EQUITILE_INVESTMENTS_LTD - Accounts

The directors present the strategic report for the year ended 28 February 2023.

During the last financial year, the firm has acted as an investment manager according to the permissions granted by the Financial Conduct Authority (FCA). Having successfully navigated the challenges of Covid-19 related lockdowns and the end of the Brexit transition period, the firm’s working practices have returned to normal and we continue to work towards achieving our long-term development plan. The past twelve months have been particularly challenging with respect to the investment environment although, as we have adapted to that environment, our investor base has remained stable and supportive of our approach.

Over the coming 12 months the management firm will continue to implement the business plan and to look for additional ways to enhance the offering to clients.

The company's main risks are business risk and operational risk, including regulatory risk.

Business risk is mitigated as the company's interests are closely aligned with those of its clients. As a result, the business strategy necessitates a conservative approach to managing risk. The Equitile Board has limited appetite for accepting operational risk. Equitile does not trade on its own account, nor does it hold principal positions. Therefore, Equitile credit risk is limited to its own funds deposit-placing activities and fee receivables from the funds under management.

The financial environment remains febrile as the global economy faces the most sever bout of inflation seen for several decades. The consequent assertive policy response from the world’s major central banks has led to a general repricing of risk which, in turn, has engendered greater market volatility than normal. We are yet to fully understand the full economic impact of higher interest rates although we expect some negative impact on economic growth and further stress in the financial system as we currently witness in the US secondary banking market. Our systematic and disciplined approach to risk has allowed us to adapt significantly to this environment in terms of our investment exposure and investing client, in general, have been reassured by this.

The Board recognises that no system of internal controls can fully mitigate the risk of error, loss or inappropriate activity occurring. The Equitile Board ensures and regularly reviews that Equitile maintains sufficient levels of capital to meet its business needs and regulatory requirements and to mitigate the key risks present in both its current business and future strategy.

The company manages capital adequacy with reference to the Internal Capital and Risk Assessment process (ICARA), as required by the Financial Conduct Authority. The ICARA document informs the Board of the ongoing assessment of the firm's harms and risks, how the firm intends to mitigate those risks, how much current and future capital is necessary having considered other mitigating factors and explains the firm's internal capital adequacy assessment process.

Turnover decreased by 2% as a result of a downturn in the global economy, with higher inflation and higher interest rates affecting funds globally. Total costs also fell for the year by 2% from the previous year, this was driven largely by a USD foreign exchange gain in the year due to favourable exchange rates.

The Board of Directors considers, both individually and together, that they have acted in the way they consider, in good faith, would be the most likely to promote the success of the company for the benefit of its members as a whole (having regard to the stakeholders and matters set out in s172(1)(a-f) of the Act) in the decisions taken during the year ended 28 February 2023.

The Board understands the importance of engaging with all its stakeholders and regularly discusses issues concerning employees, clients, suppliers, community and environment, regulators and shareholders which inform its decision-making process.

Engagement with Clients, Suppliers and others

Clients

We continue to engage with our clients. Our aim is to understand client needs for service and therefore how we can work in better ways with them so as to enhance outcome and experience.

Suppliers

As a business, we work with a relatively small number of service providers. Our aim is to develop and enter into long term agreements with these providers as this enables us to constantly review and improve the service levels within the business. We seek to be fair and transparent in our dealings with suppliers.

Environment and community

The Board takes sustainability and environmental responsibility seriously. The company encourages diversity, flexible working to suit the individual and inclusion.

Governance and regulation

The Board’s intention is to behave responsibly and to ensure that the management team operates the business in a responsible manner, acting with the high standards of business conduct and good governance expected of an FCA regulated business. In doing so, we believe we will achieve our long-term business strategy and also further develop our reputation in our sector.

On behalf of the board

The directors present their annual report and financial statements for the year ended 28 February 2023.

The principal activity of the company in the year under review was that of providing fund management services.

The results for the year are set out on page 8.

No ordinary dividends were paid. The directors do not recommend payment of a final dividend.

The directors who held office during the year and up to the date of signature of the financial statements were as follows:

In accordance with the company's articles, a resolution proposing that Azets Audit Services be reappointed as auditor of the company will be put at a General Meeting.

As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.

The company has chosen, in accordance with section 414C(11) of the Companies Act 2006, to set out the following information in the Strategic Report, which would otherwise be contained in the Report of the Directors:

- Business review and futures developments

- Principal risks and uncertainties

- Key performance indicators.

So far as each person who was a director at the date of approving this report is aware, there is no relevant audit information of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable 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 financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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 company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and accounting estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

•     prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

We have audited the financial statements of Equitile Investments Ltd (the 'company') for the year ended 28 February 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

•     give a true and fair view of the state of the company's affairs as at 28 February 2023 and of its profit for the year then ended;

•     have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

•     have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Other information

The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the 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 this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of our audit:

• the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

• the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

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

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

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

•     certain disclosures of remuneration specified by law are not made; or

•     we have not received all the information and explanations we require for our audit.

As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Extent to which the audit was considered capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above and on the Financial Reporting Council’s website, to detect material misstatements in respect of irregularities, including fraud.

We obtain and update our understanding of the entity, its activities, its control environment, and likely future developments, including in relation to the legal and regulatory framework applicable and how the entity is complying with that framework.  Based on this understanding, we identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.  This includes consideration of the risk of acts by the entity that were contrary to applicable laws and regulations, including fraud.

In response to the risk of irregularities and non-compliance with laws and regulations, including fraud, we designed procedures which included:

• Enquiry of management and those charged with governance around actual and potential litigation and claims as well as actual, suspected and alleged fraud; 

• Reviewing minutes of meetings of those charged with governance;

• Assessing the extent of compliance with the laws and regulations considered to have a direct material effect on the financial statements or the operations of the company through enquiry and inspection; 

• Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulations;

• Performing audit work over the risk of management bias and override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for indicators of potential bias. 

Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation.  This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance.  The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Use of our report

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

The profit and loss account has been prepared on the basis that all operations are continuing operations.

Equitile Investments Ltd is a private company limited by shares incorporated in England and Wales. The registered office is 2nd Floor, Regis House, 45 King William Street, London, United Kingdom, EC4R 9AN. . The company's principal place of business is 1 King William Street, London, EC4N 7BJ.

These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.

The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.

The historical cost convention has been modified to include certain financial instruments at fair value. The principal accounting policies are set out below and have been consistently applied throughout the year.

The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence and meet its liabilities as they fall due for the foreseeable future. true Accordingly, the going concern basis has been adopted in preparing the Financial Statements.

Turnover represents amounts receivable in respect of fund management services. Turnover is measured at the fair value of the consideration received or receivable, excluding discounts, rebates, value added tax and other sales taxes.

Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life.

Cash at bank and in hand are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.

The company has elected to apply the provision of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.

Financial instruments are recognised in the company’s balance sheet when the company becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legal enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.

Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.

Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.

Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.

Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.

Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.

Taxation for the year comprises current and deferred tax. Tax is recognised in the Statement of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax is measured using tax rates and laws that have been enacted or substantively enacted by the year end and that are expected to apply to the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

The company operates a defined contribution pension scheme. Contributions payable to the company's pension scheme are charged to profit or loss in the period to which they relate.

Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.

Related party exemption

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party transactions with wholly owned subsidiaries within the group.

In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.

The key judgements and sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are described below:

Taxation

Management estimation is required to determine the amount of deferred tax assets that can be recognised, based upon likely timing and level of future taxable profits together with an assessment of the effect of future tax planning strategies.

The average monthly number of persons (including directors) employed by the company during the year was:

Their aggregate remuneration comprised:

Key management personnel are considered to be the directors of the company, and their remuneration has been disclosed above.

The actual (credit)/charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:

The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:

The deferred tax asset set out above is expected to reverse fully and relates to the utilisation of tax losses against future expected profits of the same period.

At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Included within amounts owed by group undertakings is a balance of £105,632 (2022: £100,832) owed by Equitile Limited.

During the year, Equitile Investments Limited charged management fees totalling £914,861 (2022: £983,503) to Equitile Investments Feeder OEIC. As at 28 February 2023, the balance due from Equitile Investments Feeder OEIC to the Company was £68,434 (2022: £76,314) and this amount is included within prepayments and accrued income in note 10.

Also during the year, Equitile Investments Limited charged management fees totalling £665,707 (2022: £711,410) to Equitile Global Equity Fund, a sub-fund of Prescient Global Funds ICAV. As at 28 February 2023, the balance due from Equitile Global Equity Fund to the Company was £47,803 (2022: £56,559) and this amount is included within prepayments and accrued income in note 10.

Also during the year, Equitile Investments Limited charged management fees totalling £87,455 (2022: £Nil) to Equitile M3 Fund. As at 28 February 2023, the balance due from Equitile M3 Fund to the Company was £8,001 (2022: £Nil) and this amount is included within prepayments and accrued income in note 10.

Equitile Investment Limited is the Authorised Corporate Director of Equitile Investments Feeder OEIC, and is the Investment Manager and Distributor of both Equitile Global Equity Fund and Equitile M3 Fund.

The directors are considered key management personnel and their remuneration is as disclosed in the note 7.

Equitile Limited is regarded by the directors as being the company's ultimate parent company.

Equitile Limited is owned by a number of shareholders, none of whom own more that 50% of the issued share capital. Accordingly there is no ultimate controlling party.

The Company is included in the consolidated accounts of Equitile Limited, forming at once the largest and the smallest body of undertakings of which the Company forms a part as a direct subsidiary undertaking. The registered office of this company is located at 2nd Floor Regis House, 45 King William Street, London, EC4R 9AN, and the consolidated financial statements are available from the Companies House.