The members present their annual report and financial statements for the year ended 31 December 2023.
The principal activity of Capstone Investment Advisors (UK), LLP ('the limited liability partnership') is to establish investment management relationships and to provide investment management services. The limited liability partnership is regulated by the Financial Conduct Authority as a MIFIDPRU firm.
The designated members who held office during the year and up to the date of signature of the financial statements were as follows:
Policy on members' drawings and capital
The members' drawing policy allows each member to draw a proportion of their profit share, subject to the cash requirements of the business.
A member's capital requirement is linked to their share of profit and the financing requirement of the limited liability partnership. There is no opportunity for appreciation of the capital subscribed. Just as incoming members introduce their capital at "par", so members are repaid their capital at "par".
Members' interests
During the year discretionary profits of £27,049,713 were allocated to members.
The auditor, Moore Kingston Smith LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
This report represents the greenhouse gas (“GHG”) emission quantified by the business for the financial year ending 31st December 2023.
The report has been prepared under the Companies (Directors’ report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, under which we are required to disclose our UK Energy use and associated GHG emissions. Specifically, we are required to report UK energy usage and emission derived from purchased electricity, gas and transport.
UK GHG emissions: |
| 2023 | ||
|
|
|
| (Kgs CO2e) |
|
|
|
|
|
Scope 1 |
|
|
| 1,578 |
Scope 2 – Location-based |
|
| 25,337 | |
Scope 2 – Market-based |
|
| - | |
Scope 3 |
|
|
| - |
Total Location-based emissions |
|
| 26,915 | |
Kgs CO2e / Sq. ft. |
|
|
| 3.8 |
Kgs CO2e / £m Revenues |
|
| 542.1 | |
Energy consumed in UK operations: |
| 2023 | ||
|
|
|
| (kWh) |
|
|
|
|
|
Fuel combustion: natural gas |
|
| 8,646 | |
Purchased electricity |
|
| 122,355 | |
|
|
|
| 131,001 |
Methodology
The report has been prepared in reference to the GHG Protocol Corporate Standard. A ‘financial control’ approach has been used to define the GHG emissions boundary. This approach captures emissions associated with the operation of all buildings and, to the extent required under the reporting scope, business travel.
Emissions have been calculated using the latest conversion factors by the UK Government.
There are no material omission from the mandatory reporting scope.
Scope
The Scope 1 emissions have been limited to the requirements of SECR, including stationary emissions. Mobile emissions are immaterial.
The Scope 2 emissions have been calculated in accordance with GHG Protocol and SECR. Including both location- and market-based emissions.
The Scope 3 emissions have been limited to the requirements of SECR, including staff vehicle emissions. Scope 3 emission are immaterial.
Energy efficiency initiatives
The Company has taken steps to improve the energy efficiency of its operations and reduce its carbon footprint. The actions taken include:
Green energy suppliers,
Proactive management and monitoring of temperatures in offices, Office temperature is maintained between 21-23 degrees using air conditioning in some areas and a building fan system in others. All airflow is turned down between 8pm and 8am.
Ensuring lighting is turned off whenever possible, including the use of lighting sensors, and
Staff use public transportation to commute to office.
The members are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008) requires the members to prepare financial statements for each financial year. Under that law the members have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice. Under company law (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008) the members 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 limited liability partnership and of the profit or loss of the limited liability partnership for that period. In preparing these financial statements, the members 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 limited liability partnership will continue in business.
The members are responsible for keeping adequate accounting records that are sufficient to show and explain the limited liability partnership’s transactions and disclose with reasonable accuracy at any time the financial position of the limited liability partnership and enable them to ensure that the financial statements comply with the Companies Act 2006 (as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008). They are also responsible for safeguarding the assets of the limited liability partnership and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
We have audited the financial statements of Capstone Investment Advisors (UK), LLP (the 'limited liability partnership') for the year ended 31 December 2023 which comprise the Statement of Comprehensive Income, the Balance Sheet, the Reconciliation of Members' Interests, 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).
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 limited liability partnership 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 members' 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 limited liability partnership’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 members 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 members 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.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 as applied to limited liability partnerships 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
we have not received all the information and explanations we require for our audit.
As explained more fully in the Members' Responsibilities Statement, the members 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 members 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 members are responsible for assessing the limited liability partnership'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 members either intend to liquidate the limited liability partnership 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.
As part of an audit in accordance with ISAs (UK) we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
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. 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.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the limited liability partnership’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the members.
Conclude on the appropriateness of the members’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the limited liability partnership’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the limited liability partnership to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Explanation as to what extent 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, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the limited liability partnership.
Our approach was as follows:
We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008, the Limited Liability Partnerships SORP, UK financial reporting standards as issued by the Financial Reporting Council, UK taxation legislation and regulations applicable to companies regulated by the Financial Conduct Authority.
We obtained an understanding of how the limited liability partnership complies with these requirements by discussions with management and those charged with governance.
We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance.
We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations.
Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion.
Use of our report
This report is made solely to the Limited Liability Partnership’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006 (as applied by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008). Our audit work has been undertaken so that we might state to the Limited Liability Partnership’s members those matters which 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 any party other than the Limited Liability Partnership and the Limited Liability Partnership’s members as a body, for our 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.
Capstone Investment Advisors (UK), LLP is a limited liability partnership incorporated in England and Wales. The registered office is 1st Floor, 10 New Burlington Street, London, W1S 3BE.
The limited liability partnerships' principal activities are disclosed in the Members' Report.
These financial statements have been prepared in accordance with the Statement of Recommended Practice "Accounting by Limited Liability Partnerships" issued in December 2018, together 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 limited liability partnership. Monetary amounts in these financial statements are rounded to the nearest pound.
The financial statements, which are those of Capstone Investment Advisors (UK), LLP as an individual entity, have been prepared on the historical cost convention. The principal accounting policies adopted are set out below.
The financial statements of the limited liability partnership are drawn up to 31 December each year.
At the time of approving the financial statements, the members have a reasonable expectation that the limited liability partnership has adequate resources to continue in operational existence for the foreseeable future. Thus, the members continue to adopt the going concern basis of accounting in preparing the financial statements. The limited liability partnership provides services to other group entities and accordingly the members have reviewed the financial position of the group and are confident it has adequate resources to enable the limited liability partnership to continue to trade for at least a year from the date of approval of these financial statements.
The parent entity has confirmed it will continue to support the limited liability partnership for at least 12 months from the date of approval of the audit report on these financial statements.
Turnover represents the fair value of services provided during the period to the ultimate parent company. Turnover is recognised as contract activity progresses and the right to consideration is earned. Fair value reflects the amount expected to be recoverable from the ultimate parent company and is based on services provided and expenses incurred, but excludes VAT.
Members' participation rights are the rights of a member against the LLP that arise under the members' agreement (for example, in respect of amounts subscribed or otherwise contributed remuneration and profits).
Members' participation rights in the earnings or assets of the LLP are analysed between those that are, from the LLP's perspective, either a financial liability or equity, in accordance with section 22 of FRS 102. A member's participation rights including amounts subscribed or otherwise contributed by members, for example members' capital, are classed as liabilities unless the LLP has an unconditional right to refuse payment to members, in which case they are classified as equity.
All amounts due to members that are classified as liabilities are presented within 'Loans and other debts due to members' and, where such an amount relates to current year profits, they are recognised within Members' remuneration charged as an expense in arriving at the relevant year’s result. Undivided amounts that are classified as equity are shown within ‘Members' other interests’. Amounts recoverable from members are presented as debtors and shown as 'Amounts due from members' within members’ interests.
Where there exists an asset and liability component in respect of an individual member’s participation rights, they are presented on a gross basis unless the LLP has both a legally enforceable right to set off the recognised amounts, and it intends either to settle on a net basis or to settle and realise these amounts simultaneously, in which case they are presented net.
Once an unavoidable obligation has been created in favour of members through allocation of profits or other means, any undrawn profits remaining at the reporting date are shown as ‘Loans and other debts due to members’ to the extent they exceed debts due from a specific member.
The LLP classifies automatic or discretionary profit distributions as operating cash flows, because they are in substance paid for services rendered to the LLP as part of its revenue generating activities.
Tangible fixed assets are initially measured at cost and subsequently measured at cost, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
At each reporting date fixed assets are reviewed to determine whether there is any indication that those assets have suffered an impairment loss. If there is an indication of possible impairment, the recoverable amount of any affected asset is estimated and compared with its carrying value. If the estimated recoverable amount is lower, the carrying value is reduced to its estimated recoverable amount, and an impairment loss is recognised immediately in profit or loss.
If an impairment loss subsequently reverses, the carrying value of the asset is increased to the revised estimate of its recoverable amount, but not in excess of the amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
Debtors
Short term debtors are measured at transaction price, less any impairment. Loans and other debtors receivable are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method, less any impairment.
Creditors
Short term trade creditors and other current creditors payable on demand are measured at the transaction price. Other financial liabilities, are measured initially at fair value, net of transaction costs, and are measured subsequently at amortised cost using the effective interest method.
The taxation payable on the partnership profits is solely the personal liability of the individual members consequently neither partnership taxation nor related deferred taxation arising in respect of the partnership are accounted for in these financial statements.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the limited liability partnership is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
The limited liability partnership contributes to personal pension schemes of certain individual employees. Contributions payable are charged to the profit and loss account in the year they are payable.
Rentals payable under operating leases, including any lease incentives received, are charged to the profit and loss account on a straight line basis over the term of the relevant lease.
Transactions in currencies other than pounds sterling are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
A member’s share in the profit or loss for the year is accounted for when profits are allocated. Unallocated profits and losses are included within other reserves. The treatment of members' remuneration in the profit and loss account is determined by reference to the nature of the participation rights that give rise to the remuneration. If the members' remuneration gives rise to a liability it is charged as an expense. Amounts subscribed or otherwise contributed by members are classified and accounted for, according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity capital. Equity capital is any capital that is repayable to the member only at the discretion of the limited liability partnership.
Deferred compensation
The LLP has a remuneration policy whereby a portion of the compensation for the year for eligible employees is deferred and may be subject to forfeiture. Payment to participating employees will depend on whether they remain in the employment of the LLP and on their performance over the deferral period.
Deferred remuneration is recognised as an expense evenly over the deferral period once an obligation exists, it is probable that the LLP will be required to pay the deferred remuneration and the amount can be measured reliably.
In the application of the limited liability partnership’s accounting policies, the members 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 members do not consider there to be any key estimates or judgements applicable to the company.
The average number of persons (excluding members) employed by the partnership during the year was:
Their aggregate remuneration comprised:
The limited liability partnership operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the limited liability partnership in an independently administered fund.
In the event of a winding up the amounts included in "Loans and other debts due to members" will rank equally with unsecured creditors.
Any reduction in members' other interests are subject to approval by the limited liability partnership's managing committee.
At the reporting end date the limited liability partnership had outstanding commitments for future minimum lease payments under non-cancellable rental operating leases, which fall due as follows:
On 12 January 2024, the limited liability partnership entered into an agreement for future minimum lease payments under non-cancellable rental operating leases of £3,552,921.
At the balance sheet date £878,337 (2022: £3,720,659) is included in debtors in relation to balances owing from companies in which the ultimate controlling party has an interest. These amounts are interest free, unsecured and repayable on demand.
At the balance sheet date £1,159,889 (2022: £4,111,823) is included in creditors in relation to balances owed to companies in which the ultimate controlling party has an interest. These amounts are interest free, unsecured and repayable on demand.
During the year the limited liability partnership provided management services to Capstone Investment Advisors, LLC totalling £50,033,375 (2022: £39,773,379).
As part of the LLP's remuneration policy, unvested deferred compensation amounts for which a provision has not been recognised is £798,594 (2022: £1,275,559).