The members present their annual report and financial statements for the period ended 31 March 2024.
The principal activity of the limited liability partnership in the period under review was the provision of investment management services to High Net Worth & Professional investors. The members do not anticipate any material change in the nature of this activity going forward.
We believe that during the coming financial year we will implement an improved infrastructure and begin to provide other Fund management services to allow the business to grow and develop. Our aim is to continue to grow our Assets under Administration whilst maintaining an exceptional relationship with our clients.
The members of the limited liability partnership meet at least once a year to consider its risk appetite by taking into account the strategic objectives to grow & develop the business. The members believe that the principle risk areas to manage are: credit risk, operational risk, regulatory risk, strategic risk & reputational risk, all of which the senior management of the firm feel can be suitably mitigated. As a business we have a low appetite for risk.
Given the straightforward nature of the business, the members are of the opinion that analysis using key performance indicators is not necessary for an understanding of the development, performance or position of the business.
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 the retiring members are repaid their capital at "par".
The designated members who held office during the period and up to the date of signature of the financial statements were as follows:
The LLP operates systems and controls to mitigate any adverse effects across the range of risks that it faces. The LLP has no significant exposure to price, credit or interest rate risk.
Details of Intrinsic Capital LLP's UK stewardship code disclosure, as required by COBS 2.2.3 — Disclosure of commitments to the Financial Reporting Council's Stewardship Code are available in the Appendix at the end of the financial statements.
In light of the ongoing global economic uncertainty, the members have considered the impact that this could have on the LLP's future prospects. However having considered this and the nature of the LLP’s activities, the members do not believe it to pose a significant risk to the long-term trading and profitability of the business.
On 13 December 2023 the members of the LLP established a new limited company, Intrinsic Capital London Limited, as a related entity to the LLP. The limited company was inactive for the period from its incorporation to the LLP's period end.
Subsequent to the period end, the members have determined that it is their intention to transfer the LLP's regulated activity and most of its other trading activity to the limited company by the end of 2024. However, the members confirm that the LLP will continue to operate after finalising this transfer of activity.
The auditors, Gerald Edelman LLP, are deemed to be reappointed under section 487(2) of the Companies Act 2006.
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.
The LLP's Public disclosure can be found on the LLP's website (www.intrinsic.london).
We have audited the financial statements of Intrinsic Capital LLP (the 'limited liability partnership') for the period ended 31 March 2024 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 Auditors' 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 members are responsible for the other information. The other information comprises the information included in the members' report, other than the financial statements and our auditors' report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
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 auditors' 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.
The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
We planned our audit so that we have a reasonable expectation of detecting material misstatements in the financial statements resulting from irregularities, fraud or non-compliance with law or regulations.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, our procedures included the following:
The engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations.
Enquiring of management of whether they are aware of any non-compliance with laws and regulations.
Enquiring of management whether they have knowledge of any actual, suspected or alleged fraud.
Enquiring of management their internal controls established to mitigate risk related to fraud or non-compliance with laws and regulations.
Discussions amongst the engagement team on how and where fraud might occur in the financial statements and any potential indicators of fraud. As part of this discussion, we identified potential for fraud in posting of unusual journals.
Obtaining an understanding of the legal and regulatory framework in which the group operates, focusing on those laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the operations. The key laws and regulations we considered in this context included the UK Companies Act, tax legislation, employment law, health and safety law and FCA regulation.
To address the risk of fraud through management bias and override of controls, we:
Performed analytical procedures to identify any unusual or unexpected relationships.
Audited the risk of management override of controls, including through testing journal entries for appropriateness and reviewing large and unusual bank transactions.
In response to the risk of irregularities and non compliance with laws and regulations, we designed procedures which included, but are not limited to:
Agreeing financial statements disclosures to underlying supporting documentation.
Enquiring of management as to actual and potential litigation claims.
Reviewing relevant profit and loss account items for evidence of litigation.
The test nature and other inherent limitations of an audit, together with the inherent limitations of any accounting and internal control system, mean that there is an unavoidable risk that some material misstatements in respect of irregularities may remain undiscovered even though the audit is properly planned and performed in accordance with ISAs (UK). Furthermore, the further removed those laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Our examination should therefore not be relied upon to disclose all such material misstatements or frauds, errors or instances of non-compliance that might exist. The responsibility for safeguarding the assets of the company and for the prevention and detection of fraud, error and non-compliance with law or regulations rests with the directors.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors' report.
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 we are required to state to them in an auditors' 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 limited liability partnership and the limited liability partnership's members as a body, for our audit work, for this report, or for the opinions we have formed.
The statement of total comprehensive income has been prepared on the basis that all operations are continuing operations.
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.
Intrinsic Capital LLP is a limited liability partnership incorporated in England and Wales. The registered office is 73 Cornhill, London, EC3V 3QQ.
The limited liability partnership's 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 2021, 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 £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
Having considered the nature of the LLP's activities, the members do not believe it to pose a significant risk to the long-term trading and profitability of the business.
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 LLP changed its accounting period to 31 March 2024. As such these accounts are for the eleven months period to 31 March 2024. The comparative period is for the twelve month period to 30 April 2023.
Turnover represents the amounts recoverable for the services provided to clients, excluding value added tax, under contractual obligations, which are performed gradually over time.
If, at the balance sheet date, completion of contractual obligations is dependent on external factors (and thus outside the control of the Limited Liability Partnership), then revenue is recognised only when the event occurs. In such cases, revenue accounted for will only be equal to the relevant costs incurred up to the balance sheet date.
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.
Profits are divided only after a decision by the LLP or its representative, so the LLP has an unconditional right to refuse payment. Such profits are classed as equity rather than as liabilities. They are therefore shown as a residual amount available for discretionary division among members in arriving at the result for the year and are shown as appropriations of equity when they are allocated.
Whilst other than for a priority profit share clause in respect of income profits, the members’ agreement does not differentiate between profits and losses for profit sharing purposes, it does stipulate that the LLP cannot demand additional contributions from members, and as a result the LLP does not have an unconditional right to demand payment from members for losses. Therefore, to the extent that losses exceed the balance on capital and current accounts, they are not recognised as a recoverable asset and so remain within equity until such time as profits are generated to set them against.
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 members’ participation rights that are classified as liabilities are repayable upon demand, or at short notice (e.g. upon termination of membership), and as such whilst they are financing transactions, the effect of discounting is considered immaterial and so they are not discounted to present value.
Cash and cash equivalents 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 limited liability partnership has elected to apply the provisions 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 limited liability partnership's statement of financial position when the limited liability partnership becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally 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.
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 limited liability partnership 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 limited liability partnership after deducting all of its liabilities.
Basic financial liabilities, including trade and other 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 receipts 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.
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 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 limited liability partnership’s obligations expire or are discharged or cancelled.
Equity instruments issued by the limited liability partnership are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the limited liability partnership.
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.
An analysis of the limited liability partnership's turnover is as follows:
On 13 December 2023 the members of the LLP established a new limited company, Intrinsic Capital London Limited, as a related entity to the LLP. The limited company was inactive for the period from its incorporation to the LLP's period end.
Subsequent to the period end, the members have determined that it is their intention to transfer the LLP's regulated activity and most of its other trading activity to the limited company by the end of 2024. However, the members confirm that the LLP will continue to operate after finalising this transfer of activity.
During the period, Intrinsic Capital Services Limited, a designated member of the LLP, continued to incur operating expenditure in relation to the LLP, in accordance with the LLP agreement. During the year such amounts incurred by Intrinsic Capital Services Limited totalled £113,372 (2023: £86,476) and the LLP received income of £nil (2023: £nil) under the agreement.
Additionally, there were other intercompany transactions between the LLP and Intrinsic Capital Services Limited during the period. As a result, at the balance sheet date Intrinsic Capital Services Limited owed £294,289 to the LLP (2023: £223,486 owed from Intrinsic Capital Services Limited to the LLP).
At the balance sheet date the LLP owed £138,874 (2022: £113,874 owed by the LLP) to designated member, Mark Horrocks.
During the period payments totalling £40,000 were made to Brendan Adams, a designated member, as a discretionary division of profits.
As at the period end the amounts available for discretionary division among members, included within Loans and other debts due to members less any amounts due from members in debtors, amounted to £432,898 (2023: £413,510).
There are no terms of repayment or interest attached to any of these amounts.
Intrinsic Capital LLP previously recognised all profits, including those available to be divided among the members, within Other Reserves within the Members' Other Interests. The members have agreed that profits available to be divided among them should instead have been included within Loans and other debts due to members as Debt rather than in Other Reserves as Equity.
The incorrect classification resulted in Equity being overstated, and Loans and other debts due to members as Debt being understated, by £191,695 at 1 May 2022 and by £392,957 at 30 April 2023. These have now been reclassified with the only profits/losses now recognised in Equity being gains/losses on the fair value of the Investments. This had no impact on the profit or loss for any period.
Stewardship Code Disclosure
Introduction
The Stewardship Code (“the Code”) was published by the Financial Reporting Council (“FRC”), the UK’s independent regulator responsible for promoting high quality corporate governance and reporting in order to foster investment. The Code sets out good practice for institutional investors in their dealings with the companies in which they have invested.
Disclosure obligations
The Financial Conduct Authority’s (“FCA”) regulations outline a firm’s obligations in relation to the Code and for firms who manage assets for corporate professional clients to disclose to these clients the nature of their commitment to the Code or, where it does not commit to the Code, its alternate business model.
Although the firm recognises the aims and benefits of the Code, the firm’s investment strategy is such that it does not engage directly with companies and therefore the Code does not apply in the context of the firm’s investment strategy and the firm does not consider that its clients expect such engagement. It is however important to note that the firm’s investment strategy is specifically structured to maximise investment gains and enhance shareholder value and that it constantly monitors investments, would act collectively with other institutional investors where appropriate and has developed internal policies and procedures for managing conflicts of interest.