued) Market risk from direct asset holdings The Group and the Company have limited exposure to The table below shows a breakdown of the material foreign primary market risk as capital is invested in high quality, currency exposures for the unit-linked policies within the highly liquid, short-dated investments. Group: Market risk from unit-linked assets The Group and the Company have limited exposure to primary market risk from the value of unit-linked assets as fluctuations are borne by the policyholders. (b) Interest rate risk The Group receives interest on its cash and cash equivalents of £177.9 million (FY22: £183.0 million), on its loans of £6.3 CURRENCY £m % £m % 2023 2022 GBP USD EUR Others Total 24,279.2 99.3 22,021.1 99.3 133.4 15.9 12.4 0.5 0.1 0.1 127.0 16.4 9.8 0.6 0.1 0.0 24,440.9 100.0 22,174.3 100.0 million (FY22: £5.5 million) and on financial investments 99.3% of investments and cash held for the benefit of of £22.4 million (FY22: £3.1 million). The Group mitigates policyholders are denominated in GBP, its base currency. interest rate risk by diversifying its investments, which Remaining currency holdings greater than 0.1% of the include government gilts which have a fixed rate of interest. total are shown separately in the table. However, it is recognised that the majority of investments held for the Sensitivity testing has been performed to assess the impact benefit of policyholders are in collective investment schemes of a 1% change in interest rates. This would be expected and some of their underlying assets are denominated in to increase/decrease interest received on cash and cash currencies other than GBP, which increases the funds under equivalents by £1.7 million (FY22: £1.8 million) and on direction currency risk exposure. A significant rise or fall in loans by £0.1 million (FY22: £0.1 million), which would sterling exchange rates would not have a significant first increase/decrease profit after tax and equity by £1.4 million order impact on the Group’s results since any adverse or (FY22: £1.5 million). (c) Currency risk favourable movement in policyholder assets is entirely offset by a corresponding movement in the linked liability. The Group is not directly exposed to significant currency risk however it is exposed to currency risk which arises on the platform software maintenance and support fees charged by IAD Pty, which are charged in Australian Dollars. The total amount of software maintenance and support fees in FY23 amounted to £7.2 million (FY22: £6.2 million). Sensitivity testing has been performed to assess the impact of a 10% change in the GBP-AUD exchange rate. This would be expected to cause an increase/decrease of £0.7 million (FY22: £0.6 million) on the software maintenance and support fees. 194 4. Risk and risk management (continued) (2) Credit (counterparty default) risk Credit risk is the risk that the Group or Company is Details of the ECLs recognised in relation to loans can be exposed to a loss if another party fails to meet its financial seen in note 16. No ECLs have been recognised on the obligations. For the Company, the exposure to counterparty undrawn loan commitments, as any ECLs would not be default risk arises primarily from loans directly held by the considered to be material. Company, while for the Group this risk also arises from fees owed by clients. (c) Cash and equivalents Assets held at amortised cost The Group has a low risk appetite for credit risk, which (a) Accrued income is mainly limited to exposures to credit institutions for its bank deposits. A range of major regulated UK high street banks is used. A rigorous annual due diligence exercise This comprises fees owed by clients. These are held at is undertaken to assess the financial strength of these amortised cost, less expected credit losses (“ECLs”). banks with those used having a minimum credit rating of Under IFRS 9, a forward-looking approach is required A (Fitch). to assess ECLs, so that losses are recognised before the In order to actively manage the credit and concentration occurrence of any credit event. The Group estimates that risks, the board has agreed risk appetite limits for the pending fees three months or more past due are unlikely to regulated entities of the amount of corporate and client be collected and are written off. Based on management’s funds that may be deposited with any one bank; which experience, pending fees one or two months past due are is represented by a set percentage of the respective generally expected to be collected, but consideration is bank’s total customer deposits. Monthly monitoring of also given to potential losses on these fees. Historical loss these positions along with movements in Fitch ratings rates have been used to estimate expected future losses, is undertaken, with reports presented to the Directors while consideration is also given to underlying economic for review. Collectively these measures ensure that the conditions, in order to ensure that expected losses are Group diligently manages the exposures and provide recognised on a forward-looking basis. This has led to the the mitigation scope to be able to manage credit and additional recognition of an immaterial amount of ECLs. concentration exposures on behalf of itself and its Details of the ECLs recognised in relation to accrued income can be seen in note 22. Counterparty default risk exposure to loans customers. (b) Loans The Company has loans of £6.3m (FY22: £5.5m). There are no other loans held by the Group. Loans subject to the 12 month ECL are £6.3m (FY22: £5.5m). While there remains a level of economic Counterparty default risk exposure to Group companies uncertainty in the current climate, leading to potentially higher credit risk, there is not considered to be a significant As well as inconvenience and operational issues arising from increase in credit risk, as all of the loans are currently the failure of the other Group companies, there is also a risk performing to schedule, and there are no significant of a loss of assets. The Company is due £81k (FY22: £160k) concerns regarding the borrowers. There is therefore no from other Group companies. need to move from the 12 month ECL model to the lifetime ECL model. Expected losses are recognised on a forward- looking basis, which has led to the additional recognition of an immaterial amount of ECLs. In addition to the above, the Company has committed a further £5.0m in undrawn loans. 195 4. Risk and risk management (continued) Counterparty default risk exposure to other receivables The Company has no other receivables arising, due to the and have not experienced a significant increase in credit nature of its business, and the structure of the Group. risk since initial recognition) with no material expected Across the Group, there is exposure to counterparty default risk arising primarily from: Corporate assets and funds held on behalf of clients credit loss provision held. • corporate assets directly held by the Group; There is no significant risk exposure to any one UK • exposure to clients; and • exposure to other receivables. clearing bank. Counterparty default risk exposure to clients The Group is due £12.3m (FY22: £11.8m) from fee The other exposures to counterparty default risk include a income owed by clients. credit default event which affects funds held on behalf of clients and occurs at one or more of the following entities: Impact of credit risk on fair value • a bank where cash is held on behalf of clients; Due to the limited direct exposure that the Group and the • a custodian where the assets are held on behalf of material impact on the fair value movement of financial Company have to credit risk, credit risk does not have a clients; and instruments for the year under review. The fair value movements on these instruments are predominantly due • Transact Nominees Limited (TNL), which is the legal to changes in market conditions. owner of the assets held on behalf of clients. There is no first order impact on the Group from one of the events in the preceding paragraph. This is because any credit default event in respect of these holdings will be borne by clients, both in terms of loss of value and loss of liquidity. Terms and conditions have been reviewed by external lawyers to ensure that these have been drafted appropriately. However, there is a second order impact where future profits for the Group are reduced in the event of a credit default which affects funds held on behalf of clients. There are robust controls in place to mitigate credit risk, for example, holding corporate and client cash across a range of banks in order to minimise the risk of a single point of counterparty default failure. Additionally, maximum counterparty limits and minimum credit quality steps are set for banks. Cash and cash equivalents and investments are classed as stage 1 on the expected credit loss model (meaning that they are not credit-impaired on initial recognition 196 4. Risk and risk management (continued) (3) Liquidity risk Liquidity risk is the risk that funds are not accessible The payment of loan obligations is covered by the upward such that the Company, although solvent, does not have dividends from subsidiary entities which were assessed sufficient liquid financial resources to meet obligations against the financial plans and capital projections of the as they fall due, or can secure such resources only at regulated entities to ensure the level of affordability of the excessive cost. future dividends. As a holding company, the Company’s main liquidity risk is The purchase price for T4A comprised three elements, related to paying out shareholder dividends and operating a fixed sum payable on deal completion which has been expenses it may incur. Additionally, the Company has made settled, a further fixed sum to be paid in four equal annual short term commitments, in the form of a capped facility instalments and a variable amount by reference to T4A’s arrangement, to Vertus Capital SPV1 Limited (‘Vertus’) performance over that four year period. The payment of (as one of Vertus’ sources of funding) to assist Vertus these future obligations is expected to be met from the in developing its business, which is to provide tailored company’s own reserves and dividends it expects to receive niche debt facilities to adviser firms to fund acquisitions, from its subsidiaries. management buy-outs and other similar transactions. Across the Group, the following key drivers of liquidity risk to ensure that clients maintain a percentage of liquidity in The Group has set out two key liquidity requirements: first, have been identified: • liquidity risk arising due to failure of one or more of the Group’s banks; their funds at all times, and second, to maintain access to cash through a spread of cash holdings in bank accounts. There are robust controls in place to mitigate liquidity risk, for example, through regular monitoring of expenditure, • liquidity risk arising due to the bank’s system failure closely managing expenses in line with the business plan, which prevents access to Group funds; and and, in the case of the Vertus facility, capping the value of loans. Additionally, the Group holds corporate and client • liquidity risk arising from clients holding insufficient cash across a range of banks in order to mitigate the risk of cash to settle fees when they become due. a single point of counterparty default failure. The Group’s liquidity risk arises from a lack of readily Maturity schedule realisable cash to meet debts as they become due. This takes a number of forms – clients’ liabilities coming due, The following table shows an analysis of the financial assets other liabilities (e.g. expenses) coming due, insufficient and financial liabilities by remaining expected maturities as liquid assets to meet loan repayments to subsidiary at 30 September 2023 and 30 September 2022. All financial companies and future payment commitments over the next liabilities are undiscounted. three years following the acquisition of T4A. The first of these, clients’ liabilities is primarily covered shown in the tables below, the Company committed a through the terms and conditions with clients’ taking their further £5.6m in undrawn loans. These are available to be own liquidity risk, if their funds cannot be immediately drawn down immediately. In addition to the financial assets and financial liabilities surrendered for cash. Payment of other liabilities depends on the Group having sufficient liquidity at all times to meet obligations as they fall due. This requires access to liquid funds, i.e. working banks and it also requires that the Group’s main source of liquidity, charges on its clients’ assets, can also be converted into cash. 197 4. Risk and risk management (continued) FINANCIAL ASSETS: 2023 Investments held for the policyholders Investments Accrued income Trade and other receivables Loans Cash and cash equivalents Cash held for the benefit of policyholders Total RESTATED 2022 Investments held for the policyholders Investments Accrued income Trade and other receivables Loans Cash and cash equivalents Cash held for the benefit of policyholders Total See note 36 for details on 2022 restated balances. FINANCIAL LIABILITIES: 2023 Liabilities for linked investment contracts Trade and other payables Lease liabilities Total 2022 Liabilities for linked investment contracts Trade and other payables Lease liabilities Total UP TO 3 MONTHS £m 23,021.7 - 12.5 3.2 - 177.9 1,419.2 24,634.5 UP TO 3 MONTHS £m 20,715.8 0.1 12.1 2.0 - 183.0 1,458.6 22,371.6 UP TO 3 MONTHS £m 24,440.9 6.6 0.1 24,447.6 UP TO 3 MONTHS £m 22,174.4 7.0 0.6 22,182.0 3-12 MONTHS £m 1-5 YEARS £m OVER 5 YEARS £m - - - - - - - - - 22.4 - - 6.3 - - 28.7 - - - - - - - - 3-12 MONTHS £m 1-5 YEARS £m OVER 5 YEARS £m - - - - - - - - - 3.0 - - 5.5 - - 8.5 - - - - - - - - 3-12 MONTHS £m - - 0.3 0.3 3-12 MONTHS £m - - 1.3 1.3 1-5 YEARS £m OVER 5 YEARS £m - - 0.9 0.9 - - - - 1-5 YEARS £m OVER 5 YEARS £m - - 0.9 0.9 - - - - TOTAL £m 23,021.7 22.4 12.5 3.2 6.3 177.9 1,419.2 24,663.1 TOTAL £m 20,715.8 3.1 12.1 2.0 5.5 183.0 1,458.6 22,380.1 TOTAL £m 24,440.9 6.6 1.3 24,448.8 TOTAL £m 22,174.4 7.0 2.8 22,184.2 As per note 3, accruals, deferred consideration and contingent consideration have been reclassified as non-financial instruments and have therefore been removed from this table. 198 4. Risk and risk management (continued) (4) Outflow risk (5) Expense risk Outflows occur when funds are withdrawn from the Expense risk arises where costs increase faster than platform for any reason. Outflows typically occur where expected or from one-off expense “shocks”. clients’ circumstances and requirements change. However, these outflows can also be triggered by operational failure, The Group and the Company has exposure related to competitor actions or external events such as regulatory or expense inflation risk, where actual inflation deviates from economic changes. expectations. As a significant percentage of the Group’s expenses are staff related the key inflationary risk arises Outflow risk is mitigated by focusing on providing from salary inflation. The Group and the Company have exceptionally high levels of service. Outflow rates no exposures to defined benefit staff pension schemes or are closely monitored and unexpected experience is client related index linked liabilities. investigated. Despite the current challenging and uncertain economic and geopolitical environment, outflow rates The Group’s expenses are governed at a high level by remain stable and within historical norms. 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. 199 5. Disaggregation of revenue 6. Segmental reporting The Group has the following categories of revenue: The revenue and profit before tax are attributable to activities carried out in the UK and the Isle of Man. • Annual commission - based on a fixed percentage applied to the value of the client’s portfolio each The Group has three classes of business, which have been month. organised primarily based on the products they offer, as • Wrapper fee income - based on a fixed quarterly charge per wrapper. detailed below: • Investment administration services – this relates to services performed by IFAL, which is the provider of • Other income – buy commission is based on a set the Transact wrap service. It is the provider of the percentage charge applied to each transaction. Dealing General Investment Account (GIA), is a Self-Invested charges are charged based on a fixed fee for each type Personal Pension (SIPP) operator, an ISA manager and of transaction. • Adviser back-office technology – licence income is the custodian for all assets held on the platform (except for those held by third party custodians). based on a fixed monthly charge per number of users. • Insurance and life assurance business – this relates to Consultancy income is charged based on the services ILUK and ILInt, insurance companies which provide the provided. FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2023 £m 2022 £m Annual commission income 116.1 115.8 Wrapper fee income 12.3 11.6 Other income Adviser back-office technology 1.7 4.8 2.2 4.0 Transact Personal Pension, Executive Pension, Section 32 Buy-Out Bond, Transact Onshore and Offshore Bonds, and Qualifying Savings Plan on the Transact platform. • Adviser back-office technology - this relates to T4A, provider of financial planning technology to adviser and wealth management firms via the CURO adviser support system. Other Group entities relates to the rest of the Group, which provide services to support the Group’s core operating Total revenue 134.9 133.6 segments. Analysis by class of business is given below. 200 6. Segmental reporting (continued) Statement of comprehensive income – segmental information for the year ended 30 September 2023: INVESTMENT ADMINISTRATION SERVICES INSURANCE AND LIFE ASSURANCE BUSINESS ADVISER BACK-OFFICE TECHNOLOGY OTHER GROUP ENTITIES CONSOLID- ATION ADJUSTMENTS £m £m £m £m £m Revenue Annual commission income Wrapper fee income Adviser back-office technology Other income Total revenue Cost of sales Gross profit/(loss) 63.1 3.0 - 1.2 67.3 (2.1) 65.2 53.0 9.3 - 0.5 62.8 (0.6) 62.2 - - 4.8 - 4.8 (0.7) 4.1 - - - 76.0 76.0 (0.5) 75.5 - - - (76.0) (76.0) - TOTAL £m 116.1 12.3 4.8 1.7 134.9 (3.9) Administrative expenses (42.2) (30.2) (5.5) (72.3) 75.6 (74.6) Expected credit losses on financial assets - - - Operating profit/(loss) 23.0 32.0 (1.4) (76.0) 131.0 (0.1) 3.1 (0.7) 1.4 - - - - - - (0.4) 0.6 (0.6) (0.1) 56.3 (0.1) 6.4 - - - - - 12.1 (1,056.0) (193.3) 1,249.3 12.1 Interest expense Interest income Net policyholder returns Net income/(loss) attributable to policyholder returns Change in investment contract liabilities Fee and commission expenses Policyholder investment returns Net policyholder returns Profit/(loss) on ordinary activities before taxation attributable to policyholders and shareholders - 1.2 - 4.4 - - - - - 12.1 (1,056.0) (193.3) 1,249.3 12.1 - - - - - - - 24.2 48.5 (1.4) 3.8 (0.4) 74.7 Policyholder tax credit/(charge) - (12.1) - - - (12.1) Profit on ordinary activities before taxation attributable to shareholders Total tax attributable to shareholder and policyholder returns 24.2 36.4 (1.4) 3.8 (0.4) 62.6 (5.0) (18.7) 0.5 (1.7) (0.1) (24.9) Less: tax attributable to policyholder returns - 12.1 - - - 12.1 Shareholder tax on profit on ordinary activities (5.0) (6.6) 0.5 (1.7) (0.1) (12.8) Profit/(loss) for the period 19.2 29.8 (0.9) 2.1 (0.3) 49.9 201 6. Segmental reporting (continued) Statement of comprehensive income – segmental information for the year ended 30 September 2022: INVESTMENT ADMINISTRATION SERVICES INSURANCE AND LIFE ASSURANCE BUSINESS ADVISER BACK-OFFICE TECHNOLOGY OTHER GROUP ENTITIES CONSOLID- ATION ADJUSTMENTS £m £m £m £m £m 63.4 2.8 - 1.3 67.5 (0.7) 66.8 52.6 8.7 - 0.9 62.2 (0.4) 61.8 - - 3.9 - 3.9 (0.5) 3.4 - - - 64.4 64.4 (0.5) 63.9 (43.0) (28.8) (5.3) (64.6) (0.1) 23.7 - 0.1 - 33.0 - 1.0 (38.5) 2,770.3 (192.6) (2,577.7) 38.5 - - - - - (0.1) (1.9) (0.8) - - - - - - - (0.4) - - - - - - TOTAL £m 116.0 11.5 3.9 2.2 - - - (64.4) (64.4) 133.6 - (2.1) (64.4) 64.0 - (0.4) 131.5 (77.7) (0.2) 53.6 0.3 (0.3) (0.1) 0.8 - - - - - (38.5) 2,770.3 (192.6) (2,577.7) (38.5) Revenue Annual commission income Wrapper fee income Adviser back-office technology Other income Total revenue Cost of sales Gross profit/(loss) Administrative expenses Expected credit losses on financial assets Operating profit/(loss) Interest expense Interest income Net policyholder returns Net income/(loss) attributable to policyholder returns Change in investment contract liabilities Fee and commission expenses Policyholder investment returns Net policyholder returns Profit/(loss) on ordinary activities before taxation attributable to policyholders and shareholders 23.8 (4.5) (1.9) (1.2) (0.4) 15.8 Policyholder tax credit/(charge) - 38.5 - - - 38.5 Profit on ordinary activities before taxation attributable to shareholders Total tax attributable to shareholder and policyholder returns 23.8 34.0 (1.9) (1.2) (0.4) 54.3 (4.4) 32.6 0.3 (0.4) 0.1 28.2 Less: tax attributable to policyholder returns - (38.5) - - - (38.5) Shareholder tax on profit on ordinary activities (4.4) (5.9) 0.3 (0.4) 0.1 (10.3) Profit/(loss) for the period 19.4 28.1 (1.6) (1.6) (0.3) 44.0 202 6. Segmental reporting (continued) Statement of financial position – segmental information for the year ended 30 September 2023: INVESTMENT ADMINISTRATION SERVICES INSURANCE AND LIFE ASSURANCE BUSINESS ADVISER BACK-OFFICE TECHNOLOGY Assets Non-current assets Current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Policyholder assets and liabilities Cash held for the benefit of policyholder Investments held for the benefit of policyholders Liabilities for linked investment contracts Total policyholder assets and liabilities Net assets Non-current asset additions £m 10.3 78.0 88.3 8.4 0.8 9.2 - - - - 79.1 0.3 £m 19.1 154.6 173.7 18.1 47.5 65.6 1,419.2 23,021.7 (24,440.9) - 108.1 0.3 £m 1.1 2.8 3.9 1.0 0.2 1.2 - - - - 2.7 0.0 TOTAL £m 30.5 235.4 265.9 27.5 48.5 76.0 - - - - 189.9 0.6 203 6. Segmental reporting (continued) Restated Statement of financial position – segmental information for the year ended 30 September 2022: INVESTMENT ADMINISTRATION SERVICES INSURANCE AND LIFE ASSURANCE BUSINESS ADVISER BACK-OFFICE TECHNOLOGY Assets Non-current assets Current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Policyholder assets and liabilities Cash held for the benefit of policyholder Investments held for the benefit of policyholders Liabilities for linked investment contracts Total policyholder assets and liabilities £m 10.4 71.8 82.2 10.5 1.9 12.4 - - - - £m 25.4 144.7 170.1 22.5 47.6 70.1 1,458.6 20,715.8 (22,174.4) - Net assets Non-current asset additions 69.8 0.2 100.0 0.1 See note 36 for details on 2022 restated balances. Segmental information: Split by geographical location £m 0.8 3.8 4.6 1.1 0.1 1.2 - - - - 3.4 - TOTAL £m 36.6 220.3 256.9 34.1 49.6 83.7 1,458.6 20,715.8 (22,174.4) - 173.2 0.3 Revenue United Kingdom Isle of Man Total 2023 £m 129.4 5.5 134.9 2022 £m Non-current assets 128.3 United Kingdom 5.3 Isle of Man 133.6 Total 2023 £m 23.4 0.1 23.5 2022 £m 25.1 - 25.1 204 7. Earnings per share Profit 2023 2022 Profit for the year and earnings used in basic and diluted earnings per share £49.9m £44.0m Weighted average number of shares Weighted average number of Ordinary shares 331.3m 331.3m Weighted average numbers of Ordinary Shares held by Employee Benefit Trust (0.5m) (0.4m) Weighted average number of Ordinary Shares for the purposes of basic EPS 330.8m 330.9m Adjustment for dilutive share option awards 0.5m 0.4m Weighted average number of Ordinary Shares for the purposes of diluted EPS 331.3m 331.3m Earnings per share Basic Diluted Earnings per share (“EPS”) is calculated based on the share capital of IntegraFin Holdings plc and the earnings of the consolidated Group. Basic EPS is calculated by dividing profit after tax attributable to ordinary equity shareholders of the Company by the weighted average number of Ordinary Shares outstanding during the year. The weighted average number of shares excludes shares held within the Employee Benefit Trust to satisfy the Group’s obligations under employee share awards. Diluted EPS is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume conversion of all potentially dilutive Ordinary Shares. 15.1p 15.1p 13.3p 13.3p 205 8. Expenses by nature The following expenses are included within administrative expenses: Group Depreciation Amortisation Wages and employee benefits expense Other staff costs Auditor’s remuneration: - auditing of the Financial Statements of the Company pursuant to the legislation - auditing of the Financial Statements of subsidiaries - other assurance services Other professional fees Regulatory fees - Non-underlying expenses - backdated VAT - Non-underlying expenses - interest on backdated VAT - Other non-underlying expenses – deferred consideration - Other non-underlying expenses –contingent consideration - Other non-underlying expenses Short-term lease payments: - land and buildings Other occupancy costs Other costs Other income – tax relief due to shareholders Total administrative expenses 2023 £m 2.1 0.4 52.8 1.1 0.2 0.6 0.4 4.8 3.9 - - 2.1 (1.7) - 0.6 2.2 6.7 (1.6) 74.6 2022 £m 2.6 0.4 46.1 1.0 0.1 0.4 0.3 4.7 4.2 8.0 0.8 2.1 0.9 (0.3) 0.1 2.3 6.4 (2.4) 77.7 “Other income – tax relief due to shareholders” relates to the release of policyholder reserves to the statement of comprehensive income. Company Wages and employee benefits expense Non underlying expenses: - Remuneration Auditor’s remuneration: - auditing of the Financial Statements of the Company pursuant to the legislation Other professional fees Other costs Total administrative expenses 206 2023 £m 0.7 0.3 0.2 0.6 0.2 2.0 2022 £m 0.6 3.0 0.2 0.8 0.2 4.8 8. Expenses by nature (continued) Wages and employee benefits expense The average number of staff (including executive directors) employed by the Group during the financial year amounted to: CEO Client services staff Finance staff Legal and compliance staff Sales, marketing and product development staff Software development staff Technical and support staff The Company has no employees (2022: nil). 2023 2022 No. 2 232 72 39 65 139 82 631 No. 2 223 69 38 64 131 67 594 Wages and employee (including executive directors) benefits expenses during the year, included within administrative expenses, were as follows: Wages and salaries Social security costs Other pension costs Share-based payment costs 2023 £m 43.9 4.8 2.0 2.1 52.8 2022 £m 36.3 4.2 3.6 2.0 46.1 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. 2023 2022 Short-term employee benefits* Post-employment benefits Share based payment Social security costs Highest paid director: Short-term employee benefits* Other benefits Number of directors for whom pension contributions are paid *Short-term employee benefits comprise salary and cash bonus. £m 3.0 0.2 0.5 0.5 4.2 0.6 0.2 No. 8 £m 2.9 0.2 0.4 0.4 4.1 0.6 0.2 No. 8 207 9. Interest income Interest income on bank deposits Interest income on tax repayments Interest income on loans Interest income on financial investments GROUP 2023 COMPANY 2023 GROUP 2022 COMPANY 2022 £m 5.3 0.4 0.4 0.3 6.4 £m 0.5 - 0.4 - 0.9 £m 0.6 - 0.2 - 0.8 £m - - 0.2 - 0.2 All interest income is calculated using the effective interest rate method, except for interest income on tax repayments. 10. Policyholder investment returns Change in fair value of underlying assets Investment income Total policyholder investment returns 11. Tax on profit on ordinary activities Group a) Analysis of charge in year The income tax expense comprises: Corporation tax Current year - corporation tax Adjustment in respect of prior years Deferred tax Current year Change in deferred tax charge/(credit) as a result of higher tax rate Total shareholder tax charge for the year Policyholder taxation UK policyholder tax at 20% (2022: 20%) Deferred tax at 25% (2022: 25%) Prior year adjustments Tax deducted on overseas dividends Total policyholder taxation Total tax attributable to shareholder and policyholder returns 208 2023 £m 1,024.2 225.1 1,249.3 2022 £m (2,729.2) 151.5 (2,577.7) 2023 £m 12.7 (0.1) 12.6 0.1 - 12.7 - 11.8 - 0.3 12.1 24.8 2022 £m 10.0 0.7 10.7 (0.4) - 10.3 - (33.8) (4.9) 0.2 (38.5) (28.2) 11. Tax on profit on ordinary activities (continued) b) Factors affecting tax charge for the year The tax on the Group'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 taxation attributable to shareholders Profit on ordinary activities multiplied by effective rate of Corporation Tax 22% (2021: 19%) Effects of: Non-taxable dividends Group relief Income / expenses not taxable / deductible for tax purposes multiplied by effective rate of corporation tax Adjustments in respect of prior years Effect of change in tax rate Effect of lower tax rate jurisdiction Other adjustments Add policyholder tax Company a) Analysis of charge in year Deferred tax charge/(credit) (see note 26) 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 22% (2021: 19%) Effects of: Non-taxable dividends Income / expenses not taxable / deductible for tax purposes multiplied by effective rate of Corporation Tax Group loss relief to ISL 2023 £m 62.6 13.8 - - (0.6) 0.1 - (0.6) - 12.7 12.1 24.8 2023 £m - 2023 £m 31.6 7.0 2022 £m 54.3 10.3 - - (0.2) 0.7 - (0.5) - 10.3 (38.5) (28.2) 2022 £m - 2022 £m 39.9 7.6 (7.3) (8.5) - 0.3 - 0.6 0.3 - 209 12. Intangible assets – Group SOFTWARE AND IP RIGHTS GOODWILL CUSTOMER RELATIONSHIPS SOFTWARE BRAND Cost At 1 October 2022 At 30 September 2023 Amortisation At 1 October 2022 Charge for the year At 30 September 2023 Net Book Value At 30 September 2022 At 30 September 2023 Cost At 1 October 2021 At 30 September 2022 Amortisation At 1 October 2021 Charge for the year At 30 September 2022 Net Book Value At 30 September 2021 At 30 September 2022 £m £m 12.5 12.5 12.5 - 12.5 18.3 18.3 - - - - - 18.3 18.3 12.5 12.5 12.5 - 12.5 18.3 18.3 - - - - - 18.3 18.3 £m 2.1 2.1 0.3 0.1 0.4 1.8 1.7 2.1 2.1 0.1 0.2 0.3 2.0 1.7 £m 2.0 2.0 0.5 0.3 0.8 1.5 1.2 2.0 2.0 0.2 0.3 0.5 1.8 1.5 £m 0.3 0.3 0.1 - 0.1 0.2 0.2 0.3 0.3 0.1 - 0.1 0.2 0.2 TOTAL £m 35.2 35.2 13.4 0.4 13.8 21.8 21.4 35.2 35.2 12.9 0.5 13.4 22.3 21.8 All intangible assets are externally generated. Goodwill impairment assessment In accordance with IFRS, goodwill is not amortised, The carrying amount of the IAD Pty goodwill is allocated to but is assessed for impairment on an annual basis. The the two cash generating units (“CGUs”) that relate to the impairment assessment compares the carrying value of Transact platform, as these are benefitting from the IAD PTY goodwill to the recoverable amount, which is the higher acquisition. The carrying amount of the goodwill for T4A is of value in use and the fair value less costs of disposal. allocated to the CGU that relates to the CURO software as The recoverable amount is determined based on value this is the source of revenue for T4A. 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. The goodwill relates to the acquisition of IAD Pty in July 2016 and T4A in January 2021. 210 12. Intangible assets – Group (continued) IAD Pty Investment administration services Insurance and life assurance business Total Other assumptions are as follows: Discount rate Period on which detailed forecasts are based Long-term growth rate The carrying amount of the T4A goodwill is all allocated to the below CGU: T4A Adviser back-office technology Other assumptions are as follows: Discount rate Period on which detailed forecasts are based Long-term growth rate 2023 £m 7.2 5.7 12.9 2023 13.2% 5 years 2.0% 2023 £m 5.3 2023 14.0% 5 years 2.0% 2022 £m 7.2 5.7 12.9 2022 13.3% 5 years 1.0% 2022 £m 5.3 2022 11.6% 5 years 2.0% The recoverable amounts of the above CGUs have been Projected cash flows are impacted by movements in determined from value in use calculations based on cash underlying assumptions, including equity market levels, flow projections from formally approved budgets covering number of CURO users, employee numbers and cost a five-year period to 30 September 2028. Post the five inflation. The Group considers that projected cash flows year business plan, the growth rate used to determine of the investment administration services and insurance the terminal value of the cash generating units was based and life assurance business CGUs are most sensitive to on a long-term growth rate of 2.0%. The discount rate is movements in equity markets, because they have a direct assessed on an annual basis and has been calculated using impact on the level of the Group’s fee income, while the the weighted average cost of capital. adviser back-office technology CGU is most sensitive to the number of CURO users, as this forms the basis of its Based on management’s experience, the key assumptions licence income. on which management has calculated its projections are net inflows, market growth and expense inflation. A sensitivity analysis has been performed, with key assumptions being revised adversely to reflect the The annual impairment tests relating to both acquisitions potential for future performance being below expected indicated that there is significant headroom in the levels. This estimated that a fall in equity markets of recoverable amount over the carrying value of the CGUs. approximately 45%, or a reduction of CURO users of There is therefore no indication of impairment. approximately 30% compared to expectations, would be required before the carrying value of any CGU would exceed the recoverable amount. 211 13. Property, plant and equipment – Group LEASEHOLD IMPROVEMENTS £m EQUIPMENT £m FIXTURES AND FITTINGS £m MOTOR VEHICLES £m TOTAL £m Cost At 1 October 2022 Additions Disposals Reclassification Foreign exchange At 30 September 2023 Depreciation At 1 October 2022 Charge in the year Disposals Reclassification Foreign exchange At 30 September 2023 Net Book Value At 30 September 2022 At 30 September 2023 Cost At 1 October 2021 Additions Disposals At 30 September 2022 Depreciation At 1 October 2021 Charge in the year Disposals At 30 September 2022 Net Book Value At 30 September 2021 At 30 September 2022 1.7 0.1 - - - 1.8 1.4 0.1 - - - 1.5 0.3 0.3 1.7 - - 1.7 1.3 0.1 - 1.4 0.4 0.3 3.7 0.4 (0.4) (0.2) (0.1) 3.4 2.9 0.7 (0.5) (0.1) (0.1) 2.9 0.8 0.5 3.6 0.3 (0.2) 3.7 2.3 0.8 (0.2) 2.9 1.3 0.8 0.2 0.1 - 0.2 - 0.5 0.1 0.1 - 0.1 - 0.3 0.1 0.2 0.2 - - 0.2 0.1 - - 0.1 0.1 0.1 - 0.1 - - - 0.1 - - - - - - 0.1 - - - - - - - - - 5.6 0.7 (0.4) - (0.1) 5.8 4.4 0.9 (0.5) - (0.1) 4.7 1.2 1.1 5.5 0.3 (0.2) 5.6 3.7 0.9 (0.2) 4.4 1.8 1.2 The Company holds no property, plant and equipment. 212 14. Right-of-use assets – Property – Group Cost At 1 October 2022 Additions Disposals Foreign exchange At 30 September 2023 Depreciation At 1 October 2022 Charge in the year Disposals At 30 September 2023 Net Book Value At 30 September 2022 At 30 September 2023 Cost At 1 October 2021 Foreign exchange At 30 September 2022 Depreciation At 1 October 2021 Charge in the year At 30 September 2022 Net Book Value At 30 September 2021 At 30 September 2022 £m 6.6 0.4 (5.2) (0.1) 1.7 £m 4.5 1.4 (5.2) 0.7 2.1 1.0 £m 6.5 0.1 6.6 £m 2.8 1.7 4.5 3.6 2.1 Depreciation is calculated on a straight line basis over the term of the lease. During the year, the right of use asset for the Group’s Clement’s Lane office was fully depreciated as the lease came to an end in June 2023. The Group has ‘security of tenure’ and therefore the original lease continues until it is terminated by either party. The Group intends to occupy the building whilst the terms of the new lease are finalised. Costs of the lease from July 2023 onwards were therefore recognised directly in the statement of comprehensive income as occupancy costs. 213 15. Investment in subsidiaries Carrying value at 1 October Share-based payments Carrying value at 30 September 2023 £m 33.3 2.0 35.3 2022 £m 31.6 1.7 33.3 The Company has investments in the ordinary share capital of the following subsidiaries at 30 September 2023: NAME OF COMPANY HOLDING % HELD INCORPORATION AND SIGNIFICANT PLACE OF BUSINESS BUSINESS Direct holdings Integrated Financial Arrangements Ltd Ordinary Shares 100% United Kingdom Investment Administration IntegraFin Services Limited Ordinary Shares 100% United Kingdom Services Company Transact IP Limited Ordinary Shares 100% United Kingdom Software provision & development Integrated Application Development Pty Ltd Ordinary Shares 100% Australia Software maintenance 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 Transact Trustees Limited Ordinary Shares 100% United Kingdom Non-trading Objective Funds Limited Ordinary Shares 100% United Kingdom Dormant Objective Wealth Management Limited Ordinary Shares 100% United Kingdom Dormant Time For Advice Limited Ordinary Shares 100% United Kingdom Financial planning software Indirect holdings IntegraFin Limited Ordinary Shares 100% United Kingdom Non-trading ObjectMastery (UK) Limited Ordinary Shares 100% United Kingdom Dormant IntegraFin (Australia) Pty Limited Ordinary Shares 100% Australia Non-trading 214 15. Investment in subsidiaries (continued) The Group has 100% voting rights on shares held in each Transact Nominees Limited holds customer assets as of the subsidiary undertakings. a nominee company on behalf of Integrated Financial Arrangements Ltd. All the UK subsidiaries have their registered office address at 29 Clement’s Lane, London, EC4N 7AE. IntegraFin (Australia) Pty Limited is currently non-trading. ILInt’s registered office address is at 18-20 North Quay, Douglas, Isle of Man, IM1 4LE. IntegraFin (Australia) Pty’s Transact IP Limited licenses its proprietary software to registered office address is at Level 4, 854 Glenferrie Road, other members of the IntegraFin Group. Hawthorn, Victoria, Australia 3122. Integrated Application Development Pty Ltd.’s registered office address is 19-25 IntegraLife UK Limited is authorised by the Prudential Camberwell Road, Melbourne, Australia. Regulation Authority and regulated by the Financial The above subsidiaries have all been included in the Its principal activity is the transaction of ordinary long- consolidated Financial Statements. term insurance business within the United Kingdom. Conduct Authority and the Prudential Regulation Authority. Integrated Financial Arrangements Ltd is authorised and IntegraLife International Limited is authorised and regulated by the Financial Conduct Authority. The principal regulated by the Isle of Man Financial Services Authority activity of the Company and its subsidiaries is the provision and its principal activity is the transaction of ordinary of ‘Transact’, a wrap service that arranges and executes long-term insurance business within the United Kingdom transactions between clients, their financial advisers and through the Transact Offshore Bond. financial product providers including investment managers and stockbrokers. Time For Advice Limited is a specialist software provider for financial planning and wealth management. 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 Pty) 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. 215 2023 £m 6.5 0.1 6.6 (0.3) 6.3 2023 £m (0.2) (0.1) (0.3) 2022 £m 5.7 - 5.7 (0.2) 5.5 2022 £m (0.2) - (0.2) 2023 2022 £m 7.0 1.0 6.0 7.0 £m 8.0 1.0 7.0 8.0 16. Loans This note analyses the loans payable by and receivable to the Company. The carrying amounts of loans are as follows: Loans receivable Loans receivable from third parties Interest receivable on loans Total gross loans Expected credit losses Total net loans Movement in the expected credit losses for the loan is as follows: Opening expected credit losses Increase during the year Balance at 30 September The loans receivable are measured at amortised cost with the expected credit losses charged straight to the statement of comprehensive income. Loans payable Loan payable to subsidiary To be settled within 12 months To be settled after 12 months Total loan payable The loans payable are initially recognised at fair value. Subsequent measurement is at amortised cost using the effective interest method. The interest charge is recognised on the statement of comprehensive income. Interest on the loan is paid quarterly, whilst the remaining capital repayments are annual over the next 7 years. 216 17. Investments held for the benefit of policyholders ILInt Investments held for the benefit of policyholders ILUK Investments held for the benefit of policyholders 2023 COST £m 2023 FAIR VALUE £m 2022 COST £m 2022 FAIR VALUE £m 2,155.5 2,310.3 1,988.9 2,057.2 2,155.5 2,310.3 1,998.9 2,057.2 19,249.9 20,711.4 19,215.4 18,658.6 19,249.9 20,711.4 19,215.4 18,658.6 Total 21,405.4 23,021.7 21,214.3 20,715.8 All amounts are current as customers are able to make same-day withdrawal of available funds and transfers to third-party providers are generally performed within a month. 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. 217 18. Liabilities for linked investment contracts ILInt Unit linked liabilities ILUK Unit linked liabilities Total Analysis of change in liabilities for linked investment contracts Opening balance Investment inflows Investment outflows Changes in fair value of underlying assets Investment income Other fees and charges - Transact Other fees and charges – third parties Closing balance 2023 2022 FAIR VALUE FAIR VALUE £m £m 2,481.5 2,481.5 21,959.4 21,959.4 24,440.9 2023 £m 22,174.4 2,670.3 (1,400.5) 1,024.1 225.1 (59.2) (193.3) 24,440.9 2,201.4 2,201.4 19,973.0 19,973.0 22,174.4 2022 £m 23,053.4 3,113.9 (1,163.1) (2,729.0) 151.5 (59.7) (192.6) 22,174.4 The benefits offered under the unit-linked investment contracts are based on the risk appetite of policyholders and the return on their selected collective fund investments, whose underlying investments include equities, debt securities, property and derivatives. This investment mix is unique to individual policyholders. When the diversified portfolio of all policyholder investments is considered, there is a clear correlation with the FTSE 100 index and other major world indices, providing a meaningful comparison with the return on the investments. The maturity value of these financial liabilities is determined by the fair value of the linked assets at maturity date. There will be no difference between the carrying amount and the maturity amount at maturity date. 19. Cash and cash equivalents Bank balances – instant access Bank balances – notice accounts Total 2023 £m 165.9 12.0 177.9 2022 £m 173.5 9.5 183.0 Bank balances held in instant access accounts are current and available for use by the Group. All of the bank balances held in notice accounts require less than 35 days’ notice before they are available for use by the Group. 218 20. Cash held for the benefit of policyholders Cash and cash equivalents held for the benefit of the policyholders – instant access - ILUK Cash and cash equivalents held for the benefit of the policyholders – instant access - ILInt Total 2023 £m 1,248.0 171.2 1,419.2 Cash and cash equivalents held for the benefit of the policyholders are held to cover the liabilities for unit linked investment contracts. These amounts are 100% matched to corresponding liabilities. 21. Investments Fair value through profit or loss Listed shares and securities Gilts Total Amortised cost Gilts Total GROUP 2023 £m 0.1 - 0.1 22.3 22.3 22.4 2022 £m 1,314.3 144.2 1,458.5 GROUP 2022 £m 0.1 3.0 3.1 - - 3.1 In July 2023, the previously held gilt of £3.0 million matured, and new gilts of £22.3 million were purchased in August 2023. These gilts are interest-bearing and the associated income is referenced in note 9 as “interest on financial investments”. 22. Prepayments and accrued income Accrued income Less: expected credit losses Accrued income - net Prepayments Total GROUP 2023 £m 13.5 (1.0) 12.5 4.7 17.2 COMPANY 2023 £m - - - - - GROUP 2022 £m 13.1 (1.0) 12.1 5.1 17.2 COMPANY 2022 £m - - - 0.1 0.1 Movement in the expected credit losses (for accrued income, loans receivable and trade and other receivables) is as follows: Opening expected credit losses Increase during the year Balance at 30 September 2023 £m (1.0) - (1.0) 2022 £m (0.8) (0.2) (1.0) 219 23. Trade and other receivables Other receivables Less: expected credit losses Other receivables net Amounts owed by Group undertakings Repayment interest due from HMRC Total GROUP 2023 £m 3.2 (0.1) 3.1 - 0.4 3.6 COMPANY 2023 £m - - - 0.1 - 0.1 GROUP 2022 £m 2.1 (0.1) 2.0 - - 2.0 COMPANY 2022 £m - - - 0.2 - 0.2 Amount due from HMRC is in respect of tax claimed on behalf of policyholders for tax deducted at source. 24. Trade and other payables GROUP 2023 COMPANY 2023 GROUP 2022 COMPANY 2022 Trade payables PAYE and other taxation Other payables Accruals Deferred consideration Total £m 0.7 2.6 6.8 7.8 1.6 19.5 £m - 0.1 0.4 0.4 1.6 2.5 £m 1.6 2.2 7.7 8.3 1.7 21.5 Other payables mainly comprises £5.3 million (FY22: £4.8 million) in relation to bonds awaiting approval. 25. Lease liabilities Opening balance Additions Lease payments Interest expense Balance at 30 September Amounts falling due within one year Amounts falling due after one year 2023 £m 2.8 0.2 (2.0) 0.1 1.1 0.3 0.8 £m - 0.1 0.3 0.3 1.7 2.4 2022 £m 5.1 - (2.4) 0.1 2.8 1.9 0.9 The Group has various leases in respect of property as a lessee. Lease terms are negotiated on an individual basis and run for a period of one to five years. As per note 14, the lease for the Group’s Clement’s Lane office ended in June 2023. 220 26. Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 20% (FY22: 20%) on policyholder assets and liabilities and 25% (FY22: 25%) on non-policyholder items. The increase in the UK corporation tax rate from the current rate of 19% to 25% was substantively enacted in May 2021. This new rate has been applied to deferred tax balances which are expected to reverse after 1 April 2023, the date on which that new rate becomes effective. Deferred Tax Asset ACCELERATED CAPITAL ALLOWANCES SHARE BASED PAYMENTS POLICYHOLDER UNREALISED LOSSES/ (UNREALISED GAINS) POLICYHOLDER EXCESS MANAGEMENT EXPENSES AND DEFERRED ACQUISITION COSTS POLICYHOLDER UNREALISED LOSSES ON INVESTMENT TRUSTS OTHER DEDUCTIBLE TEMPORARY DIFFERENCES At 1 October 2021 Excess tax relief charged to equity Charge to income Offset Deferred Tax Liability At 30 September 2022 Excess tax relief charged to equity Charge to income Offset Deferred Tax Liability At 30 September 2023 £m - £m 0.6 (0.3) 0.1 0.2 0.1 0.5 - - - 0.2 (0.2) - 0.1 0.5 £m - 8.1 (5.2) 2.9 - (2.9) - - £m - £m - £m 0.1 TOTAL £m 0.7 (0.3) 2.2 0.2 - 10.8 (5.2) 2.2 0.2 0.1 6.0 - 0.3 - 0.4 - 0.2 0.1 (2.3) (2.5) (0.6) (0.1) (3.2) - - 0.1 0.7 Deferred Tax Liability At 1 October 2021 Charge to income Offset against Deferred Tax asset At 30 September 2022 Charge to income Offset against Deferred Tax asset At 30 September 2023 ACCELERATED CAPITAL ALLOWANCES POLICYHOLDER TAX ON UNREALISED GAINS OTHER TAXABLE DIFFERENCES £m 0.1 (0.1) - - - - £m 28.4 (23.2) (5.2) - 9.6 (3.1) 6.5 £m 1.0 (0.1) 0.9 (0.1) (0.1) 0.7 The Company has no deferred tax assets or liabilities. TOTAL £m 29.5 (23.4) (5.2) 0.9 9.5 (3.2) 7.2 221 2023 £m 56.8 - - (9.7) 1.1 48.2 7.7 40.5 0.2 1.1 46.9 48.2 2022 £m 17.8 (0.3) (0.1) 45.0 (5.6) 56.8 10.7 46.1 0.2 - 56.6 56.8 2023 £m - 2022 £m 1.7 27. Provisions - Group Balance brought forward (Decrease)/increase in dilapidations provision Decrease in ILInt non-linked unit provision (Decrease)/increase in ILUK policyholder reserves Increase/(decrease) in other provisions Balance carried forward Amounts falling due within one year Amounts falling due after one year Dilapidations provisions Other provisions ILUK policyholder reserves Total ILUK policyholder reserve comprises claims received from HMRC that are yet to be returned to policyholders, charges taken from unit-linked funds and claims received from HMRC to meet current and future policyholder tax obligations. These are expected to be paid to policyholders over the course of the next seven years. 28. Contingent consideration – Group and company Contingent consideration The T4A acquisition cost included additional consideration between £0 and £8.6 million, which was payable in January 2025 and contingent on T4A meeting certain highly stretching performance targets over the next four years. During the year, it was determined that T4A is not expected to meet these targets, and therefore, the contingent consideration recognised to date has been released. 222 29. Share-based payments Share-based payment reserve GROUP 2023 COMPANY 2023 GROUP 2022 COMPANY 2022 Balance brought forward Movement in the year Balance carried forward Share schemes (i) SIP 2005 £m 2.6 0.8 3.4 £m 2.2 0.5 2.7 £m 2.4 0.2 2.6 £m 1.7 0.5 2.2 IFAL implemented a SIP trust scheme for its staff in The share awards are made by the Company each October 2005. The SIP is an approved scheme under year, dependent on 12 months continuous service at 30 Schedule 2 of the Income Tax (Earnings & Pensions) Act September. The cost to the Group in the financial year to 2003. 30 September 2023 was £0.8m (FY22: £0.6m). This scheme entitled all the staff who were employed in Partnership and Matching Shares October 2005 to Class C shares in IFAL, subject to their remaining in employment with the Company until certain The Company provides employees with the opportunity to future dates. enter into an agreement with the Company to enable such employees to use part of their pre-tax salary to acquire The Trustee for this scheme is IntegraFin Limited, a wholly Partnership Shares. If employees acquire Partnership owned non-trading subsidiary of IFAL. Shares, the board grants relevant Matching Shares at a ratio Shares issued under the SIP may not be sold until of 2:1. the earlier of three years after issue or cessation of The cost to the Group in the financial year to 30 September employment by the Group. If the shares are held for five 2023 was £0.5m (FY22: £0.5m). years they may be sold free of income tax or capital gains tax. There are no other vesting conditions. (iii) Performance Share Plan The cost to the Group in the financial year to 30 September The Company implemented an annual PSP scheme in 2023 was £nil (FY22: £nil). There have been no new share December 2018. Awards granted under the PSP take options granted. (ii) SIP 2018 the form of options to acquire Ordinary Shares for nil consideration. These are awarded to Executive Directors, Senior Managers and other employees of any Group Company, as determined by the Remuneration Committee. The Company implemented an annual SIP awards scheme in January 2019. This is an approved scheme under The exercise of the PSP awards is conditional upon the Schedule 2 of the Income Tax (Earnings & Pensions) Act achievement of a performance condition set at the time of 2003, and entitles all eligible employees to ordinary shares grant and measured over a three-year performance period. in the Company. The shares are held in a UK Trust. The scheme includes the following awards: 2023 was £0.9m (FY22: £0.8m). This is based on the fair The cost to the Group in the financial year to 30 September Free Shares The Company may give Free Shares up to a maximum value, calculated at the date of the award of such Free Shares, of £3,600 per employee in a tax year. value of the share options at grant date, rather than on the purchase cost of shares held in the Employee Benefit Trust reserve, in line with IFRS 2 Share-based Payment. 223 29. Share-based payments (continued) Details of the share awards outstanding are as follows: SIP 2018 Shares in the plan at start of the year Granted Shares withdrawn from the plan Shares in the plan at end of year Available to withdraw from the plan at end of year Details of the movements in the share scheme during the year are as follows: 2023 SHARES (NUMBER) 854,247 504,113 (152,748) 1,205,612 557,544 2022 SHARES (NUMBER) 692,683 292,318 (130,754) 854,247 314,161 SIP 2005 Outstanding at start of the year Shares withdrawn from the plan Shares in the plan at end of year Available to withdraw from the plan at end of year 2023 2023 2022 2022 WEIGHTED AVERAGE EXERCISE PRICE SHARES WEIGHTED AVERAGE EXERCISE PRICE SHARES (PENCE) (NUMBER) (PENCE) (NUMBER) 0.00 0.00 0.00 0.00 805,509 (42,804) 762,705 762,705 0.00 0.00 0.00 0.00 872,709 (67,200) 805,509 805,509 The weighted average share price at the date of withdrawal for shares withdrawn from the plan during the year was 273.1 pence (FY22: 425.5 pence). At 30 September 2023 the exercise price was £nil as they were all nil cost options. 2023 2023 2022 2022 WEIGHTED AVERAGE EXERCISE PRICE SHARES WEIGHTED AVERAGE EXERCISE PRICE SHARES (PENCE) (NUMBER) (PENCE) (NUMBER) 0.00 0.00 0.00 0.00 0.00 0.00 675,307 293,376 - (69,019) 899,664 249,985 0.00 0.00 0.00 0.00 0.00 0.00 576,088 184,772 - (85,553) 675,307 183,958 PSP Outstanding at start of the year Granted Forfeited Exercised Outstanding at end of year Exercisable at end of year 224 29. Share-based payments (continued) The fair value of options granted during the year has been estimated using the Black-Scholes model. The principal assumptions used in the calculation were as follows: PSP Share price at date of grant Exercise price Expected life Risk free rate Dividend yield Weighted average fair value per option 30. Employee Benefit Trust reserve Group: Balance brought forward Purchase of own shares Balance carried forward Company: Balance brought forward Purchase of own shares Balance carried forward The Employee Benefit Trust (“EBT”) was settled by the Company pursuant to a trust deed entered into between the Company and Intertrust Employee Benefit Trustee Limited (“Trustee”). The Company has the power to remove the Trustee and appoint a new trustee. The EBT is a discretionary settlement and is used to satisfy awards made under the PSP. The Trustee purchases existing Ordinary Shares in the market, and the amount held in the EBT reserve represents the purchase cost of IHP shares held to satisfy options awarded under the PSP scheme. IHP is considered to be the sponsoring entity of the EBT, and the assets and liabilities of the EBT are therefore recognised as those of IHP. Shares held in the trust are treated as own shares and shown as a deduction from equity. 2023 287.8 Nil 3 years 3.5% 3.5% 258.8p 2023 £m (2.4) (0.2) (2.6) 2023 £m (2.1) (0.3) (2.4) 2022 522.5p Nil 3 years 0.7% 1.9% 493.3p 2022 £m (2.1) (0.3) (2.4) 2022 £m (1.8) (0.3) (2.1) 225 2023 £m (0.1) 5.7 2022 £m - 5.7 AMOUNTS OWED BY RELATED PARTIES 2023 £m - 2022 £m 0.1 31. Other reserves – Group Foreign exchange reserves Non-distributable merger reserve Foreign exchange reserves are gains/losses arising on retranslating the net assets of IAD Pty into sterling. Non-distributable reserves relate to the non-distributable merger reserve held by one of the Company’s subsidiaries, IFAL, which is classified within other reserves on a Group level. 32. 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 A loan of £10 million was issued to the Company by IntegraLife UK Limited in FY21. This is an arm’s length transaction as interest is charged at a commercial rate. IHP is paying the loan off over ten years and made the second payment of £1 million, plus accrued interest, during the year. The current loan balance is £7 million. The Group has not recognised any expected credit losses in respect of related party receivables, nor has it been given or received any guarantee during 2023 or 2022 regarding related party transactions. Payments to key management personnel, defined as members of the board, are shown in the Remuneration Report. Directors of the Company received a total of £3.6 million (FY22: £3.6 million) in dividends during the year and benefitted from staff discounts for using the platform of £4k (FY22: £2k). The number of IHP shares held at the end of the year by key management personnel was 35,321,348, an increase of 132,224 from last year. Schrodinger Pty Ltd, the company which leases office space to IAD Pty in Melbourne, Australia, is considered a related party of the Company, as Michael Howard has control or 226 32. Related parties (continued) 35. Dividends joint control of Schrodinger and is a member of the key During the year to 30 September 2023 the Company paid management personnel (as a director) of the Company. interim dividends of £33.7 million (FY22: £33.8 million) During the year IAD Pty paid Schrodinger £0.3 million to shareholders. The Company received dividends from (FY22: £0.3 million) in relation to the lease. The lease has subsidiaries of £33.4 million (FY22: £45.0 million). been in place since April 2012 and was last renewed in May 2021. ObjectMastery Services Pty Ltd (OM) provides the service of executive directors consultancy services to IAD Pty, and IAD Pty provides consultancy and book-keeping services to OM. OM is considered a related party of the 36. Restatement of prior period information Company, as Michael Howard has control or joint control Certain changes have been made to the comparative of it. IAD Pty paid OM £71k (FY22: £72k) for services financial information included in these financial statements received during the year, £44k (FY22: £44k) of which in order to correct prior period errors and align it to the related to Michael Howard’s services. IAD Pty received current year presentation. These changes are noted in the £43k (FY22: £39k) from OM for services provided during tables below. the year. IAD owed £2k to OM as at 30 September 2023 (30 September 2022: £1k). The Schrodinger and OM related party transactions and these financial statements, given there is no impact to total balances were not disclosed in the financial year 2022 assets, total liabilities, profit or equity, and the nature of related parties note, so the above has been restated to the values impacted are such that they do not change from include this. year to year to an extent that would influence the decision No prior year opening balance sheet has been included in All of the above transactions are commercial transactions undertaken in the normal course of business. Consolidated Statement of Cash Flows of a user. 33. Contingent liability The following changes have been made to the comparative information in the Consolidated Statement of Cash Flows: • Profit on ordinary activities before taxation attributable to policyholders and shareholders has There are some assets in ILUK policyholder linked funds been used as the starting point of cash flows from which are under review. Our current best estimate of operating activities, rather than profit on ordinary possible future outflow, in the event of remediation, is activities before taxation. Increase/(decrease) in £1.2 million. A future outflow is possible but not probable and the timing of any outflow is uncertain. Accordingly, policyholder tax recoverable has subsequently been adjusted to reflect the movement in tax attributable no provision for any liability has been made in these to shareholder and policyholder returns financial statements. • All other movements relate to reclassifications between headings 34. Events after the reporting date As per the Chair’s statement on page 3, a second interim dividend of 7.0 pence per share was declared on 13 December 2023. This dividend has not been accrued in the consolidated statement of financial position. 227 Consolidated Statement of Cash Flows (continued) PER 2022 FINANCIAL STATEMENTS MOVEMENT RESTATED 2022 Cash flows from operating activities Profit on ordinary activities before taxation Profit on ordinary activities before taxation attributable to policyholders and shareholders Adjustments for non-cash movements (previously income statement non-cash movements): Release of actuarial provision Interest charged on lease Increase in contingent consideration Increase in provisions Adjustments for cash effecting investing and financing activities: Interest charged on lease Decrease in current asset investments Adjustments for statement of financial position movements: Increase in contingent consideration Settlement of share-based payment reserve Increase in provisions Adjustments for policyholder balances: £m 54.3 - (0.5) - - - 0.1 2.0 0.9 (1.3) 39.0 £m (54.3) 15.8 0.5 0.1 0.9 38.5 (0.1) (2.0) (0.9) 1.3 (39.0) £m - 15.8 - 0.1 0.9 38.5 - - - - - Increase/(decrease) in policyholder tax recoverable (44.5) 38.5 (6.0) Cash generated from operations Net cash flows (used in)/generated from operating activities Investing activities Acquisition of property, plant and equipment (previously tangible assets) Purchase of financial instruments Redemption of financial instruments 251.0 237.5 (0.4) - - Net cash (used in)/generated from investing activities (1.7) Financing activities Purchase of shares for share scheme awards Net cash used in financing activities - (36.6) (2.0) (2.1) 0.1 (3.0) 5.0 2.1 (1.3) (1.3) 249.0 235.4 (0.3) (3.0) 5.0 0.4 (1.3) (37.9) 228 Company Statement of Cash Flows The following change has been made to the comparative information in the Company Statement of Cash Flows, which is a reclassification between headings: Adjustments for non-cash movements: Settlement of share-based payment reserve Net cash flows used in operating activities Financing activities Purchase of shares for share scheme awards Net cash used in financing activities Note 3 - Financial instruments – (ii) Financial instruments by category The following changes have been made to the comparative information within the financial instruments note 3, to the tables in (ii) Financial instruments by category table: • Assets and liabilities which are not financial instruments have been presented in the note to allow users to clearly reconcile back to other supporting notes • Accruals, contingent consideration, deferred consideration and balances due to HMRC have been reclassified from financial liabilities, to liabilities which are not financial instruments. Note that the bonus accrual was already excluded from the table as it was not classified as a financial instrument • Liabilities held for the policyholders have been split to show the liabilities linked to cash holdings at amortised cost, with those linked to investments remaining at fair value through profit or loss • Trade and other receivables has been restated to include the full balance, to correct an error in the note • Trade and other payables has been split out to show trade payables and other payables separately, and has been restated to correct an error in the note PER 2022 FINANCIAL STATEMENTS MOVEMENT RESTATED 2022 £m £m £m 1.3 (5.5) - (35.5) (1.3) (1.3) (1.3) (1.3) - (4.2) (1.3) (36.8) 229 Note 3 - Financial instruments – (ii) Financial instruments by category (continued) FINANCIAL ASSETS: FAIR VALUE THROUGH THE PROFIT OR LOSS AMORTISED COST Trade and other receivables Total financial assets Assets which are not financial instruments Prepayments Current tax asset PER 2022 FINANCIAL STATEMENTS £m 0.6 2022 £m - 20,718.9 1,659.8 PER 2022 FINANCIAL STATEMENTS £m - - - MOVEMENT RESTATED 2022 £m 1.4 £m 2.0 1,661.2 MOVEMENT RESTATED 2022 £m 5.1 15.0 £m 5.1 15.0 20.1 FINANCIAL LIABILITIES: FAIR VALUE THROUGH THE PROFIT OR LOSS AMORTISED COST PER 2022 FINANCIAL STATEMENTS MOVEMENT RESTATED 2022 PER 2022 FINANCIAL STATEMENTS MOVEMENT RESTATED 2022 £m £m £m Trade payables (previously trade and other payables) Other payables Accruals Deferred consideration - - - - - - - - Contingent consideration 1.7 (1.7) - - - - - Liabilities held for the policyholders 20,714.4 (1,458.6) 20,715.8 £m 7.4 - 3.0 1.7 - - £m (5.8) 5.4 (3.0) (1.7) - £m 1.6 5.4 - - - 1,458.6 1,458.6 Total Financial liabilities 22,176.1 20,715.8 14.9 1,468.4 PER 2022 FINANCIAL STATEMENTS £m - - - - - - MOVEMENT RESTATED 2022 £m 8.2 2.2 2.3 1.7 1.7 £m 8.2 2.2 2.3 1.7 1.7 16.1 Liabilities which are not financial instruments Accruals and deferred income PAYE and other taxation Other payables – due to HMRC Deferred consideration Contingent consideration 230 Note 3 - Financial instruments – (ii) Financial instruments by category (continued) The following table show the carrying values of the liabilities for the Company: Trade payables (previously trade and other payables) Loans payable (previously loans) Deferred consideration Contingent consideration Accruals Other payables Due to Group undertakings Total financial liabilities Liabilities which are not financial instruments Accruals and deferred income PAYE and other taxation Deferred consideration Contingent consideration Note 4 - Risk and risk management – (3) Liquidity risk – Maturity schedule The following changes have been made in the 2022 risk and risk management note 4, to the tables in (3) liquidity risk, maturity schedule: • Corrected an error in the investment balance, as the amount was shown in thousands rather than millions • Trade and other receivables has been restated to correct an error in the note • Removed accruals, VAT balances included within other taxation, deferred consideration and contingent consideration as these have been reclassified to liabilities which are not financial instruments • Lease liabilities have been added to the maturity table AMORTISED COST PER 2022 FINANCIAL STATEMENTS MOVEMENT RESTATED 2022 £m 0.4 8.0 1.7 - 0.2 - - 10.3 £m (0.4) - (1.7) - (0.2) 0.3 0.1 £m - 8.0 - - - 0.3 0.1 8.4 PER 2022 FINANCIAL STATEMENTS MOVEMENT RESTATED 2022 £m - - - - - £m 0.3 0.1 1.7 1.7 £m 0.3 0.1 1.7 1.7 3.8 231 Note 4 - Risk and risk management – (3) Liquidity risk – Maturity schedule (continued) FINANCIAL ASSETS: PER 2022 FINANCIAL STATEMENTS 2022 Investments Trade and other receivables Total MOVEMENT 2022 Investments Trade and other receivables Total RESTATED 2022 Investments Trade and other receivables Total FINANCIAL LIABILITIES: PER 2022 FINANCIAL STATEMENTS 2022 Trade and other payables Deferred consideration Contingent consideration Total MOVEMENT 2022 Trade and other payables Lease liabilities Deferred consideration Contingent consideration Total RESTATED 2022 Trade and other payables Lease liabilities Total 232 UP TO 3 MONTHS £m 124.2 2.0 22,495.7 UP TO 3 MONTHS £m (124.1) - (124.1) UP TO 3 MONTHS £m 0.1 2.0 22,371.6 UP TO 3 MONTHS £m 11.8 - - 22,186.8 UP TO 3 MONTHS £m (4.8) 0.6 - - (4.8) UP TO 3 MONTHS £m 7.0 0.6 22,182.0 3-12 MONTHS 1-5 YEARS OVER 5 YEARS £m - 0.2 0.2 £m 3.1 - 8.6 £m - - - 3-12 MONTHS 1-5 YEARS OVER 5 YEARS £m - (0.2) (0.2) £m (0.1) - (0.1) £m - - - TOTAL £m 127.3 2.2 22,504.5 TOTAL £m (124.2) (0.2) (124.4) 3-12 MONTHS 1-5 YEARS OVER 5 YEARS TOTAL £m - - - £m 3.0 - 8.5 £m - - - £m 3.1 2.0 22,380.1 3-12 MONTHS 1-5 YEARS OVER 5 YEARS TOTAL £m 3.7 1.5 - 6.5 £m - 0.2 1.7 2.8 £m - - - - £m 15.5 1.7 1.7 22,196.1 3-12 MONTHS 1-5 YEARS OVER 5 YEARS TOTAL £m (3.7) 1.3 (1.5) - (5.2) £m - 0.9 (0.2) (1.7) (1.9) £m - - - - - £m (8.5) 2.8 (1.7) (1.7) (11.9) 3-12 MONTHS 1-5 YEARS OVER 5 YEARS TOTAL £m - 1.3 1.3 £m - 0.9 0.9 £m - - - £m 7.0 2.8 22,184.2 Note 6 – Segmental reporting – Statement of financial position The following changes have been made in the 2022 segmental reporting note 6, to the statement of financial position: • Non-current assets and non-current liabilities have been adjusted by an equal amount to correct a prior year error in the note Assets Non-current assets Total assets Liabilities Non-current liabilities Total liabilities INSURANCE AND LIFE ASSURANCE BUSINESS PER 2022 FINANCIAL STATEMENTS MOVEMENT RESTATED 2022 £m 30.6 175.3 52.8 75.3 £m (5.2) (5.2) £m 25.4 170.1 47.6 70.1 233 OTHER INFORMATION OTHER INFORMATION DIRECTORS, COMPANY DETAILS, ADVISERS Executive Directors Independent Auditors Principal Bankers Alexander Scott Michael Howard Jonathan Gunby Non-Executive Directors Richard Cranfield Christopher Munro Rita Dhut Caroline Banszky Victoria Cochrane Robert Lister Company Secretary Helen Wakeford 234 Ernst & Young LLP, 25 Churchill Place, Canary Wharf, London, E14 5EY Solicitors Eversheds Sutherland (International) LLP, One Wood Street, London, EC2V 7WS Corporate Advisers Peel Hunt LLP, 7th Floor 100 Liverpool Street, London, EC2M 2AT Barclays Bank PLC, 1 Churchill Place, Canary Wharf, London, E14 5HP National Westminster Bank Plc, 250 Bishopsgate, London, EC2M 4AA Registrars Equiniti Group Ltd, Sutherland House, Russell Way, Crawley, RH10 1UH Registered Office 29 Clement’s Lane, London, EC4N 7AE Investor Relations Luke Carrivick 020 7608 4900 Website www.integrafin.co.uk Company number 8860879 GLOSSARY OF TERMS AGM Annual General Meeting IFAL Integrated Financial Arrangements Ltd APM Alternative Performance Measure IFPR Investment Firm Prudential Regime ARC Audit and Risk Committee BEIS Business Energy and Industrial Strategy CASS Client Assets Sourcebook CEO Chief Executive Officer CFO Chief Financial Officer CMP/CPP Company Maternity/Paternity Pay CMT Crisis Management Team COO Chief Operating Officer COSO Committee of Sponsoring Organisation of the Treadway Commission CRO Chief Risk Officer CTO Chief Technological Officer IFRS International Financial Reporting Standards IHP IntegraFin Holdings Plc ILInt IntegraLife International Limited ILUK IntegraLife UK Limited ISA Individual Savings Account ISAs (UK) International Standards on Auditing (UK) ISL IntegraFin Services LTD IT Investment Trust MI Management Information MiFID II Second Markets in Financial Instruments Directive DE&I Diversity, Equity and Inclusion Investment Firms MIFIDPRU the Prudential sourcebook for MiFID DIM Discretionary Investment Management MPS Managed Portfolio Service DNED Designated Non-Executive Director NED Non-Executive Director DTR Disclosure Guidance and Transparency Net inflow Net new business onto the platform Rulebook EBT Employee Benefit Trusts ETF Exchange-traded Fund FCA Financial Conduct Authority FRC Financial Reporting Council FUD Funds Under Direction GDPR General Data Protection Regulation GIA General Investment Account Gross inflow Gross new business onto the platform HMRC His Majesty’s Revenue and Customs IAD Integrated Application Development Pty Ltd ICA Individual Capital Assessment ORSA Own Risk and Solvency Assessment Outflow Business leaving the platform PRA Prudential Regulation Authority RMF/RMP Risk Management Framework/Policy SCR Solvency Capital Requirement SID Senior Independent Director SIP Share Incentive Program TCF Treating Customers Fairly TCFD Task Force on Climate-Related Financial Disclosures The Company IntegraFin Holdings plc The Group IntegraFin Holdings plc and its subsidiaries ICARA Internal Capital and Risk Assessment VCT Venture Capital Trust 235 Glossary of Alternative Performance Measures (“APMs”) Various alternative performance measures are referred to in the Annual Report, which are not defined by IFRS. They are used in order to provide better insight into the performance of the Group. Further details are provided below. APM FINANCIAL DATA PAGE REF Operational performance measures DEFINITION AND PURPOSE Funds under direction (“FUD”) Data sourced internally Calculated as the total market value of all cash and assets on the platform, valued as at the respective year end. YEAR END Cash Assets FUD % change on the previous year AVERAGE DAILY FUD Cash Assets FUD % change on the previous year 2023 £bn 3.92 51.04 54.96 10% 2023 £bn 3.54 50.10 53.64 3% 2022 £bn 3.51 46.56 50.07 (4%) 2022 £bn 3.23 49.27 52.50 11% The measurement of FUD is the primary driver of the largest component of the Group’s revenue. FUD is used to derive the annual commissions due to the Group. These values are not reported within the financial statements or the accompanying notes. Gross inflows and Net inflows Data sourced internally Calculated as gross inflows onto the platform less outflows leaving the platform by clients during the respective financial year. Inflows and outflows are measured as the total market value of assets and cash joining or leaving the platform. Gross inflows Outflows Net inflows 2023 £bn 2022 £bn 6.41 3.75 2.66 7.28 2.88 4.40 % change on the previous year (40%) (11%) The measurement of net inflows onto the platform shows the net movement of cash and assets on the platform during the year. This directly contributes to FUD and therefore revenue. These values are not reported within the financial statements or the accompanying notes. 236 Adviser and client numbers Data sourced internally Calculated as the total number of advisers or clients as at the financial year end. Advisers are calculated as the number of advisers on the platform. Clients are calculated as the total number of clients on the platform. T4A licence users calculated as the total number of core licence users active on the CURO platform. Advisers % increase Clients % increase T4A licence users % increase 2023 £’000 2022 £’000 7.7 2% 7.5 5% 230.3 224.7 2% 2.8 8% 2.3 22% 44% This measurement is an indicator of our presence in the market. These values are not reported within the financial statements or the accompanying notes. Client retention Data sourced internally Calculated as the total number of clients with a non-zero valuation present in the final month of both financial periods, as a percentage of total clients in the current financial period. Client retention 2023 95% 2022 97% This is a measurement of client loyalty and an indicator of customer satisfaction with our services provided. These values are not reported within the financial statements or the accompanying notes. Income statement measures Non- underlying expenses Consolidated statement of comprehensive income Calculated as costs which have been incurred outside of the ordinary course of the business. Page 166 NON-UNDERLYING EXPENSES Backdated VAT Interest on backdated VAT Other Non-underlying expenses 2023 £m 2022 £m - - 0.4 0.4 8.0 0.8 2.7 11.5 Our non-underlying expenses represent costs which do not relate to our recurring business operations and hence should be separated from operating expenses in the income statement. 237 Other costs consist of post-combination remuneration. Post-combination remuneration relates to the payment to the original shareholders of T4A. This is comprised of the deferred and additional consideration payable in relation to the acquisition of T4A and is recognised as remuneration over four years from January 2021 to December 2024. T4A is not expected to meet the minimum threshold for highly stretching targets to earn the additional consideration element of post combination remuneration. Therefore, the post combination expense in respect of the additional consideration element that was recognised in FY22 of £1.6 million has been released, and we have not recognised any cost in FY23. Moreover, the post combination consideration cost in respect of FY24 and FY25 is expected to reduce to £2.1 million and £0.4 million respectively, as only the deferred consideration element will now be recognised. Underlying earnings per share Financial review Page 53 Calculated as profit after tax net of non-underlying expenses, divided by called up equity share capital. Profit after tax Non-underlying expenses Tax allowable element of costs Underlying profit after tax Divide by: Called up equity share capital 2023 £m 2022 £m 49.9 0.4 - 50.3 3.3 44.0 11.5 (1.4) 54.1 3.3 Underlying earnings per share 15.2p 16.3p Underlying profit before tax Financial review Calculated as profit before tax net of non-underlying expenses. Page 53 Profit before tax Add: Non-underlying expenses Underlying profit before tax 2023 £m 2022 £m 62.6 0.4 63.0 54.3 11.5 65.8 238 Cash flow measures Shareholder returns Consolidated statement of comprehensive income Calculated as dividend per share paid to shareholders, which relate to the respective financial years. Page 166 2023 2022 1st interim dividend 3.2 pence 3.2 pence 2nd interim dividend 7.0 pence 7.0 pence Shareholder returns 10.2 pence 10.2 pence % increase on previous financial year 0.0% 2.0% There are generally two dividend payments made relating to each financial year. Shareholder returns is a measurement of the total cash dividend received by each shareholder for each individual share held by them. Dividend policy Consolidated statement of comprehensive income Calculated as total cash dividends paid in relation to the respective financial year, divided by the post-tax profit relating to that same financial year. Page 166 Total cash dividends paid Profit for the financial year Dividends as a % of profit 2023 £m 2022 £m 33.7 49.9 68% 33.7 44.0 77% Our policy is to pay 60% to 65% of full year profit after tax as two interim dividends. Delivery on dividend policy is a measurement of our performance against the policy and the businesses ability to generate distributable profits. 239 IntegraFin Holdings plc, 29 Clement's Lane, London, EC4N 7AE Tel: (020) 7608 4900 Fax: (020) 7608 5300 (Registered office: as above; Registered in England and Wales under number: 8860879) 

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