mattioli woods plc pillar 3 disclosures april 2017 woods plc - pill… · profitable and...

MATTIOLI WOODS PLC PILLAR 3 DISCLOSURES APRIL 2017

Contents

1 OVERVIEW ...................................................................................................................................... 1

1.1 GROUP BACKGROUND ........................................................................................................................... 1 1.1.1 Investment and asset management .............................................................................................. 1 1.1.2 Pension consultancy and administration .................................................................................... 2 1.1.3 Property management ................................................................................................................. 2 1.1.4 Employee benefits ....................................................................................................................... 2

1.2 REGULATORY FRAMEWORK BACKGROUND ........................................................................................... 3 1.2.1 Capital framework ...................................................................................................................... 3

1.3 SCOPE OF APPLICATION ......................................................................................................................... 3 1.4 NON-MATERIAL, PROPRIETARY OR CONFIDENTIAL INFORMATION ......................................................... 5 1.5 FREQUENCY OF DISCLOSURE ................................................................................................................. 5 1.6 MEANS OF DISCLOSURES ....................................................................................................................... 5

2 RISK MANAGEMENT OBJECTIVES AND POLICIES ............................................................ 6

2.1 GROUP RISK MANAGEMENT FRAMEWORK ............................................................................................. 6 2.2 RISK IDENTIFICATION AND MANAGEMENT METHODOLOGY ................................................................... 6 2.3 OPERATION OF THE BOARD ................................................................................................................. 10 2.4 BOARD DIRECTORSHIPS ....................................................................................................................... 12 2.5 DIVERSITY .......................................................................................................................................... 12

3 REGULATORY CAPITAL RESOURCES .................................................................................. 13

4 REGULATORY CAPITAL REQUIREMENTS .......................................................................... 14

4.1 PILLAR 1 REGULATORY CAPITAL REQUIREMENT ................................................................................. 14 4.1.1 Pillar 1 calculations ................................................................................................................. 14 4.1.2 Pillar 2 risk assessment ............................................................................................................ 18

5 REMUNERATION DISCLOSURES ............................................................................................ 20

5.1 PREAMBLE TO REMUNERATION DISCLOSURE ....................................................................................... 20 5.2 REMUNERATION POLICY ..................................................................................................................... 20 5.3 SALARIES, FEES AND BENEFITS............................................................................................................ 20 5.4 SHORT-TERM INCENTIVE ARRANGEMENTS .......................................................................................... 21 5.5 LONG-TERM INCENTIVES ..................................................................................................................... 21 5.6 SHARE INCENTIVE PLAN ...................................................................................................................... 21 5.7 SERVICE CONTRACTS .......................................................................................................................... 22 5.8 EVALUATION OF THE BOARD’S PERFORMANCE ................................................................................... 22 5.9 RETIREMENT BENEFITS ....................................................................................................................... 22 5.10 AGGREGATE QUANTITATIVE INFORMATION ON REMUNERATION .................................................... 23

APPENDIX 1 ................................................................................................................................................. 24

SUBSIDIARY UNDERTAKINGS ........................................................................................................................ 24

APPENDIX 2 ................................................................................................................................................. 26

OWN FUND DISCLOSURE TEMPLATE AS AT 30 NOVEMBER 2016 ................................................................... 26

APPENDIX 3 ................................................................................................................................................. 29

REGULATORY CAPITAL REQUIREMENTS AND OWN FUNDS DISCLOSURE AS AT 30 NOVEMBER 2016 ............. 29

APPENDIX 4 ................................................................................................................................................. 35

CAPITAL INSTRUMENTS MAIN FEATURES AS AT 30 NOVEMBER 2016............................................................ 35

APPENDIX 5 ................................................................................................................................................. 37

RISK MANAGEMENT STRUCTURE .................................................................................................................. 37

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1 OVERVIEW

1.1 Group background

Mattioli Woods plc and its subsidiaries (‘Mattioli Woods’ or ‘the Group’) is one of the UK’s leading providers of wealth management and employee benefit services, with total assets under management, administration and advice of over £7.5bn. Our objective: We are driven with passion and integrity to deliver profitable and sustainable growth year on year.

Delivering great client outcomes remains at the heart of everything we do. Our focus is on ensuring the Group continues to address our clients’ changing needs and we continue to broaden our proposition through innovative product development and by acquisition. We believe our vertically-integrated models for wealth management and employee benefits, blending our capabilities as trusted adviser, administrator, product provider and asset manager, allow us to deliver improved and sustainable client outcomes, which will enable the Group to secure further profitable growth. Across the Group, we manage our business into four related areas, as set out below:

1.1.1 Investment and asset management

Discretionary management and the provision of bespoke investment advice sit at the heart of our investment proposition. Continuing growth in the quantum of assets under management and advice has enhanced the quality of the Group’s earnings through an increase in recurring revenues, while the migration of clients’ assets under advice to assets under management allows us to deliver a more efficient wealth management service to those clients. Our services are delivered by a dedicated team, with many years’ experience in finance and investment.

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1.1.2 Pension consultancy and administration

Mattioli Woods is a leader in the provision of Self-Invested Personal Pension (‘SIPP’) and Small Self-Administered Pension Scheme (‘SSAS’) arrangements, which are often central to our clients’ pension strategies.

We have established a reputation for technical excellence, widely acknowledged within our industry. We maintain our technical edge through our in-depth understanding of UK pension legislation, which translates into the delivery of meaningful advice to clients by our consultancy team.

The provision of first-rate client service through personalised and proactive administration further differentiates us from our competitors, with our bespoke SIPP product having been awarded the Defaqto 5-star rating.

1.1.3 Property management

Our property management business, Custodian Capital Limited (‘Custodian Capital’ or ‘CCL’), is the discretionary fund manager of Custodian REIT plc, a UK real estate investment trust listed on the Main Market of the London Stock Exchange.

In addition, Custodian Capital facilitates direct property ownership on behalf of pension schemes and private clients and also manages the “Private Investors Club”, which offers alternative investment opportunities to suitable clients by way of private investor syndicates. We believe investment in good quality properties, with strong leases and good quality tenants, typically provides stable returns over the long term and our property team offers years of experience in commercial property investment to help deliver this.

1.1.4 Employee benefits

Mattioli Woods assists its corporate clients with employee engagement, with the aim of improving recruitment, retention and workplace morale. This encompasses consultancy and administration on areas such as defined contribution and defined benefit pension schemes, workplace savings, healthcare, international benefit solutions and risk benefits, in addition to the design, implementation and administration of these schemes. The Group also offers its clients total reward and flexible benefit systems, assisting its clients to deliver these to their employees, along with advice, guidance and financial education. Recent changes in legislation, such as the new pension freedoms, are increasing demand for our financial education and wealth management services to be delivered through employers. Mattioli Woods is authorised and regulated by the Financial Conduct Authority (‘FCA’) and is listed on the AIM market of the London Stock Exchange.

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1.2 Regulatory framework background

The 2006 Capital Requirements Directive (‘CRD’ or ‘the Directive’) of the European Union (‘EU’) created a revised regulatory capital framework across Europe based on the provisions of the Basel 3 Capital Accord. This was implemented in the UK through changes to the FCA Handbook of Rules and Guidance, and specifically through the creation of the Prudential Sourcebook for Investment Firms (‘IFPRU’). With effect from 1 January 2014, Mattioli Woods became subject to CRD IV, a major package of reforms to the CRD and a new Capital Requirements Regulation (‘CRR’). In addition, CRR, Part Eight (Disclosure by Institutions) applies to firms governed by CRD IV. As a result of the changes, Mattioli Woods is an IFPRU limited licence firm.

1.2.1 Capital framework

The capital framework consists of three ‘pillars’:

Pillar 1 sets out the minimum capital requirements of the Group

Pillar 2 is designed to complement the existing Pillar 1 requirements by assessing the need to hold additional capital under a more risk-based assessment

Pillar 3 requires us to publish certain details of our risks, capital, risk management processes, and remuneration code

The Group performs regular detailed assessments of Pillar 1 and Pillar 2, through the Internal Capital Adequacy and Assessment Process (‘ICAAP’), which is evaluated by the FCA as part of the Supervisory and Review Evaluation Process (‘SREP’).

1.3 Scope of application

The Group’s prudential regulator is the FCA. Our ICAAP and Pillar 3 disclosure requirement is to consider our CRR at Group level, consolidating all the companies in our UK prudential consolidation group. The prudential consolidation group includes both Mattioli Woods and its trading entities, which are all fully consolidated, being: CCL An investment management firm without permission to hold client money; acts as the external fund manager to Custodian REIT, and acts as manager of private property syndicates which are collective investment undertakings.

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Mattioli Woods (New Walk) Limited (‘MWNW’) A subsidiary company which is building a new head office for the Group. Boyd Coughlan Limited (‘BCL’) A small private investment firm categorised as an exempt CAD firm, focusing on the provision of wealth management services. Taylor Patterson Group Limited (‘TPL’) Provides wealth management and employee benefits services to a broad range of personal and corporate clients. On 31 August 2016 the trade and assets of the Taylor Patterson Group Limited and its subsidiaries Taylor Patterson Financial Planning Limited and Taylor Patterson Associates Limited were transferred to the Mattioli Woods plc. The trade and assets were exchanged for loan notes equal to the book value of the assets and assumed liabilities of the Business as at 31 August 2016, attracting annual interest on the outstanding principal at a rate of 3% above the Bank of England base rate. Old Station Road Holdings Limited and its subsidiaries (together ‘MC Trustees’ or ‘MCT’) Provides pensions administration services to SIPP and SSAS clients. MC Trustees was acquired on 7 September 2016. Our ICAAP will be updated in 2017 as the acquisition does not add new permissions or activities to the Group, and does not increase the Group’s fixed overhead by 20% or more. However, for the purposes of Pillar 3 disclosure, the Group’s Pillar 1 capital requirements and calculation of Common Equity Tier 1 capital resources accordingly. The accounting consolidation group includes Mattioli Woods and its subsidiary undertakings as listed in appendix 1. This includes entities that are not included within the prudential consolidation group, which mainly comprise trustee and dormant companies. A 49% stake in Amati Global Investors Limited (‘Amati’), an investment fund manager, was acquired on 6 February 2017. Amati does not form part of our UK consolidation group, therefore has not been considered in this ICAAP. Amati prepares its own ICAAP and Pillar 3 disclosures. There are no current or foreseeable material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities among the parent company and its subsidiaries.

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1.4 Non-material, proprietary or confidential information

CRR Article 432 states that institutions may omit one or more of the disclosures if the information provided by such disclosure is not regarded as material. Information in disclosures shall be regarded as material if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purpose of making economic decisions. CRR Article 432 also allows the omission of one or more items if those items include information regarded as proprietary to an institution or confidential. Information is regarded as proprietary if disclosing it publicly would undermine the Group’s competitive position. Information is regarded as confidential if there are obligations to customers or other counterparty relationships binding the Group to confidentiality.

1.5 Frequency of disclosure

The disclosures are made on an annual basis, as soon as practicable after the publication of the Group’s annual report, or when considered necessary as a result of changes in the business, market or specific economic circumstances, taking into account the scale and complexity of the Group’s business operations.

1.6 Means of disclosures

These disclosures have been compiled to satisfy those required under Pillar 3 and have not been audited. This report is published in the investor relations section of Mattioli Woods’ website (www.mattioliwoods.com) and is also available on request by writing to the Group.

http://www.mattioliwoods.com/

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2 RISK MANAGEMENT OBJECTIVES AND POLICIES

2.1 Group risk management framework

The board of directors of Mattioli Woods has adopted a ‘three lines of defence’ model to manage its risks. Primary responsibility for identifying, managing and mitigating risks falls to the senior management in the individual operational areas (first line of defence). Oversight and day-to-day running of the risk function are provided by the Chief Operating Officer on an executive basis (second line of defence), reporting into the Audit, Risk and Compliance committee. Finally, independent assurance is provided by the internal audit function (third line of defence), reporting into the Audit, Risk and Compliance committee of non-executive directors. The structure of the risk management function is attached as appendix 5. The Group maintains a risk register, which is a database of risks across the business. The register is reviewed and assessed on an ongoing basis, and supports the Group’s ICAAP. Risk assessments take place for new acquisitions, projects and significant events to ensure key risks are identified, assessed, mitigated and managed by project managers during the course of the project and through to implementation. Control issues are investigated by the head of internal audit and the control owner to identify the root cause of the event; the impact, and the corrective action required to prevent reoccurrence, all of which are reported to relevant director(s) and the Audit, Risk and Compliance committee.

Disaster recovery (‘DR’) planning is facilitated by the risk management function reporting into the Chief Operating Officer and DR leads across the Group. A DR team is made up of key representatives across all Group sites to ensure an efficient process of recovery and restoration of business processes. Each department has contributed to the DR plan by completing its own business impact analysis.

2.2 Risk identification and management methodology

Internal controls In accordance with the Financial Reporting Council guidance on risk management and internal control, an ongoing process has been established for identifying, evaluating and managing principal risks faced by the Group. The risk management framework is designed to ensure:

The board routinely reviews the nature and extent of the principal risks faced by the business and opines on the acceptability and appetite for those risks.

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The board routinely reviews the effectiveness of the systems of internal control to satisfy itself that the systems address the business risks and are being developed, applied and maintained appropriately.

The Group maintains appropriate insurance cover and reviews the adequacy of the cover regularly, in conjunction with the Group’s insurance brokers.

There are clearly defined procedures for reviewing and approving all bids, acquisitions and capital expenditure within the Group.

The principle of segregation of duties is defined across the business operations, to ensure clear separation of processing, authorising and accounting.

The head of internal audit is responsible for providing assurance on the internal controls related to the Group’s key activities. Control testing concludes on the design and effectiveness of the internal control framework, and control remediation is completed within an agreed timeframe. Risk management

The Group operates five key areas of day-to-day regulatory operation, summarised as:

Wealth management advice

Employee benefits advice

Product provision

Corporate reporting and regulatory permissions

Complaints and claims

Risk identification The risk register contains details of each risk identified and is reviewed and updated regularly throughout the year. Risk assessment

Each risk is given a weighting to gauge its probability and impact. The weightings are aligned to the risk appetite for each category of risk to create a measurable assessment of the movement of each risk.

Risk mitigation

The risk register contains details of each risk and a list of the mitigating factors, such as current controls and actions.

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Risk monitoring and reporting

Reporting and review structures are in place to ensure risks are effectively identified and appropriate controls and responses are in place, in order that the board (which has responsibility for risk) is able to perform adequate oversight.

Structure and organisation of risk management

Responsibility for the Group’s main risks lies with the board, which receives regular operational reports and financial reports, from the respective senior executives, which comprise, inter alia, information relating to emerging risks, and changes to existing risks. The board allocates risk management across the Group using the three lines of defence model, as follows: First line of defence - responsibility for risk management lies with all staff. The managers appointed for each business area are responsible for promoting risk awareness and ensuring appropriate segregation of duties across their operational areas. Constant communication is encouraged. Information is provided to staff in the form of meetings and reminders, and all managers and staff are required to consider their department’s risks on a regular basis. Second line of defence - several components of the governance function perform activities at arm’s length from the first line of defence. They report to the Audit, Risk and Compliance committee. The risk management, compliance, and technical teams monitor and facilitate the implementation of the controls framework and assist the first line of defence management and staff to execute their control responsibilities. Management information is provided to, and challenged by, the board on a regular basis. Third line of defence - responsibility for providing assurance on the control of risk within the Group lies with the internal audit function, which reports to the Audit, Risk and Compliance committee. The audit function assists with building a risk awareness culture within the organisation through raising challenges (to the first and second lines of defence) where deemed appropriate. In addition, the statutory external auditors perform interim and annual substantive reviews of the Group’s financial statements. The Audit, Risk and Compliance committee ensures that audit work is focused on areas of significant risk and provides assurance on the management of risk.

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The Group’s three lines of defence model is summarised in the following table.

Board declaration: risk appetite and adequacy of risk management arrangements

As a provider of wealth management and employee benefits services for its clients, based on long-term client relationships, the board takes a prudent approach when deciding upon its appetite for risk, and considers that it has adequate risk management arrangements in place regarding the Group’s risk profile. The business’s overall high-level statement of risk appetite is as follows: “We will not knowingly take risk positions that threaten our ability to provide long-term wealth management and employee benefits services for our clients. In addition, we will conduct our activities in a manner that balances our clients, staff and shareholders’ needs while seeking to maintain an additional regulatory buffer of at least 25% above the minimum capital requirement”. The Group’s overall risk appetite is low (in the context of the wider financial services market), and it has framed its risks utilising the categories set out in IFPRU 2.2.7. The appetite is set with regard to current business strategy and the board’s attitude to those risks. The principal risks the Group faces, as determined through our risk management framework, are noted below: 1 Credit risk Arises through default of a key banking partner. We monitor credit risk of

our banking partners through the analysis of credit scoring and Credit Default Swap (‘CDS’) rates.

Line Management

MW Internal Controls

Audit, Risk and Compliance Committee

Compliance

Risk Management

Technical Team

Internal Audit

Senior Management

External A

udit

1st Line of Defence 3rd Line of Defence2nd Line of Defence

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2 Operational risk Arises through exposures arising from regulatory failures; the loss or inability

to recruit key people; damage to our reputation and public image; failure to treat our customers fairly through the flawed design or mis-selling of products, and the failure of our IT systems that support our operational processes. We monitor operational risk through the analysis of regular management information.

3 Business risk Arises through market volatility that may adversely affect the value of assets

under management and advice from which we derive revenues. Our investment teams and investment committee monitors market volatility on a regular basis.

2.3 Operation of the board

The board is responsible to shareholders for the proper management of the Group and has a formal schedule of matters specifically reserved to it for decision. These include strategic planning, setting risk appetite, business acquisitions and disposals, authorisation of major capital expenditure and material contractual arrangements, setting policies for the conduct of business, and approval of budgets and financial statements. Other matters are delegated to management, supported by policies for reporting to the board. The Group maintains appropriate insurance cover in respect of legal action against the Group’s directors, but no cover exists in the event that a director is found to have acted fraudulently or dishonestly.

Board committees

The board has delegated authority to three committees. The chairman of each committee provides a report of any meeting of that Committee at the next board meeting. The chairman of each committee is present at the AGM to answer questions from shareholders. Audit, Risk and Compliance committee

The audit, risk and compliance committee has responsibility:

To monitor the integrity of the financial statements of the company and any formal announcements relating to the company’s financial performance, reviewing significant financial reporting judgements contained in them.

To monitor and review the effectiveness of the company’s internal audit function and to appoint and remove internal auditors, as appropriate.

To monitor and review the effectiveness of the company’s compliance monitoring function.

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To monitor and review the effectiveness of the company’s risk management function.

To review the company’s internal financial controls and internal control systems.

To report to the board, identifying any matters in respect of which it considers that action or improvement is needed, and making recommendations as to the steps to be taken.

To report to the board on how it has discharged its responsibilities.

Remuneration committee

The remuneration committee meets at least twice a year and is responsible for determining and reviewing the Group’s policy on executive remuneration and other benefits and terms of employment, including performance related bonuses and share options. The committee, which comprises three non-executive directors, also administers the operation of the share option and share incentive schemes established by the Group.

Nominations committee

The nominations committee is responsible for reviewing the size, structure and composition of the board, establishing appropriate succession plans for the executive directors and other senior executives in the Group, and for the nomination of candidates to fill board vacancies where required. The committee works in consultation with the executive directors and its policy is to assess the professional skills and personal qualities of nominees.

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2.4 Board directorships

The Mattioli Woods plc board comprises eight directors, three of whom are non-executive. The following table sets out the number of directorships held by each member of the board:

Director

Number of directorships

Mattioli Woods Group1

External to Mattioli Woods Group

Total

C A Duncumb (non-executive)

1 2 3

A D Fergusson 3 1 4

A M Gunther (non-executive)

1 2 3

N J M Imlach 19 2 21

C J Lake (non-executive) 1 5 6

I T Mattioli 17 2 19

M A Smith 101 - 101

M B Smith 7 - 7

2.5 Diversity

The Group is committed to the principle of equal opportunity in employment, regardless of a person’s race, creed, colour, nationality, gender, age, marital status, sexual orientation, religion or disability. Employment policies are fair, equitable and consistent with the skills and abilities of the employees and the needs of the business. Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. Group policy is that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

1 Includes directorships in Mattioli Woods plc and its subsidiaries, associates and minority holdings, including

property investment syndicates managed by Mattioli Woods.

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3 REGULATORY CAPITAL RESOURCES

The table below sets out the total available capital of the Group as at 30 November 2016 (‘1H17’), the date of the Group’s latest published financial statements:

Actual 1H17

(£000)

Share capital1 253

Share premium 28,114

Merger reserve 8,781

Equity – share-based payments 2,173

Capital redemption reserve 2,000

Retained earnings:

- At 1 June 25,391

- Retained earnings for period2 2,957

- Reserves transfer 79

- Dividends paid (2,187)

Common Equity Tier 1 (CET1) 67,561

Less: intangible assets (45,137)

Less: proposed dividends (1,192)

Less: share-based payment transactions not included in CET1 (1,689)

CET1 after adjustments (capital resources) 19,543

Intangible assets represent intangibles acquired in business combinations, software costs and software under development. For accounting purposes, software development costs are capitalised as intangible assets where they meet certain criteria. Intangible assets do not qualify as capital for Tier 1 purposes and are therefore deducted. In accordance with Article 437(1) (a), a reconciliation of capital resources to audited financial statements is disclosed in appendix 2, and to own funds in appendix 3.

1 Permission to include additional CET1 from shares issued in the period was granted by the FCA in

December 2016. 2 Permission to include additional CET1 from interim profits in the period was granted by the FCA in

March 2017.

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4 REGULATORY CAPITAL REQUIREMENTS

The Group’s Pillar 1 requirement is its minimum capital requirement (‘MCR’) and, in addition, the Group must hold capital to cover Pillar 2a stress testing, defined as the capital impact of short-term risk scenarios quantified over a one-year time horizon, and to cover its wind-down costs. Pillar 2b long-term risk scenarios are those events that would impact revenues and costs over a three to five-year time horizon. However, as a limited licence firm, Mattioli Woods is not required to hold capital for the Pillar 2b scenarios. Pillar 2 capital requirements are outside the scope of this disclosure document. The Group expects the level of capital required to satisfy prudential regulations to increase in line with growth in the Group’s fixed-cost base.

4.1 Pillar 1 regulatory capital requirement

Under CRD IV, the Group calculates its Pillar 1 requirement as the higher of its fixed overhead requirement (‘FOR’, which is 25% of audited fixed expenditure) and the sum of the market risk requirement and the credit risk requirement.

4.1.1 Pillar 1 calculations

The table below sets out the Group’s Pillar 1 capital requirement at 30 November 2016:

Group Actual 1H17

(£000)

Base capital requirement (€50,000) (A) 42

Credit risk (CR) 2,220

Market risk (MR) -

CR + MR (B) 2,220

Fixed overhead requirement (FOR) (C) 7,925

Pillar 1 requirement (higher of A, B and C) 7,925

Total Group regulatory capital resources 19,543

Excess of own funds over Pillar 1 capital requirement 11,618

Surplus 147%

In relation to Custodian Capital’s business, when a collective portfolio management investment firm calculates the credit risk capital requirement and the market risk capital requirement for the purpose of calculating the variable capital requirement under GENPRU 2.1.40R, it must do so only in respect of

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designated investment business. For this purpose, managing an alternative investment fund is excluded from designated investment business, with the associated risks considered part of our operational risk assessment. Credit risk

Credit risk is the risk that the counterparty to a financial obligation will default on repayments. The credit risk capital requirement:

Is the amount of capital a firm is required to hold to cover the exposures subject to credit risk.

Is 8% of risk weighted on and off balance sheet exposure amounts.

Applies to balance sheet exposures, i.e. assets, except when the exposure is already deducted from capital resources, e.g. material holdings, intangible assets, goodwill.

Applies to off-balance sheet exposures, e.g. guarantees, undrawn commitments.

Allocates exposure to classes based on the types of counterparty, e.g. institutions, corporates, collective investment undertakings.

Risk weights the exposures using the standardised approach or based on individual credit ratings.

The standardised approach to calculating the credit risk capital requirement is to:

Identify and quantify all on and off balance sheet exposures.

Exclude exposures deducted from capital.

Allocate each exposure to an exposure class.

Determine and apply risk weightings (RW%) based on credit ratings to calculate risk weighted assets (‘RWA’) where these are available.

Calculate the credit risk capital requirement as RWA x 8%.

Credit policy The Group trades only with recognised, creditworthy third parties. All customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis. Counterparty risk

Credit risk from the financial assets of the Group, which comprise cash and cash equivalents and investment syndicate loans, arises from the potential default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

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The only significant level of credit risk relates to the Group’s bank deposits, which are monitored on an ongoing basis in line with our treasury policy.

Loans may be advanced to new investment syndicates to facilitate the purchase of an investment. In the event a syndicate fails to raise sufficient funds to fully subscribe for the investment, the Group may either take up ownership of part of the investment or lose some, or all, of the loan. To mitigate this risk, loans are only approved by the board under strict criteria.

Credit risk exposure and capital requirements

Intangible assets are deducted from capital and are therefore excluded from the calculation of credit risk capital requirement. All balance sheet credit risk exposures of the Group as at 30 November 2016 are identified and quantified in the following table, which calculates the Group’s credit risk capital requirements, using the standardised approach, as follows:

Group balance sheet exposures

Carrying value at 30 Nov

2016 (1H17) (£000)

Exposure class Risk

weighting

Risk-weighted exposure

1H17 (£000)

Credit risk 8% capital required

1H17 (£000)

Property, plant and equipment

5,907 Tangible assets 100% 5,907 473

Deferred tax assets 965 Central government 100% 965 77

Investments 79 Corporates 100% 79 6

Trade receivables <90 days

4,890 Corporates and individuals

100% 4,890 391

Trade receivables >90 days

1,021 Corporates and individuals

150% 1,531 122

Other receivables 708 Corporates 100% 708 57

Work in progress 4,970 Corporates and individuals

100% 4,970 398

Accrued bank commission

6 Institutions 100% 6 1

Accrued client fees 3,404 Corporates and individuals

100% 3,404 272

Pre-payments 757 Corporates 100% 757 61

Cash and short-term deposits

22,649 Institutions 20% 4,530 362

Credit risk capital requirement

2,220

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Market risk

Market risk is the risk that the firm will lose money due to the daily fluctuations of the market. The market risk capital requirement is the amount of capital a firm is required to hold to cover the exposure to market risk, split into:

Interest rate position risk requirement (‘PRR’)

Equity PRR

Commodity PRR

Foreign exchange PRR In general, market risk capital requirement is calculated on:

All trading book positions (not common in investment management)

Non-trading book foreign currency positions

Non-trading book positions in commodities

For the majority of investment management companies, the foreign currency PRR is the only element of the market risk requirement calculation that applies.

Interest rate PRR Interest rate risk is the risk that the Group will sustain losses from adverse movements in interest bearing assets. This exposure is monitored to ensure the Group is optimising its interest-earning potential within accepted liquidity and credit constraints. A source of revenue is based on the value of cash balances held in clients’ schemes. These balances are not on the Group’s balance sheet. The Group has an operational risk exposure to interest rate risk on these cash balances held by clients. The current low-interest rate environment has meant the risk of a decline in earnings due to a decline in balances or interest return is no longer as significant as it was. However, we continue to work to develop our banking relationships to access competitive interest rates for our clients.

Equity PRR We treat equity risk as a business risk, which is the risk that volatility in particular asset classes may see changes in how our investment revenues are derived. Commodity PRR

Commodity risk is the risk that the Group will sustain losses through adverse movements in commodity prices. The Group does not invest or speculate in commodities and is not exposed to any commodity price risk.

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Foreign exchange PRR

Foreign currency risk is the risk that the Group will sustain losses through adverse movements in currency exchange rates. With all of the Group’s business located within the UK, the Group is not exposed to foreign exchange translation or transaction risks and does not hedge any foreign current assets or liabilities.

Market risk exposure and capital requirements

No market risk exposures have been identified, hence the market risk capital requirement is nil.

Fixed overhead requirement

The FOR is the calculation used by limited licence firms instead of operational risk requirements under Pillar 1. This is the amount of capital that an investment management firm would need in order to wind down in an orderly manner within a three-month period, calculated as 25% of audited annual fixed expenditure, after adjusting for items such as profit shares paid as bonuses, discretionary expenditure, foreign exchange losses and shared commissions. Annual expenditure is the sum of total annual expenditure at the most recent accounting reference date, which has been audited. If the Group’s expenditure changes materially after the most recent accounting reference date, the FOR is adjusted accordingly. The FOR is calculated in accordance with the EBA regulatory technical standards as the total expenses, after distribution of profits, in the most recent audited annual financial statements, less variable costs.

4.1.2 Pillar 2 risk assessment

We have performed ICAAP workshops to determine whether each of the material risks identified within the risk register should be quantified within the ICAAP as a Pillar 2a stress test, Pillar 2b scenario test, or considered under reverse stress testing, which then links into our wind-down analysis. We have set out below the Pillar 2a risks that apply to Mattioli Woods, classified under the headings ‘credit’, ‘liquidity’, and ‘operational risks’. For each of the key risks we have considered:

Type of stress, which is considered to be severe and plausible;

Assumptions supporting our choice of risk and stress event;

Quantification in financial terms of each stress; and

Comparison of stress event against Pillar 1 and base financials.

19

Credit risk

Although credit risk is primarily considered under Pillar 1, we have considered the risk that a key banking partner could fail. To mitigate this risk, our treasury policy requires us to utilise banks with investment-grade credit ratings.

Liquidity risk

Liquidity risk is the risk we are unable to meet liabilities as they become due, because of an inability to liquidate assets or obtain adequate short-term funding. We have considered a stress test whereby we have breached our liquidity risk appetite and need to secure additional funding. To mitigate this risk, our treasury policy requires us to hold three months of operational costs as liquid funds.

Operational risk

Operational risk arises from inadequate or failed internal processes, people and systems or from external events including tax and legal risk. We take operational risk across a number of areas:

Risk area Mitigating factors

Regulatory, risk that we misinterpret or incorrectly implement changes to UK regulations or laws

We operate a dedicated compliance team staffed by experts across conduct, product, complaints and technical areas.

Key person, risk that we lose or cannot recruit key personnel

Succession planning is a key consideration across the Group and is actively managed by senior managers and our HR team.

Conduct and reputation, risk that we fail our customers through a serious breach of the FCA’s TCF principles

We operate a dedicated compliance team staffed by experts across conduct, product, complaints and technical areas.

IT, risk that our IT systems and processes fail to support the operations of our business

We operate a team of dedicated IT professionals, supported by external resource when required.

Disaster recovery / business continuity risk, that we are unable to timely recover from a major disaster

Our disaster recovery plan and business continuity plan is monitored quarterly, and tested annually.

Fraud risk, that an employee or third party defrauds us

Our control environment defines segregation of duties across corporate and client-related payments.

20

5 REMUNERATION DISCLOSURES

5.1 Preamble to remuneration disclosure

The disclosures are in accordance with the ‘proportionality rule’. CRR Article 450 (2) requires firms to disclose in a manner that is appropriate to their size, internal organisation, and nature, scope and complexity of activities. Having considered regulation 604/2014 (EU), we deem that Mattioli Woods’ directors comprise those staff whose professional activities have a material impact on our risk profile.

5.2 Remuneration policy

The policy of the remuneration committee is to set basic salaries at a level that is competitive with that of comparable businesses, with a substantial proportion of the overall remuneration package being linked to performance through participation in short-term and long-term incentive schemes. The overall remuneration package should be sufficiently competitive to attract, retain and motivate high-quality executives capable of achieving the Group’s objectives and thereby enhance shareholder value.

The remuneration committee reviews executive remuneration each year, sometimes in conjunction with external remuneration consultants, benchmarking the executive directors’ remuneration against a peer group of comparable listed companies with a similar level of revenue and market capitalisation. The remuneration committee (which is described in Section 2.3), meets at least three times a year.

The FCA has published a code of practice on remuneration policies (‘the FCA code’), which requires firms to apply remuneration policies, practices and procedures that are consistent with and promote effective risk management. The FCA code applies directly to all banks, building societies and investment firms, such as the Group.

5.3 Salaries, fees and benefits

Salaries for executive directors are determined by the remuneration committee and reviewed annually, taking into account individual performance over the previous 12 months, external benchmark salary data, and pay and employment conditions elsewhere in the Group.

Fees for the non-executive directors are determined by the board, having regard to fees paid to non-executive directors in other UK quoted companies and the time commitment and responsibilities of the role. No options are held by the non-executive directors. Individuals cannot vote on their own remuneration.

21

Benefits relate to the provision of cars for certain directors, pension contributions and life assurance.

5.4 Short-term incentive arrangements

For the financial year ending 31 May 2017, the short-term incentive arrangements for the executive directors comprise:

A corporate award based on actual profit achieved compared with target profit; and

A personal award based on the achievement of personal objectives assessed on a discretionary basis, considering each executive’s performance against their key objectives.

The payment of a corporate award at its maximum level is dependent on outperformance of the board’s approved internal budget for the period.

5.5 Long-term incentives

It is a priority for the Group to continue to attract and retain appropriately-qualified staff. The Group has adopted the Mattioli Woods Consultants’ Share Option Plan (‘the Consultants’ Share Option Plan’) and the Mattioli Woods 2010 Long-Term Incentive Plan (‘the LTIP’) to incentivise certain of its senior employees and directors. Where possible, and to the limits applied by the legislation, these schemes benefit from the tax advantages under an Enterprise Management Initiative (‘EMI’) scheme.

Mattioli Woods has granted awards to the Group’s executive directors and certain senior employees under the LTIP. Conditional share awards (‘equity-settled’) grant participating employees a conditional right to become entitled to options with an exercise price of 1 pence over ordinary shares in the Group. Conditional cash awards (‘cash-settled’) grant participating employees a conditional right to be paid a cash amount based on the proceeds of the sale of a specified number of ordinary shares following the vesting of the award.

The LTIP awards are subject to the achievement of corporate profitability targets measured over a three-year performance period and will vest following publication of the Group’s audited results for the final year of the performance period.

5.6 Share incentive plan

The Mattioli Woods plc Share Incentive Plan enables employees to buy shares in the Group at an effective discount to the Stock Exchange price by having an amount deducted from pre-tax salary each month. In addition, the Group can grant participating employees matching and/or free shares.

22

5.7 Service contracts

Group policy requires executive directors to have contracts of employment that contain a termination notice period not exceeding 12 months. Ian Mattioli’s appointment will continue until terminated by either party on giving not less than 12 months’ notice. The other executive directors’ appointments continue until termination by either party on giving not less than six months’ notice to the other party.

Non-executive directors do not have service contracts. A letter of appointment provides for an initial period of 12 months and continues until terminated by either party giving three months’ prior written notice to expire at any time on or after the initial 12-month period. The remuneration of non-executive directors takes the form solely of fees, which are set by the board having taken advice on appropriate levels.

5.8 Evaluation of the board’s performance

Individual appraisal of each director’s performance is undertaken by the Chief Executive Officer each year and involves meetings with each director on a one-to-one basis. The non-executive directors, led by the Chairman, carry out an appraisal of the performance of the Chief Executive Officer.

5.9 Retirement benefits

Where an executive director elects, the Group will pay minimum contributions into a personal pension plan nominated by each executive director at a rate of 10% of their basic salary, provided the director pays contributions of not less than 5% of such salary into the same personal pension plan. Alternatively, the director may elect to receive the equivalent in basic salary.

The remuneration committee may, on an exceptional basis, award additional corporate pension contributions to an executive director as part of its ongoing review of executive remuneration arrangements.

23

5.10 Aggregate quantitative information on remuneration

The aggregate remuneration awards to members of staff and senior management who have a material impact on the risk profile of the group (‘Code staff’) for the financial year ended 31 May 2016, is shown below.

Members of management body

Number of beneficiaries 9

Beneficiaries remunerated > EUR 1 million Nil

(£000)

Fixed awards 2,095

Variable remuneration 1,441

Total remuneration 3,536

24

APPENDIX 1

Subsidiary undertakings The accounting consolidation group includes Mattioli Woods and its subsidiary undertakings as listed in the table below:

Subsidiary undertakings Share

class held

Voting rights and

shares held

Nature of business Prudential

consolidation group

GB Pension Trustees Limited Ordinary 100% Trustee company No

Great Marlborough Street Trustees Limited

Ordinary 100% Trustee company No

MW Trustees Limited Ordinary 100% Trustee company No

SLT Trustees Limited Ordinary 100% Trustee company No

Professional Independent Pension Trustees Limited


Pensions Consulting Limited (‘PCL’)

Ordinary 100% Holding company No

PC Trustees Limited (held by PCL)


Bank Street Trustees Limited Ordinary 100% Trustee company No

JB Trustees Limited Ordinary 100% Trustee company No

John Bradley Financial Services Limited

Ordinary 100% Dormant No

Mattioli Woods Legal Limited Ordinary 100% Dormant No

Mayflower Trustees Limited Ordinary 100% Trustee company No

Custodian Capital Limited Ordinary 100% Property management Yes

CP SSAS Trustees Limited Ordinary 100% Trustee company No

CP SIPP Trustees Limited Ordinary 100% Trustee company No

City Pensions Limited Ordinary and preference

100% Dormant No

City Trustees Limited Ordinary 100% Trustee company No

TCF Global Independent Financial Services Limited (‘TCF’)


Kudos Financial Services Limited (held by TCF)


AR Pension Trustees Limited Ordinary 100% Trustee company No

Robinson Gear (Management Services) Limited


25

Subsidiary undertakings Share

class held

Voting rights and

shares held

Nature of business Prudential

consolidation group

Thoroughbred Wealth Management Limited (‘TWM’)


Atkinson Bolton Consulting Limited


Simmonds Ford Trustees Limited


Acomb Trustees Limited Ordinary 100% Trustee company No

Ropergate Trustees Limited Ordinary 100% Trustee company No

Chapel Trustees Limited Ordinary 100% Trustee company No

Mattioli Woods (New Walk) Limited

Ordinary 100% Property development No

Boyd Coughlan Limited Ordinary 100%

Wealth management and employee benefits

Yes

Taylor Patterson Group Limited (‘TPG’) (formerly Lanson House Limited)

Ordinary 100% Wealth management and employee benefits

No

Taylor Patterson Associates Limited (held by TPG)

Ordinary 100% Pension administration Yes

Taylor Patterson Financial Planning Limited (held by TPG)

Ordinary 100% Wealth management and employee benefits

Yes

Taylor Patterson Trustees Limited (held by TPG)


Lanson House Limited (‘LH’) (formerly Taylor Patterson Group Limited) (held by TPG)


Lindley Trustees Limited Ordinary 100% Trustee company No

MWV Solutions Limited Ordinary 50% Dormant No

Old Station Road Holdings Limited (‘OSRH’)


M C Trustees (Pensions) Limited (held by OSRH)

Ordinary 100% Pension administration Yes

M C Trustees (Administration) Limited (held by OSRH)

Ordinary 100% Pension administration No

MCT (Properties) Limited (held by OSRH)

Ordinary 100% Investment vehicle No

M C Trustees Limited (held by OSRH)


MC Nominees Limited (held by OSRH)


26

APPENDIX 2

Own fund disclosure template as at 30 November 2016

In accordance with CRR Article 437 (1a) we disclose an extract of the Mattioli Woods plc year end (audited) and interim (unaudited) statements of financial position for the periods ended 31 May 2016 and 30 November 2016 respectively. This table links to appendix 3.

Condensed consolidated statement of financial position

Audited actual 31 May 2016

Unaudited actual 30 Nov 2016

(£000) (£000)

Assets

Property, plant and equipment 1,997 5,907

Intangible assets 43,410 45,137

Deferred tax asset 737 965

Total non-current assets 46,144 52,009

Trade and other receivables 13,495 15,756

Investments 79 79

Cash and short-term deposits 29,809 22,649

Total current assets 43,383 38,484

Total assets 89,527 90,493

Equity

Issued capital 252 253

Share premium 27,765 28,114

Merger reserve 8,531 8,781

Equity – share-based payments 1,642 2,173

Capital redemption reserve 2,000 2,000

Retained earnings 25,391 26,240

Total equity attributable to equity holders of the parent

65,5811 67,5612

1 Includes £2,184k of proposed dividends, excluded from CET1 (box 6), in appendix 3. 2 Includes £1,192k of proposed dividends, excluded from CET1 (box 6), in appendix 3.

27

Condensed consolidated statement of financial position (continued)

Audited actual 31 May 2016

Unaudited actual 30 Nov 2016

(£000) (£000)

Non-current liabilities

Deferred tax liability 3,724 3,684

Provisions 5,738 3,475

Total non-current liabilities 9,462 7,159

Current liabilities

Trade and other payables 10,047 9,565

Income tax payable 1,083 1,382

Provisions 3,354 4,826

Total current liabilities 14,484 15,773

Total liabilities 23,946 22,932

Total equity and liabilities 89,527 90,493

28

Reconciliation of audited accounts to Common Equity Tier 1 capital resources

31 May 2016 30 Nov 2016

(£000) (£000)

Equity

Issued capital 252 253

Share premium 27,765 28,114

Merger reserve 8,531 8,781

Equity – share-based payments 1,642 2,173

Capital redemption reserve 2,000 2,000

Retained earnings:

- Brought forward 22,739 25,391

- Comprehensive income for the period 5,245 2,957

- Reserves transfer 161 79

- Dividends (2,754) (2,187)

Less:

Intangible assets (43,410) (45,137)

Dividend proposed (2,184) (1,192)

Share-based payment transactions not included in CET1 (1,078) (1,610)

Common Equity Tier 1 – Accounting period end 18,909 19,543

Period to 30 Nov-16

Shares issued1 600

Total comprehensive income for the period2 2,957

Less: Adjustment to FY16 final dividend paid (4)

Less: FY17 interim dividend proposed (1,192)

Intangible assets – Arising on acquisitions (2,391)

Intangible assets – Fair value adjustments (29)

Intangible assets – Additions (278)

Intangible assets - Amortisation 971

Common Equity Tier 1 – 30 Nov 16 19,543 19,543

1 Permission to include additional CET1 from shares issued in the period was granted by the FCA in

December 2016. 2 Permission to include additional CET1 from interim profits in the period was granted by the FCA in

March 2017.

29

APPENDIX 3

Regulatory capital requirements and own funds disclosure as at 30 November 2016

In accordance with CRR Article 437 (1), the table below sets out the total available capital of the Group. This table links to Section 3.

Common Equity Tier 1 (CET1) capital: Instruments and reserves

Regulation (EU) No 575/2013

article reference

Actual 1H17

(£000)

1 Capital instruments and the related share premium accounts 26 (1), 27, 28, 29

28,367

of which: Instrument type 1 EBA list 26 (3)

28,367



2 Retained earnings 26 (1) (c) 23,204

3 Accumulated other comprehensive income (and other reserves) 26 (1) 11,344

3a Funds for general banking risk 26 (1) (f)

4 Amount of qualifying items referred to in Article 484 (3) and the related share premium accounts subject to phase out from CET1

486 (2)

5 Minority interests (amount allowed in consolidated CET1) 84

Sa Independently reviewed interim profits net of any foreseeable charge or dividend

26 (2) 1,765

6 Common Equity Tier 1 (CET1) capital before regulatory adjustments

Sum of rows 1 to Sa

64,680

Common Equity Tier 1 (CET1) capital: regulatory adjustments

7 Additional value adjustments (negative amount) 34, 105

8 Intangible assets (net of related tax liability) (negative amount) 36 (1) (b), 37 (45,137)

9 Empty set in the EU

10 Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability where the conditions in Article 38 (3) are met) (negative amount)

36 (1) (c), 38,

11 Fair value reserves related to gains or losses on cash flow hedges 33(1) (a)

12 Negative amounts resulting from the calculation of expected loss amounts

36 (1) (d), 40, 159

13 Any increase in equity that results from securitised assets (negative amount)

32 (1)

30

14 Gains or losses on liabilities valued at fair value resulting from changes in own credit standing

33(1) (b)

15 Defined-benefit pension fund assets (negative amount) 36 (1) (e), 41

16 Direct and indirect holdings by an institution of own CET1 instruments (negative amount)

36 (1) (f), 42

17 Direct, indirect and synthetic holdings of the CET 1 instruments of financial sector entities where those entities have reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative amount)

36 (1) (g), 44

18 Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution does not have a significant investment in those entities (amount above 10 % threshold and net of eligible short positions) (negative amount)

36 (1) (h), 43, 45, 46, 49 (2) (3), 79

19 Direct, indirect and synthetic holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount above 10 % threshold and net of eligible short positions) (negative amount)

36 (1) (i), 43, 45, 47, 48 (1) (b), 49 (1) to (3), 79


20a Exposure amount of the following items which qualify for a RW of 1250 %, where the institution opts for the deduction alternative

36 (1) (k)

20b of which: qualifying holdings outside the financial sector (negative amount)

36 (1) (k) (i), 89 to 91

20c of which: securitisation positions (negative amount) 36 (1) (k) (ii), 243 (1) (b), 244 (1) (b), 258

20d of which: free deliveries (negative amount) 36 (1) (k) (iii), 379 (3)

21 Deferred tax assets arising from temporary differences (amount above 10 % threshold, net of related tax liability where the conditions in Article 38 (3) are met) (negative amount)

36 (1) (c), 38, 48 (1) (a)

22 Amount exceeding the 15 % threshold (negative amount) 48 (1)

23 of which: direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities

36 (1) (i), 48 (1) (b)


25 of which: deferred tax assets arising from temporary differences

36 (1) (c), 38, 48 (1) (a)

25a Losses for the current financial year (negative amount) 36 (1) (a)

25b Foreseeable tax charges relating to CET1 items (negative amount)

36 (1) (I)

31

27 Qualifying AT1 deductions that exceed the AT1 capital of the institution (negative amount)

36 (1) Ul

28 Total regulatory adjustments to Common Equity Tier 1 (CET1)

Sum of rows 7 to 20a, 21, 22 and 25a to 27

(45,137)

29 Common Equity Tier 1 (CET1) capital Row 6 minus row 28

19,543

Additional Tier 1 (AT1) capital: Instruments

30 Capital instruments and the related share premium accounts 51, 52

31 of which: classified as equity under applicable accounting standards

32 of which: classified as liabilities under applicable accounting standards

33 Amount of qualifying items referred to in Article 484 (4) and the related share premium accounts subject to phase out from AT1

486 (3)

34 Qualifying Tier 1 capital included in consolidated AT1 capital (including minority interests not included in row 5) issued by subsidiaries and held by third parties

85, 86

35 of which: instruments issued by subsidiaries subject to phase out 486 (3)

36 Additional Tier 1 (AT1) capital before regulatory adjustments

Sum of rows 30, 33 and 34

Additional Tier 1 (AT1) capital: regulatory adjustments

37 Direct and indirect holdings by an institution of own ATi instruments (negative amount)

52 (i) (b), 56 (a), 57

38 Direct, indirect and synthetic holdings of the ATi instruments of financial sector entities where those entities have reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative amount)

56 (b), 58

39 Direct, indirect and synthetic holdings of the ATi instruments of financial sector entities where the institution does not have a significant investment in those entities (amount above i0% threshold and net of eligible short positions) (negative amount)

56 (c), 59, 60, 79

40 Direct, indirect and synthetic holdings by the institution of the ATi instruments of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions) (negative amount)

56 (d), 59, 79


42 Qualifying T2 deductions that exceed the T2 capital of the institution (negative amount)

56 (e)

43 Total regulatory adjustments to Additional Tier 1 (AT1) capital

Sum of rows 37 to 42

44 Additional Tier 1 (AT1) capital Row 36 minus row 43

32

45 Tier 1 capital (T1 = CET1 + AT1) Sum of row 29 and row 44

19,543

Tier 2 (T2) capital: Instruments and provisions

46 Capital instruments and the related share premium accounts 62, 63

47 Amount of qualifying items referred to in Article 484 (5) and the related share premium accounts subject to phase out from T2

486 (4)

48 Qualifying own funds instruments included in consolidated T2 capital (including minority interests and ATi instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties

87, 88

49 of which: instruments issued by subsidiaries subject to phase out 486 (4)

50 Credit risk adjustments 62 (c) & (d)

51 Tier 2 (T2) capital before regulatory adjustments

Tier 2 (T2) capital: regulatory adjustments

52 Direct and indirect holdings by an institution of own T2 instruments and subordinated loans (negative amount)

63 (b) (i), 66 (a), 67

53 Holdings of the T2 instruments and subordinated loans of financial sector entities where those entities have reciprocal cross holdings with the institution designed to inflate artificially the own funds of the institution (negative amount)

66 (b), 68

54 Direct and indirect holdings of the T2 instruments and subordinated loans of financial sector entities where the institution does not have a significant investment in those entities (amount above iO% threshold and net of eligible short positions) (negative amount)

66 (c), 69, 70, 79

55 Direct and indirect holdings by the institution of the T2 instruments and subordinated loans of financial sector entities where the institution has a significant investment in those entities (net of eligible short positions) (negative amount)

66 (d), 69, 79


57 Total regulatory adjustments to Tier 2 (T2) capital Sum of rows 52 to 56

58 Tier 2 (T2) capital Row 51 minus row 57

59 Total capital (TC = T1 + T2) Sum of row 45 and row 58

19,543

60 Total risk weighted assets

Capital ratios and buffers

61 Common Equity Tier 1 (as a percentage of total risk exposure amount)

92 (2) (a) 19.7%

62 Tier 1 (as a percentage of total risk exposure amount) 92 (2) (b) 19.7%

63 Total capital (as a percentage of total risk exposure amount) 92 (2) (c) 19.7%

33

64 Institution specific buller requirement (CET1 requirement in accordance with article 92 (1) (a) plus capital conservation and countercyclical buller requirements, plus systemic risk buller, plus systemically important institution buller expressed as a percentage of risk exposure amount)

CRD 128, 129, 130, 131, 133

65 of which: capital conservation buller requirement

66 of which: countercyclical buller requirement

67 of which: systemic risk buller requirement

67a of which: Global Systemically Important Institution (G-SII) or Other Systemically Important Institution (0-SII) buller

68 Common Equity Tier 1 available to meet buffers (as a percentage of risk exposure amount)

CRD 128

69 [non-relevant in EU regulation]



Amounts below the thresholds for deduction (before risk weighting)

72 Direct and indirect holdings of the capital of financial sector entities where the institution does not have a significant investment in those entities (amount below 10% threshold and net of eligible short positions)

36 (1) (h), 46, 45 56 (c), 59, 60 66 (c), 69, 70

73 Direct and indirect holdings by the institution of the CET1 instruments of financial sector entities where the institution has a significant investment in those entities (amount below 10 % threshold and net of eligible short positions)

36 (1) (i), 45, 48


75 Deferred tax assets arising from temporary differences (amount below 10% threshold, net of related tax liability where the conditions in Article 38 (3) are met)

36 (1) (c), 38, 48

Applicable caps on the Inclusion of provisions In Tier 2

76 Credit risk adjustments included in T2 in respect of exposures subject to standardised approach (prior to the application of the cap)

62

77 Cap on inclusion of credit risk adjustments in T2 under standardised approach

62

78 Credit risk adjustments included in T2 in respect of exposures subject to internal ratings-based approach (prior to the application of the cap)

62

79 Cap for inclusion of credit risk adjustments in T2 under internal ratings-based approach

62

Capital instruments subject to phase-out arrangements (only applicable between 1 Jan 2014 and 1 Jan 2022)

80 - Current cap on CET1 instruments subject to phase out arrangements

484 (3), 486 (2) & (5)

34

81 - Amount excluded from CET1 due to cap (excess over cap after redemptions and maturities)

484 (3), 486 (2) & (5)

82 - Current cap on AT1 instruments subject to phase out arrangements

484 (4), 486 (3) & (5)

83 - Amount excluded from AT1 due to cap (excess over cap after redemptions and maturities)

484 (4), 486 (3) & (5)

84 - Current cap on T2 instruments subject to phase out arrangements

484 (5), 486 (4) & (5)

85 - Amount excluded from T2 due to cap (excess over cap after redemptions and maturities)

484 (5), 486 (4) & (5)

35

APPENDIX 4

Capital instruments main features as at 30 November 2016

In accordance with CRR Article 437 (1), the table below sets out the main features of the Group’s capital instruments.

Capital instruments main features template

1 Issuer Mattioli Woods plc

2 Unique identifier e.g. CUSIP, ISIN or Bloomberg identifier for private placement

MTW

3 Governing law(s) of the instrument England and Wales

Regulatory treatment

4 Transitional CRR rules N/A

5 Post-transitional CRR rules Common Equity Tier 1

6 Eligible at solo/(sub-)consolidated/ solo and (sub-)consolidated

Consolidated

7 Instrument type (types to be specified by each jurisdiction)

Ordinary shares at 1p each

8 Amount recognised in regulatory capital (currency in million, as of most recent reporting date)

£28.4m comprising nominal value and share premium

9 Nominal amount of instrument £253,476

9a Issue price £1.32 per share at original date of issuance

9b Redemption price N/A

10 Accounting classification Shareholders’ equity

11 Original date of issuance 15 November 2005

12 Perpetual or dated Perpetual

13 Original maturity date N/A

14 Issuer call subject to prior supervisory approval No

15 Optional call date, contingent call dates and redemption amount

N/A

16 Subsequent call dates, if applicable N/A

Coupons/ dividends

17 Fixed or floating dividend/coupon Floating

18 Coupon rate and any related index N/A

19 Existence of a dividend stopper No

20a Fully discretionary, partially discretionary or mandatory (in terms of timing)

Fully discretionary

20b Fully discretionary, partially discretionary or mandatory (in terms of amount)

Fully discretionary

36

21 Existence of step up or other incentive to redeem

No

22 Non-cumulative or cumulative Non-cumulative

23 Convertible or non-convertible Non-convertible

24 If convertible, conversion trigger(s) N/A

25 If convertible, fully or partially N/A

26 If convertible, conversion rate N/A

27 If convertible, mandatory or optional conversion N/A

28 If convertible, specify instrument type into which it is convertible

N/A

29 If convertible, specify issuer of instrument into which it converts

N/A

30 Write-down features No

31 If write-down, write-down trigger(s) N/A

32 If write-down, full or partial N/A

33 If write-down, permanent or temporary N/A

34 If temporary write-down, description of write-up mechanism

N/A

35 Position in subordination hierarchy in liquidation (specify instrument type immediately senior to instrument)

The most subordinate position in the event of liquidation of the issuer

36 Non-compliant transitioned features N/A

37 If yes, specify non-compliant features N/A

37

APPENDIX 5

Risk management structure

Audit, Risk and Compliance Committee

Head of Risk Management and

Compliance

AdviceCorporate & Regulatory Reporting

Complaints Product Technical Advice

Chief Operating Officer

38

Mattioli Woods plc MW House, 1 Penman Way

Grove Park, Enderby Leicester

LE19 1SY

Telephone: 0116 240 8700 Facsimile: 0116 240 8701 Email: [email protected]

Website: www.mattioliwoods.com w

http://www.mattioliwoods.com/

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