annual report accounts 2020 - smith & williamson

Annual Report

Accounts 2020

Operating income

£295.2m +6.1%(2019: £278.1m)

Adjusted operating profit1

£53.1m +9.7%(2019: £48.4m)

Profit after tax

£34.9m -13.4%(2019: £40.3m)

Adjusted basic earnings per share1

75.3p +5.5%(2019: 71.4p)

Returns to shareholders per share

45.0p +25.0%(2019: 36.0p)

Funds under management and advice

£20.6bn -3.7%(2019: £21.4bn)

1. Adjusted operating profit and adjusted basic earnings per share exclude merger-related costs (note 8), PAYE and NIC determinations (note 11) and amortisation of intangible assets — client relationships (note 15).

Strategic Report2 AT A GLANCE 3 CHAIRMAN’S STATEMENT6 BUSINESS MODEL8 CO-CHIEF EXECUTIVES’ REVIEW12 KEY PERFORMANCE INDICATORS14 RISK MANAGEMENT18 FINANCIAL REVIEW24 CORPORATE RESPONSIBILITY REPORT

Governance30 BOARD OF DIRECTORS34 CORPORATE GOVERNANCE REPORT42 AUDIT AND RISK OVERSIGHT COMMITTEE

REPORT45 NOMINATIONS COMMITTEE REPORT46 REMUNERATION COMMITTEE REPORT50 DIRECTORS’ REPORT

Financial Statements53 INDEPENDENT AUDITOR’S REPORT55 CONSOLIDATED FINANCIAL STATEMENTS61 NOTES TO THE CONSOLIDATED FINANCIAL

STATEMENTS122 COMPANY FINANCIAL STATEMENTS126 NOTES TO THE COMPANY FINANCIAL

STATEMENTS

Corporate Information134 COMPANY INFORMATION134 OUR OFFICES

ContentsHighlights

smithandwilliamson.com 1

Strategic Report

Focused on our clients’ needs

We offer a greater range of personal and business services to support private clients and their business interests than any other UK firm in our market. In so doing, we bring to bear the knowledge and expertise of more than 1,500 people dedicated to their delivery. Our business is set apart by the breadth and depth of this expertise, our ability to combine solutions through an integrated proposition and a commitment to longstanding relationships led by a single, senior point of contact.

Investment Management

Fund Administration

Personal Financial Planning

Transaction Services

Managed Portfolio Service

Equity and Fixed Income

Funds

Treasury

Business and Private Client Tax

Forensic Services

Restructuring and Recovery

Services

Assurance and Business Services

Pensions and Employee Benefits

Sizing indicative of headcount dedicated to business area

Financial Services

Professional Services

Fund Administration

AT A GLANCE

Smith & Williamson Holdings Limited | Annual Report 20202

CHAIRMAN’S STATEMENT

Merger with Tilney GroupIn spite of the extraordinary challenges posed in this new environment and the fact that our business has now been operating almost entirely remotely for several months, we have been able to move forward in our merger discussions with Tilney Group. The Combined Group will be a market-leading business, with significant scale, offering an unrivalled breadth and depth of financial and professional services, enhancing our ability to deliver excellent client outcomes. These competitive advantages will be of even greater importance in a more challenging economic and market environment.

We have worked constructively with Tilney and Permira to accommodate the feedback from the Financial Conduct Authority (FCA) on the original deal terms received in January 2020 in order to create a revised structure which would address its concerns.

Following extensive negotiations on a revised transaction structure, which focused on maximising the total value of the consideration to be received by shareholders, we were able to reach a position where the value under the transaction of the consideration payable to non-institutional individual Smith & Williamson shareholders remains the same as under the original transaction, notwithstanding the deterioration in most markets and economies since the initial announcement of the combination in September 2019.

It should also be noted that AGF Management Limited will receive approximately £148.7 million in cash, excluding interim and special dividends and following completion will not hold any interest in the Combined Group.

COVID-19 updateSmith & Williamson, in common with so many businesses, has been through an extraordinarily challenging period with the advent of the coronavirus pandemic. Our colleagues have responded magnificently, ensuring that our business has remained fully operational throughout, serving the needs of our clients while keeping our people safe.

We were swift to move over a matter of days to comprehensive remote working by the middle of March 2020. At the same time, extreme market volatility and the massive shock to many business sectors meant that we experienced one of our busiest periods in many years, as our teams moved to assist our clients in responding to these unparalleled events.

It seems clear that the effects of COVID-19 will be with us for some time to come, but it is extraordinarily difficult to predict what the path out of lockdown may be, not only in the UK but around the world. We are planning very carefully for a return to the workplace which is likely to be phased and gradual, while recognising that patterns of work and interactions with clients and colleagues are likely to remain fundamentally changed for the foreseeable future.

Continued growth underpinned by diverse income streams


Strategic Report

We are delighted that, as part of the transaction, Warburg Pincus LLC has committed to provide a £275 million equity investment in the Combined Group, particularly in the midst of the current global health and economic crisis. This represents a significant vote of confidence in the strength of the proposed combination of Tilney and Smith & Williamson and adds further credibility to the Combined Group’s longer-term strategy. Moreover, the effects of the revised funding structure result in a material reduction in the Combined Group’s net debt position and ongoing financing costs, as well as a significantly improved regulatory capital position.

The transaction, which is structured as a scheme of arrangement, has been subject to a further confirmatory vote by Smith & Williamson shareholders, which took place on 30 July 2020. All resolutions were passed by an overwhelming majority.

The transaction has also been approved by the FCA and other regulatory and competition authorities and is expected to complete in September 2020. The High Court of Justice sanctioned the scheme at a hearing held on 6 August 2020.

I would like to take this opportunity to thank our shareholders for their continued support and engagement since our original announcement.

Financial performance The Group has performed strongly during the year. Our operating income increased by 6.1% to £295.2 million (2019: £278.1 million), driven by higher average market levels (despite the impact of COVID-19 towards the end of the year), higher trading income from increased client trading volumes and strong growth across the Group’s Professional Services transactional business lines. Adjusted operating profit1, meanwhile, increased by 9.7% to £53.1 million (2019: £48.4 million).

Funds under management and advice have decreased by 3.7% to £20.6 billion (2019: £21.4 billion), compared to the MSCI PIMFA Balanced Index and the FTSE 100 Index, which fell by 7.0% and 20.4%, respectively, over the same period. However, funds under administration have grown by 10.1% to £15.3 billion (2019: £13.9 billion).

DividendsFollowing an interim distribution of 15 pence per share in February 2020, the Board approved the payment of a second interim dividend of 30 pence per share in June 2020. These payments are in addition to the capital distribution of £67.5 million, which will be made as part of the completion of the merger with Tilney Group.

StrategyWe have made further progress in our long-term ambition to operate as a singular, cohesive and collaborative business, ‘One S&W’, highlighted particularly by a significantly enhanced focus on the coordination of client relationship management across the Group. In addition, we continue to work towards the successful implementation of our major IT programmes. However, the planned rollout of the new systems for the Financial Services division has been complicated by a combination of Brexit, our decision to relinquish our banking licence and the need to implement remote working rapidly in March this year as a result of the COVID-19 outbreak. Regrettably, these factors have led to an extension of the intended timetable and we now expect to go live with these new systems in the second half of this year. We also expect to be in a position to launch the new Practice Management System for our Professional Services division in the next few months.

Board and cultureWe were delighted to welcome Carla Stent to the Board in October 2019. Carla now chairs the Audit and Risk Oversight Committee where she has made a significant contribution.

As we address the long-term impact of the COVID-19 pandemic and prepare for completion of our merger with Tilney Group, the Board’s continuing focus on the importance of culture and values has taken on an even greater significance. This remains at the very heart of everything we do and will continue to be the foundation of our business. Our determination to provide a personal approach and our focus on delivering the right solution without compromising our integrity or professionalism has never been more valuable, either to our people or our clients.

We are committed to creating an inclusive environment, where our employees and Partners can develop and contribute fully, and one which encourages and supports diversity. Information on our approach to diversity and inclusion is included in the Co-Chief Executives’ Review on page 10 and the Corporate Responsibility Report on page 24.

We are also acutely conscious of our role in our community, never more so than in recent times. To reflect this, our CSR programme is focused on four key strategic pillars: Charities, Clients, Environment and People. Further information on the impact of the Group’s operations on these pillars can be found in the Corporate Responsibility Report on pages 24 to 29.

CHAIRMAN’S STATEMENT CONTINUED

1. Calculated on the basis set out under key performance indicators on page 12


Our peopleOn behalf of the Board, I would like to reiterate our appreciation and acknowledgement of the huge efforts made by all our staff and Partners to switch at short notice to new and challenging ways of working from March 2020 onwards. A great many of them have continued working long hours in difficult circumstances to support our clients during this turbulent period. Their dedication is testament to the commitment they have to our clients and our business.

The future It is widely accepted that the economic impact of COVID-19 will be severe, with a wide range of views on the length of the downturn and the path out of recession. Smith & Williamson will not be immune to the impact on the economy and on markets but we are confident that with strong client relationships, a robust business model and diverse income streams, we are well placed to withstand potential economic and market stresses over the coming years. We look forward to completing our merger with Tilney Group to create a strong, client- focused organisation that will be able to adapt and grow over the long-term, notwithstanding the significant challenges ahead.

In closing, I would like to express my thanks and appreciation on behalf of the Group to all our clients for choosing Smith & Williamson as their adviser and business partner. We look forward to continuing to support you in the years ahead.

Andrew SykesNON-EXECUTIVE CHAIRMAN

7 AUGUST 2020

Section 172 Statement

Section 172 of the UK Companies Act 2006 requires Directors to act in a way they consider, in good faith, would most likely promote the success of the Company for the benefit of its members as a whole. In doing this the Directors are required to have regard to the interest of the Company’s employees and other stakeholders, including the impact of its activities on the community, environment and the Company’s reputation, when making decisions.

Details on how the Board operates and the way Directors reach decisions, including some of the matters discussed during the year and the key stakeholder considerations that were central to those discussions, are included in the Corporate Governance Report on pages 34 to 41. The impact of the Company’s operations on the community and environment are included in the Corporate Responsibility Report on pages 24 to 28.


Strategic Report

BUSINESS MODEL

Solutions for personal and business lifecycles

What we do

Preparing future financesTo start planning for the future, both practicality and vision are required. We help navigate today’s regulation and financial markets to build wealth for tomorrow.

Solutions include advice on:

• Building wealth

• Planning retirement

• Managing taxes

Transferring wealth Whether it’s passing wealth on to a loved one or supporting others that are close at heart, we help to ensure the sustainability of the next generation’s finances.


• Leaving a legacy

• Receiving a legacy

• Gifting assets

BusinessPersonal

Supporting clients

Managing life’s changesAs life takes its different courses, we help with a range of services to navigate unpredictable and changing circumstances and, ultimately, provide support when clients need it most.


• Supporting family

• Exiting a business

• Dealing with divorce


Value for stakeholdersClientsOur approach to working with clients means our people spend more time developing strong relationships, built on trust and understanding. Client solutions are created to solve complex financial issues whether personal or business.

53 net promoter score1

PeopleWe invest in attracting, developing and retaining the best talent to give our clients access to a broad range of expertise. Our people are engaged in their roles and put clients at the forefront of everything we do.

16.5% our annual staff turnover rate 2019/20

Communities and environmentWe proactively manage the impact of our business on all internal and external stakeholders, particularly the communities and environment in which we operate. We do this by continuously exploring ways in which we can make a positive difference and involve our people as much as possible.

46% reduction in emissions intensity per employee since 2015/16

ShareholdersWe engage with shareholders on a regular basis to ensure they understand our business model and strategic direction. Our model has continued to deliver strong returns for them.

5.5% adjusted basic earnings per share growth year-on-year

Enhancing established businessesAs businesses mature, we offer a range of services to continue growth, raise new capital and open up new opportunities.


• Succession planning

• International expansion

• MBOs/MBIs

• Trade sales

• IPOs

• Financial planning following exit

Driving through growthPrivately-owned, entrepreneurial businesses are widely seen as a key growth engine of the UK economy. We help clients manage challenges to build and grow faster.

Supporting entrepreneurial businesses and their ownersOur experts help clients set the foundations and strategy for growth.


• Strategy and structure

• Financial outsourcing

• Tax support and planning

• Employee incentives

1. As measured by the Group’s Client Care programme between May 2019 and April 2020. A score above 50 signifies Smith & Williamson has very good levels of client satisfaction and loyalty. The score is calculated in accordance with the official methodology available at www.netpromoter.com


Strategic Report

Group performance We report on a year marked by strong performance and several notable challenges faced by the business, including significant investment in systems, market turmoil triggered by the COVID-19 outbreak over the last quarter and ongoing discussions with Tilney Group with regard to a potential merger.

In spite of these challenges, the Group’s operating income for the year ended 30 April 2020 has grown 6.1% to £295.2 million (2019: £278.1 million). Although profit after tax was 13.4% lower than prior year this can largely be attributed to merger-related costs of £7.1 million in the current year, and a PAYE and NIC determinations credit of £3.5 million which arose in the prior year. Importantly, adjusted operating profit, one of the Group’s key performance indicators (see page 12), increased by 9.7% to £53.1 million (2019: £48.4 million), which demonstrates the growth of the underlying business.

As at 30 April 2020, funds under management and advice have decreased by 3.7% to £20.6 billion (2019: £21.4 billion). This fall largely reflects the COVID-19 related market impact as, at the end of January 2020, funds under management and advice had increased by 6.5% to £22.8 billion compared to the start of the year, before falling by 9.6% in the last quarter.

Investment management and advisory fees grew by 4.8% due to a combination of organic growth and higher average market levels over the year, despite the fall in market levels in the last two months. Trading activity increased considerably due to increased volatility towards the year-end and consequently commission income and foreign exchange income grew.

The Professional Services division has continued to see strong increases in operating income with overall growth

An exciting new chapter

CO-CHIEF EXECUTIVES’ REVIEW


by fee income, the sixth largest professional services firm in the country.

The combination plays to the strengths of the two firms and broadens the range of service and regions that we serve while the benefits of scale mean we are confident the Combined Group will be uniquely positioned to support clients with their personal wealth management needs and their business interests.

The revised structure retains all these strategic advantages, supports the long-term needs of our clients and colleagues and represents value for our shareholders while delivering a more robust financial structure and a strong new partner in Warburg Pincus LLC, which will co-invest new equity alongside Permira.

Decision to de-bankDuring the year we took the decision to relinquish the firm’s banking licence and move to a client money model. This decision enabled us to free up regulatory capital to either return to shareholders or fund future acquisitions. A key requirement in implementing the change was a commitment to ensuring that our clients continued to receive the same excellent service to which they are accustomed. Delivering on this commitment included the selection of Hampden & Co Plc to take on our loan book secured against client investment portfolios on similar terms.

Our business We are a people business. Alongside clients, our people are our most important asset and that has never been more apparent than in recent months. We continue to invest in our people and to strengthen the service to clients, and are pleased to have recruited 364 new colleagues this year, including 19 Partners and Directors in 11 offices, across a range of business lines.

across all business lines. Growth was particularly strong in the non-recurring transactional businesses, led by a strong performance in Restructuring and Recovery Services and Forensics.

COVID-19 business response The sudden and devastating global impact of the COVID-19 pandemic created multiple challenges for every business almost overnight, but the response of our people in adapting to change has been outstanding.

Approximately 95% of our people had transitioned to enforced remote working within a week of Government advice for all but essential workers to stay at home on 16 March 2020, which is testament to their commitment and agility.

We also want to acknowledge the pivotal role played by our Business Continuity team in ensuring colleagues were given the correct guidance swiftly and regularly to allow them to continue servicing their clients safely. With the health and wellbeing of staff and clients as its foremost concern, the team — which comprises colleagues drawn from a wide range of disciplines across the Group — performed outstandingly in especially challenging conditions. This is testament to the preparatory work undertaken behind the scenes over several years.

Although in-person collaboration is currently difficult, we have embraced the technology available to us all, including video conferencing facilities, to stay connected and ensure business as usual as much as possible. It has been very clear that our significant investment in technology and infrastructure in recent times has ensured our business is properly prepared and resourced to cope with such events, which has been particularly reassuring for everyone during this period. Indeed, the Group’s efforts to achieve sustainability for the business in the medium and longer-

term and our commitment to investment in operational resilience is now proving to be truly valuable at the most important of times.

We have also been especially mindful of the impact of the pandemic on the mental health of our staff. Working from home for a prolonged period naturally presents a number of different challenges for many colleagues and we have sought to address some of those with transparent communication, the provision of equipment and the launch of a new hub dedicated to physical and mental wellbeing resources. We believe these measures have gone some way in helping staff to navigate the crisis and continue providing excellent client service in a drastically changed environment. To supplement this, a significant amount of practical insights and information for clients has been published regularly on our website.

Our teams are now working diligently to plan for various return-to-office scenarios, while continuing to acknowledge evolving government guidance and with the health and safety of our staff and clients as the foremost priority.

Merger with Tilney GroupIt is against this challenging backdrop that we were delighted to announce in June 2020 that we had agreed a revised transaction structure for our proposed combination with Tilney Group. The rationale for the deal remains compelling. Together, we will be the UK’s leading integrated wealth management and professional services group with total projected pro forma revenues of £530 million and responsibility for approximately £44 billion of client assets. Ranked by assets under management, Tilney Smith & Williamson — as the combined business will be known upon expected completion later this year — is expected to be a top five UK wealth management business and, measured


Strategic Report

To date we have not needed to utilise any of the Government’s available financial support, including furlough schemes, during the pandemic, which reflects the underlying financial strength of the Group.

There is no denying the impact of COVID-19 on all businesses. Nevertheless, for Smith & Williamson, we have seen an increase in the demand for our services in certain areas, including in transactional-based income, particularly in foreign exchange and treasury work. Our Restructuring and Recovery Services team has also had a particularly strong year having worked on a number of high-profile and complex cases.

While COVID-19 has delayed some of the long-trailed changes in the domestic audit market, we remain comfortable that our planning work will mean client service is protected as far as possible and the likely impact on our business will be minimised.

We remain steadfastly committed to minimising our environmental footprint and continue to manage our use of utilities effectively, to reduce our Greenhouse Gas (GHG) emissions and better control the waste we produce. In addition, during the lockdown period, we saw a number of positive impacts, such as a dramatic decrease in paper usage and business travel across the entire firm.

Diversity and inclusionWe believe that a genuine diversity in talent and ideas is vital to creating a positive working environment and continuing to deliver excellent client service for which Smith & Williamson is known.

The Group has continued to make progress towards its targets on improving diversity and inclusion and, although plenty more work is still to be done, it is encouraging to note that our Gender Pay Gap continues to compare favourably to our peer group. We are acutely conscious, however, of the considerable challenges that still remain in this important aspect of our work. We are using our involvement in a number of excellent initiatives, such as ‘Smart Futures’, to help educate ourselves more widely on how we can make a more meaningful impact.

Challenges The macro-economic background for investment remains especially challenging with volatility in markets and a prolonged threat to dividends. For every business, the long-term ramifications of this period will take some time to emerge.

We take our responsibility to help clients through the challenges they are facing in this rapidly changing environment very seriously and are doing everything in our power to ensure all their financial needs are being comprehensively addressed. In doing so, the quality of our people and their unwavering commitment to being close to their clients will be paramount.

The Group is also in the midst of its biggest overhaul in technology and infrastructure for many years and with that degree of change inevitably comes significant complexity and some upheaval. That has been compounded by planning for the impact of Brexit, integration preparations for our merger with Tilney Group and our response to COVID-19.

Good progress has been made on the implementation of our new Core Wealth platform, with total costs of £21.6 million incurred during the year. The programme is expected to go live in the second half of 2020. In addition, our MIFID-authorised subsidiary, Smith & Williamson Investment Management (Europe) Limited, which was set up to mitigate the potential impact of Brexit on the Group, is now operating as our hub for EU-facing activities and all the relevant assets have been transferred successfully.

Elsewhere, the heightened threat of sophisticated cyber-attacks means we will need to continue our programme of investing in effective systems to equip us to preserve business continuity in all circumstances; a capability that has been tested regularly this year. It is pleasing to note the investments we have made to date have already gone some way to creating an even more robust business that has demonstrated its ability to continue to perform strongly in these unprecedented circumstances.

CO-CHIEF EXECUTIVES’ REVIEW CONTINUED


OutlookThere is much to be excited about as we look forward and focus on how we serve our clients effectively and safely in a post COVID-19 world.

Moving to alternative working arrangements, and yet still being contactable as before with access to electronically stored information, has meant we are still able to provide the support and proactive service our clients are accustomed to. We will continue to provide timely insights, through a dedicated COVID-19 hub on the Smith & Williamson website, on the evolving personal finance and business implications of the outbreak.

Our plans to relocate our London Moorgate headquarters to new premises at 45 Gresham Street remain well on track and we are excited about the opportunities this will present. At this stage, we do not anticipate the impact of COVID-19 will materially delay our intended occupation of the building in the first half of 2022.

This work, together with our proposed merger with Tilney Group and the transformational re-platforming of our technology systems, are the foundations of what promises to be a very busy and exciting period in the long history of Smith & Williamson.

As we embark on an important new chapter, the successful delivery of these and other important projects marks the first steps in preparing our business properly for the next generation. We are confident the significant investments we have made already in a number of vital areas of our business will provide benefits to all of our stakeholders in the future.

While much excellent work has already been done, we know there is still a lot more to do. We believe our business is well-placed to meet the new challenges that lie ahead and to build further on the Group’s market-leading position while continuing to focus on helping clients address their commercial and personal financial priorities.

David CobbCO-CHIEF EXECUTIVE

Kevin StoppsCO-CHIEF EXECUTIVE

7 AUGUST 2020


Strategic Report

Measuring our performance

DescriptionThe value of annual net inflows from the investment management business as a percentage of opening funds under management and advice.

PerformanceIncrease in net organic growth rates was driven by higher inflows than prior year.

DescriptionTotal funds under management and advice (FUM) at the end of the year.

PerformanceFUM decreased by 3.7%; however this compares favourably to the MSCI PIMFA Balanced Index and the FTSE 100 Index, which fell by 7.0% and 20.4%, respectively, over the same period.


Net organic growth ratesOperating income Adjusted operating profit

DescriptionTotal annual income from all operating activities.

PerformanceOperating income grew by 6.1%, driven by higher market levels and trading income, coupled with increased professional services fee income.

DescriptionTotal operating profit before merger-related costs (note 8), PAYE and NIC determinations (note 11) and amortisation of intangible assets – client relationships (note 15).

PerformanceAdjusted operating profit increased by 9.7% primarily due to growth in operating income.

DescriptionStaff costs as a percentage of operating income.

PerformanceThe staff costs before PAYE and NIC determinations (note 11) ratio remained relatively stable as increases in staff costs were offset by operating income growth.

DescriptionTotal average of full-time equivalent staff (including Executive Directors and Partners) during the year.

PerformanceStaff numbers increased to support business growth and continued investment in IT infrastructure and systems.

Profitability and growth

People

Staff cost ratioStaff numbers Staff turnover ratio

(%)

16 17 18 19 20

2.3 2.

5

1.7

2.8

1.3

£m

16 17 18 19 20

222.

5

244.

6

266.

7 295.

2

278.

1

£m

16 17 18 19 20

36.0 40

.6 46.2 48

.4 53.1

£bn

16 17 18 19 20

16.0 18

.8 20.1

20.621

.4

(%)

16 17 18 19 20

12.9

12.7

12.9

15.9 16

.5

16 17 18 19 20

1,55

3

1,64

2

1,72

2 1,88

4

1,80

3

DescriptionStaff who have left during the year as a percentage of average headcount.

PerformanceStaff turnover increased slightly by 0.6%, driven by an active recruitment market, particularly in support and professional services.

(%)

16 17 18 19 20

59.1

61.3

63.1

57.7

57.8

KEY PERFORMANCE INDICATORS

4 5 13 14

2 3 6 94 7 10 125 8 11 141 15


Key risksFor further details see pages 16 and 17

Acquisition and disposal

Business growth

Business resilience

Change management

Conduct

Data loss and cyber

Financial and prudential

Financial crime and fraud

Investment performance

IT infrastructure

Material external change

Outsourcing

People

Process failure

Product and service

Regulatory and legal

Key performance indicators are monitored across four key areas and are used to measure the progress and success of our strategy

DescriptionTotal annual dividend per share (interim and final).

PerformanceThe total dividend per share increased from 36.0p to 45.0p per share due to strong growth of the business during the year.

DescriptionAdjusted profit after tax divided by the weighted average number of ordinary shares.

PerformanceThe increase in adjusted basic earnings per share of 5.5% is driven by higher profit after tax after excluding merger-related costs (note 8) in the current year and the PAYE and NIC determinations (note 11) in the prior year.

Dividend to shareholders for the year

Adjusted basic earnings per share

Share price at 30 April

DescriptionThe Company’s share price at the end of the year, as determined by external consultants, represents the sum which a willing purchaser would offer to a willing vendor on arm’s length terms for the issued share capital of the Company.

PerformanceThe increase in share price by 30.6% to £9.73 per share reflects strong growth of the business and the price a willing buyer is prepared to pay as part of merger negotiations.

Adjusted operating profit margin

DescriptionAdjusted operating profit as a percentage of operating income.

PerformanceAdjusted operating profit margin has increased as a result of higher operating income.

DescriptionCommon equity tier 1 capital as a percentage of total risk weighted exposures.

PerformanceThe ratio increased from 25.1% to 30.2% due to organic capital generation from business growth and the decrease in risk weighted exposures following the relinquishment of the Group’s banking licence.

Capital management

Returns to shareholders 1 2 6 943 7 10 125 8 11 14

8 16

8

14

15

16

Common equity tier 1 capital ratio1

£ per share

16 17 18 19 20

8.30

6.08

5.44

9.73

7.45

(%)

16 17 18 19 20

16.2

16.6 17.3 18

.0

17.4

Pence per share

16 17 18 19 20

36.0

32.0

29.0

45.0

36.0

Pence per share

16 17 18 19 20

68.7

60.2

51.9

75.3

71.4

(%)

16 17 18 19 20

27.2

24.9

25.0

30.2

25.1

1. Includes full year audited profit. For the basis of preparation, see page 21.

9

10

12

13

11

15

6 7


Strategic Report

Managing risk to support our strategy

The purpose of risk management is to identify, assess, monitor and manage those key risks that are inherent in the Group’s business activities, in line with the Board’s strategic objectives and risk appetite. Over the last year, the Group has significantly enhanced its risk management and compliance capabilities to facilitate risk awareness and further enhance the implementation and effectiveness of the risk management framework. This risk management framework is underpinned by policies, procedures and reporting, all of which have been further developed in the course of the year and will continue to evolve with the needs of the Group, as it seeks to deliver its strategic objectives.

Risk management frameworkThe objectives of the risk management framework are to:

• facilitate risk-awareness across the Group

• facilitate the effective identification, assessment, monitoring and management of risks

The risk management framework assists the organisation in the resilient provision of high-quality service to our clients and encourages the continuous improvement of the Group’s processes and controls.

The risk management framework includes components that:

• establish methods for identifying and assessing risk

• provide an approach to capturing, reporting and monitoring risk

• provide appropriate mechanisms for managing risk

Risk management framework

Key risk assessment

Risk appetite

Control appetite

Scenario analysis

Risk event process

Risk and control self assessment

OVERSIGHT(Governance1)

Boards and Committees

Roles and delegated authorities

Policies

INSIGHT(Management information)

Errors, breaches, near misses and

complaints

PAST

Risk profiles and quantifications

PRESENT

Predictor events

FUTURE

Systems and tools

Communication, education, training and guidance

Risk management methodology

Culture

RISK MANAGEMENT

1. Further information on risk management governance can be found in the Corporate Governance Report on page 40.

Risk reporting


Risk management methodologyThe risk management methodology within the risk management framework consists of the following seven interlinked steps:

• Key risk assessment — central to the risk management framework as all components of the risk management framework are linked to the key risks. The key risks are identified through the following processes:

• Top-down risk assessments undertaken with the business and by the business

• Risk and control self-assessments undertaken by the business

• Risk events

• Monitoring of the external environment

• Scenario analysis — undertaken at different levels of probability. Generally, multiple scenarios will be assessed for each key risk. The assessment presents an impact analysis on the business, including the financial impact

• Control appetite — the level of control that is in place relevant to the risk. Where the control is not sufficient, the business will put in place a mitigation plan

• Risk appetite — a top-down process that is verified by each division of the business and also by reference to internal and external experience of risk events

• Risk reporting (dashboard) — a mechanism used by the firm to manage risk. The dashboard presents each key risk, its current RAG rating, key risk indicator scores, risk events and outstanding remediation actions, where required

• Risk and control self-assessment (RCSA) — undertaken by all business units. The RCSA is a process-focused assessment but the risks identified are linked to the key risks

• Risk event process (REV) — is designed to capture, report, monitor and remediate process, control and system failures

People

Outsourcing


IT inf

rastr

uctu

re

Inve

stm

ent

perf

orm

ance

Data loss and cyber

Conduct

Change management

Business resilie

nceBu

sines

s gro

wth

Acqu

isitio

n an

d di

spos

al

Product and service

Key risk

appetite

statements


Process failure

Financial crime

and fraud

Group risk

appetite

Financial and

prudential

Risk appetite framework


Strategic Report

Key risks We have identified our key risks at Group and business levels to help manage them in a consistent and uniform way with oversight from the relevant Committees and Boards.

Risk Definition Key mitigating controls

Acquisition and disposal

Adverse business and/or client impact resulting from poor due diligence, integration of acquisition targets, or badly managed divestiture.

• An acquisition process and policy is in place• Board and Group Executive Committee review of acquisition

and disposal due diligence

Business growth

Adverse business and/or client impact resulting from a failure to achieve the business plan.

• Board and Group Executive Committee review of business performance

• Documented business plans communicated to all staff• Documented policies and procedures

Business resilience

Adverse business and/or client impact resulting from a failure to continue activities in the event of a major disaster affecting the London and/or regional offices or constraints in the off-site recovery of critical business systems. Incorporates disaster recovery and business continuity. See ‘Outsourcing’ section for risk associated with service providers.

• Group Risk and Compliance Committee, Group Executive Committee, Audit and Risk Oversight Committee and Board oversight

• Regular disaster recovery testing• Off-site backup of data• Business continuity agreements in place together with

documented disaster recovery plans • Project steering groups and working groups established• Documented policies and procedures

Change management

Adverse business and/or client impact resulting from an overload of change for the organisation, and/or the failure of one or more material projects.

• Project steering groups and Change Management Committee• Regular project reporting

Conduct Adverse business and/or client impact resulting from providing clients with inadequate, incomplete or unsuitable advice or service, or not acting in the best interest of our clients.

• Staff training, particularly relating to conduct risk• Self-certification by senior staff of actual or potential

disputes or claims • Investment process, market and performance monitoring• Investment in staff training and development• Appropriate incentivisation and disciplinary procedures

Data loss and cyber

Adverse business and/or client impact resulting from a data protection, information security or cyber-related breach. This also includes the additional risks associated with non-compliance with relevant rules and regulations.

• Dedicated working group• Staff training and development• Penetration testing (both internally and for external service

providers)• Cyber risk management framework • Embedded data governance controls within all core change

management projects• Oversight by all Boards and Committees

Financial and prudential

Adverse business and/or client impact resulting from breaching regulatory capital/liquidity requirements, or market/credit risk internal limits.

• Group Risk and Compliance Committee oversight• Segregation of duties• Authorisation limits and management oversight• Dealing limits• Documented policies and procedures• Groupwide credit and market risk frameworks in place• Liquidity risk managed through deposits with a maturity of

less than 7 days. No reliance is placed on wholesale market funding

Financial crime and fraud

Adverse business and/or client impact resulting from internal or external fraud. Failure to adhere to relevant regulation: Anti-Money Laundering (AML), Bribery & Sanctions.

• AML prevention process and controls• Proactive and regular contact with regulators• Active involvement in industry representative bodies• Documented policies and procedures• Mandatory AML training for staff

Investment performance

Adverse business and/or client impact resulting from poor investment performance of private client portfolios, or funds.

• Investment Process Committee oversight• Investment process managed by the Front Office• Reports to Group Risk and Compliance Committee through

key risk indicators

IT infrastructure

Adverse business and/or client impact resulting from sub-optimal IT infrastructure (including capacity) and IT capability.

• Infrastructure requirements assessment and planning• Documented policies and procedures• Incident management• Review of management information

RISK MANAGEMENT CONTINUED


Risk Definition Key mitigating controls


Adverse business and/or client impact resulting from a material change in the external business environment, for example economic recession, market falls, adverse political developments and Brexit.

• Reported and considered through the Board and Group Executive Committee

• Risk, Compliance and the Investment management teams monitor the external business environment

Outsourcing Adverse business and/or client impact resulting from any outsourced or service providers, including IT system providers, failure to deliver the agreed service levels.

• Ongoing monitoring of outsourced service providers• Documented policy and procedures• Enhanced due diligence• Approval by Boards

People Adverse business and/or client impact resulting from insufficient human capital in terms of numbers, focus, culture and skillset.

• Remuneration Committee and Nomination Committee oversight

• Competitive and transparent remuneration schemes• Succession and contingency planning• Staff training and development

Process failure Adverse business and/or client impact resulting from failure of process and/or control.

• Risk event reporting and analysis • Review of management information• Oversight by all Boards and Committees• Staff training and development

Product and service

Adverse business and/or client impact resulting from poor product management or service delivery.

• Product and Service Oversight Committee • Partner-led service to clients• Investment process, market and performance monitoring


Adverse business and/or client impact resulting from breach of regulation or relevant laws.

• Proactive and regular contact with regulators• Policies and procedures • Impact assessment for upcoming regulatory changes • Oversight by all Boards and Committees

Change in the previous 12 months

Over the last 12 months, the firm’s risk profile was impacted by de-banking and the COVID-19 outbreak which occurred towards the end of the financial year. Apart from these factors, the holding and entity-level risks have remained relatively static. Cyber risk and change management continue to be key areas of focus. The firm’s risk management framework has been embedded across the firm and continues to be developed and refined. The Group remains well-capitalised and liquid, with significant buffers above all regulatory requirements.

During the year, the Group ceased to be a deposit taking institution. All deposits from customers held on-balance sheet were transferred to off-balance sheet client accounts. In addition, following the transfer of outstanding customer loan facilities to Hampden & Co Plc, a third-party private banking institution, the Group no longer offers credit facilities to customers. As such, credit, market and liquidity risks associated with these balances are no longer considered key risks. Refer to page 9 for more information on the Group’s decision to de-bank.

The COVID-19 pandemic, which affected the entire market, has tested the business resilience preparedness of the firm. The Group rapidly provided the capacity and capability for all staff to work from home, while remaining within its risk appetite. See emerging risks below for further details.

Emerging risks An emerging risk radar has been, and continues to be, developed to help the firm identify developing risks at group and business levels. It is a more fluid assessment tool given the nature of the risks involved and provides a discussion point in a consistent and uniform way with oversight from the relevant Committees and Boards. This development allows specific risks to be called out, discussed and for senior management to consider if action needs to be taken.

In the last 12 months, risks that have been on the emerging risk radar include:

• The COVID-19 pandemic where, led by the crisis management teams, the business has been able to successfully adapt and maintain business as usual functions throughout the crisis. Further information on the impact of COVID-19 and the Group’s responses can be found on page 9.

• Macro-economic uncertainty where the unsettled political outlook of the UK and potential impacts of a General Election could affect the economy.


Strategic Report

Strong performance despite market challenges

The Group reported a strong performance for the financial year, with year-on-year growth in operating income of 6.1%, driving a 9.7% increase in adjusted operating profit. The Group has also continued to invest in IT infrastructure with a cash spend for the year of £25.4 million (2019: £17.8 million) on modernising technical infrastructure, systems and processes.

Group operating resultsOperating income for the year has grown to £295.2 million (2019: £278.1 million), despite the impact of COVID-19 towards the end of the financial year. Growth was driven by an increase in Financial Services revenue from higher average market levels over the year and higher commission and foreign exchange income as a result of increased client trading volumes. This was coupled with strong growth across the Professional Services transactional business lines.

Grant HotsonGROUP FINANCE DIRECTOR

Operating expenses increased to £250.2 million (2019: £227.2 million); this includes the impact of merger-related costs (£7.1 million, see note 8) in the current year and a PAYE and NIC determinations credit (£3.5 million, see note 11) in the prior year. Excluding these one-off items, the increase is primarily due to higher staff costs of £170.7 million (2019: £160.5 million) reflecting salary inflation, profit-related variable compensation and a 4.5% increase in headcount. In addition, project costs to modernise IT infrastructure increased to £9.5 million (2019: £4.8 million) primarily due to increased Core Wealth programme costs (see below).

As a result, operating profit decreased by 11.6% to £45.0 million (2019: £50.9 million); however adjusted operating profit, which excludes merger-related costs, PAYE and NIC determinations and amortisation of intangible assets – client relationships (see note 15), increased 9.7% to £53.1 million (2019: £48.4 million) reflecting the strong underlying performance of the business during the year. The adjusted operating margin was 18.0% (2019: 17.4%).

Financial performance

Group results

2020£m

(unless stated)

2019£m

(unless stated)

Operating income 295.2 278.1

Operating expenses (250.2) (227.2)

Operating profit 45.0 50.9

Adjusted operating profit1 53.1 48.4

Profit before tax 45.3 51.1

Taxation (10.4) (10.8)

Profit after tax 34.9 40.3

Unadjusted basic earnings per share 60.6p 75.4p

Adjusted basic earnings per share1 75.3p 71.4p

Dividend per share 45.0p 36.0p

Funds under management and advice 20.6bn 21.4bn

Funds under administration 15.3bn 13.9bn

1. Key performance indicators are adjusted to exclude merger-related costs (note 8), prior year PAYE and NIC determinations (note 11) and amortisation of intangible assets — client relationships (note 15). These non-GAAP measures are relevant and useful in further understanding the Group’s performance and are explained on pages 12 and 13.

FINANCIAL REVIEW


TaxThe overall effective tax rate for the year was 23.0% (2019: 21.1%). This is calculated as the tax charge in the financial statements of £10.4 million (2019: £10.8 million), divided by profit before tax of £45.3 million (2019: £51.1 million). A full reconciliation is set out in note 12.

Basic earnings per shareUnadjusted basic earnings per share decreased by 19.6% to 60.6 pence (2019: 75.4 pence). Adjusted basic earnings per share, which is a key performance indicator for the Group and excludes merger-related costs (note 8), PAYE and NIC determinations (note 11) and amortisation of intangible assets – client relationships (note 15), increased by 5.5% to 75.3 pence (2019: 71.4 pence).

Distributions to shareholdersA final dividend for the year ended 30 April 2019 of 26.0 pence per ordinary share was paid to shareholders on 27 September 2019. A first interim dividend for the year ended 30 April 2020 of 15.0 pence per ordinary share was paid on 7 February 2020. A second interim dividend for the year ended 30 April 2020 of 30.0 pence per ordinary share was paid on 26 June 2020.

Effect of changes in accounting standardsIFRS 16 became effective in the current year. On transition to IFRS 16, the Group recognised right-of-use assets of £24.3 million (see note 17) and lease liabilities of £27.2 million (see note 2). During the year ended 30 April 2020, the Group recognised depreciation of right-of-use assets of £5.5 million and interest expense on lease liabilities of £0.7 million. In comparison during the year ended 30 April 2019, the Group recognised operating lease expenses of £6.2 million in accordance with IAS 17.

Further details can be found in note 2 to the Consolidated Financial Statements.

Expenditure on IT infrastructure and systemsThe multi-year programme to modernise IT infrastructure has continued throughout the year, with total costs for the year ended 30 April 2020, comprising both operating and capital expenditure, of £25.4 million (2019: £17.8 million).

The Core Wealth programme, designed to deliver major improvements in modernising the technical infrastructure, systems and business processes supporting the Financial Services business, is now expected to go live in the second half of 2020.

Segmental performanceThe composition of operating segments is based on the information reported to the Group Executive Committee. For management purposes, the Group is organised into four operating segments: Financial Services, Professional Services, Fund Administration and Other.

A review of the performance across the Group’s operating segments is presented in the next two sections. Results are summarised, by segment, in note 4 to the consolidated financial statements.

Operating incomeOperating income for the Financial Services segment increased by 6.2% over the prior year, mainly as a result of increased fee revenue and trading income.

Investment management and advisory fees grew by 4.8% to £134.2 million from £128.0 million. This was primarily as a result of increased funds under management due to a combination of organic growth and higher average market levels over the year, despite the fall in market levels in the last two months.

Trading activity increased considerably from the prior year, particularly due to the increased volatility towards year end and consequently commission and foreign exchange income rose by 16.6% to £30.9 million (2019: £26.5 million).

Treasury margin (the net margin on monies deposited with the wholesale market) reduced by 12.3% from the prior year, largely due to the closure of the Bank of England reserve account following cessation of banking activities in December 2019 combined with the impact of the Bank of England’s reduction in interest rates in March 2020.

The Professional Services segment has continued to see strong increases in operating income in the year with overall growth across all business lines of 6.1%. The COVID-19 pandemic did not have a material impact on the full year results; however it is expected to impact future trading, particularly in terms of the levels of advisory work and corporate transactions in the coming financial year, although there are also likely to be opportunities in terms of increased Restructuring and Recovery Services activities.

The non-recurring transactional business lines have shown strong growth; the Restructuring and Recovery Services and Forensics businesses have delivered significant income growth of 36.3% and 10.8% respectively and the newly-formed Transactions business (including the transactional areas previously managed under the Assurance and Business Services team combined with our Corporate Finance offering) has delivered income growth on a like-for-like basis of 5.1%.


Strategic Report

The core business lines have seen a varied year of trading. Assurance and Business Services has seen strong growth after restructuring to focus on its key offerings of assurance and business outsourced services, with underlying like-for-like annual growth of 12.7%. This success has been offset by a fall in overall income for the tax business lines of 2.4%, due to continued uncertainty in the UK market from Brexit and the General Election coupled with no significant new tax legislation changes during the year. As a result, the tax planning and advisory opportunities have been significantly reduced for our Private Client Tax and Business Tax teams.

The Fund Administration business has delivered income growth of 4.9%, largely driven by a 10.1% increase in funds under administration to £15.3 billion (2019: £13.9 billion), despite the fall in market levels in the last two months of the year.

Operating income for the Other segment increased to £1.5 million (2019: £1.3 million) due to continued improvement in the performance of our associate businesses in Singapore.

Operating expensesOperating expenses for the Financial Services segment increased by 8.6%, to £132.2 million (2019: £121.7 million), largely due to direct costs which increased by £5.8 million as a result of salary inflation and higher profit-related bonuses. The segment’s share of expenditure on indirect and overhead costs increased by 11.3% to £9.1 million (2019: £4.7 million), mainly due to higher project costs from implementing the Core Wealth programme.

Operating expenses for the Professional Services segment increased by 3.2% to £99.9 million (2019: £96.8 million). Direct costs increased by £3.4 million due to higher compensation costs from salary inflation and an increase in headcount to 870 (2019: 818) in support

of income growth, particularly in Assurance and Business Services and Transactions. The segment’s share of expenditure on indirect and overhead costs increased by 1.2%, primarily due to increased costs allocated from central support teams offset by a reduction in project costs.

Operating expenses for the Other segment increased to £8.5 million (2019: £2.4 million), due to one-off merger-related costs.

Funds under management and adviceFunds under management and advice of £20.6 billion were 3.7% lower than at the start of the year. The decrease, which is analysed below, compares favourably to the MSCI PIMFA Balanced Index and the FTSE 100 Index, which fell by 7.0% and 20.4%, respectively, over the same period.

This fall largely reflects the COVID-19 related market impact in the last two months of the year as, at the end of January 2020, funds under management and advice had increased by 6.5% to £22.8 billion compared to the start of the year, before falling by 9.6% to the end of the year.

Net organic growth, one of the Group’s key performance indicators (see page 12), has increased to 1.7% from 1.3% in the prior year.


2020£bn

2019£bn

As at 1 May 21.4 20.1

– inflows1 1.6 1.3

– outflows1 (1.2) (0.8)

Net inflows 0.4 0.5

Market adjustments2 (1.2) 0.8

As at 30 April 20.6 21.4

1. Valued at the date of transfer in/out. 2. Impact of market movements and relative

performance.

Financial positionIntangible assetsIntangible assets arise primarily in relation to business combinations, computer software and the acquisition of client relationships. At 30 April 2020, the total carrying value of intangible assets was £148.2 million (2019: £131.8 million). During the year, computer software costs of £14.5 million (2019: £14.7 million), mainly relating to the Core Wealth programme, were capitalised. No goodwill was acquired during the year.

Intangible assets relating to computer software are amortised on a straight-line basis over three to ten years from the date the software is operating as management intended. The total amortisation charge for the year was £0.7 million (2019: £0.7 million) and will increase significantly once the Core Wealth programme is available for use in the live environment.

Client relationship intangible assets are amortised over their minimum estimated useful life of ten years. If and when a client relationship is lost, any related intangible assets are derecognised in the year. The total amortisation charge for client relationships was £1.0 million (2019: £1.0 million), with no lost relationships derecognised during the year.

Goodwill that has arisen on business combinations is not amortised but is subject to a test for impairment on an annual basis. No goodwill was found to be impaired in the year under review or the preceding year.

FINANCIAL REVIEW CONTINUED


LockupTotal lockup as at 30 April 2020, being the amount of capital tied up in accrued income and debtors, has increased to 4.8 months (2019: 4.1 months), representing a £8.6 million year-on-year increase in working capital. This increase reflects the growth in the business during the year where significant transactional revenue growth has come from the Restructuring and Recovery Services business line, which has a much longer working capital cycle than the rest of the business.

Defined benefit pension schemesThe Group operates two funded defined benefit plans for qualifying employees, namely the S&W and NCL schemes. Both schemes are closed to new members.

At 30 April 2020, the NCL scheme reported a net surplus position of £1.1 million (2019: £1.6 million surplus), while the S&W scheme remained in a net flat position. Surpluses are not recognised in the Balance Sheet as the Group does not expect to benefit from contribution holidays in respect of the plans and has no contractual right to a refund of contributions in the event of a wind-up of the scheme.

The NCL scheme liabilities decreased by 12.2% to £20.8 million (2019: £23.7 million). The decrease was driven largely by transfers out of the scheme and cash commutations in the current year. Scheme assets decreased by 13.4% to £21.9 million (2019: £25.3 million) due to the capital withdrawals from the scheme and a fair value adjustment decrease as a result of the decline in equity markets in response to the COVID-19 pandemic.

The S&W scheme assets and liabilities are both unchanged at £1.8 million compared to the prior year.

Capital, treasury and liquidityThe Group’s regulatory capital, risk weighted exposures and capital ratios at 30 April are shown below.

Capital requirementsFor regulatory reporting purposes, the Group is subject to proportional consolidation through which entities not subject to prudential supervision are excluded from the calculation of regulatory capital.

As noted in the Co-Chief Executives’ Review on page 9, the Board took the decision to relinquish the firm’s banking licence and move to a client money model. The Group’s application for a variation of permission to cease to be regulated as a deposit taking institution was approved by the Prudential Regulatory Authority (PRA) on 12 December 2019. From this point, the Group has been solely regulated by the Financial Conduct Authority (FCA) and the basis of the Pillar 1 capital requirements calculation changed. Pillar 1 is calculated as the higher of either credit and market risk, or the Fixed Overhead Requirement (FOR). In the year to 30 April 2020, Group risk weighted exposures decreased by 10.0% to £539.1 million (2019: £599.1 million) reflecting the relinquishment of the

banking licence and change in basis of the Pillar 1 calculation, which is now based on the firm’s FOR.

The CET1 capital ratio has increased to 30.2% (2019: 25.1%); this is principally due to the impact of de-banking reducing the risk weighted exposures and removal of capital buffers. Own funds increased due to organic capital generation, allowing for payment of a progressive dividend, offset by an increase in intangible assets for Core Wealth implementation costs. Share capital and premium increased as a result of LLP share unit exchanges (note 33 and 36) and were largely offset by related movements in other reserves.

The Group’s CET1 and total capital ratios continue to be comfortably ahead of minimum regulatory requirements. All Group entities subject to prudential capital requirements exceed minimum requirements on a standalone basis.

The Group is required to allocate capital to cover the capital requirements to which it is subject under the Capital Requirements Regulations and Capital Requirements Directive (collectively known as CRD IV).

Common equity tier 1 capital (CET1)12020

£m2019

£m

Share capital and premium 66.6 31.1

Reserves 224.9 234.3

291.5 265.4

Deductions (128.8) (115.3)

CET1 after deductions 162.7 150.1

Additional tier 1 – –

Tier 2 – –

Own funds 162.7 150.1

Risk weighted exposures 539.1 599.1

CET1/Tier 1/Total capital ratio 30.2% 25.1%

1. The regulatory capital calculations have been prepared on the basis that the Group is classified as a €125k Limited Licence Firm at the year ended 30 April 2020. Discussions with the FCA regarding this classification have been ongoing and approval was received on 28 July 2020.


Strategic Report

The Group holds capital in respect of:

Pillar 1 — minimum capital requirementThe Group holds capital to cover the minimum capital requirements to meet the higher of either credit and market risk or the FOR.

Pillar 2 — supplementary capital following supervisory reviewThe Pillar 2a capital requirement is set by the Board and is subject to review by the FCA, to cover risks not sufficiently covered under Pillar 1. These risks include operational risk, the prudential segregation buffer and pension risk. At 30 April 2020, Pillar 2a represented 2.3% of risk-weighted exposures and the Total Capital Requirement (Pillar 1 and Pillar 2a) was 10.3% (2019: 10.2%). The Board assesses Pillar 2a on an annual basis.

Combined capital buffersThe Group is no longer subject to the capital conservation buffer (CCB) or the countercyclical capital buffer (CCyB) under CRD IV as a result of relinquishing the Group’s banking licence.

The Group prepares a Pillar 3 disclosure on an annual basis, which provides further detail about the Group’s regulatory capital position. The Pillar 3 disclosure can be found on the Group’s website.

Treasury and liquidity operationsDuring the year, following the decision to cease banking operations, all deposits from customers held on-balance sheet were transferred to off-balance sheet client money accounts. In addition, the Group transferred its outstanding customer loan facilities to Hampden & Co Plc, a third-party private banking institution. Prior to this, as part of the banking service, the Group used non-retail funding instruments to invest liquid asset balances and to manage the risks arising from its operations.

Total assets at 30 April 2020 stood at £609.2 million, while the prior year’s balance was £1,837.5 million of which £1,267.3 million comprised client deposits with Smith & Williamson Investment Services Limited representing the uninvested cash component of client portfolios.

The Group had no borrowings at 30 April 2020. In the prior year, Group borrowings (note 27) were £21.9 million for the funding of Smith & Williamson Holdings Limited Employee Benefit Trust (EBT), which was guaranteed by the Company. In January 2020, following the sale of Company shares held by the EBT to satisfy the exchange of LLP share units (see note 35), the outstanding balances were repaid. These facilities were not utilised for the remainder of the financial year.

Cash flow and capital expenditureDuring the year, the Group ceased to be a deposit taking institution. As a result, all deposits from customers held on-balance sheet were transferred to off-balance sheet client accounts, which resulted in a significant reduction in cash and cash equivalents (note 44).

Extracts from the consolidated statement of cash flows2020

£m2019

£m

Net (used in)/cash generated from operating activities (931.1) 92.1

Net cash used in investing activities (19.3) (16.2)

Net cash used in financing activities (22.8) (19.5)

Net (decrease)/increase in cash and cash equivalents (973.2) 56.4

Net cash and cash equivalents at the beginning of the year 1,165.3 1,108.9

Cash and cash equivalents at the end of the year 192.1 1,165.3

Group’s own net cash at the end of the year 192.1 195.2

FINANCIAL REVIEW CONTINUED

Included in cash and cash equivalents was £192.1 million (2019: £195.2 million) of the Group’s own net cash. The decrease on prior year was mainly due to an increase in capital expenditure and distributions to shareholders, and a decrease in operating profits, partially offset by proceeds on the issue of Company shares to AGF Management Limited.

Net cash used in operating activities was £931.1 million (2019: £92.1 million cash generation) primarily due to transferring all deposits from customers to off-balance sheet client money accounts.

Net cash used in investing activities included capital expenditure of £20.1 million (2019: £17.0 million). Total project costs of £26.8 million (2019: £19.2 million) were primarily spent on investment in new IT systems during the year, of which £17.2 million (2019: £13.2 million) was capitalised and £9.6 million (2019: £6.0 million) was expensed.

Net cash used in financing activities included returns to ordinary shareholders amounting to £24.2 million (2019: £20.3 million).


Viability StatementThe Directors have assessed the prospects and viability of the Group over a three-year period in line with the requirements of the UK Corporate Governance Code, with which it has chosen to comply in this respect.

The Directors consider that three years continues to constitute an appropriate period over which to provide its Viability Statement given the uncertainties in predicting the future impact of investment markets on the business over longer periods and the resilience demonstrated by the stress testing as set out below.

Forecasting for the three-year period is based on a detailed year-one budget and higher-level forecasts for years two and three.

The Directors have taken into account the Group’s income, costs, cash flow and regulatory capital and the potential impact of the principal risks and uncertainties, including the COVID-19 pandemic, based on the annual business plan and the risk assessment performed as part of the annual ICAAP.

The annual ICAAP is required by the FCA and requires the Group to perform a range of stress tests including reverse stress tests. These assess the Group’s ability to withstand a market-wide stress, a Group-specific (idiosyncratic) stress and a combined stress taking into account both market-wide and Group-specific events. The stress tests are derived through discussions with senior management and are deemed to be severe but plausible, after considering the principal risks and uncertainties faced by the Group. The scenarios involved are refreshed on at least an annual basis. However, given the recent market dislocation due to the impact of the COVID-19 pandemic, the forecasts have been re-run at the year end to provide a more up to date assessment of the Group’s ability to withstand the current economic downturn.

Although there still remains uncertainty on the outcome of COVID-19, a range of potential scenarios has been considered and the potential impact on the Group has been assessed.

In making this assessment, the Directors took comfort from the results of a series of stress tests that considered the impact of a number of severe market downturn scenarios. Initially, the three-year period projections were revised to reflect the likely impact of COVID-19: this reduces income materially in the short-term. This was then tested against two further scenarios: a slower market recovery using conservative, longer-term growth rates and a deeper reduction in income aligned to ICAAP stress testing. In addition, in anticipation of the proposed merger, forecasts for the Tilney Smith & Williamson Group, which factor in the impact of COVID-19, were considered. In all cases, the Directors were able to demonstrate the ability of the Group to withstand the current economic downturn.

Based on this assessment, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due to 2023.

Grant HotsonGROUP FINANCE DIRECTOR 7 AUGUST 2020


Strategic Report

CORPORATE RESPONSIBILITY REPORT

Focused on our responsibility

Smith & Williamson has a strong sense of corporate responsibility. We aim to manage the impact of our business on people, suppliers, communities, clients and the environment. To achieve this, we look for areas where we can have a positive influence in the communities in which we work. We also seek to minimise our environmental footprint and to provide a professional and supportive workplace for our colleagues, enabling us to deliver the best possible service to our clients.

GovernanceThe Corporate Responsibility and Charities Committee includes representatives from all key business functions. It is responsible for developing and monitoring the Group’s corporate responsibility initiatives. The Chairman of the Committee reports directly to the Board.

PeopleOur ongoing success is driven by our people. We strive to create a positive, rewarding and fulfilling work environment, providing the career development and training opportunities to enable our employees and Partners to reach their full potential while promoting an appropriate work/life balance.

Our long-term focus is on attracting, developing and retaining the right talent for our current and future business needs. It is essential that our workforce is engaged, motivated and diverse, with a wide range of backgrounds, skills, experience and ideas. This is reflected in our recruitment and talent development practices, with a broad programme of training and development initiatives, coaching and mentoring available to employees and Partners. During 2019 we completed our first ‘One S&W’ talent programme for Managers and Associate Directors to encourage and support delivery of our strategy and to help develop our leaders of the future. Our talent pipeline is further supported by the graduate, apprenticeship and summer internship programmes, which continue to provide opportunities across the education spectrum to a wide range of candidates.

We have strengthened the alignment between performance and reward with a greater focus on the assessment of behaviours as part of our annual performance review process via a balanced scorecard. Closely linked to this, our reward structure is designed to support our strategic objectives and incentivise appropriate conduct and behaviours alongside financial performance.

The impact of COVID-19 on our workforce, and the switch to remote working for the majority of staff during lockdown, is a key focus at present. To support staff and help them deal with their ‘new normal’ we have rolled out training aimed at both managers and their teams to help them become effective virtual employees and managers in a healthy and sustainable way.

Diversity and inclusionWe are committed to fostering an inclusive culture which encourages and supports diversity. As an equal opportunities employer, we ensure that all job applicants, employees and Partners are treated fairly and on merit. We believe that diversity of talent and ideas is vital to creating a positive work environment and delivering excellent client service.

Having a diverse and inclusive workforce leads to more innovation and opportunities, access to a wider talent pool and, ultimately, to a stronger business performance across the firm.

We have continued to make progress in relation to gender diversity, increasing the percentage of women in senior roles (Partner, Director and Associate

Director) from 25% to 28% since we signed up to the Women in Finance Charter in 2017. This means that we are on course to achieve, and hopefully surpass, the target we set under the Charter to have women hold 30% of senior roles by 2022. The Smith & Williamson Women’s Network was launched in early 2019 to provide professional and personal support to women within the firm and the Network now runs regular events both within the firm and externally. Looking to the longer-term, we have also continued to work with other City employers to encourage young women to pursue a career in financial and professional services via programmes like ‘She Can Be’.

The attraction of a wider pool of talent is a priority and we have participated in a range of targeted recruitment events to broaden our applicant base. We are pleased to participate in the Smart Futures programme, which provides work experience and mentoring to bright students from different socioeconomic backgrounds.

Flexible working has been identified as a key driver of increased diversity. Changes to our way of working as a result of COVID-19 have demonstrated that we can operate effectively with increased flexibility and remote working and we intend to utilise the new approach to create a more agile workforce to support our business going forward.

The health and wellbeing of our workforce is a particular focus at all times and particularly in the current circumstances. In 2019, as part of our wider wellbeing initiative and to coincide with Mental Health Awareness


week, we hosted events in partnership with the Samaritans and provided access to their online ‘Wellbeing in the Workplace’ programme. This is further supported by a range of guides, initiatives and employee assistance support that is available to staff and Partners.

Our 2019 Gender Pay Gap Report reported a mean gender pay gap of 16.5% and a median gender pay gap of 18.9% for employees. For Partners within the LLPs we have a mean gender pay gap of 9% and a median gender pay gap of 15.8%. The mean gender bonus gap was 4.3% for employees and 36.5% for Partners while the median stood at 30.1% for employees and 32% for Partners. We are disappointed to have seen an increase in our gender pay gap but acknowledge that it reflects our organisational structure as we have a higher proportion of men in senior roles and therefore the average male salary is higher than the average female salary. As an employer, we are committed to reducing our gender pay gap and we continue to focus on ways to encourage and support the progression of women into senior roles through recruitment, promotions and mentoring.

Anti-bribery policySmith & Williamson values its reputation and is committed to maintaining the highest level of ethical standards in the conduct of its business affairs. The actions and conduct of the firm’s staff as well as others acting on the firm’s behalf are key to maintaining these standards. Smith & Williamson does not tolerate bribery or corruption in any form.

The firm prohibits the offering, giving, solicitation or the acceptance of any bribe or corrupt inducement, whether in cash or in any other form: to or from any person or company wherever located, whether a public official or public body, or a private person or company; by any individual employee, Director, agent, consultant, contractor or other person or body acting on the firm’s behalf; in order to gain any commercial, contractual or regulatory

advantage for the firm in any way which is unethical or to gain any personal advantage, pecuniary or otherwise, for the individual or anyone connected to the individual.

The firm will investigate thoroughly any actual or suspected breach of our anti-bribery policy.

SuppliersWe have continued our commitment to being a living wage employer, seeking to ensure that all contractors employed in our supply chain are paid the living wage.

Modern slaveryWe are committed to ensuring our business and supply chain are free from any slavery or human trafficking. As we operate in the financial services sector, many of the service providers we encounter are UK-based entities. They are often themselves regulated by governing bodies such as the ICAEW, FCA or PRA. Our material supplier contracts have been reviewed to assess whether the terms in the agreements are satisfactory to provide us with confidence that our suppliers have sufficient procedures in place to protect against slavery or human trafficking occurring within their business and supply chain. The other main types of service provider relate to essential office services, such as security, catering and cleaning.

Our office services are outsourced to organisations with their own due diligence procedures for employees and contractors. Our tender process for these contracts includes confirmation of the steps the potential suppliers take to ensure their businesses are free from modern slavery and human trafficking. The due diligence process includes verifying that they have sufficient policies and procedures in place to ensure fair treatment and pay of workers, adequate whistleblowing procedures and confirming that all those employed in the provision of services have the necessary documentation to work legally in the UK.

CommunitiesWe continue to support Partners, employees and clients who personally undertake fundraising activities. During the year, we contributed approximately £62,000 to charitable causes through this programme.

Charitable gifts totalling £42,000, made as part of our staff Christmas Appeal, contribute to this total. Every year, we invite staff to nominate a charity to receive a donation at Christmas. In 2019, we received nominations for over 160 charities covering a wide spectrum of causes, including medical research, children’s charities, hospices and community projects.

The Committee selected 21 charities to support, with each receiving a donation of £2,000. There was an emphasis on supporting smaller, local charities and in particular those organisations where a member of our staff had been providing volunteering services.

The firm also supports TaxAid, a charity that provides tax advice to people on low incomes who cannot afford professional advice. Volunteers from across the private client tax departments are involved. The volunteers run a phone helpline twice a month. Calls are set up so that they are forwarded to Smith & Williamson volunteers in the first instance, freeing up the TaxAid staff to work on other matters. We have also made a financial donation to TaxAid.

In response to the COVID-19 crisis, the firm announced donations to Fareshare and Foodcloud (totalling £73,000) as well as its intention to match staff donations of up to £25,000. The Charities Committee identified these two charities whose aim is on helping some of the most vulnerable people in our society.

Many staff members and Partners also dedicate time to supporting organisations in their local communities.


Strategic Report

ClientsWe take a proactive approach to listening to our clients’ needs and ambitions and have launched a unified Client Care programme across the Group, led by our Group Head of Client Services. This provides a platform to capture insight that will enable us to deliver a consistently exceptional client experience. We believe that by listening to our clients’ experiences on how we are performing, and by understanding what they want and expect from Smith & Williamson – now and in the future - we can improve many aspects of our service that will bring real and tangible benefits. This is a client-centric programme. It helps us to grow and deepen relationships, as well as understand more about our clients’ needs so that together we can develop growth strategies, ensuring ongoing satisfaction and enabling us to better serve their interests.

Smith & Williamson has provided Ethical and Environmental, Social & Governance (ESG) screening on a negative exclusion basis and a positive ‘best of breed’ basis for many years. We have a particularly strong reputation in this area as it plays to our strengths as a manager of genuinely bespoke, segregated portfolios and our reputation for client service. To enhance this reputation, we switched screening services in the year to MSCI ESG Manager allowing us to screen both fixed interest and equity holdings plus most funds. Clients can now receive a detailed ESG report for their portfolios plus see their estimated carbon footprint and the impact of their holdings relative to the UN Sustainable Development Goals (SDGs).

Smith & Williamson is a responsible investor which means that, while we do not impose a particular set of ethical values on our clients, we do take into account ESG factors alongside traditional financial factors when assessing investments. We do this because we think it helps us make better investment decisions. This

process helps give greater insight into each business and helps us better assess the quality of management and governance arrangements. We also expect both climate change and the social impact of companies to continue growing in importance, so as long-term investors it is important to be able to take advantage of these long-term trends.

As part of our further commitment to corporate responsibility, Smith & Williamson Investment Management LLP is a signatory of the UN supported Principles for Responsible Investing (PRI), a global community seeking to build a more sustainable financial system. Smith & Williamson Investment Management LLP is also a voluntary member of the UK Stewardship Code with a Tier 1 rating and will be signing up to the newly-revised Stewardship Code 2020 in due course. As members of the Investor Forum and Climate Action 100+, we have been able to combine our active engagement voice with many other leading asset management groups to great effect.

Smith & Williamson’s own voting policy can be found on our website. We use proxy voting adviser Glass Lewis and Broadridge, which manage the electronic proxy voting process, to vote on over 70% of our direct company holdings both in the UK and Overseas, plus the majority of our investment trust holdings and all AIM stocks. This means, for example, that in the calendar year 2019 we voted on 10,134 resolutions at 772 AGMs. We publish our quarterly voting and engagement activity, and our Annual Stewardship and Responsible Investment Report are available on our website. We continue to organise conferences, run seminars and publish widely on all things related to responsible investing.

EnvironmentGreenhouse Gas (GHG) emissionsWe remain committed to minimising our impact on the environment by effectively measuring and managing our environmental footprint. We are working to efficiently manage our use of utilities, reduce our Greenhouse Gas (GHG) emissions and better control the waste we produce.

We continue to work in partnership with EcoAct to deliver our environmental reporting. This work includes developing an online portal to manage our data, which will allow us to provide greater structure to our environmental reporting and to provide quality management information, understand areas where we can target improvements and meet our compliance.

This year we have calculated GHG emissions from our activities for the 2019-20 reporting year and provided a comparative analysis in the table below. Our emissions were calculated by EcoAct using the main requirements of the GHG Protocol Corporate Accounting and Reporting Standard and the UK Government Greenhouse Gas Conversion Factors for Company Reporting 2019. Our emissions disclosure meets the requirements of the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 for large, unquoted companies and there are no exclusions of any subsidiaries or material emissions sources.

GHG emissions from electricity consumption have decreased. While the consumption has only decreased a little, the main reduction comes from changes in the electricity grid mix, with higher amounts of renewable energy in the UK electricity grid. Also, emissions from vehicles have decreased; energy consumption in vehicles (stated in kWh

CORPORATE RESPONSIBILITY REPORT CONTINUED


in the table below) are the main source of this reduction. Emissions from gas has increased this year, however, the increase from the baseline remains in line with the growth in employee numbers.

This year, through our procurement process, we have changed our electricity supplier for the offices where we are directly responsible for the purchasing of electricity. This supply is now 100% from renewable sources and is backed by Renewable Energy Guarantees of Origin (REGOs).

Sum of CO2e (tonnes)

Total emissions: 3,918

2019/20

2,23

7.5

1,12

5.4

555.

4

2018/19**

2,43

2.3

1,27

8.5

373.

9

Total emissions: 4,085 Total emissions: 5,351

2,84

2.9

2,07

1.9

436.

0

2015/16*

Scope 1: Gas, company vehicles, refrigerants Scope 2: Electricity Scope 3: Business travel, waste, water, paper & postage, other (WTT & T&D)

Notes1. All data calculated using UK

Government GHG conversion factors for company reporting (2019).

2. Electricity calculated using location-based approach in accordance with GHG Protocol Scope Reporting Guidance.

3. Any missing data has been extrapolated based on an average of the available data, previous year’s data or data from different offices or relevant industry benchmarks.

4. WTT: well to tank, T&D: transmission & distribution.

CO2e (tonnes/FTE)

0.83

0.82

1.55

Gas Company Vehicles Electricity Grey fleet

2019/20 2018/19 2015/16*

In compliance with statutory environmental legislation, we responded to Phase 2 of the ESOS regulations this year. From the data submitted, several opportunities were identified where we may be able to save energy usage.

These included:

• Reducing temperatures on both air conditioning plant and the domestic hot water outlets in toilet areas at our head office in London

• Installation of LED lighting at our Bristol office

• Upgrading of the emergency power supply units at our Glasgow office to improve efficiency

• Closer monitoring of our car fleet usage and where possible encouraging car sharing and the use of pool or hire cars as opposed to personally-owned cars

We are currently considering how to implement these recommendations.

Due to environmental impacts on weather conditions, we experienced flash flooding at our head office in London this year. Hence, we have reviewed our risk assessment process and implemented several changes to mitigate the impacts of severe weather conditions on our business.

* 2015/16 = baseline figures ** Paper and postage figures for 2018/19 have been restated due to an over estimation in the prior year

Consumption: 7,918,321

2019/20

4,40

2,80

8

53,9

742,64

4,37

9

817,

160


2018/19

4,51

6,63

6

63,6

51

1,84

5,76

8

954,

949


2015/16*

4,48

2,70

6

112,

639

2,20

5,46

3

1,06

6,86

0

Total UK energy consumption (kWh)


Strategic Report

WasteWhere we control our waste streams, by working with our cleaning service providers, we are consistently achieving high recycling rates of all materials in our daily waste streams. Where waste cannot be recycled, the remaining non-recycled waste is being used in clean energy generation.

Reduction of single-use plastics within our offices continues to be our focus. We have significantly reduced our use of disposable cups and where this has not been possible, we ensure these cups are made of biodegradable material. We are also working with our supply chain to further remove plastic in packaging materials.

As a result of the COVID-19 pandemic, we have seen a significant reduction in paper use, coupled with the implementation of electronic solutions being incorporated to enable business operations to continue to run effectively and efficiently. We continue to explore ways of reducing paper usage across the business and have implemented new ways of working such as default duplex printing and discouraging the printing of papers for meetings. We have invested heavily in enhancing some of our IT processes this year, which we are hopeful will help in reducing the need to print paper. In addition, we are proposing to introduce an online document management solution in certain areas of our business to reduce the use of paper even further.

We also continue to encourage our clients to use our online business portal, therefore reducing mailouts of printed matter.

Health and SafetyAcross our property portfolio we continue to work with our health and safety consultancy partner, Assurity Consulting, in carrying out risk assessments at all our locations, to ensure the health, safety and wellbeing of our staff and anyone else who may be affected by our work. This information is recorded on an online portal, allowing us easy access to monitor the process and provide enhanced reporting and management information. We experienced a total of 14 minor accidents/incidents across the whole business this year and one RIDDOR (Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013) reportable incident.

As part of our health and safety training provision, we are working with Posturite to enhance what we are currently able to provide. This includes implementing an online process to ensure all staff are provided with the relevant training for their role, in compliance with legislation.

Tax strategyOur tax strategy, which can be found on our website, is focused on ensuring that taxes (and tax risks) are managed to provide outcomes consistent with commercial substance and are within the parameters of the Group’s strategic objectives. While we are mindful to run our business in a cost-effective manner in line with our obligations to our shareholders, we do not participate in aggressive tax planning. We have an open, honest and positive working relationship with HMRC.

Our appetite for tax risk is low and our tax affairs are based on sound commercial principles and relevant tax legislation.

CORPORATE RESPONSIBILITY REPORT CONTINUED


Non-financial Information Statement While not required, the Group has developed a non-financial information statement reflecting elements of the new Non-Financial Reporting requirements contained in section 414CA and 414CB of the Companies Act 2016. The table below is intended to help stakeholders understand our position on non-financial matters. Further information regarding these matters can be found as indicated in the table.

Reporting requirement Some of our relevant policies Additional information in the report Page

Environmental matters

Corporate responsibility statement1 Initiatives to minimise carbon footprint 26

Employees Employee handbook1 People 24

Family-friendly policy1

Group compliance handbook1

Health and safety policy1

Human rights Annual statement on slavery and human trafficking2

Modern slavery 25

Privacy statement2

Social matters Supporting charities policy1 Communities 25

Anti-bribery and corruption

Anti-bribery and corruption policy2 Anti-bribery policy 25

Gifts and entertainment policy1

Financial crime manual1

Whistleblowing policy1

Business model Business model Business model 6

Non-financial key performance indicators

Key performance indicators 12

Value for stakeholders 7

Environment 26

1. Available to all employees through the Smith & Williamson intranet. Not published externally.2. Available on our website www.smithandwilliamson.com and available to employees through the Smith & Williamson intranet.

Approved by the Board of Directors on 7 August 2020 and signed on its behalf by:

David Cobb CO-CHIEF EXECUTIVE

7 AUGUST 2020

Kevin StoppsCO-CHIEF EXECUTIVE


Strategic Report

Membership key

Audit and Risk Oversight Committee

Nominations Committee

Remuneration Committee

Chair of Audit and Risk Oversight Committee

Chair of Nominations Committee

Chair of Remuneration Committee

BOARD OF DIRECTORS

Director biographies

A

N

R

A

N

R

Andrew SykesNon-Executive Chairman

Appointment date28/10/04

ExperienceAndrew was appointed Deputy Chairman in 2008 and Non-Executive Chairman in September 2013. He is also Chairman of the Nominations Committee and a member of the Audit and Risk Oversight Committee and the Remuneration Committee.

Andrew has extensive experience as a Non-Executive Director, particularly in the financial services sector. He is Senior Independent Director of Intermediate Capital Group plc, and was formerly an Executive Director of Schroders plc. During his 26 years with Schroders he held a number of senior investment banking and investment management roles. He also chaired the Schroder Group’s private banking businesses.

N R

David CobbCo-Chief Executive


ExperienceDavid is Co-Chief Executive of the Group and Chief Executive of the regulated entities — Smith & Williamson Investment Management LLP, Smith & Williamson Investment Services Limited, Smith & Williamson Financial Services Limited and NCL Investments Limited. He sits on the Group Executive Committee, and chairs the Group Risk and Compliance Committee, and the Executive Committee of Smith & Williamson Investment Services Limited. In his role as Co-Chief Executive, he also sits on the Board of Smith & Williamson Fund Administration Limited.

David joined Smith & Williamson in 1985, and rose to become Head of the Investment Management and Banking division in 2007 before becoming Co-Chief Executive in 2013. While his primary role is in the senior management of the firm, he is still involved in advising a number of longstanding clients.

A


Kevin StoppsCo-Chief Executive


ExperienceKevin is Co-Chief Executive of the Group. He chairs the Group Executive Committee and is Chairman of the Board of Smith & Williamson Fund Administration Limited.

Kevin joined Smith & Williamson in 1987 and became Head of Professional Services in 2009. He has a background in tax and has been qualified as a CA and CTA for more than 30 years.

While Kevin’s primary role is in the senior management of the firm, he continues to maintain a small number of client relationships. He is also a member of the Board of Nexia International, a leading, global network of independent accounting and consulting firms.

Grant HotsonGroup Finance Director


ExperienceGrant is the Group Finance Director. He sits on the Group Executive Committee and chairs the Change Management Committee. Grant is also a member of the Group Risk and Compliance Committee and the Executive Committee of Smith & Williamson Investment Services Limited.

Grant joined Smith & Williamson in 2016 and has over 20 years’ experience in the financial services sector. After qualifying as a chartered accountant, he spent seven years with a ‘Big Four’ accountancy firm, where his clients were mainly asset management companies. Subsequently, Grant was Chief Financial Officer and member of the executive team at Ignis Asset Management Limited, having previously served as Head of Finance at Scottish Widows Investment Partnership.

Peter FernandesHead of Private Clients Investment Management


ExperiencePeter is Head of Private Clients Investment Management and, as such, he is a member of the Financial Services Executive Committee.

He chairs the Group’s Corporate and Social Responsibility and Charities Committee and is a member of the Suitability Committee. Peter also continues to be a Portfolio Manager for high net worth clients.

Peter joined Smith & Williamson in 2001 following 12 years with Fleming Private Asset Management, where he advised high net worth clients in international portfolios, family OEICs and unit trusts.


Governance

BOARD OF DIRECTORS CONTINUED

Elizabeth ChambersIndependent Non-Executive Director


ExperienceElizabeth is an experienced Board Director, senior financial services executive, strategist and marketing leader in the UK and globally. Her previous Board experience includes serving as an Executive Director of the Western Union International Bank and various Barclays JVs with leading UK brands including Sky, Argos, IHG and Thomas Cook, and as a Non-Executive Director on the Boards of Dollar Financial Group, hibu plc, and The Home and Savings Bank.

She is currently a Non-Executive Director at Provident Financial Group plc, one of the UK’s leading consumer lenders and Hastings Group Holdings plc, a major home and auto insurance provider to consumers and businesses in the UK. Elizabeth is also on the Board of the non-profit University of Colorado Anschutz Medical Campus, and on the advisory Boards of several fintech and software start-ups.

She has extensive executive experience, including serving as Chief Marketing Officer of Barclays and Barclaycard; Chief Marketing and Business Development Officer at Freshfields; Partner at McKinsey & Company; and recently as Chief Strategy, Product and Marketing Officer at Western Union, the global payments company.

NA R

Keith JonesIndependent Non-Executive Director and Senior Independent Director


ExperienceKeith is Chairman of the Remuneration Committee and a member of the Audit and Risk Oversight and Nominations Committees. He was appointed as the Senior Independent Director in January 2017.

Prior to joining the Board Keith had a wide-ranging career in the financial services sector. Keith was Chief Executive of Aviva Global Investors, having previously been an Executive Director and Partner of James Capel & Co and then Lazards. He was also a Board Director of NPI and Chief Executive Officer of NPI Asset Management and, more recently, an Adviser to Lloyds Bank plc.

Keith is an experienced Non-Executive Director, having acted as Chairman for Execution Noble and as a Non-Executive Director of F&C Asset Management PLC, Just Retirement Holdings, Chairman of Haitong Securities and a Senior Adviser to Permira. Presently he is Chairman of Pemberton Asset Management Holdings and a Non-Executive Director within Aon.

RNA

Carla StentIndependent Non-Executive Director


ExperienceCarla joined the Board on 4 October 2019 and is Chair of the Group Audit and Risk Oversight Committee.

Carla has extensive experience as an Executive and Non-Executive, both in the financial services sector and in other industries. She is currently Chair of Marex Spectron Limited, one of the world’s leading commodities brokers, a Non-Executive Director of Post Office Limited, where she also chairs the Audit and Risk Committee and is on the Boards of JP Morgan Elect plc and some early stage businesses. Her executive career has included senior roles at Virgin Group and Barclays Bank.

NA R


Board attendanceThe Board had eight scheduled meetings during the year and met on a number of other occasions to discuss specific matters, such as potential acquisitions and the progress of the merger. The number of scheduled meetings that each Director attended is shown below.

Director

Number of meetings

eligible to attend

Number of

meetings attended

E G Chambers 8 8 D M Cobb 8 8 P L Fernandes 8 8 A C Fisher 8 8B C Goldring 8 8 G T Hotson 8 8 K Jones 8 8 C Stent 4 4 K P Stopps 8 8 A F Sykes 8 8

Blake GoldringNon-Executive Director


ExperienceBlake is a member of the Nominations and Remuneration Committees.

Blake is the Executive Chairman of AGF Management Limited, a publicly traded, global asset management firm based in Toronto. He first joined AGF in 1987 and held a series of senior positions before being appointed President in 1997, Chief Executive Officer in 2000 and Chairman in 2006. Prior to that, he worked in corporate banking for a major Canadian bank.

Blake holds the Chartered Financial Analyst designation, is a member of the Toronto Society of Financial Analysts and a Fellow of the Institute of Canadian Bankers. He also sits on a number of private and not-for-profit Boards.

Blake has received numerous honours in recognition of his personal and professional achievements. Most recently, in December 2018, he was named a Member of the Order of Canada, which is Canada’s second highest honour for merit.

N R

Andrew FisherNon-Executive Director


ExperienceAndrew joined the Board as a Director nominated by AGF Management Limited. He is a member of the Audit and Risk Oversight Committee.

With a career spanning 30 years in the financial services sector, initially with Coopers & Lybrand and then as Chief Executive of Cox Insurance Holdings, Andrew has held leadership and governance roles in a range of investment management and financial services businesses. Prior to joining the Board, Andrew was Chief Executive of Towry for eight years until he stepped down in April 2014. Andrew had previously acted as Chief Executive of Coutts Group and recently stepped down as a Director at C. Hoare & Co, the UK’s oldest private bank.

He has also acted as a Senior Adviser to the Carlyle Group.

A


Governance

Corporate Governance Report

UK Corporate Governance Code and the Wates PrinciplesThe Board recognises the importance of good corporate governance in facilitating effective, entrepreneurial and prudent management that can deliver the long-term success of the Company. The Company is not quoted and therefore is not required to comply with the UK Corporate Governance Code (the Code), which was published by the Financial Reporting Council in 2018. It has had regard to the Wates Principles (the Principles), which were also published in 2018. The Board has developed, and continues to keep under review, its own governance arrangements, adopting and reflecting elements of the Code where they are considered appropriate for a Group of our size and complexity and having regard to the corporate governance arrangements set out in the Principles.

As we reported last year, the Group reviewed its governance framework in March 2018 and, since then, continues to make a number of small changes to that to reflect regulatory or legal changes or best practice. Those changes include those adopted by the Board of Smith & Williamson Fund Administration Limited, which agreed to form an Assessment of Value Committee, further embedding the governance arrangements in place for that Company and further small changes to the governance arrangements of both Smith & Williamson Investment Management (Europe) Limited, incorporated in Ireland, and Smith & Williamson International Limited, incorporated in Jersey.

The terms of reference of the Executive Committee of Smith & Williamson Investment Services Limited were updated to reflect the outcome of the process to relinquish the banking permissions granted to that Company by the Prudential Regulation Authority, whilst the terms of reference of the

Corporate Responsibility and Charities Committee, which reports to the Board, were updated to reflect its increased responsibilities in relation to environmental, social and governance (ESG) matters.

The Group has been subject to the requirements of the Senior Managers and Certification Regime (SMCR) since 2016, in respect of Smith & Williamson Investment Services Limited, and there were certain changes to the existing governance arrangements which were deemed necessary to reflect the extension of that regime to other UK regulated entities in December 2019.

The Board works to ensure that the Group’s governance arrangements continue to be robust and are able to deliver a well-run business which has, at its heart, its clients and which recognises its responsibilities towards shareholders, together with other stakeholders in the business and the wider markets and society in which it operates.

Governance frameworkThe Group has structured its governance arrangements such that the members of the Board of Smith & Williamson Holdings Limited are also Directors of the majority of the main UK trading or regulated subsidiaries.

Audit and Risk Oversight CommitteeEnsures the financial stability of the Group and the integrity of the Group’s financial statements. It also provides oversight of risk matters.See page 42

Nominations CommitteesResponsible for recommending changes to the composition of the Board and reviewing succession planning.See page 45

Remuneration CommitteeResponsible for setting the Remuneration Policy for all Partners, Directors and employees.See page 46

Each Director of Smith & Williamson Holdings Limited is also a Director of:Smith & Williamson Investment Services LimitedSmith & Williamson Financial Services LimitedSmith & Williamson Corporate Finance LimitedNCL Investments Limited

And a member of the management Boards of:Smith & Williamson Investment Management LLPSmith & Williamson LLP

Smith & Williamson Fund Administration LimitedHas its own Board, comprised of both Executive and Independent Non-Executive Directors together with its own Audit and Risk Oversight Committee, Risk Committee and the newly formed Assessment of Value Committee, mentioned above.

Offshore subsidiariesEach of the Group’s offshore subsidiaries has its own Board, comprising Executive Directors and, in the case of Smith & Williamson Investment Management (Europe) Limited and Smith & Williamson Investment Management (Ireland) Limited, Non-Executive Directors. The governance arrangements of all offshore subsidiaries are kept under review by those Boards in the light of their own regulatory and legal requirements.

CORPORATE GOVERNANCE REPORT


Board activities during the yearBoard meetingsThe role of the Board is to establish a clear strategy for the Group, to determine a risk appetite to support that strategy and to oversee an effective risk control framework. Statute requires that the Board manages the affairs of the Company for the benefit of all stakeholders. It understands its stakeholders to be:

• Its regulators and the governments of the countries in which it operates

• Its shareholders and investors

• Its staff

• Its clients

• Its suppliers

• The communities in which it operates

And that this is best achieved by:

• Developing a business model and practices that are designed to maintain and enhance market integrity

• Encouraging a culture whereby long-term relationships are fostered with clients, who are treated fairly and are content with the service that they receive

• Developing services and products designed for positive client outcomes that are attractive and provide fair treatment for both existing and new clients

• Developing practices which promote the interests of clients and mitigate the risk of reputational damage or financial loss in respect of the Group’s assets or the assets that it manages or controls on behalf of clients

• Maintaining policies such as those relating to conflicts of interest and tax avoidance

• Developing policies in relation to its employees and staff, including diversity and inclusion matters, remuneration and modern slavery that demonstrate that the Group deals fairly with its stakeholders

The Board has a list of matters that are reserved for its decision, which cover the following areas:

• Strategy and business development

• Risk and control

• Regulatory and tax

• Finance and audit

• Legal and compliance

• People

• Operations and IT

There have been a number of matters on which the Board has focused during the year.

StrategyThe Group Executive Committee has been given responsibility for the day to day implementation of the Group’s strategic plan.

The Board receives regular updates on various initiatives related to ‘One S&W’, the Group’s strategic growth plans and supporting initiatives.

MergerAs mentioned in our report to shareholders last year and set out in more detail in the documentation sent to investors in October 2019, the Group received an approach from Tilney Group in 2019 setting out a proposal for the two Groups to merge. For the reasons set out in the circular sent to investors in October 2019, after extensive discussion, the Board was content to recommend the merger to shareholders who voted overwhelmingly in favour of it.

In making that decision, the Board considered each of its stakeholders, concluding that the merger would benefit many of its staff by providing

increased opportunities for career development in a larger Group. Its shareholders would benefit from both a significant uplift in the value of their shares in Smith & Williamson Holdings Limited and the opportunity for many to be able to continue to invest in the larger Combined Group. Its clients would have the opportunity to access additional services, which were not currently widely available in the Group, such as financial planning, and would not be disadvantaged. Several clients were approached to determine their views, which substantially mirrored the view of the Board.

It was intended that the merger would complete in early February 2020, but that timetable was extended in order to address the requirements of the Financial Conduct Authority (FCA).

In the expectation that the merger will complete in the second half of 2020, the Board determined that it would focus on that transaction, rather than pursue the alternative of exploring the potential for the shares of Smith & Williamson Holdings Limited to be listed on the London Stock Exchange.

BrexitBrexit continues to give rise to considerable uncertainty for the Group, the markets in which it operates and the country. During 2019, prior to the UK’s departure from the European Union, the Board discussed the matter at several of its meetings. There was particular concern for our clients based in Europe and for staff of our offices in Dublin, as it became clear that we would be unable to offer services post-Brexit under our existing regulatory passporting arrangements, in the case of no deal being reached between the UK and European Union.


Governance

While the government continues to discuss and to agree with its European counterparts the transitional provisions relating to Brexit, which are due to be approved by December 2020, there remains uncertainty about the way in which the Group will be able to operate in Europe.

To mitigate those concerns, Smith & Williamson Investment Management (Europe) Limited was incorporated in Ireland and received permission in March 2019 from the Central Bank of Ireland to operate as a MiFID II investment firm.

AcquisitionsDuring the year the Board considered opportunities to acquire businesses, both within Professional Services and in Financial Services. Each acquisition was considered carefully on its merits, to determine whether it would enhance the Group’s business and thus benefit its investors and staff and whether it would maintain or enhance the service provided to clients. Potential acquisitions have not been progressed, for a variety of reasons.

Banking permissionsDuring the year the Board of Smith & Williamson Investment Services Limited made the decision to relinquish its banking permissions granted by the Prudential Regulation Authority. The rationale for this decision was to release surplus capital to its Parent company, Smith & Williamson Holdings Limited, enabling it to utilise that capital to return to shareholders or to make acquisitions in due course.

The Board considered the impact on clients of that proposal and, as far as possible, sought to mitigate that impact by providing an alternative third party provider of loan facilities

where such had been granted by the company and seeking ways in which other services provided to, and valued by, clients could continue to be offered.

It considered the financial impact on the company and on the wider Group, the impact on staff in the Banking department and the Group’s operating systems and was content to proceed.

The detailed execution of the decision to relinquish the banking permissions was delegated to a Project Steering Group under the chairmanship of the Group Legal Director.

Equity participationThe Group operates a number of share option schemes for both its staff and for Partners in its limited liability partnerships. The Group’s largest investor, AGF Management Limited, was given the opportunity to purchase additional shares in the Group pursuant to the articles of association of Smith & Williamson Holdings Limited. During the year, AGF Management Limited increased its holding from 29.94% to 30.04% at a cost of £9.0 million. See note 33 for further detail.

Following approval of proposals by shareholders at the annual general meeting in September 2018, individual members of the Group’s two limited liability partnerships were given the right to exchange their LLP share units for shares in Smith & Williamson Holdings Limited on a one-for-one basis. These exchanges were satisfied by the transfer of shares from the Smith & Williamson Holdings Limited Employee Benefit Trust and the allotment of Company shares. A summary of exchanges which took place in the current and prior financial year is set out in note 36.

The Group’s strategy continues to place emphasis on empowering its staff, working in unison and enhancing

technology. It focuses on the Group’s core strengths and the services that it provides to clients. The Board continues to monitor those matters which support that strategy such as the Group’s robust capital position and its shareholder base.

Cyber securityThe Board has continued to focus on cyber security matters, including data governance, following the implementation of the General Data Protection Regulation, to protect the interests of the Group’s clients, staff and shareholders in particular. Reports on such matters are made regularly to the Board. In 2019 a cyber defence target operating model was approved by the Board. The implementation of the operating model continues with improved defences, monitoring and measurement introduced through the period. Progress on the programme was reported to the Board. Further cyber security improvements are continuing, and the cyber improvements programme is revised on a regular basis as new cyber threats emerge.

The Board also received a report from the Group’s IT Director regarding the potential for raised cyber security risks resulting from staff being required to work from home during the COVID-19 pandemic and the systems and processes that were in place to minimise those risks.

IT and operational mattersThe Board has continued to receive regular reports regarding the Group’s IT strategy and the implementation of new systems. It ensures that there is appropriate challenge in respect of timetables and delivery together with oversight of the costs involved. As we reported last year, the Group has embarked on a substantial programme of IT change with the implementation of a new core system, supporting investment management services. This

CORPORATE GOVERNANCE REPORT CONTINUED


will replace many of the Group’s existing systems and lead to a number of improvements in the services that we provide to clients. The Change Management Committee, reporting to the Group Executive Committee, monitors the progress of the project and the Project Director makes regular reports to the Group’s Audit and Risk Oversight Committee and the Board on its implementation. The system is of particular relevance for clients of the Group’s Financial Services businesses, but the Board also approved the implementation of a new system for the Group’s Professional Services business, which is now underway.

During the year the Board received an internal audit report regarding the review of Board management information on operational resilience, which had been considered by the Audit and Risk Oversight Committee. That Committee agreed several actions and requested the Chief Risk Officer to prepare an action plan, which was monitored by the Committee and matters of concern escalated to the Board, where appropriate.

Governance mattersFollowing the extensive changes to the Group’s governance arrangements in early 2018, as stated above, there have been few changes proposed to the Board during the year and those that have been agreed reflect changes required to be made for legal or regulatory reasons, or as a result of feedback about the way in which existing governance could be improved.

Board members continued to have the opportunity to participate in training and development initiatives. Those initiatives focused on the Group’s businesses and the markets in which it operated, with Directors receiving presentations on investment process and the business units in the Group’s Professional Services division. Board members, as well as other senior management function holders, received

regular updates regarding their responsibilities under SMCR, which was extended in December 2019 to cover

Smith & Williamson Financial Services Limited, Smith & Williamson Corporate Finance Limited, Smith & Williamson Investment Management LLP and NCL Investments Limited, in addition to Smith & Williamson Investment Services Limited. The Board of Smith & Williamson Fund Administration Limited received similar briefings as the regime was also extended to include that Company.

The Board undertook an evaluation of its performance in April 2019 and considered the outcome of that early in the financial year ended 30 April 2020. It was recognised that a number of the recommendations would likely be addressed as a result of the merger between Smith & Williamson Holdings Limited and Tilney Group Limited and that continues to be the expectation.

Risk and regulatory mattersRisk and regulatory matters continue to be a focus for the Board. In addition to regular reports on such matters, the Internal Capital Adequacy Assessment Process (ICAAP) was approved during the year. The ICAAP, in accordance with the prudential rules of the FCA requires regular assessment of the amounts, types and distribution of capital that the Group considered adequate to cover the nature and level of the risks to which it is, or might be, exposed. The Board also reviewed and agreed the costs of wind down in addition to the Pillar 2a assessment to which reference is made in the financial review on page 22.

It also agreed the Pillar 3 report, which appears on the Group’s website.

The Board has regular dialogue with the Group’s regulators, in particular the FCA. Communications from the FCA were reviewed and discussed by the Board.

It also received reports on the Group’s compliance with the FCA’s CASS regulations from the CASS officer, together with his annual attestation. Detailed information about the Group’s approach to risk and its risk management framework may be found on page 40.

LegalThe Board receives regular updates from the Group Legal Director that include current legal matters, as well as information about developments in best practice in law and corporate governance that affect the business. Directors are periodically reminded of their responsibilities both in law and from a regulatory perspective.

The Board also considered an annual report from the Group’s Money Laundering Reporting Officer, which focused on developments in anti-money laundering regulation and financial crime. Regular reports are made to the Board regarding financial crime matters.

During the year the Board received, considered and authorised the statements made in compliance with the Modern Slavery Act 2015, which appear on the Group’s website and in the Corporate Responsibility Report on page 25.

Investment process and performanceThe Board members met together during the year to consider, in depth, the Group’s investment processes and returns and receive regular reports at Board meetings on the development of those processes. Periodic reports are made regarding investment performance and the Group’s whistleblowing arrangements.


Governance


FinanceThe Board received the Group management accounts at each of its regular meetings and approved both the Annual Report and Accounts for the year ended 30 April 2019 and the Group’s Interim Statement for the six months ended 31 October 2019. The Board also agreed the going concern and viability statements included within the Annual Report and Accounts.

It recommended the payment of a final dividend for the year ended 30 April 2019, which was approved at the annual general meeting in September 2019 and it considered and agreed to pay a first interim dividend for the year ended 30 April 2020 to shareholders of the Company. Shareholders will be aware that at a meeting in May 2020, the Board agreed to pay a second interim dividend for the year ended 30 April 2020 to shareholders of the Company.

The Company’s shares are not quoted but the fair value of shares was determined on the instruction of the Board by Canaccord Genuity Limited, independent investment bankers, in May 2019. The fair value of a share in the Company as at 1 November 2019 was determined by external consultants for the recent share exchange transactions (note 36).

The Board received revised financial forecasts as a result of the likely impact on the Group’s profit and loss account of the market volatility caused by the COVID-19 pandemic and received assurance that it was well capitalised and resilient to any potential decline in profits.

The impact of that market volatility on client portfolios was also considered by the Board, which received reassurance from the Co-Chief Executives that the Investment Process Committee was keeping the matter under review and issuing suitable guidance to investment managers on a regular basis.

PeopleThe Board received reports from the Group’s HR Director on human resources matters. Further information regarding the Group’s work on diversity and inclusion can be found on page 24. Culture continues to be a focus for the Board and was discussed during its consideration of the Group’s strategy. The Group published its Gender Pay Gap Report in April 2020, following approval by the Remuneration Committee.

The Board also reviewed the Group’s whistleblowing policy, with which it remained content.

In addition, it received regular reports on the impact on staff of the COVID-19 pandemic, both in respect of those who were required to travel to the Group’s offices and those who had been advised to work from home.

Corporate responsibilityThe annual report of the activities of the Corporate Responsibility and Charities Committee was received by the Board, which has reiterated its commitment to the firm’s culture and values. Work continues to focus on developing management information regarding culture and values to evidence that the Group, its staff and clients are aware of, and live, the culture and values that the Group espouses. Further details can be found in the Corporate Responsibility Report on pages 24 to 29. A full report of the Group’s stance in respect of ESG matters is available on the Group’s website.


The Change Management Committee also reports to the Group Executive Committee and monitors large change projects across the Group. It meets monthly and provides challenge and oversight of change activity. This includes the prioritisation, planning, execution and governance of in-scope projects and change activity in accordance with the change management/project policy and procedures adopted by the Board.

The Board of Smith & Williamson Investment Services Limited is supported by an Executive Committee which meets monthly. Until December 2019 it reviewed matters relating to the Group’s banking and settlement operations businesses and the dealing function. Since then, and following the company’s relinquishment of its banking permissions granted by the Prudential Regulation Authority it continues to review the latter two activities, in addition to the Group’s Treasury function. Typically, the Committee considers operational dashboards, a report from the Credit Review Committee, reports on risk and compliance matters affecting the Company and reports from the Fair Value Pricing Committee.

The Group Executive Committee, in its oversight of the business, is supported by the Financial Services Executive Committee and the Professional Services Executive Committee.

Other Committees in the Group’s governance structure include the CASS Oversight Committee, which is responsible for the oversight of client money and assets, the Investment Process Committee and the Group’s Appointments Committee.

Corporate governance arrangements for subsidiariesAdditional information regarding the corporate governance arrangements for NCL Investments Limited, Smith & Williamson Investment Services Limited, Smith & Williamson Investment Management LLP, Smith & Williamson Corporate Finance Limited and Smith & Williamson Financial Services Limited is available on the Group’s website.

Committee structureA number of Committees report directly to the Board. These include the Audit and Risk Oversight Committee, the work of which is described on pages 42 to 44, the Nominations Committee, the work of which is described on page 45, the Group Executive Committee and the Remuneration Committee, further information about which is set out in pages 46 to 49, together with the Corporate Responsibility and Charities Committee, the work of which is described on pages 24 to 29. The terms of reference of each, agreed by the Board, set out the matters that are delegated.

The Group Executive Committee, the membership of which is drawn from senior colleagues across the Group, is responsible for managing the business and delivering the execution of our strategy. It meets weekly and during the year has considered a wide range of topics.

The Group Risk and Compliance Committee, which reports to the Audit and Risk Oversight Committee, meets monthly and reports on risk issues and compliance matters.

The Product and Services Oversight Committee, which reports to the Group Executive Committee, reflects the product governance requirements of MiFID II.


Governance

Risk management frameworkThe Group operates a three lines of defence model to support the risk management framework. Responsibility and accountability for risk management are broken down into three lines, as follows:

A number of key risk indicators, together with associated risk appetites for each, have been agreed within the risk management policy and framework (see pages 14 and 15), which reflects the risks to the Group’s business and delivery of its strategy. Those key risk indicators sit within a consolidated risk map, which is agreed by the Board and monitored by the Group Risk and Compliance Committee, which reports to the Audit and Risk Oversight Committee on any key risks that sit outside the risk tolerances set and recommends actions to bring them back within tolerance where applicable.

Internal control and financial reporting The Board has overall responsibility for the Group’s system of internal control. The Chair of the Audit and Risk Oversight Committee is responsible for the internal audit function and is supported by the Chief Risk Officer.

The detailed work is outsourced to Ernst & Young LLP. Audit reports from a rolling programme of work are received and reviewed by the Group Risk and Compliance Committee, the Audit and Risk Oversight Committee and any other relevant Committees as appropriate.

The Group’s system of internal financial control includes restrictions on payment authorisations and execution and, where appropriate and possible, duties are segregated. The annual budgeting, forecasting and monthly

management reporting system, which applies throughout the Group, enables trends to be evaluated and variances to be acted upon. The Group’s Executive Committee received monthly financial information on results and other performance data and the Board reviewed financial and performance data at each of its regular meetings.

Any system of internal control, however, is designed to manage, rather than eliminate the risk of failure to achieve business objectives and client outcomes. In establishing and reviewing the system of internal controls the Directors consider the nature and extent of relevant risks, the likelihood of a loss being incurred and costs of control.

Relations with shareholdersSmith & Williamson Holdings Limited has a programme of communication with its shareholders through the interim and annual report and financial statements and at the annual general meeting. Shareholders are given the opportunity to participate by asking questions at that meeting or by submitting written questions in advance, as is likely to be the case in 2020, as a result of the restrictions on large gatherings imposed by the Government as part of its COVID-19 response. Regular communication with the Company’s largest shareholder, AGF Management Limited is enhanced by its representation on the Board of Smith & Williamson Holdings Limited.


1. First lineThe first line of defence is the business itself, i.e. individuals within the business have primary responsibility for managing risks, identifying control deficiencies and implementing remedial action plans to prevent the occurrence of control failures and the crystallisation of risks.

2. Second lineThe second line of defence comprises the compliance and Group risk teams, whose function is to establish the risk and compliance management frameworks, by which risks are identified, monitored and managed.

3. Third lineThe third line of defence is the internal audit team, which provides assurance to senior management that business processes and controls are operating effectively. Internal audit identifies process and control deficiencies and action plans.


Going concernThe Group’s business activities, together with the factors likely to affect its future development and performance, are set out in the strategic review. In addition, the strategic review refers to the Group’s capital position, cash flows and viability. The Group’s objectives, policies and processes for managing its capital and financial risk management objectives, details of financial instruments and exposures to credit and liquidity risk are set out in note 47.

The Group has adequate financial resources and a large, diversified client base. As a consequence, the Directors believe that the Group is well placed to manage its business risks successfully. The Group’s Capital Management Process is set out on note 46.

In addition, the Group has demonstrated a reasonable expectation of the Group’s viability over the period of assessment with reference to forecasts reflecting the impact of COVID-19 over the three years from the balance sheet date, prepared as part of the merger discussions. Refer to the Viability Statement on page 23 for further information.

The Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis of accounting in preparing the Annual Report and Accounts.


Governance

Audit and Risk Oversight Committee Report

The Committee met eight times during the year. A note of attendance is shown in the adjacent table.

The Group Finance Director, the Group Legal Director, the Chief Risk Officer, the Head of Compliance and the Group Financial Controller were all in attendance at the Committee meetings, as were representatives from the Group’s external and internal auditors, who also met with the Committee members before several meetings without management present.

Roles and responsibilities of the CommitteeThe Committee has responsibility for a number of audit and risk matters, which are set out in its terms of reference and include:

Risk oversightThe Committee has responsibility for maintaining oversight of risk matters facing the Group. At each meeting, the Committee receives a summary of the risks across the Group from the Chief Risk Officer. The Committee also receives input from the Group Risk and Compliance Committee, and makes recommendations to the Board as appropriate.

The Committee regularly considers the Group’s risk dashboard and top down risk maps on a consolidated basis. During the year it discussed and challenged the risk dashboard and risk maps, together with the associated risk appetite statements and key risk indicators.

Membership and attendance

MemberMeetings attended

Carla Stent (Chair) 1 4/4

Elizabeth Chambers 7/8

Andrew Fisher 6/8

Keith Jones 8/8

Andrew Sykes 8/8

1. Appointed 4 October 2019.

The Chair’s statementI am delighted to have joined the Board of Smith & Williamson Holdings Limited and to be chairing the Audit and Risk Oversight Committee at this exciting time for the Company. It is my pleasure to report on the Committee’s deliberations during the 2019/20 financial year, which have included risks relating to the ongoing merger discussions, the COVID-19 pandemic, and the IT infrastructure upgrades that the Group is undertaking through the Core Wealth project.

As Chair, I would, under normal circumstances, expect to attend the annual general meeting of the Company to meet shareholders and to answer questions in respect of matters for which the Committee is responsible.

Committee membersI was appointed as Chair of the Committee in October 2019, prior to which the Committee was chaired by Andrew Sykes. I would like to thank Andrew for his contribution as Chairman prior to my appointment.

Under my Chairmanship the members of the Committee are:

• Elizabeth Chambers

• Andrew Fisher

• Keith Jones

• Andrew Sykes

All of the above served as members throughout the financial year, and have a wealth of experience of financial matters and of the financial services industry.

AUDIT AND RISK OVERSIGHT COMMITTEE REPORT


During the year, the risks identified and discussed by the Committee included change management and projects (as a result of the large scale IT infrastructure upgrades being carried out), as well as merger related risks and the impact of the COVID-19 pandemic (including increased people, conduct and cyber security risks). The risks relating to the project for Smith & Williamson Investment Services Limited to relinquish its banking permissions were also discussed by the Committee.

Regulatory risksThe Committee regularly reviews the Group’s capital requirements to ensure that the Group maintains sufficient capital to pursue its strategy and that the Group adheres to the regulatory requirements set out by the FCA and (until the banking licence was relinquished) the Prudential Regulatory Authority.

During the year, the Committee received regular reports on the prudential regulatory capital of the Group. It also considered and provided challenge on the ICAAP, and after reviewing the assumptions, risk scenarios and stress tests, was content to recommend this to the Board for approval. The Committee also considered the Pillar 3 disclosures and recommended these to the Board for approval.

The Committee considered the CASS audit reports prepared by PricewaterhouseCoopers LLP (PwC), the Group’s external auditor at the time, and received reports from the Group’s CASS officer regarding CASS matters. It also received the findings from the FCA’s CMAR survey.

The Committee has also discussed financial crime and controls on a regular basis, and reviewed and approved the Group’s whistleblowing policies during the year.

Operational risksThe Committee regularly considers the operational risks that are facing the Group and discusses and recommends appropriate mitigations. During the year, it continued to receive regular reports on operational resilience matters together with a tracker of work to be done. Substantial progress has been made on embedding operational resilience across the Group throughout the financial year.

A continuing focus for the Group has been cyber security, particularly given the heightened risk in light of the COVID-19 pandemic and resulting remote working. The Committee reviewed the cyber target operating model during the year and receives regular reports on IT matters to ensure that the risks arising from the Group’s investment in technology and digital channels are managed appropriately and mitigated where possible.

The Group has a number of transformational IT projects in progress, including the Core Wealth programme. These projects are monitored by the Change Management Committee, which has provided regular reports to the Committee with a particular focus on the implementation and other risks involved.

During the year, the Committee received the results of a climate change assessment and, later in the year, a presentation on ESG matters.

Other risksBrexit — the Committee has kept under review the risk aspects of the potential impact of Brexit on the Group. This will continue to be a focus until such time that the transitional provisions have been agreed between the UK government and its European counterparts.

Legal — the Committee received regular updates from the Group Legal Director, including reports on material claims, noting any lessons learned as a result and monitoring the implementation of any resulting actions.

TaxThe Committee considered the Group’s annual taxation status report and its tax strategy, which is available on the Group’s website.

Audit mattersInternal audit — the Committee received regular reports from Ernst & Young LLP, the Group’s internal auditor. A number of internal audits were carried out during the year with material recommendations considered by the Committee. The Committee monitored progress against the implementation of the recommended actions, and reviewed management’s responses to any matters of significance raised during the audit reviews.

External audit — PwC were appointed as the Group’s external auditors in 2014, and the Committee was content with the effectiveness of the external audit for the year ended 30 April 2019. During the year, PwC resigned as the Group’s external auditors. There were no circumstances surrounding the resignation that are required to be brought to the attention of shareholders. On 28 May 2020, Mazars LLP were appointed as the Group’s external auditors.


Governance

Finance mattersCritical estimates and judgements made in the preparation of the annual report and accounts were considered by the Committee, including those in relation to the Group’s funded defined benefit pension plan and its liabilities for unfunded pension payments and share option and award assumptions.

The Committee considered the carrying value of goodwill in both Financial Services and Professional Services and concluded that there were no indications of impairment. The quantum and reasons for the provisions made in the annual report and financial statements were considered and approved.

The going concern and viability statements were discussed, together with a paper regarding dividend funding and the review of the work of the Committee that was included in the Annual Report and Accounts. The Committee confirmed that it was content to recommend to the Board that the going concern basis of accounting be used in the preparation of those statements. Following these discussions, the Committee was content to recommend to the Board that, taken as a whole, the 2019 Annual Report and Accounts were fair, balanced and understandable and provided the information necessary for shareholders to assess the Company’s performance, business model and strategy.

Prior to the year end, and in advance of the completion of the merger with Tilney, Smith & Williamson appointed Mazars LLP as the external auditors for the Group. PwC resigned on 9 April 2020 and Mazars were appointed on 28 May 2020. A full and complete handover was effected from PwC to Mazars and, given that this report covers the full year to 30 April 2020 during which PwC had provided interim assurance services, the Committee received confirmation from both firms that there were no significant facts or matters that impacted their independence as auditors that were required to be brought to the attention of the Committee. Both firms confirmed that they had complied with the Auditing Practices Board’s Ethical Standards and that they were independent and able to express an objective opinion on the financial statements. At its meeting in December 2019 the Committee considered and recommended to the Board for approval the Interim Statement for the six months ended 31 October 2019. The Committee considered the profit and loss accounts and balance sheets of those entities in the Group that were proposing to pay interim dividends and was content to recommend to the Board that a first and second interim dividend be paid to shareholders for the year ended 30 April 2020.

In May 2020, a paper was presented to the Committee in response to high-level guidance provided in March 2020 by the Financial Reporting Council (FRC) regarding the COVID-19 pandemic. The paper sets out key areas of focus in preparing the 2020 Annual Report and Accounts which include narrative reporting to provide forward-looking information, going concern and any associated material uncertainties, providing information on judgements and estimates and reporting on post balance sheet events. These matters were considered and documented in various papers submitted to the Committee in July 2020.

ConclusionDuring the coming financial year, the Committee will continue to focus on the risk and prudential risk matters facing the Group, with a particular focus on the significant IT infrastructure change as a result of the implementation of the Core Wealth system, and the integration risks arising as we proceed with the Tilney Smith & Williamson merger. It will also continue to be cognisant of the evolving pandemic and Brexit related risks, as well as any new risks and changes to the regulatory environment that may come into effect during the course of the year.

Carla StentCHAIR OF THE AUDIT AND RISK OVERSIGHT COMMITTEE

7 AUGUST 2020

AUDIT AND RISK OVERSIGHT COMMITTEE REPORT CONTINUED


Nominations Committee Report

their extensive knowledge of the Group’s business and its executives enabled them to provide effective challenge at meetings and their mix of skills and experience continued to be relevant to the Group’s activities.

During the previous financial year, the members of the Committee led the search for a successor to me as the Chair of the Audit and Risk Oversight Committee, following John Harley’s retirement from the Board. Carla Stent was selected by the Committee and appointed by the Board, subject to regulatory approval. That approval was forthcoming in the current financial year and she was appointed as a Director of each of Smith & Williamson Holdings Limited, Smith & Williamson Financial Services Limited, Smith & Williamson Corporate Finance Limited, Smith & Williamson Investment Services Limited and NCL Investments Limited. She was also appointed as a member of the management Boards of each of Smith & Williamson LLP and Smith & Williamson Investment Management LLP.

The Committee also considered the report on its activities for the prior year, which was included within the 2019 Annual Report and Accounts.

Looking forwardThe work of the Committee will develop as Smith & Williamson completes its merger with Tilney Group and the Combined Group’s governance processes are reviewed and enhanced. One focus is likely to be on succession planning in Tilney Smith & Williamson both at the Board level and amongst senior management, whilst the ongoing requirements of the FCA’s Senior Managers and Certification Regime will be kept under review by the Committee.

Andrew SykesCHAIRMAN OF THE NOMINATIONS COMMITTEE

7 AUGUST 2020

The Chairman’s statementIt is my pleasure to present to you the report of the Nominations Committee’s deliberations during the financial year.

Under my chairmanship, the members of the Committee are:


• Blake Goldring

• Keith Jones

• Carla Stent (appointed 4 October 2019)

Role and responsibilities of the CommitteeThe Committee is tasked with considering the knowledge, skills and experience of the Board, together with the succession plans for Board members and recommending the appointment of Directors to the Board.

During the year, I reported to the Committee on the outcome of the 2019 appraisals of each of the Directors of the Company, while Keith Jones, our Senior Independent Director reported on the outcome of his appraisal of me.

The Committee also received a schedule of senior management function holders and notified Non-Executive Directors of Smith & Williamson Investment Services Limited, together with a schedule of certified persons and considered the fitness and probity of each, confirming that it was content.

During the year the Committee considered those Directors who were to retire by rotation at the 2019 annual general meeting and made recommendations to the Board regarding my continued tenure, as I have served on the Board for over nine years. I absented myself from that discussion.

The Board was content to accept the recommendations of the Committee that each of those who were to retire at the annual general meeting continue to serve as a Director on the basis that


Member

Meetings attended/eligible to

attend

Andrew Sykes (Chairman) 2/2


Blake Goldring 2/2

Keith Jones 2/2

Carla Stent 1 0/0

1. Appointed 4 October 2019.

NOMINATIONS COMMITTEE REPORT


Governance

Remuneration Committee Report

The Committee received advice during the year from the Co-Chief Executives. The Committee can call for external advice, including legal advice, as required.

Remuneration PolicyThe main principles of the Remuneration Policy are to:

• align remuneration and incentive plans with the business strategy, performance of the business and shareholder interests

• ensure that remuneration is set at an appropriate and competitive level, taking into account market rates and best practice

• foster and support conduct and behaviours in line with our culture and values

• maintain a sound risk management framework

• ensure that the ratio between fixed and variable remuneration is appropriate and does not encourage excessive risk-taking

• comply with all relevant regulatory requirements

The Policy is designed to reward Partners, Directors and employees for delivery of both financial and non-financial objectives set in line with Company strategy. Performance is measured via a balanced scorecard which includes financial metrics and non-financial criteria including compliance and risk issues, client management, supervision, leadership and teamwork.

The Chairman’s statementIt is my pleasure to present the report of the Remuneration Committee’s work over the past financial year.

Under my chairmanship, the members of the Committee are:


• Blake Goldring

• Carla Stent

• Andrew Sykes

Carla Stent joined the Committee on 4 October 2019 when she was appointed to the Board as a Non-Executive Director.

The Committee is governed by formal terms of reference which are reviewed and agreed by the Board annually.

Roles and responsibilities of the CommitteeThe Remuneration Committee is responsible for setting the Remuneration Policy for all Partners, Directors and employees within the Group including individuals designated as Material Risk Takers under the Remuneration Code. Our Remuneration Policy is designed to meet the requirements of the Code and provide a framework to attract, retain, motivate and reward employees and Partners. The overall policy is designed to promote the long-term success of the Group and to support prudent risk management, with particular attention to conduct risk. The remuneration of all Executive Directors of the Board, Material Risk Takers and senior management function holders within the Group is the responsibility of the Committee.


Member

Meetings attended/eligible to

attend

Keith Jones (Chairman) 7/7


Blake Goldring 6/7

Carla Stent1 1/3

Andrew Sykes 6/7

1. Appointed 4 October 2019

REMUNERATION COMMITTEE REPORT


The remuneration of individual Executive Directors is determined by the Committee within the framework of this Policy. The Policy aims to provide overall remuneration that is competitive and will attract, motivate and retain high-calibre individuals who can deliver successful business performance in the short and long term. It seeks to provide clear alignment between remuneration and the interests of both clients and shareholders.

What we have doneDuring the year, the Committee met on seven occasions. Among the issues considered and discussed were:

• a review of the Remuneration Policy for the Group

• approval of the list of individuals identified as Material Risk Takers in relation to the Remuneration Code for the 2019/2020 financial year

• a review of regulatory changes to assess their potential impact on the Group’s remuneration strategy

• approval of bonus pool calculations

• a review of the achievement of performance conditions for the Smith & Williamson Investment Management LLP Long Term Investment Plan and approval of vesting for the third tranche of awards

• determination of remuneration for Executive Directors

• approval of remuneration for all Partners and Directors within the Group

• approval of the individual remuneration of Material Risk Takers

• determination of share and option awards for Executive Directors, Partners and Directors

• approval of the Gender Pay Gap Report for 2019

• approval of the risk methodology for the calculation and assessment of bonus pools

• assess the report of the Chief Risk Officer on the compliance, regulatory and risk management performance of the Executive Directors to determine any impact on their individual remuneration awards

• approval of awards of equity under the Growth Incentive Plan

• approval of changes to the Group Share Plans

• approve the harmonisation of working hours for regional offices

As illustrated in the chart below, fully diluted equity ownership for current employees and Partners across all levels of our business as at 30 April 2020 was 42.6%. This table assumes that LLP share units are exchanged for Company shares. Refer to note 13 for the fully dilutive impact on adjusted basic earnings per share and adjusted dilutive earning per share.

Details of all incentive plans for Directors, Partners and employees are contained in notes 33 and 34 to the financial statements. Details of LLP share units issued to individual members of the LLPs are contained in note 36 to the financial statements.

Annual report on remunerationThe fixed remuneration for each Executive Director is set on an annual basis or whenever there is a significant change in role or responsibility. In setting fixed remuneration the Committee benchmarks each role against market data on companies of a similar size and complexity within the same sectors.

When considering variable remuneration for the Executive Directors, the Committee takes account of overall business performance for the Group and divisions, the achievement of both financial and non-financial objectives (including adherence to the principles of treating customers fairly, conduct risk, compliance and regulatory rules), personal performance and any other relevant policy of the Board in respect of the year ended 30 April 2020. The Committee agrees the individual allocation and structure of variable remuneration.

Executive Directors’ fixed and variable remuneration is paid either as salary or bonus from the company or as profit shares of either, or both, of the LLPs.

Current employees and Partners vested and unvested equity interests 2020

Number ‘000

Interest %

A ordinary shares 21,939 34.3%

Conversion of vested LLP share units 780 1.2%

Conversion of unvested LLP share units 3,540 5.5%

Conversion of unvested A ordinary shares 1,015 1.6%

27,274 42.6%


Governance

Total remuneration (audited information)

Salary and LLP profit shares

£

Cash bonus

£

2020 Total

£

2019 Total

£

Executives:

D M Cobb 437,885 780,000 1,217,885 1,037,805

P L Fernandes 332,965 625,000 957,965 825,765

G T Hotson 334,070 350,000 684,070 556,512

K P Stopps 418,640 780,000 1,198,640 958,345

Non–executives:

E G Chambers 56,875 - 56,875 50,000

A C Fisher – – – –

B C Goldring – – – –

J H Harley (to September 2018) - – - 24,904

K Jones 65,000 - 65,000 65,000

C Stent (from October 2019) 37,481 - 37,481 –

A F Sykes 160,000 - 160,000 160,000

1,842,916 2,535,000 4,377,916 3,678,331

During the year ended 30 April 2020 and 30 April 2019, the following awards were made to the Executive Directors:

SWIM LLP

EMP1SW LLP EMP2

30 April 2020 Grant date Number Grant date Number

D M Cobb – – – –

P L Fernandes – – – –

G T Hotson - - - -

K P Stopps – – 30/10/19 5,917

30 April 2019

D M Cobb – – – –

P L Fernandes – – – –

G T Hotson 30/10/18 4,652 30/10/18 1,551

K P Stopps – – 30/10/18 6,203

REMUNERATION COMMITTEE REPORT CONTINUED


SWIM LLP Deferred3

SW LLP Deferred4

SWIM LLP RSA5

SW LLP RSA6

30 April 2020 Grant date Number Grant date Number Grant date Number Grant date Number

D M Cobb – – – – 30/10/19 10,414 30/10/19 2,603

P L Fernandes – – – – 30/10/19 7,100 30/10/19 1,775

G T Hotson - - - - - - - -

K P Stopps – – – – 30/10/19 2,958 30/10/19 11,83430 April 2019

D M Cobb – – – – 30/10/18 11,911 30/10/18 2,978

P L Fernandes – – – – 30/10/18 8,934 30/10/18 2,234

G T Hotson 30/10/18 76,768 30/10/18 25,590 30/10/18 9,306 30/10/18 3,102

K P Stopps – – – – 30/10/18 3,723 30/10/18 14,889

Further details of the above awards can be found in note 33.

Options exercised during the yearDuring the year ended 30 April 2020 and 30 April 2019, the following options were exercised by the Executive Directors:

SWIM LLP

RSA5 SW LLP

RSA6SW LLP

Matching7 HOL

Matching9 SWIM LLP

LTIP8 SWIM LLP Deferred3

SW LLPDeferred4

HOLSharesave10 Fair value

30 April 2020 Number Number Number Number Number Number Number Number £

D M Cobb 13,765 3,763 - - 87,000 - - 5,585 930,455

P L Fernandes 9,178 2,509 - - 64,549 - 2,495 4,468 703,032

G T Hotson – – – 3,750 – 6,398 19,192 – 247,923

K P Stopps 2,677 11,706 10,453 - - - - - 209,86430 April 2019

D M Cobb 14,211 4,759 - - 87,000 - - - 854,118

P L Fernandes 8,882 2,974 - - 64,549 - - - 615,824

G T Hotson - – – - - – – – –

K P Stopps 2,073 11,103 11,447 - - - - – 198,461

1. Smith & Williamson Investment Management LLP SWHL Equity Matching Plan, exercise price £nil2. Smith & Williamson LLP SWHL Equity Matching Plan, exercise price £nil3. Smith & Williamson Investment Management LLP Deferred Option Plan, exercise price £nil4. Smith & Williamson LLP Deferred Option Plan, exercise price £nil 5. Smith & Williamson Investment Management LLP Restricted Share Awards Plan, exercise price £nil6. Smith & Williamson LLP Restricted Share Awards Plan, exercise price £nil7. Smith & Williamson LLP Matching Share Plan, exercise price £nil8. Smith & Williamson Investment Management LLP Long Term Investment Plan, exercise price £nil9. Smith & Williamson Holdings Limited Matching Share Plan, exercise price £nil10. Smith & Williamson Sharesave Scheme, exercise price £5.835

Keith JonesCHAIRMAN OF THE REMUNERATION COMMITTEE

7 AUGUST 2020


Governance

Directors’ Report

DirectorsAll those Directors listed on pages 30 to 33 served throughout the year, with the exception of Carla Stent who was appointed to the Board on 4 October 2019.

Indemnity and insuranceThe Directors have been covered by liability insurance throughout the year and the policy of insurance remains in force.

Financial instruments and risk managementInformation on the Group’s financial instruments and management of financial risk is disclosed in notes 1 and 47 respectively.

Corporate responsibilityWe are committed to minimising the environmental impact of our operations and to delivering continuous improvement in our environmental performance. See pages 26 to 27 for more details on our total CO2 emissions data.

Substantial shareholdingsAt 30 April 2020, the Company had been notified of the following interest of 3% or more in its ordinary share capital.

The Directors present their Annual Report on the affairs of the Group, together with the audited financial statements for the year ended 30 April 2020.

Registered company numberThe Company’s registered number is 4533948.

Results and returns to shareholders during the yearThe consolidated results for the year are shown on page 55.

The Directors do not recommend the payment of a final dividend. Dividends payable in respect of the year, along with prior year payments, are set out below.

2020 2019pence £m pence £m

1st Interim 15.0 8.7 10.0 5.1

2nd Interim 30.0 17.7 - -

Final - - 26.0 13.3

Total 45.0 26.4 36.0 18.4

Capital structureDetails of changes in the Company’s share capital during the year are given in note 33 to the consolidated financial statements and details of the purchase and sale of shares in the Company by the EBT are included in note 35.

Political donationsNo political donations were made during the year (2019: £nil).

Post balance sheet eventsDetails of post-balance sheet events are set out in note 41 to the Consolidated to the Financial Statements.

Share priceThe ex-dividend fair value of an ordinary share in the Company at 30 April 2020 was £9.73 (2019: £7.45) and the range during the year was £8.45 to £9.73 (2019: £7.45 to £8.06). See page 109 for information on how the share fair value was determined.

Corporate governance statementThe Company’s statement on corporate governance can be found in the Corporate Governance Report on pages 34 to 41. The Corporate Governance Report forms part of this Directors’ Report and is incorporated into it by cross-reference.

DIRECTORS’ REPORT

Number % held

AGF Management Limited (D ordinary shares) 17,815,790 30.04%


Auditors and disclosure of information to auditorsEach person who is a Director at the date of approval of the annual report and accounts confirms that:

• so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware

• each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the auditors were aware of that information

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

During the year, PricewaterhouseCoopers LLP resigned as auditors. On 28 May 2020, Mazars LLP were appointed as auditors.

Statement of Directors’ responsibilitiesThe Directors are responsible for preparing the annual report and accounts 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 applicable law and International

Financial Reporting Standards (IFRSs), as adopted by the European Union (EU). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and of the Company and of the profit or loss of the Group and the Company for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently

• state whether applicable IFRSs as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial accounts

• make judgements and accounting estimates that are reasonable and prudent

• prepare the financial statements on a going concern basis, unless it is inappropriate to presume that the Group and the Company will continue in business

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and the Company’s transactions, and disclose with reasonable accuracy at any time the financial position of the Group and 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 Group and Company and hence for taking reasonable steps for

the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

On behalf of the Board.

D A SaundersCOMPANY SECRETARY

25 MOORGATE LONDON EC2R 6AY

7 AUGUST 2020


Governance

Financial statements

53 Independent Auditor’s Report

55 Consolidated Financial Statements

61 Notes to the Consolidated Financial Statements

122 Company Financial Statements

126 Notes to the Company Financial Statements

52 Smith & Williamson Holdings Limited | Annual Report 2020

INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Report to the members of Smith & Williamson Holdings Limited


Opinion We have audited the financial statements of (the ‘Company’) and its subsidiaries (the ‘Group’) for the year ended 30 April 2020 which comprise:

• the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income;

• the Consolidated Balance Sheet;

• the Consolidated Cash Flow Statement;

• the Consolidated Statement of Changes in Equity;

• Notes to the Consolidated Financial Statements, including a summary of significant accounting policies;

• the Company Income Statement and Statement of Comprehensive Income;

• the Company Balance Sheet;

• the Company Cash Flow Statement;

• the Company Statement of Changes in Equity; and

• Notes to the Company financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

In our opinion, the financial statements:

• give a true and fair view of the state of the Group’s and of the Company’s affairs as at 30 April 2020 and of the Group’s and the Company’s profit and cash flows for the year then ended;

• have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union; and

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

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the 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.

Emphasis of matter – Impact of the outbreak of COVID-19 on the financial statements In forming our opinion on the Company and Group financial statements, which is not modified, we draw your attention to the Directors’ view of the impact of the continuing global pandemic from the outbreak of COVID-19 as disclosed on page 9, and the consideration of the going concern basis of preparation on page 61.

Conclusions relating to going concern We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group’s or the Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and Accounts, other than the financial statements and our Auditor’s Report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.



INDEPENDENT AUDITOR’S REPORT CONTINUED

54 Smith & Williamson Holdings Limited │ Annual Report 2020

Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and 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.

Matters on which we are required to report by exception In light of the knowledge and understanding of the Group and 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 by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

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

Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on page 51, 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 Group’s and 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 Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

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

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/ auditorsresponsibilities. This description forms part of our Auditor’s Report.

Use of the Audit 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.

William Neale Bussey SENIOR STATUTORY AUDITOR

for and on behalf of Mazars LLP Chartered Accountants and Statutory Auditors, London

7 August 2020


PZC26

Stamp

INDEPENDENT AUDITOR’S REPORT CONTINUED


Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and 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.

Matters on which we are required to report by exception In light of the knowledge and understanding of the Group and 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 by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

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

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

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

Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on page 51, 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 Group’s and 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 Group or the Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

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

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at www.frc.org.uk/ auditorsresponsibilities. This description forms part of our Auditor’s Report.

Use of the Audit 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.

William Neale Bussey SENIOR STATUTORY AUDITOR

for and on behalf of Mazars LLP Chartered Accountants and Statutory Auditors, London

7 August 2020

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Income Statement for the year ended 30 April 2020


Note

Year ended 30 April 2020

£’000


£’000

Interest and similar income 9,053 11,200 Interest expense and similar charges (3,211) (3,874) Net interest income 5,842 7,326 Fee and commission income 366,112 333,298 Fee and commission expense (83,904) (68,346) Net fee and commission income 282,208 264,952 Net trading income 5,954 4,644 Share of results of associates 6 928 634 Other operating income 299 565 Operating income 295,231 278,121 Staff costs 7 (170,747) (160,454) Exceptional item: Merger-related costs 8 (7,114) - Exceptional item: PAYE and NIC determinations 11 - 3,505 Amortisation of intangible assets – client relationships 15 (982) (958) Other operating expenses 9 (71,346) (69,286) Operating expenses (250,189) (227,193) Operating profit 45,042 50,928 Dividend income 10 253 186 Profit before tax 45,295 51,114 Taxation 12 (10,425) (10,803) Profit for the year 34,870 40,311 Attributable to: Equity holders of the Parent Company 32,730 38,375 Non-controlling interests 2,140 1,936 34,870 40,311 Earnings per share for the year attributable to equity holders of the Parent Company • Unadjusted basic¹ 13 60.6p 75.4p • Unadjusted diluted 13 60.1p 74.6p 1. Adjusted basic earnings per share, a key performance indicator for the Group, is calculated in note 13.

The accompanying notes to the financial statements on pages 61 to 121 form an integral part of the financial statements.



CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

Consolidated Statement of Comprehensive Income for the year ended 30 April 2020


Note


£’000


£’000

Profit for the year 34,870 40,311 Items that will not be reclassified to profit or loss Net remeasurement of defined benefit assets: • Actual return less expected return on scheme assets 28 (1,218) 379 • Experience gains arising on scheme liabilities 28 715 1,206 • Change in assumptions underlying the present value of scheme liabilities (56) (1,064) • Effect of asset ceiling 28 503 (410) Actuarial loss on retirement annuities 28 (20) (100) Net gains on revaluation of equity investment securities designated at FVOCI 24 4,161 1,152 Tax effect of the above adjustments 12 (695) (5) 3,390 1,158 Exchange (loss)/gain on translation of foreign subsidiaries (23) 124 Exchange (loss)/gain on translation of associates 6 (19) 84 Other comprehensive income for the year, net of tax 3,348 1,366 Total comprehensive income for the year 38,218 41,677 Attributable to: Equity holders of the Parent Company 36,078 39,741 Non-controlling interests 2,140 1,936 38,218 41,677




Consolidated Statement of Comprehensive Income for the year ended 30 April 2020


Note


£’000


£’000

Profit for the year 34,870 40,311 Items that will not be reclassified to profit or loss Net remeasurement of defined benefit assets: • Actual return less expected return on scheme assets 28 (1,218) 379 • Experience gains arising on scheme liabilities 28 715 1,206 • Change in assumptions underlying the present value of scheme liabilities (56) (1,064) • Effect of asset ceiling 28 503 (410) Actuarial loss on retirement annuities 28 (20) (100) Net gains on revaluation of equity investment securities designated at FVOCI 24 4,161 1,152 Tax effect of the above adjustments 12 (695) (5) 3,390 1,158 Exchange (loss)/gain on translation of foreign subsidiaries (23) 124 Exchange (loss)/gain on translation of associates 6 (19) 84 Other comprehensive income for the year, net of tax 3,348 1,366 Total comprehensive income for the year 38,218 41,677 Attributable to: Equity holders of the Parent Company 36,078 39,741 Non-controlling interests 2,140 1,936 38,218 41,677


Consolidated Balance Sheet as at 30 April 2020


Note

As at 30 April 2020

£’000

As at 30 April 2019

£’000

Assets Non-current assets Intangible assets 15 148,220 131,779 Property, plant and equipment 16 5,124 4,779 Right-of-use assets1 17 18,839 - Interests in associates 6 4,999 4,005 Prepayments, accrued income and other receivables 22 2,741 2,128 Equity investment securities designated at FVOCI 24 - 310 Deferred tax assets 26 - 606 179,923 143,607 Current assets Cash and balances with central banks 18 192,070 1,106,938 Loans and advances to banks 19 - 99,658 Settlement balances – assets 20 141,957 130,048 Loans and advances to customers 21 - 51,010 Prepayments, accrued income and other receivables 22 83,570 70,617 Debt investment securities measured at amortised cost 23 - 227,899 Equity investment securities designated at FVOCI 24 11,471 7,734 Current tax assets 220 - 429,288 1,693,904 Total assets 609,211 1,837,511 Liabilities Non-current liabilities Deferred tax liabilities 26 1,517 - Retirement benefits 28 644 732 Accruals, deferred income, provisions and other payables 32 1,824 349 Lease liabilities1 29 15,020 - 19,005 1,081 Current liabilities Other borrowed funds 27 - 21,939 Settlement balances – liabilities 30 141,234 129,280 Due to customers 31 - 1,267,276 Accruals, deferred income, provisions and other payables 32 101,751 99,311 Lease liabilities1 29 6,144 - Current tax liabilities - 6,355 249,129 1,524,161 Total liabilities 268,134 1,525,242 Net assets 341,077 312,269 Equity Equity attributable to owners of the parent Share capital 33 5,931 5,562 Share premium 33 60,717 25,524 Own shares 35 (3,544) (26,289) Other reserves 121,986 119,205 Retained earnings 151,112 174,357 336,202 298,359 Non-controlling interests 36 4,875 13,910 Total equity 341,077 312,269 1. The Group adopted the accounting standard IFRS 16 on 1 May 2019. The impact on adoption is described in note 2.

The accompanying notes to the financial statements on pages 61 to 121 form an integral part of the financial statements. The financial statements were approved by the Board and authorised for issue on 7 August 2020 and signed on its behalf by:

A F Sykes G T Hotson NON-EXECUTIVE CHAIRMAN GROUP FINANCE DIRECTOR




Consolidated Cash Flow Statement for the year ended 30 April 2020


Note


£’000


£’000

Cash flows from operating activities Profit before tax 45,295 51,114 Non-cash movements Depreciation of property, plant and equipment 16 1,636 1,683 Depreciation of right-of-use assets 17 5,462 – Amortisation of intangible assets 15 1,700 1,700 Defined benefit pension (income)/costs (36) 117 Increase in provisions 1,689 471 Share of profit before tax in associate and profit on dilution 6 (928) (634) Change in expected credit losses on adoption of new accounting standards 25 - (569) Share based payment charges 34 6,554 6,854 Loss on disposal of property, plant and equipment and intangible assets - 628 Finance income on net investment in sublease (29) – Finance costs on lease liabilities 748 – Other non-cash movement (52) 81 Operating cash flows before movements in operating assets and liabilities 62,039 61,445 Changes in operating assets and liabilities Decrease/(increase) in loans and advances to customers and banks 75,394 (36,411) Decrease/(increase) in net settlement balances 45 (476) Increase in prepayments, accrued income and other receivables (12,832) (2,335) (Decrease)/increase in amounts due to customers (1,267,276) 117,532 Increase/(decrease) in accruals, deferred income, provisions and other payables 4,150 (1,439) Net redemption/(purchase) of debt securities measured at amortised cost 222,899 (35,356) Cash (used in)/generated from operations (915,581) 102,960 Defined benefit contribution and annuities paid (135) (136) Tax paid (15,401) (10,677) Net cash (used in)/generated from operating activities (931,117) 92,147 Cash flow from investing activities Purchase of property, equipment and intangible assets (20,145) (17,012) Proceeds from the sale of equity investment securities designated at FVOCI 734 766 Proceeds from net investment in sublease 218 – Dividends received from associate 6 147 93 Increase in holdings of associate 6 (267) (58) Net cash used in investing activities (19,313) (16,211) Cash flows from financing activities Issue of D ordinary shares 33 2,187 – Acquisition of shares through EBT 35 (2,200) (4,996) Proceeds from sale of shares in EBT 8,406 4,715 Payment of lease liabilities (6,747) – Acquisition of interest held by non-controlling interests (312) (1,484) Acquisition of interest in a subsidiary - (1,611) Distributions to shareholders (24,197) (20,253) Capital contributed by non-controlling interests 90 4,047 Net cash used in financing activities (22,773) (19,582) Net (decrease)/increase in cash and cash equivalents (973,203) 56,354 Cash and cash equivalents at beginning of the year 1,165,273 1,108,919 Cash and cash equivalents at the end of the year 44 192,070 1,165,273 Group’s own net cash at the end of the year 44 192,070 195,189




Consolidated Cash Flow Statement for the year ended 30 April 2020


Note


£’000


£’000

Cash flows from operating activities Profit before tax 45,295 51,114 Non-cash movements Depreciation of property, plant and equipment 16 1,636 1,683 Depreciation of right-of-use assets 17 5,462 – Amortisation of intangible assets 15 1,700 1,700 Defined benefit pension (income)/costs (36) 117 Increase in provisions 1,689 471 Share of profit before tax in associate and profit on dilution 6 (928) (634) Change in expected credit losses on adoption of new accounting standards 25 - (569) Share based payment charges 34 6,554 6,854 Loss on disposal of property, plant and equipment and intangible assets - 628 Finance income on net investment in sublease (29) – Finance costs on lease liabilities 748 – Other non-cash movement (52) 81 Operating cash flows before movements in operating assets and liabilities 62,039 61,445 Changes in operating assets and liabilities Decrease/(increase) in loans and advances to customers and banks 75,394 (36,411) Decrease/(increase) in net settlement balances 45 (476) Increase in prepayments, accrued income and other receivables (12,832) (2,335) (Decrease)/increase in amounts due to customers (1,267,276) 117,532 Increase/(decrease) in accruals, deferred income, provisions and other payables 4,150 (1,439) Net redemption/(purchase) of debt securities measured at amortised cost 222,899 (35,356) Cash (used in)/generated from operations (915,581) 102,960 Defined benefit contribution and annuities paid (135) (136) Tax paid (15,401) (10,677) Net cash (used in)/generated from operating activities (931,117) 92,147 Cash flow from investing activities Purchase of property, equipment and intangible assets (20,145) (17,012) Proceeds from the sale of equity investment securities designated at FVOCI 734 766 Proceeds from net investment in sublease 218 – Dividends received from associate 6 147 93 Increase in holdings of associate 6 (267) (58) Net cash used in investing activities (19,313) (16,211) Cash flows from financing activities Issue of D ordinary shares 33 2,187 – Acquisition of shares through EBT 35 (2,200) (4,996) Proceeds from sale of shares in EBT 8,406 4,715 Payment of lease liabilities (6,747) – Acquisition of interest held by non-controlling interests (312) (1,484) Acquisition of interest in a subsidiary - (1,611) Distributions to shareholders (24,197) (20,253) Capital contributed by non-controlling interests 90 4,047 Net cash used in financing activities (22,773) (19,582) Net (decrease)/increase in cash and cash equivalents (973,203) 56,354 Cash and cash equivalents at beginning of the year 1,165,273 1,108,919 Cash and cash equivalents at the end of the year 44 192,070 1,165,273 Group’s own net cash at the end of the year 44 192,070 195,189


Consolidated Statement of Changes in Equity for the year ended 30 April 2020


Other reserves

Share capital

£’000

Share premium

£’000

Own shares £’000

Merger reserve1

£’000

Capital redemption

reserve2 £’000

FVOCI Reserve3

£’000

Total other

reserves £’000

Retained Earnings4

£’000 Total £’000

Non-controlling

interests £’000

Total equity £’000

Equity at 30 April 2019 5,562 25,524 (26,289) 97,991 14,546 6,668 119,205 174,357 298,359 13,910 312,269 Profit for the year ended 30 April 2020 – – – – – – – 32,730 32,730 2,140 34,870 Other comprehensive income/(loss) for the year, net of tax – – – – – 3,435 3,435 (87) 3,348 – 3,348 Total comprehensive income – – – – – 3,435 3,435 32,643 36,078 2,140 38,218 Distributions to shareholders – – – – – – – (22,057) (22,057) (2,140) (24,197) Issue of A ordinary shares 343 33,032 – – – – – – 33,375 - 33,375 Issue of D ordinary shares 26 2,161 – – – – – – 2,187 - 2,187 Own shares bought – – (2,200) – – – – – (2,200) (2,200) Own shares sold – – 8,947 – – – – – 8,947 8,947 EBT loss on sale of shares – – – – – – – (541) (541) - (541) Gain transferred to retained earnings on disposal of equity investments designated at FVOCI – – – – – (654) (654) 654 - - - Share based payments – – – – – – – 6,554 6,554 - 6,554 Deferred tax on equity items

– – – – – – – 132 132 - 132

Acquisition of non-controlling interests – – - – – – – (27,051) (27,051) (6,636) (33,687) Exchange of non-controlling interests for Company shares – – 15,998 – – – – (13,579) 2,419 (2,399) 20 Equity at 30 April 2020 5,931 60,717 (3,544) 97,991 14,546 9,449 121,986 151,112 336,202 4,875 341,077 1. The merger reserve primarily arose on the acquisition of NCL (Securities) Limited and Smith & Williamson Limited as part of the Group’s incorporation in 2002. 2. The capital redemption reserve arose as a result of the redemption of the B ordinary shares in 2012. 3. The fair value through other comprehensive income (FVOCI) reserve consists of accumulated changes in the fair value of equity investments. 4. Retained earnings include the share option, actuarial and translation foreign currency reserves and movements thereon.





Consolidated Statement of Changes in Equity (continued) for the year ended 30 April 2020


Other reserves

Share capital

£’000

Share premium

£’000

Own shares £’000

Merger reserve1

£’000

Capital redemption

reserve2 £’000

FVOCI Reserve3

£’000

Total other

reserves £’000

Retained Earnings4

£’000 Total £’000

Non-controlling

interests £’000


Equity at 1 May 2018 5,557 25,150 (27,654) 97,991 14,546 7,111 119,648 147,222 269,923 9,680 279,603 Profit for the year ended 30 April 2019 – – – – – – – 38,375 38,375 1,936 40,311 Other comprehensive income for the year, net of tax – – – – – 1,155 1,155 211 1,366 – 1,366 Total comprehensive income – – – – – 1,155 1,155 38,586 39,741 1,936 41,677 Distributions to shareholders – – – – – – – (18,317) (18,317) (1,936) (20,253) Issue of A ordinary shares 5 374 – – – – – – 379 – 379 Own shares bought – – (4,996) – – – – – (4,996) – (4,996) Own shares sold – – 4,740 – – – – – 4,740 – 4,740 EBT loss on sale of shares – – – – – – – (25) (25) – (25) Owns shares sold as part of business combination – – 511 – – – – 203 714 – 714 Gain transferred to income statement on disposal of equity investments designated at FVOCI – – – – – (1,598) (1,598) 1,598 – – – Share based payments – – – – – – – 6,854 6,854 – 6,854 Deferred tax on equity items – – – – – – – (95) (95) – (95) Acquisition of non-controlling interests – – – – – – – (932) (932) (552) (1,484) Exchange of non-controlling interests for Company shares – – 1,110 – – – – (737) 373 (393) (20) Capital contributed by non-controlling interests – – – – – – – – – 5,175 5,175 Equity at 30 April 2019 5,562 25,524 (26,289) 97,991 14,546 6,668 119,205 174,357 298,359 13,910 312,269 1. The merger reserve primarily arose on the acquisition of NCL (Securities) Limited and Smith & Williamson Limited as part of the Group’s incorporation in 2002. 2. The capital redemption reserve arose as a result of the redemption of the B ordinary shares in 2012. 3. The fair value through other comprehensive income (FVOCI) reserve consists of accumulated changes in the fair value of equity investments. 4. Retained earnings include the share option, actuarial and translation foreign currency reserves and movements thereon.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Notes to the Consolidated Financial Statements for the year ended 30 April 2020


1. Principal accounting policies Smith & Williamson Holdings Limited is a Company incorporated and domiciled in the United Kingdom.

The Consolidated Financial Statements have been prepared in accordance with IFRSs as adopted by the EU and interpretations issued by the IFRS Interpretations Committee (IFRS IC). The financial statements are also prepared in accordance with those parts of the Companies Act 2006 that remain applicable to companies reporting under IFRSs as adopted by the EU. The financial statements have been prepared under the historical cost basis, except for certain financial instruments that are measured at fair value (see page 67). The accounting policies have been applied consistently.

New and amended standards adopted by the Group The Group has applied IFRS 16 Leases for the first time for the annual reporting period commencing 1 May 2019. The impact of the adoption of this standard and the new accounting policies are disclosed in note 2.

New standards and interpretations not yet adopted At the date of authorisation of these financial statements, the following amendments to standards, applicable to the Group, which have not been applied in these financial statements, were in issue but not yet mandatorily effective for the Group.

• Amendments to IFRS 3 Business combinations;

• Amendments to IAS 1 and IAS 8: Definition of material; and

• Amendments to references to the Conceptual Framework in IFRS Standards.

The amendments, which are effective for financial years commencing on or after 1 January 2020, are not expected to have a material impact on the Group’s financial statements. The first Annual Report published in accordance with these amendments will be the 30 April 2021 report.

Going concern The Directors are required to satisfy themselves that it is reasonable to presume that the Group and Parent Company are a going concern. After reviewing the Company’s performance projections for the period of at least 12 months, including forecast cash flows, liquidity and regulatory capital, the Directors are satisfied that in taking account of reasonable possible downsides including the potential impact of COVID-19, details of which are set out in the Viability Statement on page 23, the Group and Parent Company have adequate access to resources to enable them to meet their obligations and continue in operational existence for the foreseeable future.

In forming this view, the Directors have considered the impact of the emergence and spread of COVID-19, such as government-imposed lockdowns and restrictions, and the potential implications on the future of the Group and Parent Company. It is the view of the Directors that the business is able to remain in operation for the foreseeable future as the Group has been able to move almost all staff to a remote working model. This has meant that the Group is continuing to provide the same level of support and proactive service to clients to which they are accustomed and will be able to do so for a prolonged period.

Therefore, in the view of the Directors, despite the global economic impact of COVID-19, the Group’s robust business model and diverse income streams, which have been subjected to severe stress testing scenarios, means that the pandemic will not significantly impact the liquidity of the Group and the Parent Company over the next 12 months. Accordingly, they continue to adopt the going concern basis of accounting in preparing the Consolidated and Company Financial Statements.

Basis of consolidation The Consolidated Financial Statements incorporate the financial statements of the Parent Company and all subsidiaries controlled by the Parent Company, together ‘the Group’, made up to 30 April each year.

The Group controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are fully consolidated from the date on which control is obtained, and no longer consolidated from the date that control ceases; their results are included in the Consolidated Financial Statements up to the date that control ceases.

All transactions and balances between Group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.


NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED


1. Principal accounting policies (continued) Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.

Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.

Foreign currencies Functional and presentation currency The Consolidated Financial Statements are presented in pounds sterling, which is the Group’s presentation currency. Assets and liabilities of subsidiaries are translated at foreign exchange rates ruling at the balance sheet date. The income and expenses of such undertakings are translated at an average rate for the period where this rate approximates to the foreign exchange rates ruling at the dates of the transactions. Exchange differences arising from this translation are recognised in other comprehensive income. They are released into the income statement upon disposal of the relevant subsidiary.

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Non-monetary items are translated at rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exceptional items Exceptional items are shown as named line items in the Consolidated Income Statement and represent merger-related costs (note 8) and the PAYE and NIC cost release for the HMRC cases relating to client relationship intangibles and the amortisation thereof (note 11). These items are non-recurring in nature and considered to be material in size.

Income recognition Income is recognised at the fair value of the consideration received or receivable. The point at which revenue is recognised is described below.

Net fee and commission income Investment management, fund administration and advisory fees Investment management, fund administration and advisory fees are recognised on a continuous basis over the period in which the related services are provided. The fair value of fees received or receivable is measured based on the contracted rates by client, the current market position and the client’s funds under management/administration.

Fees in respect of contingent fee assignments are only recognised to the extent that the contingent events have occurred.

Performance fees Performance fees are only recognised once the specific assessment criteria have been met and it is highly probable that a significant income reversal will not subsequently occur.

Commissions Commission charges for executing transactions on behalf of clients are recognised when we have fulfilled our obligations to the client in respect of the transaction. The fair value of the commission received or receivable is measured based on the contractual commission rate.

Professional services Income recognition occurs in the period in which services are rendered, by reference to the services performed to date compared to the total services performed.

The fair value of the consideration received or receivable is based on the contractual terms of the engagement, usually determined by an individual’s hours worked at an appropriate charge out rate. Income represents amounts recoverable from clients for professional services provided during the year. The Group recognises revenue when it transfers control over the service to a client.


Income in respect of contingent fee assignments is only recognised when the contingent event occurs.

Unbilled income on individual client assignments is included as accrued income within prepayments, accrued income and other receivables. Where individual on-account billings exceed revenue on client assignments, the excess is classified as fees in advance within accruals, deferred income, provisions and other payables.

Net interest income (referred to as the treasury margin on page 19) Interest income or expense from interest-bearing financial instruments, except those classified as held for trading, is calculated using the effective interest method and recognised within net interest income.

The effective interest method is the method of calculating the amortised cost of a financial asset or liability (or group of assets and liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts the expected future cash payments or receipts through the expected life of the financial instrument, or when appropriate, a shorter period, to the net carrying amount of the instrument. The application of the method has the effect of recognising income receivable (or expense payable) on the instrument evenly in proportion to the amount outstanding over the period to maturity or repayment. In calculating effective interest, the Group estimates cash flows considering all contractual terms of the financial instrument but excluding future credit losses.

Net trading income Net trading income comprises net dealing profits earned on transactions entered into with the market at the request of clients.

Dividends Dividends are recognised when the right to receive the dividend is established.

Employee benefits Retirement benefits The Group operates retirement benefit plans of both a defined contribution and defined benefit nature. Defined contribution pension schemes are funded by contributions which are separate from the Group’s assets. Defined benefit schemes are closed to new members and further accrual.

The costs of defined contribution plans are charged to the income statement on the basis of contributions payable by the Group during the year.

For defined benefit plans, the defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The current service cost is recognised in the income statement as an employee benefit expense. The interest cost resulting from the increase in the present value of the defined benefit obligation over time and the interest income on assets is recognised as an employee benefit expense.

Past service costs are recognised immediately to the extent that benefits are already vested, or are otherwise amortised on a straight-line basis over the average period until the benefits become vested.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised outside of the income statement in other comprehensive income in the period in which they arise.

Share based payments The cost of share based employee compensation arrangements, whereby employees and Partners receive remuneration in the form of shares or share awards, is recognised as an employee benefit expense in the income statement.

The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value at the grant date of the shares or share awards awarded and the number that are expected to vest. The assumptions underlying the number of awards expected to vest are subsequently adjusted to reflect conditions prevailing at the balance sheet date. Fair value is measured by use of a binomial model.

Death in service benefits Insured death in service benefits are accounted for as defined contribution arrangements.



Income in respect of contingent fee assignments is only recognised when the contingent event occurs.

Unbilled income on individual client assignments is included as accrued income within prepayments, accrued income and other receivables. Where individual on-account billings exceed revenue on client assignments, the excess is classified as fees in advance within accruals, deferred income, provisions and other payables.

Net interest income (referred to as the treasury margin on page 19) Interest income or expense from interest-bearing financial instruments, except those classified as held for trading, is calculated using the effective interest method and recognised within net interest income.

The effective interest method is the method of calculating the amortised cost of a financial asset or liability (or group of assets and liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts the expected future cash payments or receipts through the expected life of the financial instrument, or when appropriate, a shorter period, to the net carrying amount of the instrument. The application of the method has the effect of recognising income receivable (or expense payable) on the instrument evenly in proportion to the amount outstanding over the period to maturity or repayment. In calculating effective interest, the Group estimates cash flows considering all contractual terms of the financial instrument but excluding future credit losses.

Net trading income Net trading income comprises net dealing profits earned on transactions entered into with the market at the request of clients.

Dividends Dividends are recognised when the right to receive the dividend is established.

Employee benefits Retirement benefits The Group operates retirement benefit plans of both a defined contribution and defined benefit nature. Defined contribution pension schemes are funded by contributions which are separate from the Group’s assets. Defined benefit schemes are closed to new members and further accrual.

The costs of defined contribution plans are charged to the income statement on the basis of contributions payable by the Group during the year.

For defined benefit plans, the defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method.

The current service cost is recognised in the income statement as an employee benefit expense. The interest cost resulting from the increase in the present value of the defined benefit obligation over time and the interest income on assets is recognised as an employee benefit expense.

Past service costs are recognised immediately to the extent that benefits are already vested, or are otherwise amortised on a straight-line basis over the average period until the benefits become vested.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised outside of the income statement in other comprehensive income in the period in which they arise.

Share based payments The cost of share based employee compensation arrangements, whereby employees and Partners receive remuneration in the form of shares or share awards, is recognised as an employee benefit expense in the income statement.

The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value at the grant date of the shares or share awards awarded and the number that are expected to vest. The assumptions underlying the number of awards expected to vest are subsequently adjusted to reflect conditions prevailing at the balance sheet date. Fair value is measured by use of a binomial model.

Death in service benefits Insured death in service benefits are accounted for as defined contribution arrangements.





1. Principal accounting policies (continued) Profit sharing and bonus plans The Group recognises a liability and an expense for bonuses and equivalent profit shares. The Group recognises a provision when contractually obliged or when there is a past practice that has created a constructive obligation.

Employee benefit trust The assets and liabilities of the Smith & Williamson Holdings Limited Employee Benefit Trust (EBT), which purchases and holds ordinary shares of the Company in connection with certain employee share schemes, are included within the Group financial statements to the extent that the Group has de facto control thereof. Any consideration paid or received by the EBT for the purchase or sale of the Company’s own shares is shown as a movement in equity. Own shares are recorded at cost within the own shares reserve and gains or losses arising on the sale of these shares are recorded in retained earnings as a movement in equity.

Taxation The tax expense represents the sum of tax currently payable and deferred tax.

Tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, provided these rates are enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to other comprehensive income or equity, in which case it is dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Intangible assets Goodwill Goodwill is stated at cost less subsequent accumulated impairment losses and is recognised as an asset with an indefinite life.

The Group’s goodwill, arising on either incorporation or consolidation, represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary at the date of acquisition. Goodwill on incorporation relates to goodwill recognised as goodwill on incorporation before the date of transition to IFRS and has been retained at the previous UK GAAP amounts.

Goodwill is allocated to a cash generating unit (CGU) that represents the smallest identifiable group of assets generating cash inflows independent of other assets or groups of assets.

On disposal, attributable goodwill, that has not been subject to impairment, is included within the determination of the profit or loss on disposal.




1. Principal accounting policies (continued) Profit sharing and bonus plans The Group recognises a liability and an expense for bonuses and equivalent profit shares. The Group recognises a provision when contractually obliged or when there is a past practice that has created a constructive obligation.

Employee benefit trust The assets and liabilities of the Smith & Williamson Holdings Limited Employee Benefit Trust (EBT), which purchases and holds ordinary shares of the Company in connection with certain employee share schemes, are included within the Group financial statements to the extent that the Group has de facto control thereof. Any consideration paid or received by the EBT for the purchase or sale of the Company’s own shares is shown as a movement in equity. Own shares are recorded at cost within the own shares reserve and gains or losses arising on the sale of these shares are recorded in retained earnings as a movement in equity.

Taxation The tax expense represents the sum of tax currently payable and deferred tax.

Tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised, provided these rates are enacted or substantively enacted at the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to other comprehensive income or equity, in which case it is dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Intangible assets Goodwill Goodwill is stated at cost less subsequent accumulated impairment losses and is recognised as an asset with an indefinite life.

The Group’s goodwill, arising on either incorporation or consolidation, represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary at the date of acquisition. Goodwill on incorporation relates to goodwill recognised as goodwill on incorporation before the date of transition to IFRS and has been retained at the previous UK GAAP amounts.

Goodwill is allocated to a cash generating unit (CGU) that represents the smallest identifiable group of assets generating cash inflows independent of other assets or groups of assets.

On disposal, attributable goodwill, that has not been subject to impairment, is included within the determination of the profit or loss on disposal.


Computer software Computer software which is not an integral part of the related hardware is classified as an intangible asset. Costs of acquiring computer software are treated as an intangible asset and amortised over three to ten years, dependent upon the assessment of the expected useful life of the software, on a straight-line basis from the date the software is operating as management intended. The assessment of the expected useful life of computer software is based on the contractual terms or, where appropriate, past experience of the life of similar assets.

Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, which are expected to generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.

Costs associated with developing or maintaining computer software programs that are not recognised as assets are recognised as an expense as incurred.

Client relationships Intangible assets classified as client relationships are recognised when acquired. Client relationships are initially recognised at cost and are subsequently measured at cost less accumulated amortisation and any accumulated impairment losses. The initial cost of client relationships is the fair value at the acquisition date.

When payments are made to teams of investment managers to acquire client relationships, elements of the total consideration may be deferred or contingent. In such cases the cost of the recognised client relationships includes the Group’s best estimate of the future consideration likely to be paid. The consideration is based on the value after a period, of certain categories of funds under management and advice introduced by investment managers to the Group.

Client relationships are amortised on a straight-line basis over ten years, their minimum estimated useful lives.

Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset into use.

Depreciation is calculated on a straight-line basis to write down the assets less any estimated residual value by equal instalments over their estimated useful economic lives as follows:

Asset type Term of depreciation

Short term leasehold improvements over the lease term Computer equipment 3 years Furniture, fittings and equipment 5 years Motor vehicles 4 years

The residual values and useful economic lives of all property, plant and equipment are reviewed and adjusted if appropriate, at the end of each financial year.

Gains and losses on disposals are calculated by comparing sale proceeds with carrying amounts and are included in the income statement.

Interests in associates An associate is an entity over which the Group exercises significant influence, but not control or joint control, through participation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated into these financial statements using the equity method of accounting. Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interest that, in substance, forms part of the Group’s net investment in the associate) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.





1. Principal accounting policies (continued) Any excess of the cost of acquisition over the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. If the cost of acquisition is less than the fair value of the net assets of the associate acquired, the difference is recognised directly in the income statement.

Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Impairment of non-current assets At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. An intangible asset, with an indefinite useful life, is tested for impairment annually and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of the fair value less cost to sell and the value-in-use. In determining a CGU’s or asset’s value-in-use estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects a current market assessment of the time value of money and risks specific to the CGU or asset that have not already been included in the estimate of future cash flows.

If the recoverable amount of the CGU or asset is estimated to be less than its carrying amount, the carrying amount of the CGU or asset is reduced to its recoverable amount. An impairment loss is immediately recognised as an expense.

Where an impairment loss subsequently reverses, other than in respect of goodwill, the carrying amount of the asset is increased to the revised estimate of its recoverable amount.

Cash and cash equivalents For the purpose of preparation of the cash flow statement, cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity period of three months or less. Bank overdrafts that are an integral part of a Group entity’s cash management are included in cash and cash equivalents where they have a legal right of set-off against positive cash balances and an intention to settle on a net basis, otherwise bank overdrafts are classified as borrowings.

Settlement balances Settlement balances, which are a sub-class of either financial assets or financial liabilities, are disclosed separately. They represent amounts that are either receivable or payable by the Group in respect of unsettled trades. Purchases and sales of investments are recognised at settlement date and, in some cases, at trade date, which is the date on which the Group commits to purchase or sell the asset.

In accordance with market practice settlement balances with clients, counterparties, Stock Exchange member firms and settlement offices are included in settlement balances gross for unsettled bought and sold transactions respectively. These receivables or payables are initially recognised at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the receivable is impaired.

Financial instruments

Financial assets Classification of financial assets The Group classifies its financial assets into those to be measured at amortised cost and those to be measured at fair value (either through other comprehensive income, or through profit or loss). The classification depends on the Group’s business model for managing financial assets and the contractual terms of the financial assets’ cash flows.




1. Principal accounting policies (continued) Any excess of the cost of acquisition over the Group’s share of the fair values of the identifiable net assets of the associate at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of that investment. If the cost of acquisition is less than the fair value of the net assets of the associate acquired, the difference is recognised directly in the income statement.

Where a Group company transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Impairment of non-current assets At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the CGU to which the asset belongs. An intangible asset, with an indefinite useful life, is tested for impairment annually and whenever there is an indication that the asset may be impaired.

The recoverable amount is the higher of the fair value less cost to sell and the value-in-use. In determining a CGU’s or asset’s value-in-use estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects a current market assessment of the time value of money and risks specific to the CGU or asset that have not already been included in the estimate of future cash flows.

If the recoverable amount of the CGU or asset is estimated to be less than its carrying amount, the carrying amount of the CGU or asset is reduced to its recoverable amount. An impairment loss is immediately recognised as an expense.

Where an impairment loss subsequently reverses, other than in respect of goodwill, the carrying amount of the asset is increased to the revised estimate of its recoverable amount.

Cash and cash equivalents For the purpose of preparation of the cash flow statement, cash and cash equivalents include cash at bank and in hand and short-term deposits with an original maturity period of three months or less. Bank overdrafts that are an integral part of a Group entity’s cash management are included in cash and cash equivalents where they have a legal right of set-off against positive cash balances and an intention to settle on a net basis, otherwise bank overdrafts are classified as borrowings.

Settlement balances Settlement balances, which are a sub-class of either financial assets or financial liabilities, are disclosed separately. They represent amounts that are either receivable or payable by the Group in respect of unsettled trades. Purchases and sales of investments are recognised at settlement date and, in some cases, at trade date, which is the date on which the Group commits to purchase or sell the asset.

In accordance with market practice settlement balances with clients, counterparties, Stock Exchange member firms and settlement offices are included in settlement balances gross for unsettled bought and sold transactions respectively. These receivables or payables are initially recognised at fair value. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the receivable is impaired.

Financial instruments

Financial assets Classification of financial assets The Group classifies its financial assets into those to be measured at amortised cost and those to be measured at fair value (either through other comprehensive income, or through profit or loss). The classification depends on the Group’s business model for managing financial assets and the contractual terms of the financial assets’ cash flows.


Financial assets measured at amortised cost

Debt instruments Investments in debt instruments are measured at amortised cost where they:

• have contractual terms that give rise to cash flows on specified dates, that represent solely payments of principal and interest on the principal amount outstanding; and

• are held within a business model whose objective is achieved by holding to collect contractual cash flows.

These debt instruments are initially recognised at fair value plus directly attributable transaction costs and subsequently measured at amortised cost. The measurement of credit impairment is based on the three-stage expected credit loss (ECL) model described below in impairment of financial assets. Financial assets measured at amortised cost are included in note 18 - cash and balances with central banks, note 19 – loans and advances to banks, note 21 – loans and advances to customers, note 20 – settlement balances – assets, note 23 – debt investment securities measured at amortised cost and note 22 – other receivables.

Financial assets measured at fair value through other comprehensive income

Equity instruments Investment in equity instruments that are neither held for trading nor contingent consideration recognised by the Group in a business combination, are measured at fair value through other comprehensive income, where an irrevocable election has been made by management.

Amounts presented in other comprehensive income are not subsequently transferred to profit or loss. Dividends on such investments are recognised in the income statement.

Financial assets measured at fair value through profit and loss

Derivatives Derivatives are recorded at fair value at each reporting date. Changes in the fair value of derivatives are recognised immediately in the income statement.

The Group trades derivatives, on behalf of clients, with a counter offset with the exchange or market. The Group does not hold or issue derivatives for its own trading purposes but deals on a matched principal basis because this is required by, and is the custom of, the relevant markets. Clients lodge an initial margin with the Group in cash or suitable stock, which is valued at a discount to market price with such discount being set at the Group’s discretion but generally at the level recognised in the relevant market.

Such stock is held by a Group nominee or with its custodian. In addition, clients are required to provide additional variation margin in line with practice in the relevant market, for amounts indicated through the contract’s daily fair valuation. In line with market practice, both sides of the derivative position are valued at fair value being the market price at close of business and are included within settlement balances on a gross basis.

Impairment of financial assets The Group applies a three-stage approach to measuring ECLs for debt instruments measured at amortised cost. No ECL is recognised on equity investments.

Financial assets migrate through the following three stages based on the change in credit risk since initial recognition:

Stage 1: 12-months ECL For exposures where there has not been a significant increase in credit risk since initial recognition and that are not credit impaired upon origination, the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months is recognised.

Stage 2: Lifetime ECL – not credit impaired For exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset) is recognised.

Stage 3: Lifetime ECL – credit impaired Exposures are assessed as credit impaired when one or more events that have a detrimental impact on the estimated future cash flows of that asset have occurred. For exposures that have become credit impaired, a lifetime ECL is recognised and interest revenue is calculated by applying the effective interest rate to the amortised cost (net of provision) rather than the gross carrying amount.





1. Principal accounting policies (continued) Determining the stage for impairment At each reporting date, the Group assesses whether there has been a significant increase in credit risk for exposures since initial recognition by comparing the risk of default occurring over the expected life between the reporting date and the date of initial recognition. The Group considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and also forward-looking analysis.

An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for doubtful debts reverts from lifetime ECL to 12-months ECL. Exposures that have not deteriorated significantly since origination, or where the deterioration remains within the Group’s investment grade criteria, or which are less than 30 days past due, are considered to have a low credit risk. The provision for doubtful debts for these financial assets is based on a 12-months ECL. When an asset is uncollectible, it is written off against the related provision. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off reduce the amount of the expense in the income statement.

The Group assesses whether the credit risk on an exposure has increased significantly on an individual or collective basis. For the purposes of a collective evaluation of impairment, financial instruments are grouped on the basis of shared credit risk characteristics, taking into account instrument type, credit risk ratings, date of initial recognition, remaining term to maturity, industry, geographical location of the borrower and other relevant factors.

Measurement of ECLs

(i) Loans and advances to customers The Group has an internally developed credit rating structure for loans and advances to customers which is derived from lending policies and is used to assess the potential default risk in lending.

(ii) Cash and balances with central banks, loans and advances to banks and debt investment securities measured at amortised cost The Group uses default rates from Standard & Poor’s to assess the potential default risk in lending. ECLs calculated using these rates are compared to 12-month forward-looking stress scenarios which assume all counterparties are downgraded by two notches (a pre-set severity indicator requiring immediate review and action by the Credit Review Committee). Where materially different, default rates are adjusted to incorporate forward-looking information as described on page 69.

(iii) Trade receivables The Group’s trade receivables are generally short term and do not contain significant financing components. Therefore, the group has applied a practical expedient by using a provision matrix to calculate lifetime ECLs based on actual credit loss experience over the past two years adjusted by forward-looking estimates.

Inputs, assumptions and techniques used for estimating impairment In assessing the impairment of financial assets under the expected credit loss model, the Group assesses default in accordance with its Credit Risk Management Policy, which defines defaulted and impaired assets as described below.

When determining whether the risk of default has increased significantly since initial recognition, the Group considers both quantitative and qualitative information and analysis based on the Group’s historical experience and expert credit risk assessment, including forward-looking information.

(i) Loans and advances to customers Smith & Williamson Investment Services Limited requires customer loans to be covered by formal security over clients’ assets under the Group’s control, with a minimum value of 200% of the advance at the outset and a minimum value of 150% thereafter. These indicators provide evidence of where there is sufficient doubt about the ultimate collectability of principal and/or interest.

Customer loan facilities which fall outside of these lending policies are deemed to represent a significant increase in credit risk.

During the year, following the decision to cease banking operations, the Group transferred its outstanding customer loan facilities to a third party private banking institution. Loans and advances to customers as at 30 April 2020 were £nil (2019: £48.0 million).




1. Principal accounting policies (continued) Determining the stage for impairment At each reporting date, the Group assesses whether there has been a significant increase in credit risk for exposures since initial recognition by comparing the risk of default occurring over the expected life between the reporting date and the date of initial recognition. The Group considers reasonable and supportable information that is relevant and available without undue cost or effort for this purpose. This includes quantitative and qualitative information and also forward-looking analysis.

An exposure will migrate through the ECL stages as asset quality deteriorates. If, in a subsequent period, asset quality improves and also reverses any previously assessed significant increase in credit risk since origination, then the provision for doubtful debts reverts from lifetime ECL to 12-months ECL. Exposures that have not deteriorated significantly since origination, or where the deterioration remains within the Group’s investment grade criteria, or which are less than 30 days past due, are considered to have a low credit risk. The provision for doubtful debts for these financial assets is based on a 12-months ECL. When an asset is uncollectible, it is written off against the related provision. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off reduce the amount of the expense in the income statement.

The Group assesses whether the credit risk on an exposure has increased significantly on an individual or collective basis. For the purposes of a collective evaluation of impairment, financial instruments are grouped on the basis of shared credit risk characteristics, taking into account instrument type, credit risk ratings, date of initial recognition, remaining term to maturity, industry, geographical location of the borrower and other relevant factors.

Measurement of ECLs

(i) Loans and advances to customers The Group has an internally developed credit rating structure for loans and advances to customers which is derived from lending policies and is used to assess the potential default risk in lending.

(ii) Cash and balances with central banks, loans and advances to banks and debt investment securities measured at amortised cost The Group uses default rates from Standard & Poor’s to assess the potential default risk in lending. ECLs calculated using these rates are compared to 12-month forward-looking stress scenarios which assume all counterparties are downgraded by two notches (a pre-set severity indicator requiring immediate review and action by the Credit Review Committee). Where materially different, default rates are adjusted to incorporate forward-looking information as described on page 69.

(iii) Trade receivables The Group’s trade receivables are generally short term and do not contain significant financing components. Therefore, the group has applied a practical expedient by using a provision matrix to calculate lifetime ECLs based on actual credit loss experience over the past two years adjusted by forward-looking estimates.

Inputs, assumptions and techniques used for estimating impairment In assessing the impairment of financial assets under the expected credit loss model, the Group assesses default in accordance with its Credit Risk Management Policy, which defines defaulted and impaired assets as described below.

When determining whether the risk of default has increased significantly since initial recognition, the Group considers both quantitative and qualitative information and analysis based on the Group’s historical experience and expert credit risk assessment, including forward-looking information.

(i) Loans and advances to customers Smith & Williamson Investment Services Limited requires customer loans to be covered by formal security over clients’ assets under the Group’s control, with a minimum value of 200% of the advance at the outset and a minimum value of 150% thereafter. These indicators provide evidence of where there is sufficient doubt about the ultimate collectability of principal and/or interest.

Customer loan facilities which fall outside of these lending policies are deemed to represent a significant increase in credit risk.

During the year, following the decision to cease banking operations, the Group transferred its outstanding customer loan facilities to a third party private banking institution. Loans and advances to customers as at 30 April 2020 were £nil (2019: £48.0 million).


(ii) Cash and balances with central banks, loans and advances to banks and debt investment securities measured at amortised cost Bank deposits which have an external grade lower than BBB are deemed to provide evidence of sufficient doubt about the ultimate collectability of principal and/or interest.

Externally derived credit ratings as described above have been identified as representing the best available determinant of credit risk. The Group assigns each facility a credit rating at initial recognition based on available information about the borrower. Credit risk is deemed to have increased significantly if the credit rating has significantly deteriorated at the reporting date relative to the credit rating at the date of initial recognition.

(iii) Trade receivables The provision matrix used to calculate lifetime ECLs is based on historical observed default rates, and is adjusted by forward-looking estimates that include the probability of a worsening economic environment within the next year. The loss rates are applied to balances on a collective basis in each segment, net of specific allowances calculated on an individual basis.

The Group has applied the simplified approach to measuring ECLs on trade receivables. Under this approach there is no requirement to determine the stage of the trade receivable because the impairment loss is measured at lifetime ECL.

Calculation of expected credit losses ECLs are calculated based on management’s estimate of the probability of default, the loss given default and exposure at default of each exposure taking into account industry credit loss data, the Group’s own credit loss experience and level of collateral held. For bank deposits, percentages are generally derived from credit defaults for different categories of exposure published by Standard & Poor’s. For accounting purposes, the 12-months and lifetime probability of default represent the expected point-in-time probability of a default over the next 12 months and remaining lifetime of the financial instrument based on conditions existing at the balance sheet date and future economic conditions that affect credit risk.

Incorporation of forward-looking information Where appropriate, the Group uses default assumptions which consider a range of relevant internal and external forward-looking macro-economic assumptions for the determination of unbiased general industry adjustments and any related specific industry adjustments, which support the calculation of ECLs. Relevant regional and industry specific adjustments are applied to capture variations from general industry scenarios. These reflect reasonable and supportable forecasts of future macro-economic conditions that are not captured within the base ECL calculations. Macro-economic factors taken into consideration include, but are not limited to, unemployment, interest rates, gross domestic product, inflation, and require an evaluation of both the current and forecast direction of the macro-economic cycle. Incorporating forward-looking information increases the degree of judgement required as to how changes in these macro-economic factors will affect ECLs. The methodologies and assumptions including any forecasts of future economic conditions are reviewed regularly.

Presentation of impairment Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

Impairment losses are presented under ‘other operating expenses’ (note 9). No losses are presented separately in the income statement and there have been no reclassifications of amounts previously recognised under IAS 39.

Financial liabilities The basis of classification for financial liabilities under IFRS 9 remains unchanged from under IAS 39. The two categories are amortised cost and fair value through profit or loss (either designated as such or held for trading).

The Company has not designated any liabilities as fair value through profit or loss. Therefore, under IFRS 9, the Company has classified all financial liabilities as amortised cost, with no material impact on measurement.

Deposits and borrowings All deposits and borrowings by banks and customer accounts are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost: any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest rate method.





1. Principal accounting policies (continued) Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Other borrowed funds Other borrowed funds are initially recognised at fair value less directly attributable transaction costs.

After initial recognition, other borrowed funds are subsequently measured at amortised cost: any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the other borrowed funds using the effective interest rate method. Other borrowed funds are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Leases The Group has applied IFRS 16 using the modified retrospective approach. The impact of the change is disclosed in note 2.

The Group leases office properties and motor vehicles. Rental contracts are typically made for fixed periods of up to 15 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.

The Group, as lessee, initially recognises a right-of-use asset and a corresponding lease liability when the lease commences (at commencement date) based on the discounted payments required under the lease, taking into account the lease term (determined as the non-cancellable period for which the Group has the right to use an asset, including optional periods when an entity is reasonably certain to exercise the option to extend). Initial direct costs and restoration costs are included in the asset cost.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically assessed for impairment and adjusted for certain remeasurements of the lease liability.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases with a term of less than 12 months and leases of low-value assets.

As an intermediate lessor, the Group accounts for its interests in the head lease and a sublease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

Provisions Provisions are recognised when the Group has a present legal or constructive obligation which, as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Provisions are recognised for future committed property lease payments when the Group receives no benefit from the property through continuing usage and future receipts from any sub-letting arrangements are less than the Group’s future committed payments.

Provisions are measured at the present value of the Directors’ best estimate of the expenditure required to settle the present obligation at the balance sheet date.

The Group provides for dilapidation costs following advice from chartered surveyors and previous experience of exit costs. The estimated cost of fulfilling the leasehold dilapidation obligations is recognised on the Group’s leasehold properties over the last five to seven years of the lease term.

Recognition and derecognition of financial instruments A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument, which is generally on trade date. Loans and receivables are recognised when cash is advanced (or settled) to the borrowers.

Financial assets at fair value through profit or loss are recognised initially at fair value. All other financial assets are recognised initially at fair value plus directly attributable transaction costs.




1. Principal accounting policies (continued) Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Other borrowed funds Other borrowed funds are initially recognised at fair value less directly attributable transaction costs.

After initial recognition, other borrowed funds are subsequently measured at amortised cost: any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the other borrowed funds using the effective interest rate method. Other borrowed funds are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Leases The Group has applied IFRS 16 using the modified retrospective approach. The impact of the change is disclosed in note 2.

The Group leases office properties and motor vehicles. Rental contracts are typically made for fixed periods of up to 15 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes.


The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically assessed for impairment and adjusted for certain remeasurements of the lease liability.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases with a term of less than 12 months and leases of low-value assets.

As an intermediate lessor, the Group accounts for its interests in the head lease and a sublease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

Provisions Provisions are recognised when the Group has a present legal or constructive obligation which, as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated.

Provisions are recognised for future committed property lease payments when the Group receives no benefit from the property through continuing usage and future receipts from any sub-letting arrangements are less than the Group’s future committed payments.

Provisions are measured at the present value of the Directors’ best estimate of the expenditure required to settle the present obligation at the balance sheet date.

The Group provides for dilapidation costs following advice from chartered surveyors and previous experience of exit costs. The estimated cost of fulfilling the leasehold dilapidation obligations is recognised on the Group’s leasehold properties over the last five to seven years of the lease term.

Recognition and derecognition of financial instruments A financial asset or financial liability is recognised in the balance sheet when the Group becomes a party to the contractual provisions of the instrument, which is generally on trade date. Loans and receivables are recognised when cash is advanced (or settled) to the borrowers.

Financial assets at fair value through profit or loss are recognised initially at fair value. All other financial assets are recognised initially at fair value plus directly attributable transaction costs.


The Group derecognises a financial asset when the contractual cash flows from the asset expire or it transfers its rights to receive contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

A financial liability is derecognised from the balance sheet when the Group has discharged its obligation or the contract is cancelled or expires.

Offsetting Financial assets and liabilities are offset and the net amount is presented in the balance sheet when the Group has a legal right to offset the amounts and intends to settle on a net basis or to realise the asset and settle the liability simultaneously.

Share capital The Company has two classes of shares, A ordinary shares and D ordinary shares. Both classes are classified as equity.

Distributions to shareholders Distributions payable to the Company’s A ordinary and D ordinary shareholders are recognised as a liability and deducted from equity in the period in which the shareholders’ right to receive payment is established.

Segmental reporting The Group determines and presents operating segments based on the information that is provided internally to the Board, which is the Group’s chief operating decision maker. An operating segment is a component of the Group that engages in business activities from which it may earn income and incur expenses, including income and expenses that relate to transactions with any of the Group’s other components. Discrete financial information is available for operating segments. The Board regularly reviews and assesses the performance of an operating segment and makes decisions about the level of resources allocated to a segment. Operating segments are organised around the services provided to clients and a description of the services provided by each segment is given in the financial review section. No operating segments have been aggregated in the Group’s financial statements. Transactions between operating segments are reported within the income or expenses for those segments. Indirect costs are allocated between segments in proportion to the principal cost driver for each category of indirect cost.





2. Changes in accounting policies This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements and also discloses the new accounting policies that have been applied from 1 May 2019, where they are different to those applied in prior periods.

IFRS 16 Leases The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised as an adjustment to the opening balance sheet. Comparatives have not been restated.

IFRS 16 eliminates the classification of leases as either operating leases or finance leases. Instead, any leases with more than 12 months’ term are recognised as an asset with the related future lease obligations shown as a liability.


For leases previously classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at 1 May 2019. The right-of-use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments on the Group’s balance sheet at the date of transition.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically assessed for impairment and adjusted for certain remeasurements of the lease liability.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases with a term of less than 12 months and leases of low-value assets. These exemptions allow the Group to apply similar accounting to usual services rendering arrangements which were allowed under the previous leases standard, IAS 17.

Accounting requirements for lessors are largely unchanged from IAS 17. The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for instances in which it acts as an intermediate lessor. As an intermediate lessor, the Group accounts for its interests in the head lease and a sublease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

Impact on the Consolidated Financial Statements

Audited as at

30 April 2019 £’000

Adjustments £’000

Adjusted as at

1 May 2019 £’000

Assets Right-of-use assets (note 17) - 24,322 24,322 Prepayments, accrued income and other receivables 72,745 1,090 73,835 Total assets 1,837,511 25,412 1,862,923 Liabilities Accruals, deferred income, provisions and other payables 99,660 (1,832) 97,828 Lease liabilities - 27,244 27,244 Total liabilities 1,525,242 25,412 1,550,654 Net assets 312,269 - 312,269

On transition to IFRS 16, the Group recognised right-of-use assets of £24.3 million (see note 17) and lease liabilities of £27.2 million. As at 1 May 2019, in accordance with transition provisions of IFRS 16, the initial right-of-use assets balance of £27.2 million was adjusted by £1.8 million of accrued lease payments on the Group’s balance sheet. In addition, £1.1 million was derecognised and transferred to net investment in subleases where the Group acts as an intermediate lessor. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at 30 April 2019. The weighted average rate applied is 3.04%.




2. Changes in accounting policies This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements and also discloses the new accounting policies that have been applied from 1 May 2019, where they are different to those applied in prior periods.

IFRS 16 Leases The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised as an adjustment to the opening balance sheet. Comparatives have not been restated.

IFRS 16 eliminates the classification of leases as either operating leases or finance leases. Instead, any leases with more than 12 months’ term are recognised as an asset with the related future lease obligations shown as a liability.


For leases previously classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at 1 May 2019. The right-of-use assets were measured at an amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments on the Group’s balance sheet at the date of transition.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant and equipment. In addition, the right-of-use asset is periodically assessed for impairment and adjusted for certain remeasurements of the lease liability.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases with a term of less than 12 months and leases of low-value assets. These exemptions allow the Group to apply similar accounting to usual services rendering arrangements which were allowed under the previous leases standard, IAS 17.

Accounting requirements for lessors are largely unchanged from IAS 17. The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for instances in which it acts as an intermediate lessor. As an intermediate lessor, the Group accounts for its interests in the head lease and a sublease separately. It assesses the lease classification of a sublease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

Impact on the Consolidated Financial Statements

Audited as at

30 April 2019 £’000

Adjustments £’000

Adjusted as at

1 May 2019 £’000

Assets Right-of-use assets (note 17) - 24,322 24,322 Prepayments, accrued income and other receivables 72,745 1,090 73,835 Total assets 1,837,511 25,412 1,862,923 Liabilities Accruals, deferred income, provisions and other payables 99,660 (1,832) 97,828 Lease liabilities - 27,244 27,244 Total liabilities 1,525,242 25,412 1,550,654 Net assets 312,269 - 312,269

On transition to IFRS 16, the Group recognised right-of-use assets of £24.3 million (see note 17) and lease liabilities of £27.2 million. As at 1 May 2019, in accordance with transition provisions of IFRS 16, the initial right-of-use assets balance of £27.2 million was adjusted by £1.8 million of accrued lease payments on the Group’s balance sheet. In addition, £1.1 million was derecognised and transferred to net investment in subleases where the Group acts as an intermediate lessor. When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at 30 April 2019. The weighted average rate applied is 3.04%.


During the year ended 30 April 2020, the Group recognised depreciation of right-of-use assets of £5.5 million, interest expense on lease liabilities of £0.7 million and finance income on net investment in sublease of £0.03 million. During the year ended 30 April 2019, the Group recognised operating lease expenses of £6.2 million in accordance with IAS 17.

The Group is required to identify the difference between the present value of its operating lease obligations disclosed at 30 April 2019 under IAS 17, discounted by using the Group’s incremental borrowing rate, and its lease liabilities recognised at the date of initial application to IFRS 16. This reconciliation has been presented below:

£’000

Operating lease obligations at 30 April 2019 disclosed in the Group’s Consolidated Financial Statements 29,707 Discounted using the incremental borrowing rate at 1 May 2019 (2,279) Finance lease liabilities recognised as at 30 April 2019 27,428 Recognition exemption for: • Short-term leases (64) • Leases of low-value assets (120) Lease liabilities recognised at 1 May 2019 27,244 Of which are: • Current lease liabilities 6,078 • Non-current lease liabilities 21,166 27,244

3. Critical accounting judgements and key sources of estimation uncertainty The Group makes estimates and assumptions that could affect the reported amounts of assets and liabilities within the next financial year. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In making these estimates and judgements, the impact of COVID-19 has been considered and, where appropriate, additional disclosures have been made.

Accounting judgements Impairment of financial assets measured at amortised cost Judgement is required in defining what is considered to be a significant increase in credit risk, and in making assumptions and estimates to incorporate relevant information about past events, current conditions and forecasts of economic conditions. A high degree of uncertainty is involved in making estimations using assumptions that are highly subjective. Inputs and assumptions used for measuring impairment are set on pages 68 and 69. In making these assumptions for the year ended 30 April 2020, the Group has taken into account the relinquishing of the Group’s banking licence in December 2019 (note 44) and the impact of COVID-19 adjusted forward-looking information on trade receivable lifetime ECLs (note 25).

Impairment of goodwill The impairment of goodwill is determined as set out in the accounting policies in note 1 and requires estimates in relation to future cash flows and suitable discount rates, which incorporate the impact of the COVID-19 pandemic as explained in note 15. The carrying amount of goodwill in respect of incorporation or consolidation at the balance sheet date was £106.7 million (2019: £106.7 million). Note 15 summarises the potential impact on the carrying value of goodwill of key sensitivities.

Fiduciary activities Individual entities within the Group commonly act as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and institutions. Such assets and the income arising thereon are excluded from these financial statements as they are not assets of the Group.

The Group holds money on behalf of some clients in accordance with the FCA client money rules. Such monies and the corresponding liability to clients are not shown on the face of the balance sheet as the Group is not beneficially entitled thereto. Money held on behalf of clients at the end of the financial year is set out in note 40.





3. Critical accounting judgements and key sources of estimation uncertainty (continued) Computer software For substantial computer software development, the Group applies the requirements under IAS 38 to determine whether or not costs may be capitalised at each key stage within a project’s lifecycle. During the course of the project, the Group calculates a weighted capitalisation rate based on budgeted costs for each stage of the project lifecycle which is then applied to all costs of the project. This rate is regularly assessed throughout the project lifecycle with a final assessment made prior to implementation to ensure that the overall rate of capitalisation is appropriate to the project.

Fair value of financial instruments Valuation techniques are used in measuring the fair value of financial instruments where active market quotes are not available. In applying the valuation techniques where possible market inputs are used, consistent with observable data that market participants would use in pricing the instrument. Where applicable data is not observable, management uses the best estimate about the assumptions that market participants would make. These estimates, which incorporate the impact of COVID-19, may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date. Note 24 summarises the fair value estimation techniques used for the Group’s unlisted investments.

Share based payments The Group generally operates a bi-annual share selling window through the EBT. The Group does not consider that this creates an obligation on the Company to settle any awards in cash. See note 34 for further detail.

Accounting estimates Retirement benefits The Group makes estimates about the range of long-term trends and market conditions to determine the value of the surplus or deficit on its retirement benefit schemes, based on the Group’s expectation of the future and advice from qualified actuaries. Annuities are valued on the same basis as defined benefit schemes. The principal assumptions are set out in note 28.

Long-term forecasts and estimates are necessarily highly judgemental and subject to the risk that actual events may be significantly different to those forecast. If actual events deviate from the assumptions made by the Group then the reported surplus or deficit in respect of retirement benefits may be materially different.

Share based payments In determining the fair value of equity settled share based awards and the related charge to the income statement, the Group makes assumptions about future events and market conditions. In particular, judgement must be formed as to the likely number of shares that will vest and the fair value of each award granted. The fair value is determined using a valuation model which is dependent on a number of assumptions about the Group’s future dividend policy and the future volatility in the price of the Group’s shares. Such assumptions are based on publicly available information, and reflect market expectations and advice taken from qualified personnel. Different assumptions about these factors to those made by the Group could materially affect the reported value of share based payments. Details of the Group’s share schemes and share based payments can be found in notes 33 and 34 respectively.

Accrued income Accrued income and work billed are recognised as income when there is a right to consideration and the outcome can be estimated reliably. This methodology is subject to significant estimation uncertainty due to the subjective nature of assessing both the stage of completion and recoverability of accrued income and different estimations could materially affect the reported value of accrued income. The review of the stage of completion and recoverability of accrued income is undertaken by the relevant Partner or Director on a client by client basis.

To minimise the estimation uncertainty risk a detailed year end review is undertaken at portfolio level to ensure consistency with Group policy.


4. Segmental information For management purposes, the Group is organised into four operating segments: Financial Services, Professional Services, Fund Administration and Other. The Group’s operations are predominantly in one geographical segment, the UK and Ireland.


Financial Services

£’000


£’000

Fund Administration

£’000 Other £’000

Total £’000

Segment results Net interest income 6,073 (546) (16) 331 5,842 Net fee and commission income 159,682 111,552 10,746 228 282,208 Other income 5,954 - 299 928 7,181 Operating income 171,709 111,006 11,029 1,487 295,231 Operating expenses before merger-related costs and amortisation of intangible assets – client relationships

(132,201) (99,888) (8,651) (1,353) (242,093)

Adjusted operating profit (see page 12) 39,508 11,118 2,378 134 53,138 Amortisation of intangible assets – client relationships (620) (362) - - (982) Operating profit before tax and merger-related costs 38,888 10,756 2,378 134 52,156 Merger-related costs - - - (7,114) (7,114) Operating profit before tax 38,888 10,756 2,378 (6,980) 45,042 Dividend income 253 Taxation (10,425) Profit for the year 34,870 Segment assets as at 30 April 2020 289,143 159,267 85,040 70,542 603,992 Interests in associates 4,999 Unallocated corporate assets 220 Consolidated total assets 609,211 Segment liabilities as at 30 April 2020 116,764 38,208 78,131 33,514 266,617 Unallocated corporate liabilities 1,517 Consolidated total liabilities 268,134 Other segment items: Purchase of property, plant and equipment 988 988 - - 1,976 Purchase of intangibles 17,446 723 - - 18,169 Change in cost of right-of-use assets 6,780 16,953 565 - 24,298 Depreciation and amortisation 3,392 5,279 127 - 8,798




4. Segmental information (continued)


Financial Services

£’000


£’000

Fund Administration

£’000 Other £’000

Total £’000

Segment results Net interest income 6,965 – – 361 7,326 Net fee and commission income 150,001 104,169 10,517 265 264,952 Other income 4,644 498 – 701 5,843 Operating income 161,610 104,667 10,517 1,327 278,121 Operating expenses before amortisation of intangible assets – client relationships and PAYE and NIC determinations (121,746) (96,819) (8,813) (2,362) (229,740) Adjusted operating profit (see page 12) 39,864 7,848 1,704 (1,035) 48,381 Amortisation of intangible assets – client relationships (718) (240) – – (958) Operating profit before tax and PAYE and NIC determinations 39,146 7,608 1,704 (1,035) 47,423 PAYE and NIC determinations 3,505 – – – 3,505 Operating profit before tax 42,651 7,608 1,704 (1,035) 50,928 Dividend income 186 Taxation (10,803) Profit for the year 40,311 Segment assets as at 30 April 2019 1,579,472 150,794 71,509 31,125 1,832,900 Interests in associates 4,005 Unallocated corporate assets 606 Consolidated total assets 1,837,511 Segment liabilities as at 30 April 2019 1,384,146 35,120 64,493 35,128 1,518,887 Unallocated corporate liabilities 6,355 Consolidated total liabilities 1,525,242 Other segment items: Purchase of property, plant and equipment 1,140 1,140 – – 2,280 Purchase of intangibles 14,163 569 – – 14,732 Depreciation and amortisation 1,930 1,453 – – 3,383


5. Revenue from contracts with customers Revenue from contracts with customers is disclosed as net fee and commission income in the income statement.

Disaggregation of revenue from contracts with customers The Group derives revenue from the transfer of services over time and at a point in time in the following business areas:

Timing of revenue

recognition


Operating income

£’000

At a point in time

£’000 Over time

£’000

Financial Services Investment management fee 134,222 - 134,222 Commission 24,684 24,684 - Treasury1 6,231 - 6,231 Other3 6,572 6,730 (158) 171,709 31,414 140,295 Professional Services Assurance and business services 32,863 - 32,863 Business tax 20,890 - 20,890 Transactions2 8,982 8,982 - Forensics 6,849 - 6,849 Private client tax services 28,251 - 28,251 Restructuring and recovery services 13,932 - 13,932 Other3 (761) - (761) 111,006 8,982 102,024 Fund Administration 11,029 - 11,029 Other 1,487 - 1,487 Total operating income 295,231 40,396 254,835 1. Treasury services once the Group ceased to operate as a bank. See note 47 for further details. 2. Transactional areas previously managed under assurance and business services and corporate finance. 3. Includes finance costs on lease liabilities (IFRS 16)



5. Revenue from contracts with customers Revenue from contracts with customers is disclosed as net fee and commission income in the income statement.

Disaggregation of revenue from contracts with customers The Group derives revenue from the transfer of services over time and at a point in time in the following business areas:

Timing of revenue

recognition


Operating income

£’000

At a point in time

£’000 Over time

£’000

Financial Services Investment management fee 134,222 - 134,222 Commission 24,684 24,684 - Treasury1 6,231 - 6,231 Other3 6,572 6,730 (158) 171,709 31,414 140,295 Professional Services Assurance and business services 32,863 - 32,863 Business tax 20,890 - 20,890 Transactions2 8,982 8,982 - Forensics 6,849 - 6,849 Private client tax services 28,251 - 28,251 Restructuring and recovery services 13,932 - 13,932 Other3 (761) - (761) 111,006 8,982 102,024 Fund Administration 11,029 - 11,029 Other 1,487 - 1,487 Total operating income 295,231 40,396 254,835 1. Treasury services once the Group ceased to operate as a bank. See note 47 for further details. 2. Transactional areas previously managed under assurance and business services and corporate finance. 3. Includes finance costs on lease liabilities (IFRS 16)





5. Revenue from contracts with customers (continued)

Timing of revenue

recognition


Operating income

£’000

At a point in time

£’000 Over time

£’000

Financial Services Investment management fee 127,969 – 127,969 Commission 21,610 21,610 – Private banking 6,965 – 6,965 Other 5,066 5,066 – 161,610 26,676 134,934 Professional Services Assurance and business services 32,819 – 32,819 Business tax 20,513 – 20,513 Corporate finance 4,544 4,544 – Forensics 6,179 – 6,179 Private client tax services 29,922 – 29,922 Restructuring and recovery services 10,220 – 10,220 Other 470 – 470 104,667 4,544 100,123 Fund Administration 10,517 – 10,517 Other 1,327 – 1,327 Total operating income 278,121 31,220 246,901

Contract balances The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:

2020 £’000

2019 £’000

Receivables Financial Services – billed fees 1,535 2,112 Professional Services – billed fees 29,522 26,282 31,057 28,394

Receivables are included in trade and other receivables (note 22).

2020 £’000

2019 £’000

Contract assets Financial Services – unbilled fees 8,685 8,933 Professional Services – unbilled fees 17,745 12,879 26,430 21,812

Contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the reporting date and are included in accrued income (note 22).




5. Revenue from contracts with customers (continued)

Timing of revenue

recognition


Operating income

£’000

At a point in time

£’000 Over time

£’000

Financial Services Investment management fee 127,969 – 127,969 Commission 21,610 21,610 – Private banking 6,965 – 6,965 Other 5,066 5,066 – 161,610 26,676 134,934 Professional Services Assurance and business services 32,819 – 32,819 Business tax 20,513 – 20,513 Corporate finance 4,544 4,544 – Forensics 6,179 – 6,179 Private client tax services 29,922 – 29,922 Restructuring and recovery services 10,220 – 10,220 Other 470 – 470 104,667 4,544 100,123 Fund Administration 10,517 – 10,517 Other 1,327 – 1,327 Total operating income 278,121 31,220 246,901

Contract balances The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:

2020 £’000

2019 £’000

Receivables Financial Services – billed fees 1,535 2,112 Professional Services – billed fees 29,522 26,282 31,057 28,394

Receivables are included in trade and other receivables (note 22).

2020 £’000

2019 £’000

Contract assets Financial Services – unbilled fees 8,685 8,933 Professional Services – unbilled fees 17,745 12,879 26,430 21,812

Contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the reporting date and are included in accrued income (note 22).


2020 £’000

2019 £’000

Contract liabilities Financial Services – fees in advance 1,658 1,418 Professional Services – fees in advance 2,905 1,652 4,563 3,070

Contract liabilities primarily relate to the advance of consideration received from clients and are included in fees in advance (note 32).

Significant changes in the contract assets and the contract liabilities balances during the year are as follows:

Contract assets £’000

Contract liabilities

£’000

At 1 May 2019 21,812 3,070 Income recognised - (3,070) Cash received excluding recognised income - 4,563 Transfer to receivables (21,812) - Increases as a result of changes in the measure of progress 26,430 - At 30 April 2020 26,430 4,563

Contract assets £’000

Contract liabilities

£’000

At 1 May 2018 18,647 3,011 Income recognised – (3,011) Cash received excluding recognised income – 3,070 Transfer to receivables (18,647) – Increases as a result of changes in the measure of progress 21,812 – At 30 April 2019 21,812 3,070

6. Interests in associates

2020

£’000 2019

£’000

At 1 May 4,005 3,377 Increase in holdings of associate 267 58 Dilution of investment holding 70 - Share of profit after tax 823 579 Dividend received (147) (93) Currency translation adjustment (19) 84 At 30 April 4,999 4,005

Interests in associates at 30 April 2020 include goodwill of £1.9 million (2019: £1.9 million). The total share of results of associates included in the income statement of £928,000 (2019: £634,000) comprises dilution of investment holding and share of profit before tax and is net of a tax charge for the year of £35,000 (2019: £55,000) which is included in the total tax charge detailed in note 12.

The table below summarises the Group’s share of assets, liabilities and results of associates as at 30 April 2020.

Country of

incorporation Assets £’000

Liabilities £’000

Revenues £’000

Profit after tax

£’000

% interest held

£’000

Nexia TS Pte Ltd Singapore 3,491 791 3,137 823 45.56% Nexia China Pte Ltd Singapore 9 - - - 20.00% IPM (Malta) Limited Malta 12 3 - - 49.00%





6. Interests in associates (continued)


Country of



Revenues £’000

Profit after tax

£’000

% interest held

£’000

Nexia TS Pte Ltd Singapore 2,791 802 3,119 577 44.69% Nexia China Pte Ltd Singapore 13 – 8 2 20.00% IPM (Malta) Limited Malta 12 3 – – 49.00%

The statutory financial year end of the Singapore associates does not coincide with the financial year end of the Group. The Group’s share of assets, liabilities and results is based on the audited financial statements to 31 December 2019 and management reporting information made up to the financial year end of the Group.

The assumptions used in the goodwill impairment review for the aggregated value of the associates are included in note 15.

7. Staff costs The average monthly number of full time equivalent staff (including Executive Directors and Partners) is summarised below by operating segment.

2020

Number 2019

Number

Financial Services 624 601 Professional Services 870 818 Fund Administration 79 83 Administrative staff 311 301 1,884 1,803

Their aggregate remuneration comprised:

2020

£’000 2019

£’000

Wages and salaries 143,204 134,756 Social security costs 7,516 6,407 Other staff costs 4,536 4,698 Pension costs • defined contribution plans 8,973 7,623 • defined benefit plans (note 28) (41) 111 Other retirement costs 5 5 Cash based remuneration 164,193 153,600 Share option scheme costs (note 34) 6,554 6,854 Staff costs before PAYE and NIC determinations 170,747 160,454 PAYE and NIC determinations (note 11) - (3,505) Total staff costs 170,747 156,949

The Group operates a number of defined contribution pension schemes for employees, and two defined benefit pension schemes. The assets of the plans are held separately from those of the Group in funds under the control of trustees.

Disclosure required by the Companies Act 2006 on Directors’ remuneration, including salaries, Partner profit shares and pension contributions, is included in the Directors’ Remuneration Report and forms part of the financial statements.




6. Interests in associates (continued)


Country of



Revenues £’000

Profit after tax

£’000

% interest held

£’000

Nexia TS Pte Ltd Singapore 2,791 802 3,119 577 44.69% Nexia China Pte Ltd Singapore 13 – 8 2 20.00% IPM (Malta) Limited Malta 12 3 – – 49.00%

The statutory financial year end of the Singapore associates does not coincide with the financial year end of the Group. The Group’s share of assets, liabilities and results is based on the audited financial statements to 31 December 2019 and management reporting information made up to the financial year end of the Group.

The assumptions used in the goodwill impairment review for the aggregated value of the associates are included in note 15.

7. Staff costs The average monthly number of full time equivalent staff (including Executive Directors and Partners) is summarised below by operating segment.

2020

Number 2019

Number

Financial Services 624 601 Professional Services 870 818 Fund Administration 79 83 Administrative staff 311 301 1,884 1,803

Their aggregate remuneration comprised:

2020

£’000 2019

£’000

Wages and salaries 143,204 134,756 Social security costs 7,516 6,407 Other staff costs 4,536 4,698 Pension costs • defined contribution plans 8,973 7,623 • defined benefit plans (note 28) (41) 111 Other retirement costs 5 5 Cash based remuneration 164,193 153,600 Share option scheme costs (note 34) 6,554 6,854 Staff costs before PAYE and NIC determinations 170,747 160,454 PAYE and NIC determinations (note 11) - (3,505) Total staff costs 170,747 156,949

The Group operates a number of defined contribution pension schemes for employees, and two defined benefit pension schemes. The assets of the plans are held separately from those of the Group in funds under the control of trustees.

Disclosure required by the Companies Act 2006 on Directors’ remuneration, including salaries, Partner profit shares and pension contributions, is included in the Directors’ Remuneration Report and forms part of the financial statements.


8. Merger-related costs During the year, the Group incurred professional services costs of £7.1 million in relation to merger discussions with Tilney. Further information on the merger can be found on pages 3 and 9, and note 41.

9. Other operating expenses

2020

£’000 2019

£’000

Depreciation of property, plant and equipment (note 16) 1,636 1,683 Depreciation of right-of-use assets (note 17) 5,462 – Amortisation of intangible assets (excluding client relationships) (note 15) 718 742 Operating lease expenses 66 6,231 Other occupancy costs 7,230 7,117 Change in expected credit losses (note 25) 84 928 Other operating expenses 55,242 51,870 Loss on foreign exchange 9 30 Auditor’s remuneration (see below) 899 685 71,346 69,286

A more detailed analysis of auditor’s remuneration is provided below.

2020

£’000 2019

£’000

Fees payable to the Company’s auditors for: The audit of the Company’s annual financial statements 98 90 The audit of the Company’s subsidiaries pursuant to legislation 352 356 Audit related assurance services 186 134 Tax advisory services - 2 Other assurance services 263 103 899 685

In the current period, fees for the audit of the Company and its subsidiaries were for services rendered by Mazars LLP. All other auditor's remuneration relates to services rendered by the Group's predecessor auditors, PricewaterhouseCoopers LLP.

10. Dividend income Dividend income comprises income from equity investment securities designated at FVOCI, as detailed below.

Number

of shares 2020

£’000 Number

of shares 2019

£’000

Euroclear plc (unlisted) 5,427 253 5,427 186

11. PAYE and NIC determinations As disclosed in the prior year, the Group was subject to HMRC enquiries concerning PAYE and NIC determinations on the treatment of client relationship payments and the amortisation of intangible fixed assets. Both matters have now been concluded and, as a result, a provision of £3.5 million was released to the Income Statement during the year ended 30 April 2019.





12. Taxation

2020

£’000 2019

£’000

Current tax - charge for the year 10,979 10,815 - adjustments in respect of prior years (528) (29) Deferred tax (note 26) - credit for the year (26) 17 10,425 10,803

UK corporation tax is calculated at 19.0% (2019: 19.0%) of the estimated assessable profit for the year.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

2020

£’000 2019

£’000

Profit before tax 45,295 51,114 Tax calculated at domestic tax rates applicable to profits for the respective countries 8,377 8,967 Income not subject to tax (224) (182) Expenses not deductible for tax purposes 3,169 2,279 Share acquisition deduction (411) (250) Foreign tax on income taxable at source 60 82 Retirement benefit obligation deduction (8) – Relief for initial recognition of expected credit losses (10) (36) Loss on disposal of property, plant and equipment and investments - (28) Over provision in respect of prior year (528) (29) Total tax 10,425 10,803

Tax recognised in the statement of comprehensive income comprises:

2020

£’000 2019

£’000

Actuarial movements (31) 8 Equity investment designated at FVOCI movements 726 (3) Debited in the statement of comprehensive income 695 5

In addition to the tax recognised in the statement of comprehensive income, tax recognised in equity comprises:

2020

£’000 2019

£’000

Share acquisition deductions (132) 95 (Credited)/debited to equity (132) 95




12. Taxation

2020

£’000 2019

£’000

Current tax - charge for the year 10,979 10,815 - adjustments in respect of prior years (528) (29) Deferred tax (note 26) - credit for the year (26) 17 10,425 10,803

UK corporation tax is calculated at 19.0% (2019: 19.0%) of the estimated assessable profit for the year.

Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

2020

£’000 2019

£’000

Profit before tax 45,295 51,114 Tax calculated at domestic tax rates applicable to profits for the respective countries 8,377 8,967 Income not subject to tax (224) (182) Expenses not deductible for tax purposes 3,169 2,279 Share acquisition deduction (411) (250) Foreign tax on income taxable at source 60 82 Retirement benefit obligation deduction (8) – Relief for initial recognition of expected credit losses (10) (36) Loss on disposal of property, plant and equipment and investments - (28) Over provision in respect of prior year (528) (29) Total tax 10,425 10,803

Tax recognised in the statement of comprehensive income comprises:

2020

£’000 2019

£’000

Actuarial movements (31) 8 Equity investment designated at FVOCI movements 726 (3) Debited in the statement of comprehensive income 695 5

In addition to the tax recognised in the statement of comprehensive income, tax recognised in equity comprises:

2020

£’000 2019

£’000

Share acquisition deductions (132) 95 (Credited)/debited to equity (132) 95


13. Earnings per share

2020

£’000 2019

£’000

Earnings attributable to equity holders of the Parent Company for unadjusted basic and diluted earnings per share 32,730 38,375 Amortisation of intangible assets – client relationships, net of tax (note 15) 795 776 Merger-related costs, net of tax (note 8) 7,114 – PAYE and NIC determinations, net of tax (note 11) - (2,840) Earnings attributable to equity holders of the Parent Company for adjusted basic and diluted earnings per share 40,639 36,311

Number

’000 Number

’000

Weighted average number of A ordinary shares in issue during the year 36,640 34,226 Weighted average number of D ordinary shares in issue during the year 17,326 16,641 Number of shares for unadjusted and adjusted basic earnings per share 53,966 50,867 Number of dilutive A ordinary shares under share awards 514 597 Number of shares for unadjusted and adjusted diluted earnings per share 54,480 51,464 Basic earnings per share • Unadjusted 60.6p 75.4p • Adjusted 75.3p 71.4p Diluted earnings per share • Unadjusted 60.1p 74.6p • Adjusted 74.6p 70.6p

The number of shares used in the unadjusted basic earnings per share (EPS) calculation is the weighted average number of A and D ordinary shares in issue, less the weighted average number of shares owned by the EBT. The diluted figure recalculates that number as if all share awards that would be expected to be exercised, as they have value to the award holder, had been exercised in the year.

Effective September 2018, share units held in Smith & Williamson Investment Management LLP and Smith & Williamson LLP may be exchanged for Company shares on a one-for-one basis at any time. As such, following a recalibration of LLP share units so that the value of a share unit tracks the Company’s share price (note 36), options in place to swap up LLP share units are considered fairly priced and therefore not included in the calculation of diluted earnings per share. In the event that all issued LLP share units were exchanged for Company shares at the beginning of the period, adjusted basic earnings per share would be 72.6 pence and, with the inclusion of unvested LLP share units, adjusted diluted earnings per share would be 68.8 pence.

14. Distributions to shareholders A final dividend for the year ended 30 April 2019 of 26.0 pence per A and D ordinary share was paid to shareholders on 27 September 2019.

A first interim dividend for the year ended 30 April 2020 of 15.0 pence per A and D ordinary share was paid to shareholders on 7 February 2020.

A second interim dividend for the year ended 30 April 2020 of 30.0 pence per A and D ordinary share was paid to shareholders on 26 June 2020.





15. Intangible assets

Goodwill on consolidation

£’000

Goodwill on incorporation

£’000

Computer software

£’000

Client relationships

£’000 Total £’000

Cost At 1 May 2018 49,968 64,844 13,714 22,098 150,624 Additions – – 14,732 – 14,732 Acquired through business combinations – – – 2,806 2,806 Disposal – – (628) – (628) Other movement – – – (254) (254) At 30 April 2019 49,968 64,844 27,818 24,650 167,280 Additions - - 14,481 3,688 18,169 Other movement - - - (28) (28) At 30 April 2020 49,968 64,844 42,299 28,310 185,421 Accumulated amortisation and impairment At 1 May 2018 8,073 – 6,331 19,397 33,801 Amortisation – – 742 958 1,700 At 30 April 2019 8,073 – 7,073 20,355 35,501 Amortisation - - 718 982 1,700 At 30 April 2020 8,073 - 7,791 21,337 37,201 Carrying amount At 30 April 2020 41,895 64,844 34,508 6,973 148,220 At 30 April 2019 41,895 64,844 20,745 4,295 131,779

Goodwill on incorporation arose on the incorporation of Smith & Williamson Chartered Accountants and Smith & Williamson.

Computer software comprises software development costs and other software costs not integral to computer hardware that meet the definition of an intangible asset.

For impairment testing purposes, goodwill has been allocated to the four CGUs shown in the table below, with the Investment Management and Treasury business segment comprising one CGU.

2020

Opening goodwill

£’000 Acquisition

£’000 Impairment

£’000

Currency translation adjustment

£’000

Closing goodwill

£’000

Financial Services Investment Management and Treasury 33,456 – – – 33,456 Smith & Williamson Financial Services Limited 1,127 – – – 1,127 34,583 – – – 34,583 Professional Services Smith & Williamson Corporate Finance Limited 525 – – – 525 Smith & Williamson LLP 71,631 – – – 71,631 72,156 – – – 72,156 106,739 – – – 106,739





Goodwill on consolidation

£’000

Goodwill on incorporation

£’000

Computer software

£’000

Client relationships

£’000 Total £’000

Cost At 1 May 2018 49,968 64,844 13,714 22,098 150,624 Additions – – 14,732 – 14,732 Acquired through business combinations – – – 2,806 2,806 Disposal – – (628) – (628) Other movement – – – (254) (254) At 30 April 2019 49,968 64,844 27,818 24,650 167,280 Additions - - 14,481 3,688 18,169 Other movement - - - (28) (28) At 30 April 2020 49,968 64,844 42,299 28,310 185,421 Accumulated amortisation and impairment At 1 May 2018 8,073 – 6,331 19,397 33,801 Amortisation – – 742 958 1,700 At 30 April 2019 8,073 – 7,073 20,355 35,501 Amortisation - - 718 982 1,700 At 30 April 2020 8,073 - 7,791 21,337 37,201 Carrying amount At 30 April 2020 41,895 64,844 34,508 6,973 148,220 At 30 April 2019 41,895 64,844 20,745 4,295 131,779

Goodwill on incorporation arose on the incorporation of Smith & Williamson Chartered Accountants and Smith & Williamson.

Computer software comprises software development costs and other software costs not integral to computer hardware that meet the definition of an intangible asset.

For impairment testing purposes, goodwill has been allocated to the four CGUs shown in the table below, with the Investment Management and Treasury business segment comprising one CGU.

2020

Opening goodwill


£’000 Impairment

£’000


£’000

Closing goodwill

£’000

Financial Services Investment Management and Treasury 33,456 – – – 33,456 Smith & Williamson Financial Services Limited 1,127 – – – 1,127 34,583 – – – 34,583 Professional Services Smith & Williamson Corporate Finance Limited 525 – – – 525 Smith & Williamson LLP 71,631 – – – 71,631 72,156 – – – 72,156 106,739 – – – 106,739


2019

Opening goodwill


£’000 Impairment

£’000


£’000

Closing goodwill

£’000

Financial Services Investment Management and Banking 33,456 – – – 33,456 Smith & Williamson Financial Services Limited 1,127 – – – 1,127 34,583 – – – 34,583 Professional Services Smith & Williamson Corporate Finance Limited 525 – – – 525 Smith & Williamson LLP 71,631 – – – 71,631 72,156 – – – 72,156 106,739 – – – 106,739

The recoverable amounts of these CGUs have been determined based on value-in-use calculations, using discounted cash flow projections prepared by management covering the five year period ending 30 April 2025. Cash flows beyond this period are extrapolated using the estimated long-term growth rates and applying the pre-tax discount rates referred to below.

The key assumptions in the value-in-use calculation are: the five year revenue and cost growth rates, the long-term economic growth rates (used to determine terminal values) and the pre-tax discount rates.

The revenue and cost growth rate assumptions were derived from the 2021 budget and five year forecasts and reflect past experience, current trends, anticipated market deterioration from the COVID-19 crisis and subsequent market recovery, and management’s experience. Following the market recovery anticipated during the year ended 30 April 2022, growth rates are expected to stabilise. UK revenue and cost growth rates from 1 May 2022 to 30 April 2025 have been estimated at between 4.0% and 6.0% per annum. Singapore revenue and cost growth rates from 1 May 2022 to 30 April 2025 have been estimated at between 7% and 8% per annum.

Given the high degree of uncertainty, the April 2020 IMF World Economic Outlook does not extend beyond 2021. As such, the long-term growth rate of 2%, which was based upon the IMF forecast as at 30 April 2019 for GDP growth in 2024 of 2%, remains unchanged. Reasonable changes in long-term growth rates have been considered in the sensitivity analysis discussed below.

The pre-tax discount rate was based on a number of factors including the risk-free rates in the UK (using the yield from 20 year British Government Securities, with a nominal zero coupon, as at 30 April 2020), the Group’s estimated market risk premium and a premium to reflect the private status and size of the Group and current economic environment associated with the COVID-19 pandemic. The pre-tax discount rate used was 8.9% (2019: 8.4%) for Smith & Williamson LLP, Smith & Williamson Corporate Finance Limited and Smith & Williamson Financial Services Limited and 10.0% (2019: 9.9%) for Investment Management and Treasury.

The Group considers that the CGUs within Professional Services and Smith & Williamson Financial Services Limited are all sufficiently comparable, in terms of recurring and non-recurring income, to support the adoption of the same assumptions (and thus pre-tax discount rates). The pre-tax discount rate for the Investment Management and Treasury CGU differs slightly due to the availability of sufficiently comparable quoted companies to support the alternative assumptions applied for beta and gearing.

Based on the results of the impairment tests performed, management believes there is no impairment of the carrying value of the goodwill in any CGU.





15. Intangible assets (continued) Value-in-use calculations are sensitive to changes in the key assumptions. An unfavourable change in revenue or cost growth rates by 0.5% indicates the Smith & Williamson Financial Services Limited CGU results in a deficit of value-in-use over carrying value, however, as this deficit is not material to the Group, no impairment has been recognised. The impact of these changes and sensitivities applied to Smith & Williamson LLP CGU, where changes result in proportionately less headroom than the other CGU’s, is set out in the table below:

Impact on value-in-use of:

Excess of value-in-use

over carrying value £’000

0.5% decrease in revenue

growth rate £’000

0.5% increase in cost growth

rate £’000

1.0% decrease in terminal


1.0% increase in pre-tax

discount rate £’000

Cash generating unit: Smith & Williamson LLP 64,146 (36,416) (32,868) (18,029) (22,525) Smith & Williamson Financial Services Limited 3,410 (3,748) (3,723) (397) (498)

Revenue and cost sensitivities for the Smith & Williamson LLP CGU are equivalent to a 22.5% and 20.3% decrease respectively in the forecast year five operating profit. Revenue and cost sensitivities for the Smith & Williamson Financial Services Limited CGU are equivalent to a 104.5% and 104.0% decrease respectively in the forecast year five operating profit.

Management believes goodwill allocated to the Investment Management and Treasury CGU, and Smith & Williamson Corporate Finance Limited CGU is unlikely to be impaired under any reasonable changes to key assumptions. The excess of value-in-use over carrying value is determined by reference to the net carrying value as at 30 April 2020.




15. Intangible assets (continued) Value-in-use calculations are sensitive to changes in the key assumptions. An unfavourable change in revenue or cost growth rates by 0.5% indicates the Smith & Williamson Financial Services Limited CGU results in a deficit of value-in-use over carrying value, however, as this deficit is not material to the Group, no impairment has been recognised. The impact of these changes and sensitivities applied to Smith & Williamson LLP CGU, where changes result in proportionately less headroom than the other CGU’s, is set out in the table below:

Impact on value-in-use of:

Excess of value-in-use

over carrying value £’000

0.5% decrease in revenue


0.5% increase in cost growth

rate £’000

1.0% decrease in terminal


1.0% increase in pre-tax

discount rate £’000

Cash generating unit: Smith & Williamson LLP 64,146 (36,416) (32,868) (18,029) (22,525) Smith & Williamson Financial Services Limited 3,410 (3,748) (3,723) (397) (498)

Revenue and cost sensitivities for the Smith & Williamson LLP CGU are equivalent to a 22.5% and 20.3% decrease respectively in the forecast year five operating profit. Revenue and cost sensitivities for the Smith & Williamson Financial Services Limited CGU are equivalent to a 104.5% and 104.0% decrease respectively in the forecast year five operating profit.

Management believes goodwill allocated to the Investment Management and Treasury CGU, and Smith & Williamson Corporate Finance Limited CGU is unlikely to be impaired under any reasonable changes to key assumptions. The excess of value-in-use over carrying value is determined by reference to the net carrying value as at 30 April 2020.


16. Property, plant and equipment

Short term leasehold

improvements £’000

Computer equipment

£’000

Furniture, fittings and equipment

£’000 Total £’000

Cost At 1 May 2018 9,742 1,834 7,321 18,897 Additions 1,504 465 311 2,280 Disposals (459) – – (459) Other movement 18 – 1 19 At 30 April 2019 10,805 2,299 7,633 20,737 Additions 1,725 70 181 1,976 Other movement 5 - - 5 At 30 April 2020 12,535 2,369 7,814 22,718 Accumulated depreciation At 1 May 2018 8,479 910 5,343 14,732 Charge for the year 403 485 795 1,683 Disposals (459) – – (459) Other movement 1 – 1 2 At 30 April 2019 8,424 1,395 6,139 15,958 Charge for the year 468 427 741 1,636 At 30 April 2020 8,892 1,822 6,880 17,594 Carrying amount At 30 April 2020 3,643 547 934 5,124 At 30 April 2019 2,381 904 1,494 4,779

17. Right-of-use assets

Property

£’000

Cost At 30 April 2018 and 1 May 2019 - Adjusted for adoption of new accounting standards (note 2) 24,322 Additions 39 Other movement (63) At 30 April 2020 24,298 Accumulated depreciation At 30 April 2018 and 1 May 2019 - Charge for the year 5,462 Other movement (3) At 30 April 2020 5,459 Carrying amount At 30 April 2020 18,839 At 30 April 2019 -

On 7 May 2019, the Group signed an Agreement For Lease for a new London head office situated at 40 Gresham Street, which is scheduled to commence in March 2021. In accordance with the new lease standard IFRS 16 (note 2), on commencement date the Group shall recognise a right-of-use asset and lease liability of approximately £52.8 million, with depreciation and interest costs charged to the income statement over the lease term (approximately £5.2 million in the first full year).





18. Cash and balances with central banks

2020

£’000 2019

£’000

Cash at bank 192,070 232,790 Balances with central banks - 874,148 192,070 1,106,938

2020

£’000 2019

£’000

Repayable: • on demand 168,093 1,083,383 • 3 months or less excluding on demand 23,977 23,555 192,070 1,106,938 Amounts include loans and advances with: • variable interest rates 168,093 1,100,612 • fixed interest rates 23,977 5,724 • non-interest bearing - 602 192,070 1,106,938

During the year, the Group ceased to be a deposit taking institution. As a result, all deposits from customers held on-balance sheet were transferred to off-balance sheet client accounts (see note 40). Following relinquishment of the Group’s banking licence, it no longer has access to the facility to deposit monies with the Bank of England.

19. Loans and advances to banks

2020

£’000 2019

£’000

Repayable: • on demand - 39,769 • 3 months or less excluding on demand - 35,505 • 1 year or less but over 3 months - 24,384 - 99,658 Amounts include loans and advances with: • variable interest rates - 75,658 • fixed interest rates - 24,000 - 99,658

Loans and advances to banks included in cash and cash equivalents were £nil (note 44) (2019: £75.3 million).

During the year, the Group ceased to be a deposit taking institution. As a result, all deposits from customers held on-balance sheet were transferred to off-balance sheet client accounts (see note 40), which resulted in a related reduction in loans and advances to banks.

20. Settlement balances – assets

2020

£’000 2019

£’000

Market and client balances 141,957 130,048




18. Cash and balances with central banks

2020

£’000 2019

£’000

Cash at bank 192,070 232,790 Balances with central banks - 874,148 192,070 1,106,938

2020

£’000 2019

£’000

Repayable: • on demand 168,093 1,083,383 • 3 months or less excluding on demand 23,977 23,555 192,070 1,106,938 Amounts include loans and advances with: • variable interest rates 168,093 1,100,612 • fixed interest rates 23,977 5,724 • non-interest bearing - 602 192,070 1,106,938

During the year, the Group ceased to be a deposit taking institution. As a result, all deposits from customers held on-balance sheet were transferred to off-balance sheet client accounts (see note 40). Following relinquishment of the Group’s banking licence, it no longer has access to the facility to deposit monies with the Bank of England.

19. Loans and advances to banks

2020

£’000 2019

£’000

Repayable: • on demand - 39,769 • 3 months or less excluding on demand - 35,505 • 1 year or less but over 3 months - 24,384 - 99,658 Amounts include loans and advances with: • variable interest rates - 75,658 • fixed interest rates - 24,000 - 99,658

Loans and advances to banks included in cash and cash equivalents were £nil (note 44) (2019: £75.3 million).

During the year, the Group ceased to be a deposit taking institution. As a result, all deposits from customers held on-balance sheet were transferred to off-balance sheet client accounts (see note 40), which resulted in a related reduction in loans and advances to banks.

20. Settlement balances – assets

2020

£’000 2019

£’000

Market and client balances 141,957 130,048


21. Loans and advances to customers

2020

£’000 2019

£’000

Client loans - 48,028 Client overdrafts - 2,982 - 51,010

All client loans and overdrafts are at variable interest rates and are repayable on demand. Loans and advances are provided on a secured basis (note 47).

In December 2019, following the decision to cease banking operations, the Group transferred its outstanding customer loan facilities comprising borrowings for 86 clients, totalling £32.0 million, to a third party private banking institution. At 30 April 2020, remaining customer loans comprise loans to employees of £0.4 million (2019: £0.4 million) which are disclosed under other receivables (note 22).

22. Prepayments, accrued income and other receivables

2020

£’000 2019

£’000

Trade and fee receivables (gross) 32,507 30,120 Less: Specific provision – lifetime ECL credit impaired (note 25) (1,137) (1,538) Less: Collective provision – lifetime ECL not credit impaired (note 25) (313) (188) Trade and fee receivables (net) 31,057 28,394 Prepayments 8,361 3,107 Accrued income 27,752 25,638 Net investment in subleases 176 - Other receivables 16,224 13,478 Current assets 83,570 70,617 Amounts due from individual members of Group partnerships (note 36) 1,038 1,128 Accrued income 83 28 Net investment in subleases 648 - Other receivables 972 972 Non-current assets 2,741 2,128

The net movement in the provision for impairment of trade receivables for the Group during the year was a decrease of £276,000 (2019: £812,000 increase). The income statement impact relating to the creation and utilisation of impairment provisions was a charge of £84,000 (2019: £927,000) within other operating expenses.

Other receivables under non-current assets represent deferred cash consideration receivable on disposal of equity investment securities designated at FVOCI (note 24).

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large and diverse client base. As a result, the Directors do not believe that credit risk provisions, in excess of the provision for impairment of trade and fee receivables, are required.

23. Debt investment securities measured at amortised cost

2020

£’000 2019

£’000

Debt securities - 227,899

2020

£’000 2019

£’000

At 1 May 227,899 187,543 Additions 18,000 291,014 Maturities (246,000) (250,557) Less: Collective provision – 12 months ECL 101 (101) At 30 April - 227,899





23. Debt investment securities measured at amortised cost (continued)

Debt investment securities measured at amortised cost included in cash and cash equivalents were £nil (note 44) (2019: £5.0 million).

During the year, the Group ceased to be a deposit taking institution. As a result, all deposits from customers held on-balance sheet were transferred to off-balance sheet client accounts (see note 40), resulting in a related reduction in debt investment securities measured at amortised costs.

24. Equity investment securities designated at FVOCI

2020

£’000 2019

£’000

Equity securities – listed (level 1) 715 391 Equity securities – unlisted (level 3) 10,756 7,343 Current assets 11,471 7,734 Equity securities – listed (level 1) - 310 Non-current assets - 310 Total 11,471 8,044

2020 £’000

2019 £’000

At 1 May 8,044 8,630 Disposals (734) (1,738) Net changes in fair value 4,161 1,152 At 30 April 11,471 8,044

Fair value estimation The disclosure of fair value measurements by level is based on the following hierarchy:

• Level 1: quoted prices in active markets for identical assets or liabilities

• Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)

• Level 3: inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)

There have been no transfers between level 1, level 2 and level 3 recurring fair value measurements during the year.

The fair value of listed investments is determined by reference to quoted prices on active markets.

Unlisted investments include the Group’s holding in CG Asset Management Limited and Euroclear plc for which no observable market data is available as to their values.

In September 2019, CG Asset Management Limited bought back 2,801 A shares owned by the Group for cash consideration of £0.7 million. At 30 April 2020, the Group held a non-controlling equity interest of 1,561 A shares, 10,809 B shares and 3,631 C shares in CG Asset Management Limited which are valued on an earnings yield basis. The Group has used a 9.1x times multiple, which is deemed appropriate considering the nature and size of CG Asset Management Limited. This multiple was used to determine share transactions which took place during the year.

At 30 April 2020, the Group held a non-controlling equity interest of 5,427 shares in Euroclear plc which are valued on an earnings yield basis. The Group has used a 11.49x times multiple, which is based on multiples seen for comparable listed entities after applying a discount to reflect the illiquidity of Euroclear shares, lack of control and that Euroclear is smaller and less diversified than its comparable peers.


Given the uncertainties around the impact of the COVID-19 pandemic, the Group took a conservative approach to the assessment of the maintainable earnings used to value Euroclear shares. As such, in order to balance the positive, sustained growth achieved in 2019, the Group estimated a normalised profit after tax based on the average net earnings for 2018 and 2019 in reaching an assessment of £342 million for valuation purposes. The impact of this assumption on the valuation can be assessed by considering a maintainable earnings range of £300-£400 million, reflecting the movement in Euroclear results between 2018 and 2019. The lower-end of the range would result in a valuation decrease of £0.8 million, while the higher-end would result in a valuation increase of £1.1 million.

The earnings yield calculations are sensitive to changes in the key assumptions, the impact of which is set out in the table below:

Decrease of 1% in earnings

yield £’000

Increase of 1% in earnings

yield £’000

CG Asset Management Limited 175 (146) Euroclear plc 4,206 (1,876) 4,381 (2,022)

25. Provision for doubtful debts

2020 £’000

2019 £’000

Specific provision for doubtful debts – lifetime ECL credit impaired 1,137 1,538 Collective provision for doubtful debts – 12-months ECL • 12-months ECL 86 410 • lifetime ECL not credit impaired 313 188 Total collective provision for doubtful debts 399 598 Total provision for doubtful debts 1,536 2,136

Specific provision Collective provision

£’000

Lifetime ECL credit

impaired 12-months

ECL

Lifetime ECL not credit impaired Total Total

At 1 May 2018 915 409 160 569 1,484 Bad debts written off (276) – – – (276) Charge to income statement 899 1 28 29 928 At 30 April 2019 1,538 410 188 598 2,136 Bad debts written off (684) - - - (684) Charge to income statement 283 (324) 125 (199) 84 At 30 April 2020 1,137 86 313 399 1,536

The impact of 12-month ECLs has reduced significantly following relinquishment of the Group’s banking licence in December 2019 (note 44). At year-end, bank deposits were held with high quality financial institutions (note 47).

Any reasonable changes to trade receivable lifetime ECLs, primarily due to COVID-19 adjusted forward-looking information, were not materially different to historic actual credit loss experienced over the last two years.

Impact of movements in gross carrying amount on provision for doubtful debts Provision for doubtful debts reflects expected credit losses (ECLs) measured using the three-stage approach, as described in note 1.



Given the uncertainties around the impact of the COVID-19 pandemic, the Group took a conservative approach to the assessment of the maintainable earnings used to value Euroclear shares. As such, in order to balance the positive, sustained growth achieved in 2019, the Group estimated a normalised profit after tax based on the average net earnings for 2018 and 2019 in reaching an assessment of £342 million for valuation purposes. The impact of this assumption on the valuation can be assessed by considering a maintainable earnings range of £300-£400 million, reflecting the movement in Euroclear results between 2018 and 2019. The lower-end of the range would result in a valuation decrease of £0.8 million, while the higher-end would result in a valuation increase of £1.1 million.

The earnings yield calculations are sensitive to changes in the key assumptions, the impact of which is set out in the table below:

Decrease of 1% in earnings

yield £’000

Increase of 1% in earnings

yield £’000

CG Asset Management Limited 175 (146) Euroclear plc 4,206 (1,876) 4,381 (2,022)

25. Provision for doubtful debts

2020 £’000

2019 £’000

Specific provision for doubtful debts – lifetime ECL credit impaired 1,137 1,538 Collective provision for doubtful debts – 12-months ECL • 12-months ECL 86 410 • lifetime ECL not credit impaired 313 188 Total collective provision for doubtful debts 399 598 Total provision for doubtful debts 1,536 2,136

Specific provision Collective provision

£’000

Lifetime ECL credit

impaired 12-months

ECL

Lifetime ECL not credit impaired Total Total

At 1 May 2018 915 409 160 569 1,484 Bad debts written off (276) – – – (276) Charge to income statement 899 1 28 29 928 At 30 April 2019 1,538 410 188 598 2,136 Bad debts written off (684) - - - (684) Charge to income statement 283 (324) 125 (199) 84 At 30 April 2020 1,137 86 313 399 1,536

The impact of 12-month ECLs has reduced significantly following relinquishment of the Group’s banking licence in December 2019 (note 44). At year-end, bank deposits were held with high quality financial institutions (note 47).

Any reasonable changes to trade receivable lifetime ECLs, primarily due to COVID-19 adjusted forward-looking information, were not materially different to historic actual credit loss experienced over the last two years.

Impact of movements in gross carrying amount on provision for doubtful debts Provision for doubtful debts reflects expected credit losses (ECLs) measured using the three-stage approach, as described in note 1.





26. Deferred tax The following are the major deferred tax assets and liabilities recognised by the Group, and the movements thereon, during the current and prior reporting years.

Pensions and other post retirement

benefits £’000

Equity investment

securities designated at

FVOCI £’000

Share acquisition deduction1

£’000

Intangible assets2 £’000

Other temporary

differences £’000

Total £’000

At 1 May 2018 292 (544) 629 - 350 727 (Debit)/credit to income statement for the year – – (18) - 1 (17) (Debit)/credit to equity for the year (8) 3 (95) - – (100) Other (4) – – - – (4) At 30 April 2019 280 (541) 516 - 351 606 Effect of change in tax rate in the income statement

- - 34 - 6 40

(Debit)/credit to income statement for the year - - (54) - 40 (14) Effect of change in tax rate to equity 3 (11) 24 - - 16 Credit/(debit) to equity for the year 28 (715) 108 - - (579) Other 3 - - (1,590) 1 (1,586) At 30 April 2020 314 (1,267) 628 (1,590) 398 (1,517)

2020

£’000 2019

£’000

Deferred tax assets 1,340 1,147 Deferred tax liabilities (2,857) (541) Net deferred tax (liabilities)/assets (1,517) 606 1. The share acquisition deduction relates to the potential tax deduction that could arise if all outstanding options at the balance sheet date were exercised at the current fair

value. 2. Tax relief on certain computer software intangible assets is available in the year the costs are incurred. As a consequence, a deferred tax liability is created to reflect the

future amortisation of these assets which will not be deductible for tax purposes. The overall impact during the year was the recognition of a corporate tax receivable of £1,590,000 and a corresponding increase in deferred tax liability.

27. Other borrowed funds

Effective rate of interest 2020

£’000 2019

£’000

Bank overdrafts Libor or base rate + 1.75% (average) - 11,939 Bank term loans Libor + 1.4% - 10,000 - 21,939

The Group has various loans and facilities with members of The Royal Bank of Scotland Group plc (RBS).

Multi-option facilities of £25.0 million (2019: £25.0 million) are provided in respect of financing the purchase by the EBT of the Company’s shares. Following the sale of Company shares held by the EBT (see note 35), outstanding balances were repaid. These facilities were not utilised for the remainder of the financial year.

Smith & Williamson Fund Administration Limited cancelled an overdraft facility of £5.0 million on 1 July 2019.

Overdraft facilities amounting to €650,000 (2019: €650,000) and €450,000 (2019: €450,000) are provided to Smith & Williamson Freaney Limited and Smith & Williamson Freaney Employment Services Limited respectively.

Overdraft facilities are reviewed annually.



The Group has the following undrawn borrowing facilities:

2020

£’000 2019

£’000

Floating rate – expiring within one year 25,955 9,008

An analysis of the movement in other borrowed funds is presented below.

2020

£’000 2019

£’000

At 1 May 21,939 19,408 Investment in shares in EBT 2,200 4,996 Proceeds from sale of shares in EBT (24,403) (5,429) Transfer of funds to the Company from the EBT - 3,500 Other operating cash flows 264 (536) At 30 April - 21,939

28. Retirement benefits The Group operates two funded defined benefit plans which are closed to new members.

The most recent actuarial valuations of these plans were carried out as at 30 April 2020 by Goddard Perry Actuarial LLP. The present value of the defined benefit obligations, and the related current service cost and past service cost, were measured using the projected unit credit method. The assets of the NCL Scheme are managed by a subsidiary of the Group, Smith & Williamson Investment Management LLP.

The schemes are administered by trustees in accordance with their trust deeds and rules and relevant legislation. The employer meets the cost of providing scheme benefits. The contributions payable by the employer are set by the trustees after consulting the employer and in accordance with the funding requirements of the Pensions Act 2004. The trustees’ other duties include managing the investment of plan assets and administration of plan benefits.

The principal assumptions used for the purpose of the actuarial valuation were as follows:

S&W scheme NCL scheme

2020

% 2019

% 2020

% 2019

%

Rate of increase in salaries - – 2.7 3.4 Discount rate 1.6 2.6 1.6 2.6 Inflation rate 2.7 3.4 2.7 3.4 Rate of increase to deferred pensions in excess of the GMP 2.0 2.7 2.0 2.7 Pension increase assumption fixed at 0%

or 3% fixed at 0%

or 3%

• RPI capped at 5% p.a 2.7 3.3 • CPI capped at 3% p.a 1.8 2.3

The assumed life expectancy for the membership of the NCL and S&W schemes was based upon the standard tables known as S3NMA x 105% for males and S3NFA x 110% for females using the CMI_2018 projection based on year of birth and with a long term rate of improvement of 1% per annum. In the prior year, assumed life expectancy was based upon the standard table known as S2NA using the CMI_2018 projection based on year of birth and with a long term rate of improvement of 1% per annum.

The life expectancy for a current 65 year old male is 22 years (2019: 22 years) and a 65 year old female is 24 years (2019: 24 years).





28. Retirement benefits (continued) Amounts recognised in the balance sheet under IAS 19 in relation to these plans are as follows:

S&W scheme NCL scheme Total

2020

£’000 2019

£’000 2020

£’000 2019

£’000 2020

£’000 2019

£’000

Fair value of plan assets: Equities and property - – 14,522 17,344 14,522 17,344 Bonds - – 3,969 4,770 3,969 4,770 Other assets 465 497 2,305 1,940 2,770 2,437 With profits - 181 - – -- 181 Cash 233 – 1,108 1,220 1,341 1,220 Insured annuities 1,075 1,104 - – 1,075 1,104 1,773 1,782 21,904 25,274 23,677 27,056 Present value of funded obligations (1,788) (1,782) (20,819) (23,686) (22,607) (25,468) (Deficit)/surplus in scheme (15) – 1,085 1,588 1,070 1,588 Amounts not recognised due to effect of asset ceiling - – (1,085) (1,588) (1,085) (1,588) Retirement benefit obligation recognised in the balance sheet (15) – - – (15) –

Surpluses are not recognised as the Group does not expect to benefit from contribution holidays in respect of the plans and has no contractual right to a refund of contributions in the event of a wind up of the scheme.


2020

£’000 2019

£’000 2020

£’000 2019

£’000 2020

£’000 2019

£’000

Movement in surplus/(deficit): Net assets at 1 May - 26 1,588 1,152 1,588 1,178 Net income/(expenses) recognised in income statement - – 41 (111) 41 (111) Remeasurement (loss)/gain recognised in statement of comprehensive income (15) (26) (544) 547 (559) 521 Net (liabilities)/assets at 30 April (15) – 1,085 1,588 1,070 1,588

The amounts recognised in the income statement in respect of the Group’s defined benefit plans are as follows:


2020

£’000 2019

£’000 2020

£’000 2019

£’000 2020

£’000 2019

£’000

Past service cost - – - 142 - 142 Net interest - – (41) (31) (41) (31) - – (41) 111 (41) 111

The credit for the year is included in the employee benefits expense in the income statement. The actual loss on plan assets was £0.6 million (2019: £1.1 million gain). Actuarial gains and losses have been recognised in retained earnings.



The changes in the present value of obligations are as follows:


2020

£’000 2019

£’000 2020

£’000 2019

£’000 2020

£’000 2019

£’000

Defined benefit obligation at 1 May 1,782 699 23,686 25,173 25,468 25,872 Past service cost - – - 142 - 142 Interest on funded obligation 45 19 571 668 616 687 Actuarial losses/(gains) arising from: • Financials 76 17 1,078 1,577 1,154 1,594 • Demographics (51) (9) (1,047) (521) (1,098) (530) • Experience (13) 2 (702) (1,208) (715) (1,206) Benefits paid (22) (50) (2,767) (2,145) (2,789) (2,195) Inclusion/change of insured annuities (29) 1,104 - – (29) 1,104 Defined benefit obligation at 30 April 1,788 1,782 20,819 23,686 22,607 25,468

The changes in the fair value of plan assets are as follows:


2020

£’000 2019

£’000 2020

£’000 2019

£’000 2020

£’000 2019

£’000

Plan assets at 1 May 1,782 725 25,274 26,325 27,056 27,050 Remeasurement of defined benefit asset: • Interest income 45 19 612 699 657 718 • Return on scheme asset (excluding

amounts included in interest income) (3) (16) (1,215) 395 (1,218) 379 Benefits paid (22) (50) (2,767) (2,145) (2,789) (2,195) Inclusion/change of insured annuities (29) 1,104 - – (29) 1,104 Plan assets at 30 April 1,773 1,782 21,904 25,274 23,677 27,056 The plan assets do not include any of the Group’s own financial instruments, nor any property occupied by, or other assets used by, the Group.

All equity and debt instruments have quoted prices in active markets.

The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated balance in the plan’s investment portfolio.





28. Retirement benefits (continued) The history of the plans is as follows:

S&W scheme

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000

Present value of defined benefit obligation (1,788) (1,782) (699) (622) (605) Fair value of plan assets 1,773 1,782 725 734 716 (Liability)/asset (15) – 26 112 111 Actuarial (loss)/gain recognised in statement of comprehensive income (15) (26) (89) (3) 20

NCL scheme

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000

Present value of defined benefit obligation (20,819) (23,686) (25,173) (34,570) (29,245) Fair value of plan assets 21,904 25,274 26,325 33,863 30,435 Asset/(liability) 1,085 1,588 1,152 (707) 1,190 Actuarial (loss)/gain recognised in statement of comprehensive income (544) 547 1,878 (1,931) (977)

Total

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000


During the year ended 30 April 2020, the Group has recognised the following in equity:

S&W scheme

£’000 NCL scheme

£’000 Total £’000

Actuarial loss at 1 May 2019 295 445 740 Remeasurement loss during the year 15 544 559 Deferred tax on actuarial reserve (3) (103) (106) Surplus in scheme – asset ceiling adjustment - (503) (503) Deferred tax on surplus on scheme - 96 96 Effect of change in deferred tax rate (7) (11) (18) Actuarial loss at 30 April 2020 300 468 768


S&W scheme

£’000 NCL scheme

£’000 Total £’000

Actuarial loss at 1 May 2018 295 537 832 Remeasurement loss/(gain) during the year 26 (547) (521) Deferred tax on actuarial reserve (4) 93 89 Surplus in scheme – asset ceiling adjustment (26) 436 410 Deferred tax on surplus on scheme 4 (74) (70) Actuarial loss at 30 April 2019 295 445 740




28. Retirement benefits (continued) The history of the plans is as follows:

S&W scheme

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000

Present value of defined benefit obligation (1,788) (1,782) (699) (622) (605) Fair value of plan assets 1,773 1,782 725 734 716 (Liability)/asset (15) – 26 112 111 Actuarial (loss)/gain recognised in statement of comprehensive income (15) (26) (89) (3) 20

NCL scheme

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000


Total

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000



S&W scheme

£’000 NCL scheme

£’000 Total £’000

Actuarial loss at 1 May 2019 295 445 740 Remeasurement loss during the year 15 544 559 Deferred tax on actuarial reserve (3) (103) (106) Surplus in scheme – asset ceiling adjustment - (503) (503) Deferred tax on surplus on scheme - 96 96 Effect of change in deferred tax rate (7) (11) (18) Actuarial loss at 30 April 2020 300 468 768


S&W scheme

£’000 NCL scheme

£’000 Total £’000

Actuarial loss at 1 May 2018 295 537 832 Remeasurement loss/(gain) during the year 26 (547) (521) Deferred tax on actuarial reserve (4) 93 89 Surplus in scheme – asset ceiling adjustment (26) 436 410 Deferred tax on surplus on scheme 4 (74) (70) Actuarial loss at 30 April 2019 295 445 740


The history of experience adjustments is as follows:

S&W scheme

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000

Experience adjustments on scheme liabilities 12 10 84 20 (19) Experience adjustments on scheme assets (3) (16) (5) 17 1

NCL scheme

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000

Experience adjustments on scheme liabilities (671) (152) (1,430) 5,471 (984) Experience adjustments on scheme assets (1,215) 395 448 3,540 (1,961)

Total

2020

£’000 2019

£’000 2018

£’000 2017

£’000 2016

£’000

Experience adjustments on scheme liabilities (659) (142) (1,346) 5,491 (1,003) Experience adjustments on scheme assets (1,218) 379 443 3,557 (1,960)

It is currently estimated that the sponsoring employers of the defined benefit schemes will contribute approximately £nil to the NCL scheme and £nil to the S&W scheme in the coming year.

The two key assumptions affecting the results of the valuation are the discount rate and inflation. In order to demonstrate the sensitivity of the results to these assumptions, the actuary has recalculated the defined benefit obligations for each scheme by varying each of these assumptions in isolation whilst leaving the other assumptions unchanged. For example, in order to demonstrate the sensitivity of the results to the discount rate, the actuary has recalculated the defined benefit obligations for each scheme using a discount rate that is 0.25% higher than used for calculating the disclosed figures. A similar approach has been taken to demonstrate the sensitivity of the results to inflation.

At 30 April 2020, the summary of the sensitivities in respect of the two schemes is set out below:

S&W scheme

Effect of change in assumptions Liabilities

£’000 Assets £’000

Surplus/ (deficit)

£’000

Increase/ (decrease) in surplus

£’000

No change 1,788 1,773 (15) - 0.25% rise in discount rate 1,747 1,773 26 41 0.25% fall in discount rate 1,829 1,773 (56) (41) 0.25% rise in inflation 1,788 1,773 (15) - 0.25% fall in inflation 1,788 1,773 (15) - NCL scheme


£’000 Assets £’000

Surplus £’000


£’000

No change 20,819 21,904 1,085 - 0.25% rise in discount rate 20,002 21,904 1,902 817 0.25% fall in discount rate 21,689 21,904 215 (870) 0.25% rise in inflation 21,399 21,904 505 (580) 0.25% fall in inflation 20,019 21,904 1,885 800





28. Retirement benefits (continued) At 30 April 2019, the summary of the sensitivities in respect of the two schemes is set out below:

S&W scheme


£’000 Assets £’000

Surplus £’000


£’000

No change 1,782 1,782 – – 0.25% rise in discount rate 1,742 1,762 20 20 0.25% fall in discount rate 1,824 1,803 (21) (21) 0.25% rise in inflation 1,782 1,782 – – 0.25% fall in inflation 1,782 1,782 – – NCL scheme


£’000 Assets £’000

Surplus/ (deficit)

£’000


£’000

No change 23,686 25,274 1,588 – 0.25% rise in discount rate 22,634 25,274 2,640 1,052 0.25% fall in discount rate 24,811 25,274 463 (1,125) 0.25% rise in inflation 24,554 25,274 720 (868) 0.25% fall in inflation 22,834 25,274 2,440 852

Funding arrangements NCL scheme The trustees use the projected unit funding method to fund the scheme. The last full triennial actuarial valuation was undertaken as at 31 December 2018. Since the scheme closed to future accrual with effect from 31 March 2017 and at the last valuation there was a surplus of assets over accrued liabilities (technical provisions) there are no employer contributions required for the forthcoming year.

S&W scheme The trustees use the projected unit funding method to fund the scheme. The last full triennial actuarial valuation was undertaken as at 1 May 2017. No contributions are currently required from the employer.

The main risks for the schemes are:

Investment return risk If the assets underperform the returns assumed in setting the funding targets then additional contributions may be required at subsequent valuations.

Investment match risk The schemes invest significantly in equities, whereas the funding targets are closely related to the returns on bonds. If equities fall in value relative to the matching asset of bonds, additional contributions may be required.

Longevity risk If future improvements in longevity exceed the assumptions made for scheme funding then additional contributions may be required.




28. Retirement benefits (continued) At 30 April 2019, the summary of the sensitivities in respect of the two schemes is set out below:

S&W scheme


£’000 Assets £’000

Surplus £’000


£’000

No change 1,782 1,782 – – 0.25% rise in discount rate 1,742 1,762 20 20 0.25% fall in discount rate 1,824 1,803 (21) (21) 0.25% rise in inflation 1,782 1,782 – – 0.25% fall in inflation 1,782 1,782 – – NCL scheme


£’000 Assets £’000

Surplus/ (deficit)

£’000


£’000

No change 23,686 25,274 1,588 – 0.25% rise in discount rate 22,634 25,274 2,640 1,052 0.25% fall in discount rate 24,811 25,274 463 (1,125) 0.25% rise in inflation 24,554 25,274 720 (868) 0.25% fall in inflation 22,834 25,274 2,440 852

Funding arrangements NCL scheme The trustees use the projected unit funding method to fund the scheme. The last full triennial actuarial valuation was undertaken as at 31 December 2018. Since the scheme closed to future accrual with effect from 31 March 2017 and at the last valuation there was a surplus of assets over accrued liabilities (technical provisions) there are no employer contributions required for the forthcoming year.

S&W scheme The trustees use the projected unit funding method to fund the scheme. The last full triennial actuarial valuation was undertaken as at 1 May 2017. No contributions are currently required from the employer.

The main risks for the schemes are:

Investment return risk If the assets underperform the returns assumed in setting the funding targets then additional contributions may be required at subsequent valuations.

Investment match risk The schemes invest significantly in equities, whereas the funding targets are closely related to the returns on bonds. If equities fall in value relative to the matching asset of bonds, additional contributions may be required.

Longevity risk If future improvements in longevity exceed the assumptions made for scheme funding then additional contributions may be required.


Retirement annuities Annuities relate to the Group’s estimated liability to certain spouses of former Partners of the Smith & Williamson Group.

An analysis of the changes in the present value of obligations is as follows:

2020

£’000 2019

£’000

Defined benefit obligation at 1 May 732 773 Interest cost 5 6 Foreign exchange loss/(gain) 7 (11) Actuarial loss 20 100 Benefits paid (135) (136) Defined benefit obligation at 30 April 629 732

Summary of retirement benefits

Retirement benefit assets 2020

£’000 2019

£’000

NCL scheme assets not recognised on balance sheet due to asset ceiling adjustment 1,085 1,588 1,085 1,588

Retirement benefit liabilities 2020

£’000 2019

£’000

S&W scheme liability (15) - Annuities (629) (732) (644) (732)

29. Lease liabilities

2020

£’000 2019

£’000

Maturity analysis – contractual undiscounted cash flows Within one year 6,702 - In the second to fifth years inclusive 13,366 - After five years 2,633 - Total undiscounted lease liabilities 22,701 - Lease liabilities included in the balance sheet Current 6,144 - Non-current 15,020 - 21,164 -

2020

£’000 2019

£’000

Amounts recognised in the income statement Interest on lease liabilities 748 –

2020 £’000

2019 £’000

Amounts recognised in the cash flow statement Total cash outflow for leases 6,747 –





30. Settlement balances – liabilities

2020

£’000 2019

£’000

Market and client balances 72,452 74,090 Other items in the course of settlement 68,782 55,190 141,234 129,280

Other items in the course of settlement relate to the Group’s Fund Administration business where balances are payable to clients and brokers in respect of unsettled trades.

31. Due to customers

2020

£’000 2019

£’000

Client deposits repayable on demand - 1,188,828 Client deposits with agreed maturity dates of under 12 months - 78,448 - 1,267,276

Deposits repayable on demand carry variable interest rates. Fixed maturity deposits carry fixed interest rates.

During the year, the Group applied for a variation of permission from the Prudential Regulatory Authority (PRA) to cease to be regulated as a deposit taking institution. This was approved by the PRA effective from 12 December 2019. To satisfy the variation of permission, all deposits held on-balance sheet were transferred to off-balance sheet client money accounts (see note 40).

32. Accruals, deferred income, provisions and other payables

2020

£’000 2019

£’000

Trade payables 2,750 2,922 Other payables 40,640 37,885 Fees in advance 4,563 3,070 Other taxes and social security 11,416 10,851 Accruals 24,684 25,327 Amounts due to individual members of Group partnerships1 16,025 16,764 Provision for liabilities (see below) 1,673 2,492 Current liabilities 101,751 99,311 Other payables - 349 Provision for liabilities (see below) 1,824 - Non-current liabilities 1,824 349

1 Smith & Williamson LLP received B capital contributions of £6.7 million (2019: £7.3 million) and Smith & Williamson Investment Management LLP received B capital contributions of £9.3 million (2019: £9.5 million) from individual members of the relevant LLP. The B capital contributions are repayable on retirement from the relevant LLP.




30. Settlement balances – liabilities

2020

£’000 2019

£’000

Market and client balances 72,452 74,090 Other items in the course of settlement 68,782 55,190 141,234 129,280

Other items in the course of settlement relate to the Group’s Fund Administration business where balances are payable to clients and brokers in respect of unsettled trades.

31. Due to customers

2020

£’000 2019

£’000

Client deposits repayable on demand - 1,188,828 Client deposits with agreed maturity dates of under 12 months - 78,448 - 1,267,276

Deposits repayable on demand carry variable interest rates. Fixed maturity deposits carry fixed interest rates.

During the year, the Group applied for a variation of permission from the Prudential Regulatory Authority (PRA) to cease to be regulated as a deposit taking institution. This was approved by the PRA effective from 12 December 2019. To satisfy the variation of permission, all deposits held on-balance sheet were transferred to off-balance sheet client money accounts (see note 40).


2020

£’000 2019

£’000

Trade payables 2,750 2,922 Other payables 40,640 37,885 Fees in advance 4,563 3,070 Other taxes and social security 11,416 10,851 Accruals 24,684 25,327 Amounts due to individual members of Group partnerships1 16,025 16,764 Provision for liabilities (see below) 1,673 2,492 Current liabilities 101,751 99,311 Other payables - 349 Provision for liabilities (see below) 1,824 - Non-current liabilities 1,824 349

1 Smith & Williamson LLP received B capital contributions of £6.7 million (2019: £7.3 million) and Smith & Williamson Investment Management LLP received B capital contributions of £9.3 million (2019: £9.5 million) from individual members of the relevant LLP. The B capital contributions are repayable on retirement from the relevant LLP.


Provisions for liabilities comprise the following:

Professional indemnity provision

£’000 Dilapidations

£’000

Onerous lease provision

£’000

Deferred consideration

£’000

Deferred bonus

compensation £’000

Total provisions

£’000

At 1 May 2018 446 1,034 29 568 100 2,177 Acquisitions made in the year – – – 671 – 671 Payments made in the year – – – (33) – (33) Charged to income statement 580 488 – – – 1,068 Used during the year (174) (316) (29) – – (519) Release of provision (486) (11) – – (100) (597) Other movement – – – (275) – (275) At 30 April 2019 366 1,195 – 931 – 2,492 Payments made in the year - - - (531) - (531) Charged to income statement 1,170 689 - - - 1,859 Used during the year (81) - - - - (81) Release of provision (170) - - - - (170) Other movement - - - (72) - (72) At 30 April 2020 1,285 1,884 - 328 - 3,497

The deferred consideration represents the Group’s best estimate of the future payments likely to be made to teams of investment managers for acquired client relationship intangible assets.





33. Share capital and share premium A and D ordinary shares have a par value of 10 pence per share. All issued shares are fully paid.

The following movements in issued share capital occurred during the year:

Number ’000

A ordinary shares issued

A ordinary shares to be issued

Total A ordinary

shares

Total D ordinary

shares

Total number of

shares

At 1 May 2018 38,931 – 38,931 16,641 55,572 Issue of A ordinary shares 2 47 49 – 49 At 30 April 2019 38,933 47 38,980 16,641 55,621 Conversion of A ordinary shares to D ordinary shares (916) - (916) 916 - Issue of A ordinary shares 3,430 - 3,430 - 3,430 Issue of D ordinary shares - - - 259 259 Issue of allocated shares 47 (47) - - - At 30 April 2020 41,494 - 41,494 17,816 59,310 Share capital Share premium £’000 Issued To be issued Total Issued To be issued Total Total

At 1 May 2018 5,557 – 5,557 25,150 – 25,150 30,707 Issue of A ordinary shares – 5 5 – 374 374 379 At 30 April 2019 5,557 5 5,562 25,150 374 25,524 31,086 Issue of A ordinary shares 343 - 343 33,032 - 33,032 33,375 Issue of D ordinary shares 26 - 26 2,161 - 2,161 2,187 Issue of allocated shares 5 (5) - 374 (374) - - At 30 April 2020 5,931 - 5,931 60,717 - 60,717 66,648

During the year, AGF Management Limited exercised rights pursuant to the Company’s articles of association to subscribe for 1,175,105 additional D ordinary shares in order to maintain its shareholding at 30% of the diluted share capital of the Company. To satisfy these rights, the EBT sold 916,262 A ordinary shares at £7.45 per share for £6.8 million (immediately converted to D ordinary shares) and the Company issued 258,843 D ordinary shares at £8.45 per share for £2.2 million.

During the year, the Company issued 3,430,087 A ordinary shares at £9.73 per share for £33.4 million to satisfy the exchange of LLP share units. Refer to note 36 for further details.

In the prior year, Smith & Williamson Freaney Limited acquired a 100% interest in LHM Casey McGrath Limited, an accounting firm based in Dublin. As part of the deferred equity consideration, on 1 October 2018 the EBT transferred 88,068 A ordinary shares at £8.06 per share to a nominee Company for £0.7 million and on 9 January 2020 the Company issued a further 46,900 A ordinary shares at £8.06 per share for £0.4 million.

All classes of ordinary shares have equal rights in relation to dividends, other distributions and returns of capital.

Under the terms of the Company’s articles, any A ordinary shareholders that leave the Group for any reason other than a ‘good leaver’, and request to sell their shares, shall do so at a discount to fair value unless they were acquired from the EBT, through the exercise of options (other than the Smith & Williamson Investment Management LLP Long Term Incentive Plan or Smith & Williamson Investment Management LLP Employee Long Term Incentive Plan) or by a new issue after 29 October 2002, except new issues in respect of acquisitions. AGF Management Limited, as holder of the D ordinary shares, is entitled to appoint Directors. All classes of shares rank pari passu in the event of the Company being wound up.




33. Share capital and share premium A and D ordinary shares have a par value of 10 pence per share. All issued shares are fully paid.

The following movements in issued share capital occurred during the year:

Number ’000

A ordinary shares issued

A ordinary shares to be issued

Total A ordinary

shares

Total D ordinary

shares

Total number of

shares

At 1 May 2018 38,931 – 38,931 16,641 55,572 Issue of A ordinary shares 2 47 49 – 49 At 30 April 2019 38,933 47 38,980 16,641 55,621 Conversion of A ordinary shares to D ordinary shares (916) - (916) 916 - Issue of A ordinary shares 3,430 - 3,430 - 3,430 Issue of D ordinary shares - - - 259 259 Issue of allocated shares 47 (47) - - - At 30 April 2020 41,494 - 41,494 17,816 59,310 Share capital Share premium £’000 Issued To be issued Total Issued To be issued Total Total

At 1 May 2018 5,557 – 5,557 25,150 – 25,150 30,707 Issue of A ordinary shares – 5 5 – 374 374 379 At 30 April 2019 5,557 5 5,562 25,150 374 25,524 31,086 Issue of A ordinary shares 343 - 343 33,032 - 33,032 33,375 Issue of D ordinary shares 26 - 26 2,161 - 2,161 2,187 Issue of allocated shares 5 (5) - 374 (374) - - At 30 April 2020 5,931 - 5,931 60,717 - 60,717 66,648

During the year, AGF Management Limited exercised rights pursuant to the Company’s articles of association to subscribe for 1,175,105 additional D ordinary shares in order to maintain its shareholding at 30% of the diluted share capital of the Company. To satisfy these rights, the EBT sold 916,262 A ordinary shares at £7.45 per share for £6.8 million (immediately converted to D ordinary shares) and the Company issued 258,843 D ordinary shares at £8.45 per share for £2.2 million.

During the year, the Company issued 3,430,087 A ordinary shares at £9.73 per share for £33.4 million to satisfy the exchange of LLP share units. Refer to note 36 for further details.

In the prior year, Smith & Williamson Freaney Limited acquired a 100% interest in LHM Casey McGrath Limited, an accounting firm based in Dublin. As part of the deferred equity consideration, on 1 October 2018 the EBT transferred 88,068 A ordinary shares at £8.06 per share to a nominee Company for £0.7 million and on 9 January 2020 the Company issued a further 46,900 A ordinary shares at £8.06 per share for £0.4 million.

All classes of ordinary shares have equal rights in relation to dividends, other distributions and returns of capital.

Under the terms of the Company’s articles, any A ordinary shareholders that leave the Group for any reason other than a ‘good leaver’, and request to sell their shares, shall do so at a discount to fair value unless they were acquired from the EBT, through the exercise of options (other than the Smith & Williamson Investment Management LLP Long Term Incentive Plan or Smith & Williamson Investment Management LLP Employee Long Term Incentive Plan) or by a new issue after 29 October 2002, except new issues in respect of acquisitions. AGF Management Limited, as holder of the D ordinary shares, is entitled to appoint Directors. All classes of shares rank pari passu in the event of the Company being wound up.


Smith & Williamson Holdings Limited Sharesave Scheme Under the terms of the Smith & Williamson Sharesave Scheme (Sharesave), at 30 April 2020 certain Directors and employees held options to acquire A ordinary shares as detailed.

Date options granted Number Exercise price

November 2015 18,503 £5.84 November 2016 79,795 £4.98 November 2017 162,753 £7.01 November 2018 106,884 £8.06

Sharesave is a HMRC tax efficient savings-related share scheme, where participants buy shares with their savings at a fixed price (the ‘option price’). Participants can choose to save between £10 and £500 a month under the scheme. At the end of a three or five year savings term they are able to use the savings to buy shares at the option price.

Deferred Option Plan Under the terms of the Smith & Williamson Holdings Limited Deferred Option Plan (Deferred), at 30 April 2020 certain Partners, Directors and employees held options to acquire A ordinary shares as detailed.


October 2018 110,509 £nil March 2019 2,013 £nil April 2019 38,785 £nil October 2019 45,887 £nil

These options are exercisable between two to three years from grant.

Matching Share Plan Under the terms of the Smith & Williamson Holdings Limited Matching Share Plan (Matching), at 30 April 2020 certain Partners, Directors and employees held options to acquire A ordinary shares as detailed.


October 2017 88,554 £nil October 2018 58,799 £nil March 2019 10,612 £nil October 2019 90,271 £nil

Participants purchase A ordinary shares in Smith & Williamson Holdings Limited (‘purchased shares’) at the then current fair value and receive an award over an equivalent number of shares at £nil (‘matching shares’). In accordance with the plan rules, the purchased shares are held by trustees on the participants’ behalf, and, as the beneficial owner of the shares, participants receive the same benefits as A ordinary shareholders. The purchased shares are subject to time restrictions of between two and three years and, if the purchased shares are sold or transferred before the end of the time restrictions, any matching shares will lapse.

As part of the initial Implementation Agreement with Tilney, in October 2019 participants were asked to surrender the right to purchase A ordinary shares. Instead a deferred cash payment equal to the uplift in value of these shares and related dividend foregone will be paid to participants once the transaction completes. Participants were still granted the right to receive matching shares under the terms of the matching plan. If the transaction does not complete, pursuant to the plan rules, participants will be required to subscribe for the shares in the normal way at the ex-dividend fair value for 1 May to 30 October 2019 of £8.45.





33. Share capital and share premium (continued) Long Term Investment Plan Under the terms of the Smith & Williamson Holdings Limited Long Term Investment Plan (LTIP), at 30 April 2020 certain Directors held options to acquire A ordinary shares as detailed.


October 2014 202,000 £nil

These awards will vest in two equal tranches on each of the 6th and 7th anniversary of the date of grant.

Performance conditions 1. As at the first vesting date, the participant must have repapered to repapering project standard and within the timetable defined for the project at least 95% (in number) of the client accounts under his control as at the date.

2. Provided condition 1 above is satisfied, each remaining tranche of shares will vest on the relevant vesting date subject to revenue performance over the performance period compared against revenue performance in the year ending 30 April 2014 (base year) as follows:

• the tranche will vest in full should revenues have fallen by less than 10% from base year

• the tranche will vest at 80% should revenues have fallen by between 10% and less than 20% from base year

• the tranche will vest at 50% should revenues have fallen between 20-30% from base year

• should revenues decline by more than 30% then the tranche will not vest

‘Revenues’ means the fees, commission and treasury turn earned by Smith & Williamson Investment Management LLP on clients managed by the participant during the relevant period.

Share Purchase Plan In the prior year, the Group introduced a Share Purchase Plan (Plan), which is available to UK employees. Employees can contribute anything from £10 to £150 per month to acquire partnership shares, which are purchased at the end of a six month period (‘accumulation period’). At the end of the accumulation period, funds are used to buy A ordinary shares in the Company at the lower of the share price at the start and the end of the accumulation period.

As at 30 April 2020, the trustees of the Plan held 52,276 (2019: 15,841) ordinary shares of 10p each in the Company. Dividends on shares held in the Trust are reinvested into further shares (‘dividend shares’), however in the current year dividends were paid out as cash to individuals.

Smith & Williamson Investment Management LLP Smith & Williamson Investment Management LLP SWHL Equity Matching Plan Under the terms of the Smith & Williamson Investment Management LLP SWHL Equity Matching Plan (EMP), at 30 April 2020 certain Partners held options to acquire share units as detailed.


October 2017 304,170 £nil October 2018 203,221 £nil October 2019 164,637 £nil

Participants purchase A ordinary shares in Smith & Williamson Holdings Limited (‘purchased shares’) at the then current fair value and receive an award up to the value of the purchased shares in Smith and Williamson Investment Management LLP shares units at £nil (‘matching shares’). In accordance with the plan rules, the purchased shares are held by trustees acting as a nominee on the participants’ behalf, and, as the beneficial owner of the shares, participants receive the same benefits as A ordinary shareholders. The purchased shares are subject to time restrictions of between two and four years and, if the purchased shares are sold or transferred before the end of the time restrictions, any matching shares will lapse.




33. Share capital and share premium (continued) Long Term Investment Plan Under the terms of the Smith & Williamson Holdings Limited Long Term Investment Plan (LTIP), at 30 April 2020 certain Directors held options to acquire A ordinary shares as detailed.


October 2014 202,000 £nil


Performance conditions 1. As at the first vesting date, the participant must have repapered to repapering project standard and within the timetable defined for the project at least 95% (in number) of the client accounts under his control as at the date.







Share Purchase Plan In the prior year, the Group introduced a Share Purchase Plan (Plan), which is available to UK employees. Employees can contribute anything from £10 to £150 per month to acquire partnership shares, which are purchased at the end of a six month period (‘accumulation period’). At the end of the accumulation period, funds are used to buy A ordinary shares in the Company at the lower of the share price at the start and the end of the accumulation period.

As at 30 April 2020, the trustees of the Plan held 52,276 (2019: 15,841) ordinary shares of 10p each in the Company. Dividends on shares held in the Trust are reinvested into further shares (‘dividend shares’), however in the current year dividends were paid out as cash to individuals.

Smith & Williamson Investment Management LLP Smith & Williamson Investment Management LLP SWHL Equity Matching Plan Under the terms of the Smith & Williamson Investment Management LLP SWHL Equity Matching Plan (EMP), at 30 April 2020 certain Partners held options to acquire share units as detailed.



Participants purchase A ordinary shares in Smith & Williamson Holdings Limited (‘purchased shares’) at the then current fair value and receive an award up to the value of the purchased shares in Smith and Williamson Investment Management LLP shares units at £nil (‘matching shares’). In accordance with the plan rules, the purchased shares are held by trustees acting as a nominee on the participants’ behalf, and, as the beneficial owner of the shares, participants receive the same benefits as A ordinary shareholders. The purchased shares are subject to time restrictions of between two and four years and, if the purchased shares are sold or transferred before the end of the time restrictions, any matching shares will lapse.


Smith & Williamson Investment Management LLP Deferred Option Plan Under the terms of the Smith & Williamson Investment Management LLP Deferred Option Plan (Deferred), at 30 April 2020 certain Partners held options to acquire share units as detailed.


January 2017 5,559 £nil March 2018 19,607 £nil October 2018 113,094 £nil March 2019 37,246 £nil October 2019 194,775 £nil

These options are generally exercisable three years from grant.

Smith & Williamson Investment Management LLP Long Term Investment Plan Under the terms of the Smith & Williamson Investment Management LLP Long Term Investment Plan (LTIP), at 30 April 2020 certain Partners held options to acquire share units as detailed.


October 2014 1,721,734 £nil


Performance conditions for Partners who are not members of the Board: 1. As at the first vesting date, the participant must have repapered to repapering project standard and within the timetable defined for the project at least 95% (in number) of the client accounts under his control as at the date.







Performance conditions for Partners who are members of the Board: 1. As at the first vesting date, the London Private Client department or the investment management and treasury division (as applicable) must have repapered to post repapering project standard and within the timetable defined for the project at least 95% (in number) of the client accounts under their control at that date. If this condition is not satisfied to the satisfaction of the Committee on that date the award will lapse (unless the Committee determines otherwise).

2. The participant must ensure that all practices within the London Private Client department or the investment management and treasury division (as applicable) comply with the appropriate regulatory guidelines and codes of practice and are designed to foster and support prudent risk management including the implementation and management by the participant of the appropriate conduct risk framework. This condition will be tested on each vesting date. If it is not satisfied to the satisfaction of the Committee as at any vesting date the tranche which would otherwise have vested on that date will lapse.

3. Subject to conditions 1 and 2, each remaining tranche of shares will vest on the relevant vesting date subject to revenue performance over the performance period compared against revenue performance for the London Private Client department in the year ending 30 April 2014 (base year) as follows:



• the tranche will vest at 50% should revenues have fallen by between 20-30% from base year






33. Share capital and share premium (continued) ‘Revenues’ means the fees, commission and treasury turn earned by clients managed by the London Private Client department.

4. The Committee also has an additional power to adjust awards for those Executive Directors who are participants if it is not satisfied that the overall performance and profitability of the Group warrants vesting.

Smith & Williamson Investment Management LLP Restricted Share Awards Plan Under the terms of the Smith & Williamson Investment Management LLP Restricted Share Awards Plan (RSA), at 30 April 2020 certain Partners held options to acquire share units as detailed.



These options are exercisable three years from grant.

Smith & Williamson LLP Smith & Williamson LLP SWHL Equity Matching Plan Under the terms of the Smith & Williamson LLP SWHL Equity Matching Plan (EMP), at 30 April 2020 certain Partners held options to acquire share units as detailed.



Participants purchase A ordinary shares in Smith & Williamson Holdings Limited (‘purchased shares’) at the then current fair value and receive an award up to the value of the purchased shares in Smith and Williamson LLP shares units at £nil (‘matching shares’). In accordance with the plan rules, the purchased shares are held by trustees acting as a nominee on the participants’ behalf, and, as the beneficial owner of the shares, participants receive the same benefits as A ordinary shareholders. The purchased shares are subject to time restrictions of between two and three years and, if the purchased shares are sold or transferred before the end of the time restrictions, any matching shares will lapse.

Smith & Williamson LLP Deferred Option Plan Under the terms of the Smith & Williamson LLP Deferred Option Plan (Deferred), at 30 April 2020 certain Partners held options to acquire share units as detailed.


October 2018 33,969 £nil March 2019 10,902 £nil

These options are exercisable between three to four years from grant.

Smith & Williamson LLP Restricted Share Awards Plan Under the terms of the Smith & Williamson LLP Restricted Share Awards Plan (RSA), at 30 April 2020 certain Partners held options to acquire share units as detailed.



These options are exercisable three years from grant.



34. Share based payments The share schemes, detailed in note 33, attract a share based payment charge under IFRS 2 ‘Share Based Payments’. The Group has no legal or constructive obligation to settle options awarded for cash under any of the share schemes and has never done so in the past. As detailed in note 35, the EBT was established to buy and sell the Company’s shares and it generally does this by operating a bi-annual share selling window. As there is no obligation on the EBT (or Group) to offer a share selling window, or to accept offers to sell that are received, no present obligation exists until the EBT accepts an offer. As such, the existence of the share selling window does not, in itself, create a present obligation to repurchase shares in the Company. Therefore it does not create a constructive obligation on the Group to settle any share awards in cash. As a consequence, awards under all of the share schemes are treated as equity settled.

In September 2018, the Group recalibrated the LLP share units to align the interests of LLP members with the Company’s shareholders such that the value of LLP share units move in line with the price of the Company’s shares and ensures rights attached to such interests are, so far as possible, the same. This was implemented by changing the number of share units pro rata so that each individual LLP share unit in both LLPs has the same price as one ordinary share. LLP share units may also be exchanged for Company shares on a one-for-one basis at any time.

Details of awards outstanding in respect of the Company’s shares for the schemes are as follows:


Number

Weighted average

exercise price £


Number

Weighted average

exercise price £

Outstanding at 1 May 1,393,051 2.67 1,331,158 2.76 Granted during the year 143,100 - 452,379 2.50 Exercised during the year (446,667) 1.89 (256,011) 1.57 Lapsed during the year (74,119) 5.39 (134,475) 5.15 Outstanding at 30 April 1,015,365 2.47 1,393,051 2.67 Exercisable at 30 April - - – –

The weighted average life of outstanding options was one year (2019: two years).

Details of the number of share options outstanding by type of Company scheme were as follows:

Sharesave Deferred Matching LTIP Total

Outstanding at 1 May 2018 629,726 12,770 284,662 404,000 1,331,158 Granted during the year 140,408 225,834 86,137 – 452,379 Exercised during the year (72,406) (6,151) (76,454) (101,000) (256,011) Lapsed during the year (112,709) – (21,766) – (134,475) Outstanding at 30 April 2019 585,019 232,453 272,579 303,000 1,393,051 Granted during the year - 45,887 97,213 - 143,100 Exercised during the year (164,663) (81,146) (99,858) (101,000) (446,667) Lapsed during the year (52,421) - (21,698) - (74,119) Outstanding at 30 April 2020 367,935 197,194 248,236 202,000 1,015,365





34. Share based payments (continued) Details of options outstanding in respect of Smith & Williamson Investment Management LLP and Smith & Williamson LLP share units are as follows:

Smith & Williamson Investment Management LLP Smith & Williamson LLP


number

Weighted average exercise

price £


number


price £


number


price £


number


price £

Outstanding at 1 May 3,633,025 - 6,329,872 – 662,805 - 3,119,873 – Granted during the year 380,459 - 419,187 – 245,786 - 263,562 – Exercised during the year (1,141,607) - (1,179,201) – (199,606) - (217,349) – Lapsed during the year (20,342) - (94,726) – (20,871) - (23,655) – Recalibration - - (1,842,107) – - - (2,479,626) – Outstanding at 30 April 2,851,535 - 3,633,025 – 688,114 - 662,805 – Exercisable 30 April - - – – - - – –

The weighted average life of outstanding options in Smith & Williamson Investment Management LLP and Smith & Williamson LLP was one year (2019: two years) and one year (2019: two years) respectively.

Details of the number of share options outstanding by type of scheme are as follows:

Smith & Williamson Investment Management LLP Deferred Matching EMP LTIP RSA Total

Outstanding at 1 May 2018 207,433 292,065 730,753 4,980,000 119,621 6,329,872 Exercised during the year (79,636) (7,177) (4,198) – – (91,011) Lapsed during the year – (15,149) (13,628) (36,000) – (64,777) Balance before recalibration 127,797 269,739 712,927 4,944,000 119,621 6,174,084 Recalibration (38,113) (80,445) (212,651) (1,475,209) (35,689) (1,842,107) Granted during the year 181,164 – 204,149 – 33,874 419,187 Exercised during the year – (189,294) (6,516) (867,214) (25,166) (1,088,190) Lapsed during the year (3,124) – (26,825) – – (29,949) Outstanding at 30 April 2019 267,724 – 671,084 2,601,577 92,640 3,633,025 Granted during the year 194,775 - 165,212 - 20,472 380,459 Exercised during the year (92,218) - (162,870) (860,899) (25,620) (1,141,607) Lapsed during the year - - (1,398) (18,944) - (20,342) Outstanding at 30 April 2020 370,281 - 672,028 1,721,734 87,492 2,851,535

Smith & Williamson LLP Deferred Matching EMP RSA Total

Outstanding at 1 May 2018 52,944 859,646 1,876,264 331,019 3,119,873 Exercised during the year (6,819) (17,115) (3,052) – (26,986) Lapsed during the year – (6,807) (15,908) – (22,715) Balance before recalibration 46,125 835,724 1,857,304 331,019 3,070,172 Recalibration (37,254) (674,947) (1,500,069) (267,356) (2,479,626) Granted during the year 46,930 – 193,429 23,203 263,562 Exercised during the year (8,871) (160,777) (1,879) (18,836) (190,363) Lapsed during the year – – (940) – (940) Outstanding at 30 April 2019 46,930 – 547,845 68,030 662,805 Granted during the year 10,902 - 218,672 16,212 245,786 Exercised during the year (12,961) - (168,667) (17,978) (199,606) Lapsed during the year - - (20,871) - (20,871) Outstanding at 30 April 2020 44,871 - 576,979 66,264 688,114




34. Share based payments (continued) Details of options outstanding in respect of Smith & Williamson Investment Management LLP and Smith & Williamson LLP share units are as follows:

Smith & Williamson Investment Management LLP Smith & Williamson LLP


number


price £


number


price £


number


price £


number


price £

Outstanding at 1 May 3,633,025 - 6,329,872 – 662,805 - 3,119,873 – Granted during the year 380,459 - 419,187 – 245,786 - 263,562 – Exercised during the year (1,141,607) - (1,179,201) – (199,606) - (217,349) – Lapsed during the year (20,342) - (94,726) – (20,871) - (23,655) – Recalibration - - (1,842,107) – - - (2,479,626) – Outstanding at 30 April 2,851,535 - 3,633,025 – 688,114 - 662,805 – Exercisable 30 April - - – – - - – –

The weighted average life of outstanding options in Smith & Williamson Investment Management LLP and Smith & Williamson LLP was one year (2019: two years) and one year (2019: two years) respectively.

Details of the number of share options outstanding by type of scheme are as follows:

Smith & Williamson Investment Management LLP Deferred Matching EMP LTIP RSA Total

Outstanding at 1 May 2018 207,433 292,065 730,753 4,980,000 119,621 6,329,872 Exercised during the year (79,636) (7,177) (4,198) – – (91,011) Lapsed during the year – (15,149) (13,628) (36,000) – (64,777) Balance before recalibration 127,797 269,739 712,927 4,944,000 119,621 6,174,084 Recalibration (38,113) (80,445) (212,651) (1,475,209) (35,689) (1,842,107) Granted during the year 181,164 – 204,149 – 33,874 419,187 Exercised during the year – (189,294) (6,516) (867,214) (25,166) (1,088,190) Lapsed during the year (3,124) – (26,825) – – (29,949) Outstanding at 30 April 2019 267,724 – 671,084 2,601,577 92,640 3,633,025 Granted during the year 194,775 - 165,212 - 20,472 380,459 Exercised during the year (92,218) - (162,870) (860,899) (25,620) (1,141,607) Lapsed during the year - - (1,398) (18,944) - (20,342) Outstanding at 30 April 2020 370,281 - 672,028 1,721,734 87,492 2,851,535

Smith & Williamson LLP Deferred Matching EMP RSA Total

Outstanding at 1 May 2018 52,944 859,646 1,876,264 331,019 3,119,873 Exercised during the year (6,819) (17,115) (3,052) – (26,986) Lapsed during the year – (6,807) (15,908) – (22,715) Balance before recalibration 46,125 835,724 1,857,304 331,019 3,070,172 Recalibration (37,254) (674,947) (1,500,069) (267,356) (2,479,626) Granted during the year 46,930 – 193,429 23,203 263,562 Exercised during the year (8,871) (160,777) (1,879) (18,836) (190,363) Lapsed during the year – – (940) – (940) Outstanding at 30 April 2019 46,930 – 547,845 68,030 662,805 Granted during the year 10,902 - 218,672 16,212 245,786 Exercised during the year (12,961) - (168,667) (17,978) (199,606) Lapsed during the year - - (20,871) - (20,871) Outstanding at 30 April 2020 44,871 - 576,979 66,264 688,114


The value of the options is measured by the use of a binomial pricing model. The inputs into the binomial model were as follows:

Date options granted

Expected dividend yield

%

Exercise price

£ Volatility

%

Risk free rate

%

October 2014 4.5 Nil N/A N/A November 2014 4.5 5.425 N/A 2.09 November 2015 4.5 5.835 30 1.38 November 2016 4.5 4.980 30 0.42 November 2016 4.5 4.980 30 0.71 October 2016 4.5 Nil N/A N/A February 2017 4.5 Nil N/A N/A October 2017 4.5 Nil N/A N/A November 2017 4.5 7.010 30 0.60 November 2017 4.5 7.010 30 0.86 March 2018 4.5 Nil N/A N/A October 2018 4.5 Nil N/A N/A October 2018 4.5 8.060 30 0.87 October 2018 4.5 8.060 30 1.06 March 2019 4.5 Nil N/A N/A April 2019 4.5 Nil N/A N/A October 2019 4.5 Nil N/A N/A

With the exception of awards where the strike price is £nil, the share price at the grant date is the same as the exercise price. The expected life of the options is 2.5 to 7 years. An assumed attrition rate of 3% per annum is applied to the majority of awards.

Expected volatility is determined by discounting the weighted average volatility of comparable listed companies to comparable private company volatility, while the expected dividend yield is based on the historic average dividend yield. The share price at the time of the grant of the awards was the fair value of the shares. Fair value is defined under IFRS and is the price used as the basis for any transactions in the shares. The fair value of shares is determined on a six-monthly basis by investment bankers appointed by the Board, with the exception of the fair value as at 30 April 2020, which was determined by external consultants for the share exchange transactions (note 36). The Board has power at any time to make its own fair value determination if it considers that it is necessary to do so.

The Group recognised a charge of £6.6 million (2019: £6.9 million) in relation to share based payment transactions in the year. The value of the shares at 30 April 2020 was £9.73 (2019: £7.45).





35. Own shares

Smith & Williamson

Holdings Limited EBT

2020 Number

‘000

2019 Number

‘000

Number of shares At 1 May 4,367 4,806 Shares sold to employees and Partners (4,075) (1,074) Shares bought from shareholders 284 635 At 30 April 576 4,367

2020

£’000 2019

£’000

Cost At 1 May 26,289 27,654 Shares sold to employees and Partners (8,947) (4,740) Exchange of LLP share units for Company shares (15,998) (1,110) Shares sold as part of business combination - (511) Shares bought from shareholders 2,200 4,996 At 30 April 3,544 26,289

The EBT was established to buy and sell the Company’s shares. Shares held by the EBT are for distribution to employees and Partners and certain family members of employees and Partners under incentive arrangements. The EBT is funded by an overdraft from RBS which is guaranteed by the Company and an intercompany loan from the Company. Interest on amounts drawn down and running costs are borne by Smith & Williamson Corporate Services Limited in its capacity as sponsoring employer for the Group. The EBT has waived the right to receive dividends but not capital distributions on shares held in the Company.

During the year, the EBT sold a total of 2,245,041 A ordinary shares at £9.73 for a consideration of £21.8 million to satisfy the exchange of LLP share units for Company shares on a one-for-one basis. Refer to note 36 for further details.

During the year, AGF Management Limited exercised rights to subscribe for additional D ordinary shares. To satisfy these rights, the EBT sold 916,262 A ordinary shares at £7.45 per share for £6.8 million which were immediately converted to D ordinary shares. Refer to note 33 for further details.

36. Non-controlling interests Smith & Williamson Investment Management LLP and Smith & Williamson LLP issue share units to their individual members. Individual members may also sell share units to the Group during specified share trading windows or upon ceasing membership. The following movements occurred during the year:

Smith & Williamson Investment

Management LLP Smith & Williamson LLP Total Number £’000 % interest Number £’000 % interest £’000

At 1 May 2018 4,137,656 7,093 7.0% 5,286,172 2,587 8.7% 9,680 Issued during the year 91,011 – 23,439 – – Sold during the year (67,973) (159) (54,115) (22) (181) Balance before recalibration 4,160,694 6,934 7.0% 5,255,496 2,565 8.6% 9,499 Recalibration (1,241,245) – (4,244,624) – – Issued during the year 1,393,653 1,740 650,354 3,435 5,175 Sold during the year (99,748) (291) (18,947) (80) (371) Exchange of share units for Company shares (173,321) (360) (14,948) (33) (393) At 30 April 2019 4,040,033 8,023 9.4% 1,627,331 5,887 13.1% 13,910 Issued during the year 1,136,459 - 197,840 - - Sold during the year (5,896) (18) (34,858) (72) (90) Exchange of share units for Company shares

(4,813,433)

(6,542)

(1,213,726)

(2,403)

(8,945)

At 30 April 2020 357,163 1,463 0.8% 576,587 3,412 4.6% 4,875




35. Own shares

Smith & Williamson

Holdings Limited EBT

2020 Number

‘000

2019 Number

‘000

Number of shares At 1 May 4,367 4,806 Shares sold to employees and Partners (4,075) (1,074) Shares bought from shareholders 284 635 At 30 April 576 4,367

2020

£’000 2019

£’000

Cost At 1 May 26,289 27,654 Shares sold to employees and Partners (8,947) (4,740) Exchange of LLP share units for Company shares (15,998) (1,110) Shares sold as part of business combination - (511) Shares bought from shareholders 2,200 4,996 At 30 April 3,544 26,289

The EBT was established to buy and sell the Company’s shares. Shares held by the EBT are for distribution to employees and Partners and certain family members of employees and Partners under incentive arrangements. The EBT is funded by an overdraft from RBS which is guaranteed by the Company and an intercompany loan from the Company. Interest on amounts drawn down and running costs are borne by Smith & Williamson Corporate Services Limited in its capacity as sponsoring employer for the Group. The EBT has waived the right to receive dividends but not capital distributions on shares held in the Company.

During the year, the EBT sold a total of 2,245,041 A ordinary shares at £9.73 for a consideration of £21.8 million to satisfy the exchange of LLP share units for Company shares on a one-for-one basis. Refer to note 36 for further details.

During the year, AGF Management Limited exercised rights to subscribe for additional D ordinary shares. To satisfy these rights, the EBT sold 916,262 A ordinary shares at £7.45 per share for £6.8 million which were immediately converted to D ordinary shares. Refer to note 33 for further details.

36. Non-controlling interests Smith & Williamson Investment Management LLP and Smith & Williamson LLP issue share units to their individual members. Individual members may also sell share units to the Group during specified share trading windows or upon ceasing membership. The following movements occurred during the year:

Smith & Williamson Investment

Management LLP Smith & Williamson LLP Total Number £’000 % interest Number £’000 % interest £’000

At 1 May 2018 4,137,656 7,093 7.0% 5,286,172 2,587 8.7% 9,680 Issued during the year 91,011 – 23,439 – – Sold during the year (67,973) (159) (54,115) (22) (181) Balance before recalibration 4,160,694 6,934 7.0% 5,255,496 2,565 8.6% 9,499 Recalibration (1,241,245) – (4,244,624) – – Issued during the year 1,393,653 1,740 650,354 3,435 5,175 Sold during the year (99,748) (291) (18,947) (80) (371) Exchange of share units for Company shares (173,321) (360) (14,948) (33) (393) At 30 April 2019 4,040,033 8,023 9.4% 1,627,331 5,887 13.1% 13,910 Issued during the year 1,136,459 - 197,840 - - Sold during the year (5,896) (18) (34,858) (72) (90) Exchange of share units for Company shares

(4,813,433)

(6,542)

(1,213,726)

(2,403)

(8,945)

At 30 April 2020 357,163 1,463 0.8% 576,587 3,412 4.6% 4,875


In December 2019, LLP share units totalling 5,303,698 were exchanged for Company shares on a one-for-one basis. To satisfy the exchange, the EBT sold 2,141,782 A ordinary shares at £9.73 per share for £20.8 million and the Company issued 3,161,916 A ordinary shares at £9.73 per share for £30.8 million.

In March 2019, LLP share units totalling 371,430 were exchanged for Company shares on a one-for-one basis. To satisfy the exchange, the EBT sold 103,259 A ordinary shares at £9.73 per share for £1.0 million and the Company issued 268,171 A ordinary shares at £9.73 per share for £2.6 million.

In the prior year, the Group introduced an Equity Ownership Programme, which is available to all individual members of both LLPs. This programme enables a member to fund 75% of the value of the LLP share unit purchase with a personal loan from NatWest or fund this themselves and the remaining 25% is funded by the member. Members have the option of funding the remaining 25% by a purchase of partly paid LLP share units on a 75% partly paid basis, which will be subject to a long-stop date of 5 years for payment of the unpaid amount. Amounts due from individual members are classified as non-current assets under prepayments, accrued income and other receivables (note 22). As at 30 April 2020, the LLP share units issued to individual members of Smith & Williamson Investment Management LLP and Smith & Williamson LLP under this programme were 201,179 and 411,560 (2019: 207,891 and 453,883) respectively. Fully paid Smith & Williamson Investment Management LLP share units of 6,712 and Smith & Williamson LLP share units of 42,323 acquired under the programme were exchanged for Company shares during the year.

At 30 April 2020, the Group held the remaining share units in Smith & Williamson Investment Management LLP and Smith & Williamson LLP of 43,862,364 and 11,998,464 (2019: 39,043,035 and 10,749,880), respectively.

At 30 April 2020, individual members held options outstanding in respect of Smith & Williamson Investment Management LLP and Smith & Williamson LLP share units which were 2,851,535 and 688,114 (2019: 3,633,025 and 662,805) respectively (notes 33 and 34). These options vest over a period of up to four years.

The combination of issued share units and options outstanding, as at 30 April 2020, will provide individual members with an aggregate interest in Smith & Williamson Investment Management LLP and Smith & Williamson LLP, following full vesting, of 3.9% and 7.1% (2019: 16.4% and 17.6%) respectively.

37. Capital commitments On 7 May 2019, the Group signed an Agreement For Lease for a new London head office situated at 40 Gresham Street, which is scheduled to commence in March 2021. In accordance with the new lease standard IFRS 16 (note 2), on commencement date the Group shall recognise a right-of-use asset and lease liability. See note 17 for further detail.

At the balance sheet date, the Group had no other material capital commitments in respect of property, plant and equipment (2019: £nil).

38. Operating leases IFRS 16 eliminates the classification of leases as either operating leases or finance leases. Instead, any leases with more than 12 months’ term are recognised as an asset (see note 17) with the related future lease obligations shown as a liability (see note 29).

The Group is required to identify the difference between the present value of its operating lease obligations disclosed at 30 April 2019 under IAS 17, discounted by using the Group’s incremental borrowing rate, and its lease liabilities recognised at the date of initial application to IFRS 16. This reconciliation has been presented in note 2.

This note is applicable for the year ended 30 April 2019 which was not restated. At 30 April 2019, the Group had outstanding obligations under non-cancellable operating leases that fall due as follows:

2020

£’000 2019

£’000

Within one year - 6,917 In the second year to fifth year inclusive - 18,680 After five years - 4,110 - 29,707

Operating lease payments represent rentals payable by the Group for certain office properties and motor vehicles. As at 30 April 2019, the total future sublease payments receivable were £1.2 million.





39. Contingent liabilities and commitments The Company is from time to time involved in legal actions that are incidental to its operations. Currently the Company is not involved in any legal actions that would significantly affect the financial position or profitability of the Company.

The Group was subject to HMRC enquiries concerning PAYE and NIC determinations on the treatment of client relationship payments and the amortisation of intangible fixed assets. During the year ended 30 April 2019, a final settlement of £1.0 million was agreed with HMRC with respect to this matter and, as a result, £3.5 million was released to the income statement (note 11).

During the year the Group transferred its outstanding customer loan facilities to a third party private banking institution. As a result, as at 30 April 2020, the Group’s undrawn commitments to lend to its clients were £nil million (2019: £37.0 million).

40. Fiduciary activities The Group provides custody, trustee, corporate administration, investment management and advisory services to third parties, which involves the Group making allocations and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements as, in the Directors’ judgement, the primary risks and rewards of these assets and money rest with the group’s clients and, as such, are not assets of the Group.

During the year, the Group applied for a variation of permission from the Prudential Regulatory Authority (PRA) to cease to be regulated as a deposit taking institution. This was approved by the PRA effective from 12 December 2019. To satisfy the variation of permission, all deposits from customers held on-balance sheet by Smith & Williamson Investment Services Limited were transferred to off-balance sheet client money accounts. In addition to ceasing to be a deposit taking institution, the Group transferred its outstanding client loan facilities to a third party private banking institution.

At 30 April 2020 the Group, acting as trustee, held client money amounting to £1,357 million (2019: £0.7 million) in accordance with the FCA client money rules.

41. Post balance sheet events In September 2019, Smith & Williamson Group entered into a merger agreement with Tilney Group. The merger, which was approved by Smith & Williamson Holdings Limited shareholders, was subject to regulatory approval. However, following FCA concerns raised in January 2020, both parties entered into new merger negotiations in respect of a revised transaction structure.

In June 2020, the Smith & Williamson Group announced that it had agreed a revised transaction structure, which took account of the FCA’s feedback (and which included a new investment into the Tilney Group by Warburg Pincus). The revisions to the structure meant that further regulatory, anti-trust and shareholder approvals were required. Smith & Williamson shareholders re-confirmed their support for the merger on 30 July 2020, and the last of the third party conditions was satisfied on 31 July 2020.

The High Court of Justice sanctioned the scheme at a hearing held on 6 August 2020. On the completion date, which is scheduled for 1 September 2020, the entire issued and to be issued share capital of Smith & Williamson Holdings Limited will be acquired by entities within the Tilney Group. Refer to the Chairman's Statement on page 3 for further details.

There have been no other material post balance sheet events.




39. Contingent liabilities and commitments The Company is from time to time involved in legal actions that are incidental to its operations. Currently the Company is not involved in any legal actions that would significantly affect the financial position or profitability of the Company.

The Group was subject to HMRC enquiries concerning PAYE and NIC determinations on the treatment of client relationship payments and the amortisation of intangible fixed assets. During the year ended 30 April 2019, a final settlement of £1.0 million was agreed with HMRC with respect to this matter and, as a result, £3.5 million was released to the income statement (note 11).

During the year the Group transferred its outstanding customer loan facilities to a third party private banking institution. As a result, as at 30 April 2020, the Group’s undrawn commitments to lend to its clients were £nil million (2019: £37.0 million).

40. Fiduciary activities The Group provides custody, trustee, corporate administration, investment management and advisory services to third parties, which involves the Group making allocations and purchase and sale decisions in relation to a wide range of financial instruments. Those assets that are held in a fiduciary capacity are not included in these financial statements as, in the Directors’ judgement, the primary risks and rewards of these assets and money rest with the group’s clients and, as such, are not assets of the Group.

During the year, the Group applied for a variation of permission from the Prudential Regulatory Authority (PRA) to cease to be regulated as a deposit taking institution. This was approved by the PRA effective from 12 December 2019. To satisfy the variation of permission, all deposits from customers held on-balance sheet by Smith & Williamson Investment Services Limited were transferred to off-balance sheet client money accounts. In addition to ceasing to be a deposit taking institution, the Group transferred its outstanding client loan facilities to a third party private banking institution.

At 30 April 2020 the Group, acting as trustee, held client money amounting to £1,357 million (2019: £0.7 million) in accordance with the FCA client money rules.

41. Post balance sheet events In September 2019, Smith & Williamson Group entered into a merger agreement with Tilney Group. The merger, which was approved by Smith & Williamson Holdings Limited shareholders, was subject to regulatory approval. However, following FCA concerns raised in January 2020, both parties entered into new merger negotiations in respect of a revised transaction structure.

In June 2020, the Smith & Williamson Group announced that it had agreed a revised transaction structure, which took account of the FCA’s feedback (and which included a new investment into the Tilney Group by Warburg Pincus). The revisions to the structure meant that further regulatory, anti-trust and shareholder approvals were required. Smith & Williamson shareholders re-confirmed their support for the merger on 30 July 2020, and the last of the third party conditions was satisfied on 31 July 2020.

The High Court of Justice sanctioned the scheme at a hearing held on 6 August 2020. On the completion date, which is scheduled for 1 September 2020, the entire issued and to be issued share capital of Smith & Williamson Holdings Limited will be acquired by entities within the Tilney Group. Refer to the Chairman's Statement on page 3 for further details.



42. Related party transactions The Group provides accommodation and services to Nexia Smith & Williamson Audit Limited. The Company and Nexia Smith & Williamson Audit Limited are considered to be related as they have certain shareholders in common. Smith & Williamson Corporate Services Limited and Smith & Williamson LLP have provided staff to Nexia Smith & Williamson Audit Limited, the charge in the year being £15.4 million (2019: £13.9 million). Accommodation and other overheads totalling £2.8 million (2019: £3.2 million) have been charged to Nexia Smith & Williamson Audit Limited by the Group.

The amount owed to Smith & Williamson LLP, a subsidiary of the Group, by Nexia Smith & Williamson Audit Limited at 30 April 2020 was £3.9 million (2019: £4.2 million).

At the balance sheet date, the Group had the following guarantees in place for related parties:

2020 Base currency

‘000

2019 Base currency

‘000

2020 £ equivalent

‘000

2019 £ equivalent

‘000

Overdraft facilities: • Nexia TS Pte Ltd S$416 S$416 234 234 SME Working Capital Loan: • Nexia TS Pte Ltd S$156 S$156 88 88 Indemnity for financial loss: • Nexia Smith & Williamson Audit Limited £2,000 £2,000 2,000 2,000 Indemnity for insolvency: • NCL Investments Limited Pension Scheme (note 60) £10,000 £10,000 10,000 10,000 Total 12,322 12,322

The remuneration of the key management personnel of the Group, who are defined as the Directors of the Parent Company, is set out in the Remuneration Committee report. The value of share based payments awards to key management in the year ended 30 April 2020 was £0.9 million (2019: £0.9 million). At 30 April 2020, key management personnel and their close family members had outstanding deposits of £nil (2019: £0.4 million), which were made on normal business terms. Loans to key management personnel and their close family members at 30 April 2020 amounted to £nil (2019: £nil). Some key management personnel and their close family members make use of the services provided by companies within the Group. Charges for such services are made at various staff rates. Distributions to key management personnel and their close family members during the year were £1.0 million (2019: £0.8 million).

All amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been given or received in respect of amounts outstanding. No provisions have been made for doubtful debts in respect of the amounts owed by the related parties.

43. Interests in structured entities A structured entity is defined as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only, or when the relevant activities are directed by means of contractual arrangements. The Group has assessed whether the funds it manages are structured entities and concluded that managed funds are structured entities unless substantive removal or liquidation rights exist.

IFRS 12 includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates and structured entities. The adoption of IFRS 12 has resulted in additional disclosures in respect of these interests. There is no impact on the Group’s profit or loss for the current or prior year or on the equity reported.

The Group has interests in structured entities as a result of contractual arrangements arising from the management of assets on behalf of its clients. These structured entities typically consist of unitised vehicles such as Open Ended Investment Companies and Authorised Unit Trusts, which entitle investors to a percentage of the vehicle’s net asset value. The structured entities are financed by the purchase of units or shares by investors.

The business activity of all structured entities, in which the Group has an interest, is the management of assets in order to maximise investment returns for investors from capital appreciation and/or investment income. The Group earns a management fee from its structured entities, based on a percentage of the entity’s net asset value and, where contractually agreed, a performance fee, based on outperformance against predetermined benchmarks.

As fund manager, the Group does not guarantee returns on its funds or commit to financially support its funds.





43. Interests in structured entities (continued) The Group does not have any material seed capital investments, individually or collectively, in funds managed by the Group.

The table below shows the funds under management and advice of structured entities that the Group manages and fee income that it receives from these entities. The carrying value of the Group’s interest in these entities is considered to be the value of the funds under management and advice reflected below.

At 30 April 2020

Type Number of

funds

Net funds under management

and advice £bn

Investment management/administration

fees for the year ended 30 April 2020

£’000

Management fees receivable

£’000

Investment Management 62 2.3 12,488 751 Fund Administration 167 15.3 11,045 5,864 At 30 April 2019

Type Number of

funds


and advice £bn



£’000


£’000

Investment Management 63 2.3 11,662 702 Fund Administration 169 13.9 10,512 5,729

The Group has no direct exposure to losses in relation to the funds under management and advice reported above as the investment risk is borne by external investors. The main risk the Group faces from its interest in funds under management and advice managed on behalf of external investors is the loss of fee income as a result of the withdrawal of funds by clients. Outflows from funds are dependent on market sentiment, asset performance and investor considerations.

44. Consolidated statement of cash flows For the purpose of the cash flow statement, cash and cash equivalents comprise the following balances with less than three months until maturity from the date of acquisition:

2020

£’000 2019

£’000

Cash and balances with central banks (note 18) 192,070 1,106,938 Loans and advances to banks (note 19) - 75,274 Debt investment securities measured at amortised cost (note 23) - 5,000 Other borrowed funds (note 27) - (21,939) 192,070 1,165,273

Balances with central banks are interest-bearing and repayable on demand.

Included in cash and cash equivalents is £192.1 million (2019: £195.2 million) of the Group’s own net cash.

During the year, the Group applied for a variation of permission from the PRA to cease to be regulated as a deposit taking institution. This was approved by the PRA effective from 12 December 2019. To satisfy the variation of permission, all deposits from customers held on-balance sheet were transferred to off-balance sheet client money accounts (see note 40). In addition to ceasing to be a deposit taking institution, the Group transferred its outstanding customer loan facilities to a third party private banking institution.




43. Interests in structured entities (continued) The Group does not have any material seed capital investments, individually or collectively, in funds managed by the Group.

The table below shows the funds under management and advice of structured entities that the Group manages and fee income that it receives from these entities. The carrying value of the Group’s interest in these entities is considered to be the value of the funds under management and advice reflected below.

At 30 April 2020

Type Number of

funds


and advice £bn



£’000


£’000

Investment Management 62 2.3 12,488 751 Fund Administration 167 15.3 11,045 5,864 At 30 April 2019

Type Number of

funds


and advice £bn



£’000


£’000

Investment Management 63 2.3 11,662 702 Fund Administration 169 13.9 10,512 5,729

The Group has no direct exposure to losses in relation to the funds under management and advice reported above as the investment risk is borne by external investors. The main risk the Group faces from its interest in funds under management and advice managed on behalf of external investors is the loss of fee income as a result of the withdrawal of funds by clients. Outflows from funds are dependent on market sentiment, asset performance and investor considerations.

44. Consolidated statement of cash flows For the purpose of the cash flow statement, cash and cash equivalents comprise the following balances with less than three months until maturity from the date of acquisition:

2020

£’000 2019

£’000

Cash and balances with central banks (note 18) 192,070 1,106,938 Loans and advances to banks (note 19) - 75,274 Debt investment securities measured at amortised cost (note 23) - 5,000 Other borrowed funds (note 27) - (21,939) 192,070 1,165,273

Balances with central banks are interest-bearing and repayable on demand.

Included in cash and cash equivalents is £192.1 million (2019: £195.2 million) of the Group’s own net cash.

During the year, the Group applied for a variation of permission from the PRA to cease to be regulated as a deposit taking institution. This was approved by the PRA effective from 12 December 2019. To satisfy the variation of permission, all deposits from customers held on-balance sheet were transferred to off-balance sheet client money accounts (see note 40). In addition to ceasing to be a deposit taking institution, the Group transferred its outstanding customer loan facilities to a third party private banking institution.


45. Group entities The Company has holdings, directly or indirectly, in the following entities. Subsidiaries denoted by * are direct subsidiaries of the Company. The principal operations are carried out in the country of incorporation.

Name Principal activity

Ordinary shares/share units % held

Registered office

Smith & Williamson LLP Accountancy 95 1 Smith & Williamson Investment Management LLP Investment management 99 1 Smith & Williamson Corporate Finance Limited Corporate finance *100 1 Smith & Williamson Services Limited Services company *100 1 Smith & Williamson Investment Services Limited Treasury *100 1 Smith & Williamson Fund Administration Limited Fund administration and unit trust

managers *100 1

Smith & Williamson Financial Services Limited Pensions and insurance *100 1 Smith & Williamson Investment Management (Ireland) Limited

OEIC managers *100 2

Smith & Williamson Trust Corporation Limited Trust company *100 1 NCL Investments Limited Investment management and

stockbroking 100 1

Smith & Williamson Freaney Limited Chartered accountancy *100 3 LHM Casey McGrath Limited Chartered accountancy 100 3 Smith & Williamson Corporate Services Limited Services company 100 1 25 Moorgate Limited Property management 100 1 Oakfield Trustees Limited Trust company 100 7 Smith & Williamson Freaney Employment Services Limited Services company 100 3 Smith & Williamson (Channel Islands) Limited Chartered accountancy *100 4 Smith & Williamson Pensioneer Trustee Limited Pensions *100 5 Smith & Williamson International Limited Investment management *100 4 Smith & Williamson Investment Management (Europe) Limited Investment management *100 5 1 Riding House Street Limited Dormant 100 1 Athenaeum Directors Limited Dormant 100 1 Athenaeum Secretaries Limited Dormant 100 1 Cunningham Coates Limited Dormant 100 6 M & A International Limited Dormant 100 1 M & A Partners Limited Dormant 100 1 NCL (Nominees) Limited Dormant 100 1 NCL (Securities) Limited Holding company *100 1 Smith & Williamson Freaney (UK) Limited Dormant 100 1 Smith & Williamson Group Holdings Limited Holding company 100 1 Smith & Williamson I M Limited Holding company *100 1 Smith & Williamson Nominees Limited Dormant 100 1 Smith & Williamson Tax LLP Dormant 100 1 Smith & Williamson TBS Holdings Limited Holding company *100 1 St Vincent St Fund Administration Limited Dormant 100 1 Smith & Williamson Trustees Limited Dormant 100 1 1. 25 Moorgate, London, EC2R 6AY, England 2. Trinity Point, 10-11 Leinster Street South, Dublin 2, DO2 EF85, Republic of Ireland 3. Paramount Court, Corrig Road, Sandyford Business Park, Dublin 18, D18 R9C7, Republic of Ireland 4. Weighbridge House, Liberation Square, St. Helier, Jersey, JE2 3NA 5. 12 Herbert Street, Dublin 2, D02 X240, Republic of Ireland 6. 32-38 Linenhall Street, Belfast, County Antrim, BT2 8BG, Northern Ireland 7. 4th Floor Portwall Place, Portwall Lane, Bristol BS1 6NA, England





45. Group entities (continued)

Regulation At 30 April 2020 Smith & Williamson Investment Services Limited is solely regulated by the FCA following the relinquishment of its banking licence in December 2019 (see note 40). Smith & Williamson Investment Management LLP, NCL Investments Limited, Smith & Williamson Fund Administration Limited, Smith & Williamson Financial Services Limited and Smith & Williamson Corporate Finance Limited are authorised and regulated by the FCA in the UK. Smith & Williamson Investment Management (Ireland) Limited and Smith & Williamson Investment Management (Europe) Limited are regulated in Ireland by the Central Bank of Ireland. Smith & Williamson International Limited is regulated by the Jersey Financial Services Commission.

Smith & Williamson LLP is licensed by the Institute of Chartered Accountants in England and Wales to provide a range of investment services.

Smith & Williamson Freaney Limited is authorised to carry on investment business by the Institute of Chartered Accountants in Ireland.

NCL Investments Limited and Smith & Williamson Investment Services Limited are each member firms of the London Stock Exchange.

46. Capital management Accounting capital is defined as the total of share capital, share premium, retained earnings and other reserves less own shares. Total capital at 30 April 2020 was £341.1 million (2019: £312.3 million). In accordance with CRD IV, a prudential regulatory consolidation group, referred to as the PCG, has been created. This consists of the Parent Company, regulated and ancillary entities. Regulatory capital for the PCG is subject to supervision by the FCA (previously the PRA until ceasing to be a regulated deposit taking institution in December 2019) and is calculated in accordance with CRD IV. These require certain adjustments to and certain deductions from accounting capital, the latter principally in respect of intangible assets, investments in Group companies outside the PCG and the holding of own shares.

The Group’s objectives when managing capital are to:

• comply with the capital requirements set by the regulators of the banking and other regulated markets where the Group operates;

• safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for its other stakeholders; and

• maintain a strong capital base to support the future strategy and development of the business.

The PCG has embedded the Internal Capital Adequacy Assessment Process (ICAAP) into the management process which considers current and projected risks and their associated capital requirements. The regulatory capital figures for the PCG and, where relevant, its constituent companies are monitored against their respective regulatory capital requirements derived using the CRD IV Pillar 1 requirement, ICAAP Pillar 2a assessment, stress testing and the cost of wind down analysis. At 30 April 2020, the PCG’s total capital, including profits for the full year to 30 April 2020, was £162.7 million (2019: £150.1 million).

Capital and liquidity adequacy is monitored on a daily, monthly and less frequent basis as required. Surplus capital levels are forecast on a monthly basis, taking account of proposed dividends and investment requirements, to ensure appropriate buffers are maintained. The PCG regularly reports its capital position to its lead regulator, the FCA.

Regulatory capital requirements have been met throughout the financial year ended 30 April 2020, on a solo regulated and consolidated basis.




45. Group entities (continued)

Regulation At 30 April 2020 Smith & Williamson Investment Services Limited is solely regulated by the FCA following the relinquishment of its banking licence in December 2019 (see note 40). Smith & Williamson Investment Management LLP, NCL Investments Limited, Smith & Williamson Fund Administration Limited, Smith & Williamson Financial Services Limited and Smith & Williamson Corporate Finance Limited are authorised and regulated by the FCA in the UK. Smith & Williamson Investment Management (Ireland) Limited and Smith & Williamson Investment Management (Europe) Limited are regulated in Ireland by the Central Bank of Ireland. Smith & Williamson International Limited is regulated by the Jersey Financial Services Commission.

Smith & Williamson LLP is licensed by the Institute of Chartered Accountants in England and Wales to provide a range of investment services.

Smith & Williamson Freaney Limited is authorised to carry on investment business by the Institute of Chartered Accountants in Ireland.

NCL Investments Limited and Smith & Williamson Investment Services Limited are each member firms of the London Stock Exchange.

46. Capital management Accounting capital is defined as the total of share capital, share premium, retained earnings and other reserves less own shares. Total capital at 30 April 2020 was £341.1 million (2019: £312.3 million). In accordance with CRD IV, a prudential regulatory consolidation group, referred to as the PCG, has been created. This consists of the Parent Company, regulated and ancillary entities. Regulatory capital for the PCG is subject to supervision by the FCA (previously the PRA until ceasing to be a regulated deposit taking institution in December 2019) and is calculated in accordance with CRD IV. These require certain adjustments to and certain deductions from accounting capital, the latter principally in respect of intangible assets, investments in Group companies outside the PCG and the holding of own shares.

The Group’s objectives when managing capital are to:

• comply with the capital requirements set by the regulators of the banking and other regulated markets where the Group operates;

• safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for its other stakeholders; and

• maintain a strong capital base to support the future strategy and development of the business.

The PCG has embedded the Internal Capital Adequacy Assessment Process (ICAAP) into the management process which considers current and projected risks and their associated capital requirements. The regulatory capital figures for the PCG and, where relevant, its constituent companies are monitored against their respective regulatory capital requirements derived using the CRD IV Pillar 1 requirement, ICAAP Pillar 2a assessment, stress testing and the cost of wind down analysis. At 30 April 2020, the PCG’s total capital, including profits for the full year to 30 April 2020, was £162.7 million (2019: £150.1 million).

Capital and liquidity adequacy is monitored on a daily, monthly and less frequent basis as required. Surplus capital levels are forecast on a monthly basis, taking account of proposed dividends and investment requirements, to ensure appropriate buffers are maintained. The PCG regularly reports its capital position to its lead regulator, the FCA.

Regulatory capital requirements have been met throughout the financial year ended 30 April 2020, on a solo regulated and consolidated basis.


47. Financial risk management The Group offers a range of services to private clients, family and charitable trusts and corporate clients.

During the year, following the decision to cease banking operations, all deposits from customers held on-balance sheet were transferred to off-balance sheet client money accounts. In addition, the Group transferred its outstanding customer loan facilities to a third party private banking institution. Prior to this, as part of the banking service, the Group used non-retail funding instruments to invest liquid asset balances and to manage the risks arising from its operations.

The Group has a formal structure for managing risk, including established risk limits, reporting lines, mandates and other control procedures.

The Group does not use derivative financial instruments for risk management purposes. The fair values of the Group’s assets and liabilities are not materially different from their carrying amounts.

a) Categories of financial instruments The Group classifies its financial assets into those measured at amortised cost (note 23) and those measured at fair value through other comprehensive income. Further information can be found in note 1.

All financial liabilities are held at amortised cost, as described in the accounting policies in note 1.

b) Strategy in using financial instruments As a Group which includes authorised institutions, the Group’s activities include the use of financial instruments but the Group does not trade financial instruments for its own account. During the year, following a decision to cease banking operations, the Group no longer accepts deposits from customers. Prior to this, the Group accepted deposits from customers, at a mix of fixed and floating rates, and used financial instruments to provide a return while offering competitive interest rates to clients.

c) Credit risk As a treasury function, the primary source of credit risk arises from placing funds with banks. It is the Group’s policy to place funds with a range of high quality financial institutions approved by the Board. Investments are diversified to avoid excessive exposures to individual counterparties, groups of connected counterparties or geographical location.

Exposure to credit risk is managed through lending limits and by reference to external ratings. Limits are reviewed at least annually and more frequently if individual or market conditions dictate. Default rates from Standard and Poor’s are used to assess the potential default risk in lending.

Information regarding measurement of ECLs, inputs, assumptions and techniques used for estimating impairment, calculation of ECLs and incorporation of forward-looking information can be found in note 1.

While operating as a bank, the Group’s primary source of credit risk arose from placing funds with, and holding interest bearing securities issued by, banks, building societies and central governments. The Group had an internally developed credit rating structure for loans and advances to customers which was derived from lending policies and was used to assess the potential default risk in lending.

Loans and advances to banks and cash and cash equivalents The Group has exposures to a range of financial institutions through its treasury operations. The Group policy requires that all such exposures are only entered into with counterparties or groups of counterparties approved by the Board after reference to each counterparty’s Fitch rating. Exposures are monitored on a daily basis and reviewed by the Smith & Williamson Investment Services Limited (SWIS) Executive Committee on a monthly basis. The SWIS Executive Committee may suspend a counterparty and/or withdraw funds or liquidate a holding if market conditions dictate.

Settlement balances Settlement risk arises where payment is made or a transfer of a security is effected in the expectation of a corresponding delivery of a security or cash. The vast majority of transactions are on a delivery versus payment basis (DvP), with near immediate exchange of cash and securities. Outstanding settlement balances, both DvP and free deliveries, are monitored on a daily basis. No settlement balances were impaired at the balance sheet date (2019: £nil).





47. Financial risk management (continued)

Loans and advances to customers Loan book During the year, following the decision to cease banking operations, the Group transferred its outstanding customer loan facilities to a third party private banking institution. The following loan book activities apply to periods before this transfer.

Loans and overdrafts are provided to clients on a secured basis either against portfolios held in one of the Group’s nominee companies or against property over which the Group holds a charge. Loans are reviewed on an annual basis as a minimum, and more frequently if individual or market conditions dictate.

All loans and extensions to loans are approved by a minimum of two members of the SWIS Executive Committee, against a set exposure limit for the loan book.

At 30 April 2020 the total advanced as loans was £0.4 million (2019: £48.0 million), comprising loans of £0.4 million (2019: £0.4 million) to employees. Loans to employees are unsecured.

Overdrafts Overdrafts may arise from time to time, principally due to timing differences between the purchase and sale of client assets. Overdrafts are actively monitored and reviewed by the Credit Review Committee.

Trade and fee receivables Trade and fee receivables relate to fees that have been invoiced to, but not settled by, clients. The Group has policies in place to ensure that services are provided to clients with an appropriate credit history. Client invoices are typically due for payment on issue and accordingly all trade and fee receivables are disclosed past due. Where trade receivables are impaired, in view of normal client payment patterns, full provision is made against any such trade receivables. The collection of receivables is monitored by individual business lines on a monthly basis. Senior management periodically reviews, as a preventative measure, potential bad debts and takes appropriate risk mitigating action at local levels.

Derivatives It is not Group policy to hold or issue derivatives for its own trading purposes. It deals on a matched principal basis because this is required by, and is the custom of, the relevant markets.

Maximum exposure to credit risk The Group’s on-balance sheet credit risk exposure at 30 April 2020, ignoring the value of any collateral held, amounted to £423 million (2019: £1,693 million). Financial guarantees of £12.3 million (2019: £12.3 million) were granted to related parties (note 42) and £nil (2019: £nil) were granted to clients. Off-balance sheet balances are shown in section d) Liquidity risk below. For accrued income and other receivables, the amount stated is after any provisions for impairment.

Neither past due nor impaired Cash and balances with central banks, loans and advances to banks and debt investment securities measured at amortised cost were neither past due nor impaired and are further analysed below by reference to the Fitch rating at the balance sheet date.

2020

£’000 2019

£’000

Cash and balances with central banks – AA+ to AA- 26,030 954,582 Cash and balances with central banks – A+ to A- 162,845 148,559 Cash and balances with central banks – BBB+ - 5 Cash and balances with central banks – unrated 3,195 3,792 Loans and advances – AA+ to AA- - 40,688 Loans and advances – A+ to A- - 58,970 Debt investment securities measured at amortised cost – AA+ to AA- - 83,975 Debt investment securities measured at amortised cost – A+ to A- - 143,924 192,070 1,434,495

Loans and advances to customers were neither past due nor impaired at the balance sheet date.





Loans and advances to customers Loan book During the year, following the decision to cease banking operations, the Group transferred its outstanding customer loan facilities to a third party private banking institution. The following loan book activities apply to periods before this transfer.

Loans and overdrafts are provided to clients on a secured basis either against portfolios held in one of the Group’s nominee companies or against property over which the Group holds a charge. Loans are reviewed on an annual basis as a minimum, and more frequently if individual or market conditions dictate.

All loans and extensions to loans are approved by a minimum of two members of the SWIS Executive Committee, against a set exposure limit for the loan book.

At 30 April 2020 the total advanced as loans was £0.4 million (2019: £48.0 million), comprising loans of £0.4 million (2019: £0.4 million) to employees. Loans to employees are unsecured.

Overdrafts Overdrafts may arise from time to time, principally due to timing differences between the purchase and sale of client assets. Overdrafts are actively monitored and reviewed by the Credit Review Committee.

Trade and fee receivables Trade and fee receivables relate to fees that have been invoiced to, but not settled by, clients. The Group has policies in place to ensure that services are provided to clients with an appropriate credit history. Client invoices are typically due for payment on issue and accordingly all trade and fee receivables are disclosed past due. Where trade receivables are impaired, in view of normal client payment patterns, full provision is made against any such trade receivables. The collection of receivables is monitored by individual business lines on a monthly basis. Senior management periodically reviews, as a preventative measure, potential bad debts and takes appropriate risk mitigating action at local levels.

Derivatives It is not Group policy to hold or issue derivatives for its own trading purposes. It deals on a matched principal basis because this is required by, and is the custom of, the relevant markets.

Maximum exposure to credit risk The Group’s on-balance sheet credit risk exposure at 30 April 2020, ignoring the value of any collateral held, amounted to £423 million (2019: £1,693 million). Financial guarantees of £12.3 million (2019: £12.3 million) were granted to related parties (note 42) and £nil (2019: £nil) were granted to clients. Off-balance sheet balances are shown in section d) Liquidity risk below. For accrued income and other receivables, the amount stated is after any provisions for impairment.

Neither past due nor impaired Cash and balances with central banks, loans and advances to banks and debt investment securities measured at amortised cost were neither past due nor impaired and are further analysed below by reference to the Fitch rating at the balance sheet date.

2020

£’000 2019

£’000

Cash and balances with central banks – AA+ to AA- 26,030 954,582 Cash and balances with central banks – A+ to A- 162,845 148,559 Cash and balances with central banks – BBB+ - 5 Cash and balances with central banks – unrated 3,195 3,792 Loans and advances – AA+ to AA- - 40,688 Loans and advances – A+ to A- - 58,970 Debt investment securities measured at amortised cost – AA+ to AA- - 83,975 Debt investment securities measured at amortised cost – A+ to A- - 143,924 192,070 1,434,495

Loans and advances to customers were neither past due nor impaired at the balance sheet date.


d) Liquidity risk Liquidity risk is the risk that the Group is unable to meet its obligations as they fall due. The Group operates strict criteria for counterparties, to ensure that all investments are liquid and placed with high quality counterparties. The Group manages this risk by placing deposits across a range of maturities and by maintaining a stock of liquid and tradable assets. The risk is monitored daily against liquidity limits and reviewed monthly by the SWIS Executive Committee. The Group also maintains banking facilities with external organisations.

Cash flows The table below analyses financial assets and liabilities of the Group on an undiscounted future cash flow basis according to the contractual maturity, into relevant maturity groupings based upon the remaining period at the balance sheet date. Balances with no fixed maturity are included in the ‘over 5 years’ category. Included within the ‘under 1 month’ category are amounts that are either repayable on demand or which have no contractual maturity.

At 30 April 2020

Under 1 month £’000

1 to 3 months

£’000

3 to 12 months

£’000

1 to 5 years £’000

Over 5 years £’000

Total £’000

Assets Cash and balances with central banks 192,070 - - - - 192,070 Settlement balances – assets 141,957 - - - - 141,957 Accrued income and other receivables 31,078 33,897 9,067 3,422 486 77,950 Equity investment securities designated at FVOCI

-

-

11,471

-

-

11,471

Total 365,105 33,897 20,538 3,422 486 423,448 Liabilities Settlement balances – liabilities 141,234 - - - - 141,234 Accruals, provisions and other payables 50,994 42,082 3,940 1,996 - 99,012 Lease liabilities 133 1,421 4,590 12,523 2,497 21,164 Total 192,361 43,503 8,530 14,519 2,497 261,410 Net liquidity gap 172,744 (9,606) 12,008 (11,097) (2,011) 162,038






At 30 April 2019


1 to 3 months

£’000

3 to 12 months

£’000

1 to 5 years £’000


Total £’000

Assets Cash and balances with central banks 1,106,938 – – – – 1,106,938 Loans and advances to banks 74,270 7,388 18,000 – – 99,658 Settlement balances – assets 130,048 – – – – 130,048 Loans and advances to customers 51,010 – – – – 51,010 Accrued income and other receivables 28,036 33,828 4,764 2,589 421 69,638 Debt investment securities measured at amortised cost 15,899 52,000 160,000 – – 227,899 Equity investment securities designated at FVOCI – – 7,734 310 – 8,044 Total 1,406,201 93,216 190,498 2,899 421 1,693,235 Liabilities Other borrowed funds 21,939 – – – – 21,939 Settlement balances – liabilities 129,280 – – – – 129,280 Due to customers 1,252,852 2,479 11,945 – – 1,267,276 Accruals, provisions and other payables 59,787 31,323 1,537 3,935 8 96,590 Total 1,463,858 33,802 13,482 3,935 8 1,515,085 Net liquidity gap (57,657) 59,414 177,016 (1,036) 413 178,150

Off-balance sheet items Cash flows resulting from the Group’s off-balance sheet financial liabilities relate to client money detailed in note 40, contingent liabilities and commitments in note 39 and related party indemnities and guarantees as detailed in note 42.

e) Market risk

Interest rate risk In the prior year, the SWIS Executive Committee set an overall pre-tax interest rate exposure limit of £2.0 million for the total profit or loss resulting from an unexpected, immediate and sustained 2% movement in sterling interest rates for Smith & Williamson Investment Services Limited, the principal operating subsidiary subject to interest rate risk. The potential total profit or loss was calculated on the basis of the average number of days to repricing of the interest bearing liabilities compared with the period to repricing on a corresponding amount of interest bearing assets. The total potential impact on profit or loss before tax was £1.9 million at the balance sheet date for a 2% movement in interest rates.

During the year, following the decision to cease banking operations, the SWIS Executive Committee ceased the computation of an interest rate exposure limit.

Part of the Group’s return on financial instruments is obtained from controlled mismatching of the dates on which interest receivable on assets and interest payable on liabilities are next reset to market rates or, if earlier, the dates on which the instruments mature. The tables on the following page summarise these repricing mismatches on the Group’s non-trading book at 30 April 2020 and 2019. Items are allocated to time bands by reference to the earlier of the next contractual interest rate repricing date and the maturity date.





At 30 April 2019


1 to 3 months

£’000

3 to 12 months

£’000

1 to 5 years £’000


Total £’000

Assets Cash and balances with central banks 1,106,938 – – – – 1,106,938 Loans and advances to banks 74,270 7,388 18,000 – – 99,658 Settlement balances – assets 130,048 – – – – 130,048 Loans and advances to customers 51,010 – – – – 51,010 Accrued income and other receivables 28,036 33,828 4,764 2,589 421 69,638 Debt investment securities measured at amortised cost 15,899 52,000 160,000 – – 227,899 Equity investment securities designated at FVOCI – – 7,734 310 – 8,044 Total 1,406,201 93,216 190,498 2,899 421 1,693,235 Liabilities Other borrowed funds 21,939 – – – – 21,939 Settlement balances – liabilities 129,280 – – – – 129,280 Due to customers 1,252,852 2,479 11,945 – – 1,267,276 Accruals, provisions and other payables 59,787 31,323 1,537 3,935 8 96,590 Total 1,463,858 33,802 13,482 3,935 8 1,515,085 Net liquidity gap (57,657) 59,414 177,016 (1,036) 413 178,150

Off-balance sheet items Cash flows resulting from the Group’s off-balance sheet financial liabilities relate to client money detailed in note 40, contingent liabilities and commitments in note 39 and related party indemnities and guarantees as detailed in note 42.

e) Market risk

Interest rate risk In the prior year, the SWIS Executive Committee set an overall pre-tax interest rate exposure limit of £2.0 million for the total profit or loss resulting from an unexpected, immediate and sustained 2% movement in sterling interest rates for Smith & Williamson Investment Services Limited, the principal operating subsidiary subject to interest rate risk. The potential total profit or loss was calculated on the basis of the average number of days to repricing of the interest bearing liabilities compared with the period to repricing on a corresponding amount of interest bearing assets. The total potential impact on profit or loss before tax was £1.9 million at the balance sheet date for a 2% movement in interest rates.

During the year, following the decision to cease banking operations, the SWIS Executive Committee ceased the computation of an interest rate exposure limit.

Part of the Group’s return on financial instruments is obtained from controlled mismatching of the dates on which interest receivable on assets and interest payable on liabilities are next reset to market rates or, if earlier, the dates on which the instruments mature. The tables on the following page summarise these repricing mismatches on the Group’s non-trading book at 30 April 2020 and 2019. Items are allocated to time bands by reference to the earlier of the next contractual interest rate repricing date and the maturity date.


At 30 April 2020

Under 3 months

£’000

3 to 6 months

£’000

6 to 12 months

£’000

1 to 5 years £’000

Non-interest bearing

£’000 Total £’000

Assets Cash and balances with central banks 192,070 - - - - 192,070 Settlement balances – assets - - - - 141,957 141,957 Accrued income and other receivables 44 44 88 2,741 75,033 77,950 Equity investment securities designated at FVOCI - - - - 11,471 11,471 Total 192,114 44 88 2,741 228,461 423,448 Liabilities Settlement balances – liabilities - - - - 141,234 141,234 Accruals, provisions and other payables - - - - 99,012 99,012 Lease liabilities 1,554 1,565 3,025 15,020 - 21,164 Total 1,554 1,565 3,025 15,020 240,246 261,410 Interest rate sensitivity gap 190,560 (1,521) (2,937) (12,279) (11,785) 162,038

At 30 April 2019

Under 3 months

£’000

3 to 6 months

£’000

6 to 12 months

£’000

1 to 5 years £’000

Non-interest bearing

£’000 Total £’000

Assets Cash and balances with central banks 1,106,336 – – – 602 1,106,938 Loans and advances to banks 81,658 500 17,500 – – 99,658 Settlement balances – assets – – – – 130,048 130,048 Loans and advances to customers 51,010 – – – – 51,010 Accrued income and other receivables – – – 2,100 67,538 69,638 Debt investment securities measured at amortised cost 67,899 50,500 109,500 – – 227,899 Equity investment securities designated at FVOCI – – – – 8,044 8,044 Total 1,306,903 51,000 127,000 2,100 206,232 1,693,235 Liabilities Other borrowed funds 21,939 – – – – 21,939 Settlement balances – liabilities – – – – 129,280 129,280 Due to customers 1,255,331 2,175 9,770 – – 1,267,276 Accruals, provisions and other payables – – – – 96,590 96,590 Total 1,277,270 2,175 9,770 – 225,870 1,515,085 Interest rate sensitivity gap 29,633 48,825 117,230 2,100 (19,638) 178,150

Foreign exchange risk The Group’s operations are predominantly in the UK. The Group continuously monitors its exposure to currency fluctuation risks based on balance sheet items and expected cash flows. Foreign currency exposures resulting from the Group’s treasury business or income from the Company’s Irish subsidiaries are converted to stirling on a regular basis.

At 30 April 2020, the Group had no significant foreign exchange risk.

48. Ultimate controlling party At 30 April 2020, the Company had no ultimate controlling party.



COMPANY FINANCIAL STATEMENTS

Company Income Statement and Statement of Comprehensive Income for the year ended 30 April 2020


Note


£’000


£’000

Revenue 45,352 38,131 Cost of sales (21,175) (19,566) Gross profit 24,177 18,565 Operating expenses 50 (22,000) (17,118) Operating profit 2,177 1,447 Investment revenue 51 49,602 21,848 Profit before tax 51,779 23,295 Taxation 52 (1,251) (510) Profit for the year attributable to equity holders of the Company 50,528 22,785


£’000


£’000

Profit for the year attributable to equity holders of the Company 50,528 22,785 Items that will not be reclassified to profit or loss Net gains on revaluation of equity investment securities designated at FVOCI, net of tax 17,759 112,487 Other comprehensive income for the year, net of tax 17,759 112,487 Total comprehensive income for the year attributable to equity holders of the Company 68,287 135,272



COMPANY FINANCIAL STATEMENTS

Company Income Statement and Statement of Comprehensive Income for the year ended 30 April 2020


Note


£’000


£’000

Revenue 45,352 38,131 Cost of sales (21,175) (19,566) Gross profit 24,177 18,565 Operating expenses 50 (22,000) (17,118) Operating profit 2,177 1,447 Investment revenue 51 49,602 21,848 Profit before tax 51,779 23,295 Taxation 52 (1,251) (510) Profit for the year attributable to equity holders of the Company 50,528 22,785


£’000


£’000

Profit for the year attributable to equity holders of the Company 50,528 22,785 Items that will not be reclassified to profit or loss Net gains on revaluation of equity investment securities designated at FVOCI, net of tax 17,759 112,487 Other comprehensive income for the year, net of tax 17,759 112,487 Total comprehensive income for the year attributable to equity holders of the Company 68,287 135,272


Company Balance Sheet as at 30 April 2020


Note

As at 30 April 2020

£’000

As at 30 April 2019

£’000

Assets Non-current assets Intangible assets 53 34,445 19,543 Property, plant and equipment 54 351 510 Investments in subsidiaries designated at FVOCI 55 617,187 544,080 Equity investment securities designated at FVOCI 56 - 310 Deferred tax assets - 49 651,983 564,492 Current assets Cash and cash equivalents 1,403 4,286 Prepayments, accrued income and other receivables 57 9,832 10,197 Equity investment securities designated at FVOCI 56 322 - Current tax assets 228 - 11,785 14,483 Total assets 663,768 578,975 Liabilities Non-current liabilities Deferred tax liabilities 1,537 – Accruals, deferred income, provisions and other payables 58 - 311 1,537 311 Current liabilities Accruals, deferred income, provisions and other payables 58 8,448 6,270 Current tax liabilities - 406 8,448 6,676 Total liabilities 9,985 6,987 Net assets 653,783 571,988 Equity Share capital 33 5,931 5,562 Share premium 33 60,717 25,524 Other reserves 525,084 507,325 Retained earnings 62,051 33,577 Total equity 653,783 571,988


The financial statements were approved by the Board and authorised for issue on 7 August 2020 and signed on its behalf by:

A F Sykes G T Hotson NON-EXECUTIVE CHAIRMAN GROUP FINANCE DIRECTOR



COMPANY FINANCIAL STATEMENTS CONTINUED

Company Cash Flow Statement for the year ended 30 April 2020


Note


£’000


£’000

Cash flows from operating activities Profit before tax 51,779 23,295 Amortisation of intangible assets 53 619 608 Depreciation of property, plant and equipment 54 169 196 Investment revenue 51 (49,602) (21,848) Change in expected credit losses - (10) Operating cash flows before movements in operating assets and liabilities 2,965 2,241 Changes in operating assets and liabilities Decrease in prepayments, accrued income and other receivables 365 64 Increase in accruals, deferred income, provisions and other payables 1,867 1,817 Cash generated from operations 5,197 4,122 Tax paid (304) (518) Net cash inflow from operating activities 4,893 3,604 Cash flows from investing activities Purchase of property, equipment and intangible assets 53,54 (15,531) (13,187) Purchase of investments in subsidiaries designated at FVOCI (21,980) (1,321) Dividend received from subsidiaries 51 49,602 21,848 Net cash generated from investing activities 12,091 7,340 Cash flows from financing activities Issue of D ordinary shares 33 2,187 - Distributions to shareholders (22,054) (18,315) Net cash used in financing activities (19,867) (18,315) Net decrease in cash and cash equivalents (2,883) (7,371) Cash and cash equivalents at the beginning of the year 4,286 11,657 Cash and cash equivalents at the end of the year 1,403 4,286



COMPANY FINANCIAL STATEMENTS CONTINUED

Company Cash Flow Statement for the year ended 30 April 2020


Note


£’000


£’000

Cash flows from operating activities Profit before tax 51,779 23,295 Amortisation of intangible assets 53 619 608 Depreciation of property, plant and equipment 54 169 196 Investment revenue 51 (49,602) (21,848) Change in expected credit losses - (10) Operating cash flows before movements in operating assets and liabilities 2,965 2,241 Changes in operating assets and liabilities Decrease in prepayments, accrued income and other receivables 365 64 Increase in accruals, deferred income, provisions and other payables 1,867 1,817 Cash generated from operations 5,197 4,122 Tax paid (304) (518) Net cash inflow from operating activities 4,893 3,604 Cash flows from investing activities Purchase of property, equipment and intangible assets 53,54 (15,531) (13,187) Purchase of investments in subsidiaries designated at FVOCI (21,980) (1,321) Dividend received from subsidiaries 51 49,602 21,848 Net cash generated from investing activities 12,091 7,340 Cash flows from financing activities Issue of D ordinary shares 33 2,187 - Distributions to shareholders (22,054) (18,315) Net cash used in financing activities (19,867) (18,315) Net decrease in cash and cash equivalents (2,883) (7,371) Cash and cash equivalents at the beginning of the year 4,286 11,657 Cash and cash equivalents at the end of the year 1,403 4,286


Company Statement of Changes in Equity for the year ended 30 April 2020


Other reserves

Share capital

£’000

Share premium

£’000

Merger reserve1

£’000

Capital redemption

reserve2 £’000

FVOCI Reserve3

£’000

Total other reserves

£’000

Retained earnings

£’000


Equity at 1 May 2018 5,557 25,150 37,392 14,546 342,900 394,838 29,107 454,652 Profit for the year ended 30 April 2019 – – – – – – 22,785 22,785 Other comprehensive income for the year – – – – 112,487 112,487 – 112,487 Total comprehensive income – – – – 112,487 112,487 22,785 135,272 Distributions to shareholders – – – – – – (18,315) (18,315) Issue of A ordinary shares 5 374 – – – – – 379 Equity at 30 April 2019 5,562 25,524 37,392 14,546 455,387 507,325 33,577 571,988 Profit for the year ended 30 April 2020 - - - - - - 50,528 50,528 Other comprehensive income for the year - - - - 17,759 17,759 - 17,759 Total comprehensive income - - - - 17,759 17,759 50,528 68,287 Distributions to shareholders - - - - - - (22,054) (22,054) Issue of A ordinary shares 343 33,032 - - - - - 33,375 Issue of D ordinary shares 26 2,161 - - - - - 2,187 Equity at 30 April 2020 5,931 60,717 37,392 14,546 473,146 525,084 62,051 653,783 1. The merger reserve primarily arose on the acquisition of NCL (Securities) Limited and Smith & Williamson Limited as part of the Group’s incorporation in 2002, offset by an

accounting policy change in 2014 to hold investments in subsidiaries at fair value, rather than cost. 2. The capital redemption reserve arose as a result of the redemption of the B ordinary shares in 2012. 3. The fair value through other comprehensive income (FVOCI) reserve consists of accumulated changes in the fair value of equity investments.




NOTES TO THE COMPANY FINANCIAL STATEMENTS

Notes to the Company Financial Statements for the year ended 30 April 2020


49. Significant accounting policies The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with IFRSs as adopted by the EU.

The principal accounting policies adopted are the same as those set out in note 1 to the Consolidated Financial Statements. In addition, investments in subsidiaries are accounted for in line with the requirements of IFRS 9. The Company provides services to other entities within the Smith & Williamson Group. Fees receivable for services are recognised as revenue in the accounting period in which the services are provided. Cost of sales represents the cost of the services provided to the Group companies.

The Company charges the Group’s employing entities for the fair value of share awards granted to their employees by the EBT.

50. Operating expenses Operating profit has been arrived at after charging:

2020

£’000 2019

£’000

Operating expenses 21,292 16,428 Change in expected credit losses (1) (8) Amortisation of intangible assets 619 608 Auditor’s remuneration for the audit of the Company’s financial statements 90 90 22,000 17,118

51. Investment revenue

2020

£’000 2019

£’000

Dividend income from subsidiaries 49,602 21,848

52. Taxation

2020

£’000 2019

£’000

Current tax - charge for the year 1,788 600 - adjustments in respect of prior years (528) (29) Deferred tax - credit for the year (9) (61) 1,251 510

The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to its profits as follows:

2020

£’000 2019

£’000

Profit before tax 51,779 23,295 Tax calculated at the average rate of UK corporation tax 19.0% (2019: 19.0%) 9,838 4,426 Expenses not deductible for tax purposes 1,365 264 Non-taxable income (9,424) (4,151) Over provision in respect of prior year (528) (29) Total tax 1,251 510


NOTES TO THE COMPANY FINANCIAL STATEMENTS

Notes to the Company Financial Statements for the year ended 30 April 2020


49. Significant accounting policies The separate financial statements of the Company are presented as required by the Companies Act 2006. As permitted by that Act, the separate financial statements have been prepared in accordance with IFRSs as adopted by the EU.

The principal accounting policies adopted are the same as those set out in note 1 to the Consolidated Financial Statements. In addition, investments in subsidiaries are accounted for in line with the requirements of IFRS 9. The Company provides services to other entities within the Smith & Williamson Group. Fees receivable for services are recognised as revenue in the accounting period in which the services are provided. Cost of sales represents the cost of the services provided to the Group companies.

The Company charges the Group’s employing entities for the fair value of share awards granted to their employees by the EBT.

50. Operating expenses Operating profit has been arrived at after charging:

2020

£’000 2019

£’000

Operating expenses 21,292 16,428 Change in expected credit losses (1) (8) Amortisation of intangible assets 619 608 Auditor’s remuneration for the audit of the Company’s financial statements 90 90 22,000 17,118

51. Investment revenue

2020

£’000 2019

£’000

Dividend income from subsidiaries 49,602 21,848

52. Taxation

2020

£’000 2019

£’000

Current tax - charge for the year 1,788 600 - adjustments in respect of prior years (528) (29) Deferred tax - credit for the year (9) (61) 1,251 510

The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to its profits as follows:

2020

£’000 2019

£’000

Profit before tax 51,779 23,295 Tax calculated at the average rate of UK corporation tax 19.0% (2019: 19.0%) 9,838 4,426 Expenses not deductible for tax purposes 1,365 264 Non-taxable income (9,424) (4,151) Over provision in respect of prior year (528) (29) Total tax 1,251 510



Computer software

£’000

Cost At 1 May 2018 7,638 Additions 13,034 At 30 April 2019 20,672 Additions 15,521 At 30 April 2020 36,193 Accumulated amortisation At 1 May 2018 521 Charge for the year 608 At 30 April 2019 1,129 Charge for the year 619 At 30 April 2020 1,748 Carrying amount At 30 April 2020 34,445 At 30 April 2019 19,543

54. Property, plant and equipment

Computer equipment

£’000

Cost At 1 May 2018 563 Additions 153 At 30 April 2019 716 Additions 10 At 30 April 2020 726 Accumulated amortisation At 1 May 2018 10 Charge for the year 196 At 30 April 2019 206 Charge for the year 169 At 30 April 2020 375 Net book value At 30 April 2020 351 At 30 April 2019 510

55. Investments in subsidiaries designated at FVOCI

2020

£’000 2019

£’000

Equity investments Unlisted 617,187 544,080

Investments in subsidiaries designated at FVOCI are the Company’s direct holdings in its subsidiaries.



NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED


55. Investments in subsidiaries designated at FVOCI (continued) The change in the Company’s holdings in investments in subsidiaries designated at FVOCI in the year is summarised below:

Investments in subsidiaries

designated at FVOCI £’000

At 1 May 2018 430,280 Additions 1,321 Gains from changes in fair value recognised in other comprehensive income 112,479 At 30 April 2019 544,080 Additions 55,355 Gains from changes in fair value recognised in other comprehensive income 17,752 At 30 April 2020 617,187

During the year, the Company acquired 4,531,159 and 1,143,969 LLP share units in Smith & Williamson Investment Management LLP and Smith & Williamson LLP respectively, in exchange for issuing 3,430,087 A ordinary shares at £9.73 per share for £33.4 million to individual members of those LLPs and a cash consideration of £21.8 million paid for 2,245,041 A ordinary shares held by the EBT. Refer to note 36 for further details.

In the prior year, the Company acquired 100% of the issued share capital of Smith & Williamson Investment Management (Europe) Limited, an investment management Company based in Dublin, for a cash consideration of £1.3 million (€1.5 million).

Details of the Company’s direct investments in subsidiaries are as follows:


2020 % ownership

interest

2019 % ownership

interest Registered

office

Smith & Williamson LLP Accountancy 9%6 0% 1 Smith & Williamson Investment Management LLP Investment management 10%7 0% 1 NCL (Securities) Limited Holding company 100% 100% 1 Smith & Williamson Corporate Finance Limited Corporate finance 100% 100% 1 Smith & Williamson Financial Services Limited Pensions 100% 100% 1 Smith & Williamson Freaney Limited Chartered accountancy 100% 100% 3 Smith & Williamson Investment Services Limited Treasury 100% 100% 1 Smith & Williamson Services Limited Service company 100% 100% 1 Smith & Williamson TBS Holdings Limited Holding company 100% 100% 1 Smith & Williamson I M Limited Holding company 100% 100% 1 Smith & Williamson Fund Administration Limited Fund administration and

unit trust managers 100% 100% 1

Smith & Williamson Investment Management (Ireland) Limited OEIC manager 100% 100% 2 Smith & Williamson (Channel Islands) Limited Chartered accountancy 100% 100% 4 Smith & Williamson Pensioneer Trustee Limited Pension trustee 100% 100% 5 Smith & Williamson International Limited Investment management 100% 100% 4 Smith & Williamson Trust Corporation Limited Trust company 100% 100% 1 Smith & Williamson Investment Management (Europe) Limited Investment management 100% 100% 5 1. 25 Moorgate, London, EC2R 6AY, England 2. Trinity Point, 10-11 Leinster Street South, Dublin 2, DO2 EF85, Republic of Ireland 3. Paramount Court, Corrig Road, Sandyford Business Park, Dublin 18, D18 R9C7, Republic of Ireland 4. Weighbridge House, Liberation Square, St. Helier, Jersey, JE2 3NA 5. 12 Herbert Street, Dublin 2, D02 X240, Republic of Ireland 6. Total indirect ownership from the Company’s direct interest in Smith & Williamson TBS Holdings Limited was 86% 7. Total indirect ownership from the Company’s direct interest in Smith & Williamson I M Limited was 89%




55. Investments in subsidiaries designated at FVOCI (continued) The change in the Company’s holdings in investments in subsidiaries designated at FVOCI in the year is summarised below:

Investments in subsidiaries

designated at FVOCI £’000

At 1 May 2018 430,280 Additions 1,321 Gains from changes in fair value recognised in other comprehensive income 112,479 At 30 April 2019 544,080 Additions 55,355 Gains from changes in fair value recognised in other comprehensive income 17,752 At 30 April 2020 617,187

During the year, the Company acquired 4,531,159 and 1,143,969 LLP share units in Smith & Williamson Investment Management LLP and Smith & Williamson LLP respectively, in exchange for issuing 3,430,087 A ordinary shares at £9.73 per share for £33.4 million to individual members of those LLPs and a cash consideration of £21.8 million paid for 2,245,041 A ordinary shares held by the EBT. Refer to note 36 for further details.

In the prior year, the Company acquired 100% of the issued share capital of Smith & Williamson Investment Management (Europe) Limited, an investment management Company based in Dublin, for a cash consideration of £1.3 million (€1.5 million).

Details of the Company’s direct investments in subsidiaries are as follows:


2020 % ownership

interest

2019 % ownership

interest Registered

office

Smith & Williamson LLP Accountancy 9%6 0% 1 Smith & Williamson Investment Management LLP Investment management 10%7 0% 1 NCL (Securities) Limited Holding company 100% 100% 1 Smith & Williamson Corporate Finance Limited Corporate finance 100% 100% 1 Smith & Williamson Financial Services Limited Pensions 100% 100% 1 Smith & Williamson Freaney Limited Chartered accountancy 100% 100% 3 Smith & Williamson Investment Services Limited Treasury 100% 100% 1 Smith & Williamson Services Limited Service company 100% 100% 1 Smith & Williamson TBS Holdings Limited Holding company 100% 100% 1 Smith & Williamson I M Limited Holding company 100% 100% 1 Smith & Williamson Fund Administration Limited Fund administration and

unit trust managers 100% 100% 1

Smith & Williamson Investment Management (Ireland) Limited OEIC manager 100% 100% 2 Smith & Williamson (Channel Islands) Limited Chartered accountancy 100% 100% 4 Smith & Williamson Pensioneer Trustee Limited Pension trustee 100% 100% 5 Smith & Williamson International Limited Investment management 100% 100% 4 Smith & Williamson Trust Corporation Limited Trust company 100% 100% 1 Smith & Williamson Investment Management (Europe) Limited Investment management 100% 100% 5 1. 25 Moorgate, London, EC2R 6AY, England 2. Trinity Point, 10-11 Leinster Street South, Dublin 2, DO2 EF85, Republic of Ireland 3. Paramount Court, Corrig Road, Sandyford Business Park, Dublin 18, D18 R9C7, Republic of Ireland 4. Weighbridge House, Liberation Square, St. Helier, Jersey, JE2 3NA 5. 12 Herbert Street, Dublin 2, D02 X240, Republic of Ireland 6. Total indirect ownership from the Company’s direct interest in Smith & Williamson TBS Holdings Limited was 86% 7. Total indirect ownership from the Company’s direct interest in Smith & Williamson I M Limited was 89%


56. Equity investment securities designated at FVOCI

2020

£’000 2019

£’000

Equity securities Listed (level 1) 322 310

In the current year, the investment was reclassified to current assets as it is expected to be sold within the next 12 months.

The change in the Company’s holdings in equity investment securities designated at FVOCI in the year is summarised below:

Equity investment

securities designated at

FVOCI £’000

At 1 May 2018 302 Gains from changes in fair value recognised in other comprehensive income 8 At 30 April 2019 310 Gains from changes in fair value recognised in other comprehensive income 12 At 30 April 2020 322

57. Prepayments, accrued income and other receivables

2020

£’000 2019

£’000

Amount due from Group companies 9,832 10,197

The fair value of prepayments, accrued income and other receivables is not materially different to their carrying amount.


2020

£’000 2019

£’000

Accruals 8,012 6,156 Other payables 322 - Payables due to related parties 114 114 Current liabilities 8,448 6,270

Other payables - 311 Non-current liabilities - 311

59. Merger reserve

2020

£’000 2019

£’000

At 30 April 37,392 37,392





60. Related party transactions The Company’s related parties are the Directors, other Group companies and Nexia Smith & Williamson Audit Limited.

The remuneration of the key management personnel of the Group, who are defined as the Directors, is set out in the Directors’ Remuneration Report. Details of the fair value of share based payments awards, dividends paid to, and outstanding deposits by key management and their close family members are included in note 42.

All amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been given or received in respect of amounts outstanding. No provisions have been made for doubtful debts in respect of the amounts owed by the related parties. The Company from time to time is charged or recharges other Group companies in respect of staff, services provided and other overhead costs.

The EBT’s overdraft facility with RBS as per note 27 is guaranteed by the Company.

Effective from 26 March 2019, the Company provides a guarantee of up to £10.0 million to the NCL Investment Limited Pension Scheme to cover its liabilities in the event that the NCL Scheme’s principal employer, NCL Investments Limited, becomes insolvent. The £10.0 million cap is retained for any post-insolvency claims, while any pre-insolvency claims under the guarantee are limited to any employer deficit recovery pension contributions outstanding for the year of insolvency.

During the year, the transactions between the Company and other Group companies were as follows:

2020

£’000 2019

£’000

Intercompany charges receivable from Group companies 45,301 38,112 Intercompany charges payable to Group companies 23,099 21,485

At the balance sheet date, the amounts due from other Group companies were as follows:

2020

£’000 2019

£’000

Smith & Williamson LLP - 2,400 Smith & Williamson Freaney Limited 370 366 Smith & Williamson Investment Management LLP 3,079 1,048 Smith & Williamson Holdings Limited Employee Benefit Trust 6,383 6,383 Total amount due from Group companies 9,832 10,197 Smith & Williamson Group Holdings Limited (114) (114) Total amount due to Group companies (114) (114)




60. Related party transactions The Company’s related parties are the Directors, other Group companies and Nexia Smith & Williamson Audit Limited.

The remuneration of the key management personnel of the Group, who are defined as the Directors, is set out in the Directors’ Remuneration Report. Details of the fair value of share based payments awards, dividends paid to, and outstanding deposits by key management and their close family members are included in note 42.

All amounts outstanding with related parties are unsecured and will be settled in cash. No guarantees have been given or received in respect of amounts outstanding. No provisions have been made for doubtful debts in respect of the amounts owed by the related parties. The Company from time to time is charged or recharges other Group companies in respect of staff, services provided and other overhead costs.

The EBT’s overdraft facility with RBS as per note 27 is guaranteed by the Company.

Effective from 26 March 2019, the Company provides a guarantee of up to £10.0 million to the NCL Investment Limited Pension Scheme to cover its liabilities in the event that the NCL Scheme’s principal employer, NCL Investments Limited, becomes insolvent. The £10.0 million cap is retained for any post-insolvency claims, while any pre-insolvency claims under the guarantee are limited to any employer deficit recovery pension contributions outstanding for the year of insolvency.

During the year, the transactions between the Company and other Group companies were as follows:

2020

£’000 2019

£’000

Intercompany charges receivable from Group companies 45,301 38,112 Intercompany charges payable to Group companies 23,099 21,485

At the balance sheet date, the amounts due from other Group companies were as follows:

2020

£’000 2019

£’000

Smith & Williamson LLP - 2,400 Smith & Williamson Freaney Limited 370 366 Smith & Williamson Investment Management LLP 3,079 1,048 Smith & Williamson Holdings Limited Employee Benefit Trust 6,383 6,383 Total amount due from Group companies 9,832 10,197 Smith & Williamson Group Holdings Limited (114) (114) Total amount due to Group companies (114) (114)


61. Financial risk management The Company’s financial risk management is consistent with the Group’s approach as set out in note 47. The sections relevant to the Company have been included below.

Maximum exposure to credit risk The only credit risk the Company is exposed to is on intercompany balances and cash balances, and as such credit risk is not considered to be material.

a) Liquidity risk The Directors are of the opinion that the Company does not have any significant liquidity risk.

b) Market risk Price risk Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from foreign exchange risk). The Company is exposed to price risk through its holdings of equity investments in subsidiaries which are carried at fair value.

Fair values The fair value of the Company’s financial assets and liabilities are not materially different from their carrying values.

The table below analyses the financial instruments measured at fair values into a fair value hierarchy based on the valuation techniques used to determine the fair value:

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities

• Level 2: inputs other than quoted price included within level 1 that are observable for the asset or liability, either directly or indirectly

• Level 3: inputs for the asset or liability that are derived from formal valuation techniques that include inputs for the asset or a liability that are not based on observable market data

At 30 April 2020 Level 1

£’000 Level 2

£’000 Level 3 £’000

Total £’000

Investments in subsidiaries designated at FVOCI Financial Services entities - - 508,148 508,148 Professional Services entities - - 85,176 85,176 Fund Administration entity - - 23,863 23,863 - - 617,187 617,187

At 30 April 2019 Level 1

£’000 Level 2

£’000 Level 3 £’000

Total £’000

Investments in subsidiaries designated at FVOCI Financial Services entities – – 452,093 452,093 Professional Services entities – – 77,119 77,119 Fund Administration entity – – 14,868 14,868 – – 544,080 544,080

There has been no transfer between level 1, level 2 and level 3 recurring fair value measurements during the year.

The fair value of the level 3 investments is calculated on a multiples based approach which has been benchmarked where possible to comparable listed peers, precedent market transactions and merger negotiations with Tilney Group (details of the multiples are provided in the table below).






Description

Fair value at 30 April 2020

£’000 Valuation

technique Range

Financial Services entities 508,148 EBITDA multiple 2020 EBITDA multiple 2021

9.6 – 10.8 8.6 – 9.7

Professional Services entities 85,176 Revenue multiple 2020 Revenue multiple 2021

0.9 – 1.0 0.6 – 0.7

Fund Administration entity 23,863 EBITDA multiple 2020 EBITDA multiple 2021

14.2 – 16.0 13.1 – 14.6

Significant increases/(decreases) in any of these inputs in isolation would result in a significantly higher/(lower) fair value measurement. The model produced a range of valuations based on the inputs, from which we have taken the mean as our current fair value. The range of valuation produced by the model was as follows:

Low

£’000 High

£’000

Financial Services entities 482,888 533,409 Professional Services entities 80,301 90,051 Fund Administration entity 22,530 25,195 585,719 648,655

Foreign exchange risk The Directors are of the opinion that the Company does not have any significant foreign exchange risk.

62. Capital management Capital is managed on a Group basis as detailed in note 46.

62. Post balance sheet events In June 2020, the Smith & Williamson Group announced that it had agreed a revised transaction structure for the proposed merger with Tilney Group. See note 41 for further details.



CORPORATE INFORMATION


Company Information

Non-executive Chairman A F Sykes

Executive Directors D M Cobb P L Fernandes G T Hotson K P Stopps

Non-executive Directors E G Chambers A C Fisher B C Goldring K Jones C Stent

Independent auditors Mazars LLP Tower Bridge House St Katharine’s Way London E1W 1DD

Bankers Royal Bank of Scotland Group plc 250 Bishopsgate London EC2M 4AA

Corporate lawyers Macfarlanes LLP 20 Cursitor Street London EC4A 1LT

Registrar Link Asset Services 6th Floor 65 Gresham Street London EC2V 7NQ

Company Secretary and registered office D A Saunders 25 Moorgate London EC2R 6AY Company No. 4533948 smithandwilliamson.com

Our Offices

London 25 Moorgate London EC2R 6AY t: 020 7131 4000 f: 020 7131 4001

Belfast The Linenhall 32-38 Linenhall Street Belfast BT2 8BG t: 028 9072 3000 f: 028 9072 3001

Birmingham 3rd Floor 9 Colmore Row Birmingham B3 2BJ t: 0121 710 5200 f: 0121 710 5201

Bristol Portwall Place Portwall Lane Bristol BS1 6NA t: 0117 376 2000 f: 0117 376 2001

Cheltenham Festival House Jessop Avenue Cheltenham GL50 3SH t: 01242 506050 f: 01242 506051

Dublin Paramount Court Corrig Road Sandyford Business Park Dublin 18, D18 R9C7 Republic of Ireland t: +353 1 614 2500 f: +353 1 614 2501

Dublin 12 Herbert Street Dublin 2, D02 X240 Republic of Ireland t: +353 1 500 6500 f: +353 1 500 6501

Glasgow 206 St Vincent Street Glasgow G2 5SG t: 0141 222 1100 f: 0141 222 1101

Guildford Onslow House Onslow Street Guildford Surrey GU1 4TL t: 01483 407 100 f: 01483 407 101

Jersey 3rd Floor Weighbridge House Liberation Square St. Helier Jersey JE2 3NA t: 01534 716 850 f: 01534 716 851

Salisbury Old Library Chambers 21 Chipper Lane Salisbury Wiltshire SP1 1BG t: 01722 431 000 f: 01722 431 001

Southampton 4th Floor Cumberland House 15-17 Cumberland Place Southampton SO15 2BG t: 023 8082 7600 f: 023 8082 7601

Associate Offices

People’s Republic of China Nexia China Pte Ltd – Nexia TS (Shanghai) Co Ltd Room A, 20 Floor Heng Ji Building No. 99 East Huai Road Huang Pu District, Shanghai 200021 t: +8621 6047 8716 f: +8621 6047 8712

Singapore Nexia TS Pte Ltd 100 Beach Road Shaw Tower #30-00, Singapore 189702 t: +65 6534 5700 f: +65 6534 5766

Malta IPM (Malta) Limited 1, Block C, Skyway Offices 179 Marina Street Pieta, PTA 9042 Malta t: +356 21 222 777 f: +356 21 221 692


annual report accounts 2020 - smith & williamson

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