PILLAR 3 DISCLOSURES | 18 May 2021 Contents 1 EXECUTIVE SUMMARY .......................................................................................................................................................... 3 1.1 MATTIOLI WOODS GROUP, ICAAP AND PILLAR 3 DISCLOSURES ............................................................................................................... 3 1.2 CAPITAL RESOURCE REQUIREMENT AND CAPITAL SURPLUS ......................................................................................................................... 4 1.3 NON-MATERIAL, PROPRIETARY OR CONFIDENTIAL INFORMATION ............................................................................................................... 5 1.4 FREQUENCY OF DISCLOSURE .................................................................................................................................................................... 5 1.5 MEANS OF DISCLOSURE........................................................................................................................................................................... 5 2 BACKGROUND ....................................................................................................................................................................... 6 2.1 Key business activities ............................................................................................................................................................ 6 2.2 INDUSTRY OVERVIEW .............................................................................................................................................................................. 8 2.3 PRUDENTIAL CATEGORY .......................................................................................................................................................................... 8 2.3.1 IFPRU ........................................................................................................................................................................................ 9 2.3.2 BIPRU 12 – Liquidity adequacy ............................................................................................................................................. 9 2.3.3 Capital framework .................................................................................................................................................................. 9 2.3.4 New UK Prudential Regime for MiFID investment firms (IFR) ......................................................................................... 10 3 CORPORATE GOVERNANCE AND RISK MANAGEMENT ................................................................................................. 11 3.1 CORPORATE GOVERNANCE ARRANGEMENTS ........................................................................................................................................... 11 3.1.1 Overview ................................................................................................................................................................................ 11 3.1.3 Operation of the Board ........................................................................................................................................................ 12 3.1.11 Governance arrangements of active subsidiaries ............................................................................................................. 19 3.1.12 Diversity ................................................................................................................................................................................. 19 3.2 RISK MANAGEMENT FRAMEWORK .......................................................................................................................................................... 19 3.2.1 RISK APPETITE ................................................................................................................................................................................. 20 How we use the risk appetite ............................................................................................................................................................... 20 3.2.2 RISK IDENTIFICATION AND MANAGEMENT ......................................................................................................................................... 20 4 CAPITAL RESOURCES .......................................................................................................................................................... 25 4.1 BACKGROUND ...................................................................................................................................................................................... 25 Retained earnings .................................................................................................................................................................................. 25 4.2 Regulatory capital calculations ........................................................................................................................................... 26 5 PILLAR 1 RISKS AND CALCULATION METHODOLOGIES ................................................................................................ 27 5.1 OVERVIEW ............................................................................................................................................................................................ 27 5.2 PILLAR 1 CALCULATIONS ....................................................................................................................................................................... 27 5.3 CREDIT RISK .......................................................................................................................................................................................... 27 5.4 MARKET RISK ........................................................................................................................................................................................ 30 5.5 FIXED OVERHEAD REQUIREMENT ........................................................................................................................................................... 31 6 REMUNERATION DISCLOSURES ........................................................................................................................................ 33 6.1 REMUNERATION POLICY ........................................................................................................................................................................ 33 6.2 SINGLE TOTAL FIGURE OF REMUNERATION FOR EACH DIRECTOR ............................................................................................................... 34 6.3 SALARY, FEES AND BENEFITS .................................................................................................................................................................. 35 6.4 BONUS ................................................................................................................................................................................................. 35 6.5 LONG-TERM INCENTIVE PLAN ................................................................................................................................................................ 36 6.6 SERVICE CONTRACTS ............................................................................................................................................................................. 38 6.7 DIRECTORS’ SHAREHOLDINGS ................................................................................................................................................................ 38 APPENDIX 1 – FCA CLASSIFICATIONS OF REGULATED ENTITIES .................................................................................................. 39 APPENDIX 2 – GOVERNANCE STRUCTURE AT 31 MAY 2020 ......................................................................................................... 41 APPENDIX 3 – GROUP LEGAL STRUCTURE AT 30 SEPTEMBER 2020 ............................................................................................. 42 APPENDIX 4 – GOVERNANCE OF ACTIVE SUBSIDIARY COMPANIES ............................................................................................ 43 APPENDIX 5 – RISK MANAGEMENT STRUCTURE AT 31 MAY 2020 .............................................................................................. 45 APPENDIX 6 – REGULATORY CAPITAL REQUIREMENTS AND OWN FUNDS DISCLOSURES AS AT 31 MAY 2020 ................... 46 APPENDIX 7 – CAPITAL INSTRUMENTS MAIN FEATURES AS AT 31 MAY 2020 .......................................................................... 51 Page | 2 Mattioli Woods plc 1 Executive summary 1.1 Mattioli Woods Group, ICAAP and Pillar 3 disclosures Mattioli Woods plc (“Mattioli Woods” or “the Company”) is a specialist wealth management and employee benefits business, operating at the top end of its chosen markets. Mattioli Woods is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”) and is an IFPRU €50k limited licence investment firm (“IFPRU 50k firm”). The Internal Capital Adequacy Assessment Process (“ICAAP”) is our own assessment of the key risks Mattioli Woods’ business model is exposed to and of the level of capital required to adequately support current and future risks of the