Mattioli Woods Regulatory News (MTW)

13 September 2022

Mattioli Woods plc

("Mattioli Woods", "the Company" or "the Group")

Final results

Mattioli Woods plc (AIM: MTW.L), the specialist wealth and asset management business, is pleased to report its final audited results for the year ended 31 May 2022. 

Mattioli Woods is creating a responsibly integrated, full-service wealth management group, growing organically through its distribution network of 185 consultants and investment management offering, and through the acquisition and integration of complementary businesses, with the aim of enhancing the Group's client proposition while delivering strong shareholder returns.

Financial highlights

· Total client assets of the Group and its associate[1] rose 23.1% to £14.9bn (2021: £12.1bn) at year end

· Revenue increased 72.8% to £108.2m (2021: £62.6m)

-  Strong organic revenue growth up 10.0% to £62.2m (2021: £56.6m)

-  Positive contribution from acquisitions of £46.1m (2021: £6.0m)

-  Increased new client wins of 1,084 (2021: 898), reflecting investment in business development initiatives

· Recurring revenues[2],[3] represent 86.8% (2021: 92.7%) of total revenue, reflecting contributions from Maven Capital Partners and increased initial client fees

· Adjusted EBITDA2,[4] increased 88.4% to £32.6m (2021: £17.3m), including our post-tax profit of our associate Amati Global Investors, which grew 45.5% to £1.6m (2021: £1.1m)

· Adjusted EBITDA margin[5] rose to 30.1% (2021: 27.7%)

· Adjusted EPS3,[6] rose 17.5% to 48.3p (2021: 41.1p), growing organically and through accretive acquisitions

· Proposed final dividend of 17.8p (2021: 13.5p), giving a total dividend rise of 24.3% to 26.1p (2021: 21.0p)

· Strong cash generation and overall financial position, with £53.9m of cash at 31 May 2022 (2021: £21.9m)

Operational highlights and recent developments

· Diversified revenue mix with 48.0% (2021: 54.2%) fixed, initial or time-based fees uncorrelated to market performance

· Gross discretionary AuM[7] rose 25.8% to £5.1bn (2021: £4.1bn), with net inflows of over £341m in the year

· Strong revenue and earnings contribution from recent acquisitions that are performing ahead of expectations and integrating well

-  Acquisition of Ferguson Financial Management completed in May 2022, with a strong pipeline of further accretive acquisition opportunities

· Continued progress on strategic initiatives with increased investment in technology, compliance and training

· Strong new business pipeline versus prior year

Strategic vision and goals: medium term targets

Our strategic goals continue to be to grow Group's operations towards:

· £300m of revenues

· £30bn of total client assets

· £100m of EBITDA

1. Includes £1,100.5m (2021: £1,196.0m) of funds under management by the Group's associate, Amati Global Investors Limited, excluding £93.6m (2021: £94.9m) of Mattioli Woods' client investment and £14.8m (2021: £17.2m) of crossholdings between the TB Amati Smaller Companies Fund, TB Amati Strategic Metals Fund and the Amati AIM Venture Capital Trust ("VCT") plc. 

2. Annual pension consultancy and administration fees; ongoing adviser charges; level and renewal commissions; banking income; property, discretionary portfolio and other annual management charges adjusted for Private Investor Club initial fees. 

3. This is an alternative performance measure ("APM") the Group reports to assist stakeholders in assessing performance alongside the Group's results on a statutory basis. APMs may not be directly comparable with other companies' adjusted measures and are not intended to be a substitute for, or superior to, any IFRS measures of performance. Supporting calculations for APMs and reconciliations between APMs and their IFRS equivalents are set out in the alternative performance measure workings section of the Annual Report. See APMs section for further details.

4. Calculated as earnings before interest, taxation, depreciation, amortisation, acquisition-related costs, gain on bargain purchase, contingent consideration treated as remuneration and including share of profit from associates (net of tax). 

5. Adjusted EBITDA divided by revenue. 

6. Adjusted profit after tax used to derive adjusted EPS is calculated as adjusted profit before tax as defined above less income tax at the standard rate of 19% (2021: 19%). 

7. Includes £1,208.9m (31 May 2021: £1,308.1m) of funds under management by Amati Global Investors Limited, including Mattioli Woods' client investment and crossholdings between TB Amati Smaller Companies Fund, TB Amati Strategic Metals Fund and Amati AIM VCT plc.

Our underlying organic growth in revenues over the last five years underpins future organic growth, and we shall continue to seek further acquisitions, building on our well-established track record and benefitting from ongoing consolidation within the wealth and asset management sector.

Commenting on the results, Ian Mattioli MBE, Chief Executive Officer, said:

"The last financial year was another turbulent period for clients, which served to reinforce our commitment to putting clients first, developing our service offering and building a business that is sustainable and resilient over the long-term. I am pleased to report this approach delivered strong revenue growth of 72.8% to £108.2m (2021: £62.6m) reflecting the positive contribution of recent acquisitions combined with 10.0% organic growth in our core business and increased levels of new business offsetting the impact of negative market movements on the value of clients' assets. Adjusted EBITDA was up 88.4% to £32.6m (2021: £17.3m) and adjusted EBITDA margin increased to 30.1% (2021: 27.7%) representing meaningful progress towards our strategic goals.

"Adjusted EPS rose 17.5% to 48.3p (2021: 41.1p). The Board is pleased to recommend a final dividend of 17.8p per share (2021: 13.5p). This makes a proposed total dividend for the year of 26.1p (2021: 21.0p) a year-on-year increase of 24.3% (2021: 5.0% increase), demonstrating our desire to deliver value to shareholders and confidence in the outlook for our business.  

"We plan to maintain this positive momentum, advancing our strategic initiatives: new business generation, growth through the integration of acquisitions, developing new products and services, reviewing our processes and investing in technology to deliver an improved client experience and further operational efficiencies.

"Investment markets are likely to remain volatile for some time, although the spectre of rising inflation typically creates significant advice opportunities given our diverse revenue streams and for further investment inflows as existing and prospective clients consider appropriately investing surplus cash to avoid suffering an erosion in value of savings in real terms.

"We will continue to seek to understand our clients' needs and provide quality solutions, maintaining our focus on client service and continuing to adapt our business model to the changing market, integrating asset management and financial planning. 

"We further plan to build on our track record of successful acquisitions by continuing to assess and progress opportunities that meet our strict criteria. Consolidation within wealth management, asset management and SIPP administration is expected to continue for the foreseeable future, with many more opportunities coming to market.

"I sincerely thank and remain humbled by the continued professionalism, commitment, endeavour and agility that our people have shown in managing our clients' affairs throughout another challenging year. 

"The outlook for the new financial year remains positive, notwithstanding the continuing challenging macroeconomic conditions, and we continue to trade in line with expectations. As previously disclosed, cost inflation and progressing our strategic initiatives including investment in people and technology are expected to impact margins in the short term but will position us to secure future growth in revenue and profits. This will also provide opportunities to deliver future growth and sustainable shareholder returns as a business that is here for the long term". 

- Ends -

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Analyst presentation

There will be an analyst presentation held via webinar to discuss Mattioli Woods' full year results at 09:30am today. Those analysts wishing to attend are asked to contact Camarco on +44 (0) 20 3757 4998 or at mtwplc@camarco.co.uk . 

Investor presentation

There will be an investor presentation to discuss Mattioli Woods' full year results at 12.30pm Friday, 16 September 2022. 

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9:00am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Mattioli Woods plc via: https://www.investormeetcompany.com/mattioli-woods-plc/register-investor. Investors who already follow Mattioli Woods plc on the Investor Meet Company platform will automatically be invited.

Strategic report

Our vision and approach

Our business model

Mattioli Woods plc is a diversified wealth and investment management business. Our core proposition integrates asset management and financial planning to serve a market predominantly consisting of mass affluent individuals, controlling directors and owner-managed businesses, professionals, executives, families and retirees. We plan to expand our reach to new client demographics as we continue developing both our investment and product propositions. 

Our vision

Our aim is to achieve continued growth across our core pillars of advice, investments and administration while delivering exceptional client outcomes, specifically through:

1. New client wins and greater integration across the value-chain for existing clients;

2. Enhancing the Group's investment proposition;

3. Further investment in developing the Group's digital platform and client portal;

4. Simplifying administration processes and improving productivity; and

5. Accelerating growth through strategic acquisitions. 

Our medium-term financial goals are for the Group to deliver:

· £300m Revenue

· £30bn Total client assets

· £100m EBITDA

We will continue to put our clients and their needs at the core of everything we do, with the objective of growing and preserving their assets, while giving them control and understanding of their overall financial position. At the same time, we aim to grow our business, both organically and through acquisition, to deliver strong, sustainable shareholder returns over the long-term. 

Our focus on holistic planning, providing high levels of personal service and maintaining close multi-generational relationships with our clients has also been a key attribute of each of the financial planning businesses acquired during the last financial year. We plan to continue developing complementary services around our core specialisms, blending advice and investment management with specialist product provision to progress as a modern financial services business aligned to our clients' needs. We believe this will allow us to deliver great client outcomes while keeping clients' costs low, with our integrated model allowing us to address more of the value chain.

Wealth and asset management

Our wealth and asset management business comprises four operating segments: pensions consultancy and administration, investment management, private equity asset management and property management. We provide services to individuals, families and institutions, embracing all aspects of financial planning and investment, including specialist pensions and estate planning, personal and trust investment, and fund management. 

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' life planning strategies. We have an established 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 meaningful advice given to clients by our consultancy team. 

To support our advised and non-advised clients we specialise in the provision of proactive and personalised pension administration, which differentiates us from our competitors. Our 11,000+ SIPP and SSAS clients are supported by our proprietary MWeb pensions administration platform, into which additional investment is planned to further enhance our client experience and deliver operational efficiencies. 

Investment management

The provision of bespoke investment advice sits at the heart of our investment proposition. The Group's investment services include discretionary portfolio management and in meeting our clients' needs we use third parties' investment funds, but where we have a particular expertise we look to meet those needs in-house. This approach has led to the development of our internal investment management function and a range of products designed to meet our clients' needs, including a range of multi-asset funds that have received external recognition as well as providing direct UK equity management. In the last year, we launched the Mattioli Woods Responsible Equity and Property Securities funds in response to client demand. These are complemented by our alternative asset investments managed by the Group's subsidiaries; Maven Capital Partners UK LLP ("Maven") and Custodian Capital Limited ("Custodian Capital"), and the funds managed by our associate company Amati Global Investors Limited. Where appropriate, we intend to expand upon these offerings to enhance the investment proposition for our clients and drive further organic growth. 

Private equity asset management

The completion of our acquisition of Maven, a leading private equity and alternative asset manager, represents a new and exciting opportunity to enhance the Group's investment offering and widen distribution of the enlarged Group's products and services, including our range of VCTs, infrastructure funds and private equity investment opportunities.

Property management

Custodian Capital facilitates direct property ownership on behalf of pension schemes and private clients and is the external discretionary fund manager of Custodian Real Estate Investment Trust plc ("Custodian REIT" or "CREIT"), a UK real estate investment trust listed on the Main Market of the London Stock Exchange. We believe investment in good quality properties with high grade tenants typically provides stable returns over the long-term and our property team draws on many years' commercial property investment experience. 

Employee benefits

The Group advice offering also comprises the Employee Benefits advice business. We assist our corporate clients with employee engagement, with the aim of improving recruitment, retention and workplace morale. Our services include consultancy in 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 total reward and flexible benefit systems, assisting clients to deliver these to their employees, together with advice, guidance and financial education. Changes in legislation and the uncertainty caused by the recent pandemic, combined with increased utilisation of flexible working arrangements, are increasing the demand for our financial education and wealth management services to be delivered through employers. 

Strategic report

Chair's statement

This is my first year as Chair of Mattioli Woods, having been appointed as a Non-Executive Director at the beginning of 2021. Since joining the Board, I have seen a step change in the scale of the Group driven by both organic and acquired growth, and the number of growth opportunities available to it. I am fortunate to be Chair of a Group with considerable growth potential, which truly excites me and the other members of the board. 

I would like to thank my predecessor, Joanne Lake, recognising the commitment she made to supporting the firm's growth and for her contributions and stewardship of the Board over the last nine years and wish her the best for her future endeavours.

The development of a new executive team and the enhanced governance structures we have put in place provide the appropriate leadership and oversight for the Group's next phase of development, where I intend to share my own investment management experience with the leadership team, so that they may identify further opportunities to improve the options available for our clients. 

For the year ended 31 May 2022, I am pleased to report that group revenues grew 72.8% to £108.2m (2021: £62.6m), with strong organic revenue growth of 10%, despite the difficult market backdrop throughout the period. Adjusted EBITDA was up 88.4% to £32.6m (2021: £17.3m), reflecting both continued organic growth and the positive impact of acquisitions made during the last two years and after normalising for acquisition-related costs. 

The acquisitions of Maven, Richings Financial Management, Ludlow Wealth Management and Ferguson Financial Management, together with those businesses acquired in the prior year, contributed £46.1m of revenue growth. The Group's organic revenue[8] growth of 10% was driven by increased levels of new business offsetting the impact of negative market movements on the value of clients' assets during the year.

Our focus remains on delivering great client outcomes and we have continued to develop our customer and business propositions, with the majority of our team continuing to work flexibly with a mix of remote and office-based working. We are mindful of our social impact and continue to support our various stakeholders and the local communities in which we operate through a number of commercial and charitable arrangements.

The Group's strong revenue and profit growth represents meaningful progress towards our ambitious medium term strategic goals, with profit before tax ("PBT") up 56.9% to £8.0m (2021: £5.1m). Excluding the impact of acquisition-related costs and contingent consideration on acquisitions recognised as remuneration, adjusted PBT increased by 107.7% to £29.5m (2021: £14.2m).

The Board is committed to growing the dividend while maintaining an appropriate level of cover to protect the Group's financial position and balance the interests of all stakeholders. Accordingly, the Board is pleased to propose an increased final dividend of 17.8p per share (2021: 13.5p), making a proposed total dividend for the year of 26.1p, up 24.3% (2021: 21.0p). 

8. Total revenues excluding revenue growth from businesses acquired in the last 24 months.

Our strategy

Our medium-term targets to grow revenue to £300m and achieve EBITDA of £100m, underpinned by total client assets of £30bn, reflect the Board's ambitions for the Group. Our strategy remains focused on achieving sustainable levels of growth that both enhances value and broadens or deepens our expertise and services to better serve our clients. 

The Group has completed nine acquisitions in the last two years including our largest two acquisitions of Maven and Ludlow and maintains a strong pipeline of further acquisition opportunities.  Our clearly defined acquisition criteria are focused on transactions that deliver positive shareholder returns and extend the Group's existing client proposition or add to our distribution capacity and scale. We will seek to build on our track record of successfully combining businesses that share the same culture and ethos of putting clients first, alongside continued organic growth. 

Our people

I have been incredibly impressed and honoured to witness the team's dedication to dealing with our clients' affairs over the last year and thank all our staff for their continued enthusiasm, professionalism and commitment to delivering high levels of service to our clients despite the challenging times in which we operate. 

We remain committed to investing in and developing our staff to build the expertise and capacity to deliver sustainable growth over the long-term. We maintain a culture that is based on knowledge, professionalism and diversity, putting clients first and adopting a team-based, collegiate approach. Retaining the commitment, integrity, expertise and passion of our people is vital to our success and remains a priority of the Board. 

Governance and the Board

We recently reviewed our governance framework, putting in place a new structure that will better enable us to meet the diverse needs of our clients and other stakeholders and support our further growth. Further details of these changes, which are designed to enable appropriate decision-making authority within the advice, administration and investment pillars of our business are detailed in the Governance Report.

The Company operates with a balanced Board, which we believe represents the right governance structure for the business. We strive for high standards in our corporate governance and disclosure and have adopted the QCA Corporate Governance Code to facilitate this. The Board remains committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business. 

Shareholders

During the year we have engaged with our shareholders through traditional face-to-face meetings, when permitted, and through virtual channels including webinars and group meetings. We are fortunate to have a group of supportive institutional shareholders with a significant investment in the Company and welcome the opportunity to talk to all our shareholders. We will continue to maintain a regular and constructive dialogue with our shareholders, while seeking to further broaden our shareholder base. 

Outlook

The Board is pleased by the Group's performance in the year. We expect the difficult macroeconomic conditions to sustain an increased demand for advice from clients, underpinning further growth in our pensions and advice business. 

The spectre of rising inflation typically represents an opportunity for further investment inflows as existing and prospective mass-affluent clients consider appropriately investing surplus cash to avoid suffering an erosion in value of savings in real terms. We expect inflationary pressures to further impact employment costs, professional costs and office costs across our business, and the Board intends to take a rigorous and proactive approach to the management of these costs while retaining operational flexibility, strength and depth for the long-term benefit of all stakeholders. 

Consolidation within the wealth and asset management sector continues apace, and we continue to assess further acquisition opportunities, with all potential transactions required to meet our strict investment criteria and due diligence procedures. We are also progressing our strategic initiatives, including the development of our digital platforms and our people, to improve operational efficiency and create additional capacity. 

We are confident in the resilience of our business model. The outlook for the new financial year remains positive, with revenues continuing to grow. As previously disclosed, cost inflation and progressing our strategic initiatives including investment in people and technology are expected to impact margins in the short term, the latter will position us to secure future growth in revenue and profits, and to deliver sustainable shareholder returns over the long-term. 

We are a business that is here for the long-term and we look forward to the future with confidence and enthusiasm.

David Kiddie

Independent Non-Executive Chair

12 September 2022

Strategic report

Chief Executive's review

Introduction

The last financial year was another turbulent period for clients, which served to reinforce our commitment to putting clients first, developing our service offering and building a business that is sustainable and resilient over the long-term. I am pleased to report this approach delivered strong revenue and profit growth, representing meaningful progress towards our ambitious strategic goals.

The Group's revenue grew 72.8% to £108.2m (2021: £62.6m), reflecting the positive contribution of recent acquisitions combined with 10.0% organic growth in our core business, with increased levels of new business offsetting the impact of negative market movements on the value of clients' assets. 

The growing momentum of new business generation we saw in the first half continued into the second half of the year, despite the uncertain market backdrop. A total of 1,084 (2021: 898) new SIPP, SSAS and personal clients with assets totalling £212m (2021: £239m) chose to use Mattioli Woods during the year, representing 20.7% growth. Our investment in technology has enabled us to host virtual client meetings in addition to client and introducer webinars, which continue to attract larger numbers of attendees than our traditional in-person seminars, which we have reintroduced for those people who prefer face-to-face meetings following the easing of the pandemic restrictions. 

Operating profit before financing grew 73.8% to £7.3m (2021: £4.2m) and profit before tax was up 56.9% to £8.0m (2021: £5.1m). Adjusted profit before tax of £29.5m and up 107.7%, was primarily driven by the contribution of recent acquisitions and further enhanced by an increased share of profit of £1.6m (2021: £1.1m) from our 49% associate Amati, which had £1.1bn of assets under management at the year-end. This is a significant increase from when we acquired our interest in the business with AuM of £120m. Amati's strong investment performance continues to be recognised, with the Amati AIM VCT winning the VCT AIM Quoted Category at Investment Week's Investment Company of the Year Awards 2021 and the Amati UK Smaller Companies Fund being highly commended at the Fund Manager of the Year Awards 2021.

Adjusted EBITDA was up 88.4% to £32.6m (2021: £17.3m) and adjusted EBITDA margin increased to 30.1% (2021: 27.7%) due to a change in revenue mix following the acquisitions made during the year and close management of administrative expenditure.

The profit margins achieved for the year support our path to our longer-term targets.  We are working to realise the economies of scale and operational efficiencies that our responsibly integrated model offers, while seeking ways to reduce clients' costs. As previously announced, despite some short-term impact to margins, further investment in our platform infrastructure will allow us to improve client outcomes and experience, and to realise operational efficiencies.

Our success has been based upon the delivery of quality advice, growing our clients' assets and enhancing their financial outcomes. We enjoy strong, intergenerational client retention and throughout the year we saw sustained demand for advice from clients against a difficult market backdrop. We expect a continued demand for advice driven by working and lifestyle changes, the impact of the pandemic on financial planning matters, an uncertain investment environment, increasing longevity, tax and other legislative changes, where navigating these headwinds becomes ever more complex.

We continue to focus on delivering investment performance across both portfolios and funds. Despite continued market uncertainty, gross discretionary assets under management ("AuM") by the Group and its associate increased to £5.1bn (2021: £4.1bn) following the acquisition of Maven in July 2021 and aggregate net inflows (before market movements) of £341.4m (2021: £452.9m) into the Group's bespoke investment services. This includes an increase in the value of properties held within CREIT by £119.6m (2021: £53.5m) to £527.6m.

The value of assets held within our discretionary portfolio management ("DPM") service increased by 17.9% to £2.5bn (2021: £2.1bn), of which £144.3m or 5.7% (2021: £144.0m or 6.7%) is invested within funds managed by the Group and its associate. We plan to continue developing new products and services to better meet our clients' and external investors' needs, using the best of what we have and the best of what other providers can offer as appropriate. This was shown in the year through the launch of the Mattioli Woods Responsible Equity and Property Securities funds which had grown to £62.2m and £7.2m respectively at the year-end.

Market overview

Mattioli Woods operates within the UK's financial services industry, which is subject to the effects of movements in financial markets, economic conditions and regulatory changes. Our markets are highly fragmented and remain competitive, serviced by a wide range of suppliers offering diverse services to both individual and corporate clients. 

The UK retail savings and investment market has demonstrated considerable growth in recent years. It remains dominated by pension schemes but is evolving as a result of societal, economic, regulatory and technological changes. More than a decade of low interest rates and evolving client preferences, including environmental, social and governance ("ESG") and responsible investing considerations, have created challenges for people seeking to generate income while preserving and growing their capital. 

At the same time, the recent pandemic and subsequent events have created an uncertain market backdrop that has heightened awareness of the gap between the current level of UK savings and that which is necessary to provide a reasonable standard of living in adverse circumstances or during retirement. It has also served to highlight the general under-provision in the level of protection policies established to ensure that individuals, their families and their dependents are sheltered from the impact of adverse life events.

Employers continue to withdraw from defined benefit pension schemes, requiring individuals to be self-reliant in planning for their own long-term needs. Individuals who have generated substantial personal and family wealth are increasingly seeking solutions that help them fulfil their personal ambitions. 

We believe these current market dynamics will continue driving demand for the holistic planning and expert advice we provide.

Regulation

The Executive Director of Supervision at the Financial Conduct Authority ("FCA") set out the regulator's priorities and long-term expectations for the wealth management and advice industry in June this year. The focus is on firms' operational and financial resilience, including the preservation of client assets and money, and it expects firms to take reasonable steps to ensure they continue to meet the challenges the pandemic poses to customers and staff, particularly through their business continuity plans. 

This is expected to be expanded by the introduction of a new Principle, the Consumer Duty, whereby "A firm must act to deliver good outcomes for retail customers". These requirements are intended to ensure our clients understand what products and services they are paying for, why these are appropriate for them and that the Company is cognisant of the cost and value of products and services we recommend. All the new requirements accord with our principles of integrity, professionalism and having a client-focused culture.

As regulators focus on protecting consumers, legislation is becoming increasingly stringent and the level of public scrutiny on conduct and cost is increasing, with clients able to view the cost of the services they receive more easily following the introduction of the Markets in Financial Instruments Directive II ("MiFID II"). 

The new Investment Firm Prudential Regime ("IFPR") for UK investment firms authorised under UK MiFID brings significant changes, such that UK investment firms are now subject to liquidity requirements across the board, a new methodology for calculating capital requirements plus new remuneration and disclosure requirements. 

Changes to the tax regime

The Chancellor's March 2021 budget announced a rise in corporation tax for businesses with profits above £250,000 to move to 25% from 2023, with profits between £50,000 and £250,000 taxed on a tapered scale. The current Conservative Party leadership contest has created uncertainty around the future direction of tax rates, but if implemented, we expect the rise in corporation tax will increase the Group's effective tax rate in future years. 

For our clients, there remain many opportunities to manage their tax positions effectively, with any future changes in the tax regime expected to create further demand for our financial planning and advisory services. 

Outlook

Investment markets are likely to remain volatile for some time, although the spectre of rising inflation typically creates an opportunity for further investment inflows as existing and prospective clients consider appropriately investing surplus cash to avoid suffering an erosion in value of savings in real terms. In response to the continued inflationary pressures on costs, as expected the Group intends to maintain a rigorous and proactive approach to the management of costs, abiding by the principles of not spending on anything considered non-essential with examples including the rationalisation of our office footprint, recruiting only where necessary and negotiating all professional costs.

Unsettled times typically create significant advice opportunities for Mattioli Woods given our diverse revenue streams, as people seek to take charge of their financial affairs and protect their own and their families' wealth. We will continue to seek to understand our clients' needs and provide quality solutions, maintaining our focus on client service and continuing to adapt our business model to the changing market, integrating asset management and financial planning to build upon our established reputation for delivering sound advice and consistent investment performance. 

Our services

Our core pension and wealth management offering currently serves a wide demographic cross-section including affluent families and the higher end of the market, including controlling directors and owner-managed businesses, professionals, executives and retirees.

We intend to extend our reach to new client demographics as we develop both our investment and product propositions, including our partnership with the Tiller Group Limited to develop a self-directed investment platform for new and existing clients. The revenue mix of the Group's five operating segments changed as follows during the year, principally driven by the impact of recent acquisitions on total group revenue:

· 46.6% investment and asset management (2021: 53.3%);

· 24.2% private equity asset management (2021: nil);

· 18.2% pension consultancy and administration (2021: 30.1%);

· 5.8% property management (2021: 7.8%); and

· 5.2% employee benefits (2021: 8.8%).

We aim to operate a seamless structure, allowing us to cover all aspects of financial planning, wealth management and employee benefits. Our key objectives are:

· Maintaining long-term relationships and delivering great outcomes for our clients;

· Proactively anticipating our clients' needs to deliver on their expectations;

· Investing in our people and technology to service greater business volumes with increased operational efficiency at a lower cost;

· Sharing knowledge and ideas between ourselves and others for mutual benefit;

· Developing our market standing through the integrity and expertise of our people;

· Extending our range of products and services, seeking to attract new clients both organically and via strategic acquisitions; and

· Being proud of our charitable and community spirit, supporting staff and local and national charities. 

Assets under management, administration and advice

Unlike many wealth managers, almost half the Group's revenues are fee-based, rather than being linked to the value of assets under management, administration or advice[9], giving our business a resilient revenue profile that is less sensitive to market performance.  The acquisitions of Maven, Richings and Ludlow during the year added £2.6bn of client assets, with total client assets of the Group and its associate of £14.9bn at 31 May 2022 (2021: £12.1bn) summarised as follows:

9. Revenue for the year ended 31 May 2022 was split 48% (2021: 54%) fixed, initial or time-based fees and 52% (2021: 46%) ad valorem fees based on the value of assets under management, advice and administration. 

10. Certain pension scheme assets, including clients' own commercial properties, are only subject to a statutory valuation at a benefit crystallisation event. 

11. Value of funds under trusteeship in SIPP and SSAS schemes administered by Mattioli Woods and its subsidiaries. 

12. Assets under management of £1,100.5m (2021: £1,196.0m) excludes £93.6m (2021: £94.9m) of Mattioli Woods' client investment included within SIPP and SSAS, employee benefits and personal wealth and other assets and excludes £14.8m (2021: £17.2m) of crossholdings between the TB Amati Smaller Companies Fund, TB Amati Strategic Metals Fund and the Amati AIM VCT plc.

13. SIPP and SSAS schemes where the Group acts as pension consultant and administrator. SIPP and SSAS schemes administered by SSAS Solutions reclassified as direct during the year. 

Our DPM service and the four multi-asset funds forming the backbone of this continued to perform well under volatile market conditions, with aggregate net inflows of over £341.4m, as shown in the segmental review, into this and the Group's other bespoke investment services during the year. The movement in total client assets is analysed as follows:

· A £172.2m increase (2021: £712.0m) in SIPP and SSAS assets under administration driven by a 0.1% increase (2021: 1.3% rise) in the number of schemes being administered at the year-end, comprising a 2.7% increase (2021: 7.1% rise) in the number of direct[13] schemes to 7,098 (2021: 6,912) and a (4.2% decrease) (2021: 7.2% decrease) in the number of schemes the Group operates on an administration-only basis to 3,986 (2021: 4,159). In recent years, we have been appointed to operate or wind-up several SIPP portfolios following the failure of their previous operators, with the lower number of schemes due in part to the transfer of certain members of these distressed portfolios to more appropriate arrangements;

· A £0.6m increase (2021: £428.0m) in the value of assets held in the corporate pension schemes advised by our employee benefits business. These revenues are not linked to the value of client assets in the way that certain of our wealth management revenue streams are, although market performance and economic uncertainty can impact clients' ability to increase investment in their schemes. Our corporate client portfolio remains well diversified;

· A £1,936.3m increase (2021: £1,005.5m) in personal wealth and other assets under management and advice, with the acquisitions of Ludlow Wealth Management Group Limited and Richings Financial Management Limited in the period contributing £1,861.4m of the increase. The 511 (2021: 422) new personal clients[14] won during the year was partially offset by some natural client attrition, with the addition of acquired clients resulting in a 44.5% increase (2021: 23.3% increase) in the total number of personal clients[15] to 10,506 (2021: 7,270);

· A £95.6m decrease (2021: £677.6m increase) in Amati's funds under management (excluding Mattioli Woods' client investments), primarily due to market falls reducing funds within the TB Amati UK Smaller Companies Fund to £840.3m (2021: £980.9m), partially offset by positive growth in the TB Amati Strategic Metals Fund to £77.6m (2021: £25.1m). The TB Amati Strategic Innovation Fund was launched in May 2022 and had raised £1.1m at the year end with further growth anticipated; and

· £766.9m of assets added as a result of the acquisition of Maven. During the year Maven generated £6.9m of performance fees from successful fund, VCT and investor partner exits, highlighting the quality of its investment proposition and further supporting the acquisition rationale.

14. New personal clients includes from acquired businesses.

15. Includes personal wealth clients with SIPP and SSAS schemes operated by third parties.

Key performance indicators

The Directors consider the key performance indicators ("KPIs") for the Group are as follows:

Alternative performance measures

The Group has identified certain measures that it believes will assist in the understanding of the performance of the business. Recurring revenues, organic revenues, adjusted EBITDA, adjusted profit before tax ("adjusted PBT"), adjusted profit after tax ("adjusted PAT"), adjusted EPS and adjusted cash generated from operations are non-GAAP alternative performance measures, considered by the Board to provide additional insight into business performance compared with reporting the Group's results on a statutory basis only. 

Accounting standards require the contingent consideration payable on certain acquisitions to be recognised as an expense in the income statement rather than as a capital payment. On certain acquisitions, the Board has included employment-related conditions for the payment of contingent consideration to protect shareholder value. While the Board accepts this is the required treatment for its reported results, adjusted measures of the Group's profitability, including adjusted EBITDA, adjusted PBT, adjusted PAT and adjusted EPS, have been amended to add-back items including £3.7m of acquisition-related costs and £9.7m of contingent consideration recognised as remuneration. 

These alternative performance measures may not be directly comparable with other companies' adjusted measures and are not intended to be a substitute for, or superior to, any IFRS measures of performance. However, the Board considers them to be important measures for assessing underlying performance, used widely within the business and by research analysts covering the Company. 

Supporting calculations for alternative performance measures and reconciliations between alternative performance measures and their IFRS equivalents are set out in the Alternative performance measure workings section of the Annual Report. 

Financial performance and future developments

Revenue

Group revenue was up 72.8% to £108.2m (2021: £62.6m), reflecting the contribution of recent acquisitions and 10.0% organic growth (2021: 2.9% reduction), with the increased levels of new business offsetting the impact of negative market movements on the value of client assets.

Revenue grew across all business segments, with growth in investment and asset management revenues driven by aggregate net inflows (before market movements) of £341.4m (2021: £452.9m) into the Group's bespoke investment services. This, together with the addition of private equity management fees following the acquisition of Maven, increased revenues linked to the value of clients' assets to 52% (2021: 46%) of total revenues. 

We continue to focus on delivering great client outcomes and addressing their evolving needs. In addition to increasing client caseloads within our consultancy and administration teams through improved operating efficiency, we are working to streamline and automate our administration processes through initiatives like the adoption of electronic signatures, creating a scalable operating model and making Mattioli Woods easier to do business with. Over time, we anticipate these changes will deliver improved margins and cost savings for both us and our clients.

Employee benefits expense

As in previous years, the major component of the Group's operating costs is our employee benefits expense of £59.6m (2021: £34.1m) representing 55.1% of revenue (2021: 54.5%), with the increase including £20.9m employee benefits expense at businesses acquired during the year, discretionary staff bonuses totalling £6.6m (2021: £3.1m) and deferred consideration presented as remuneration £9.7m (2021: £3.8m).

The Group's total headcount increased to 847 (2021: 663) as at 31 May 2022, with retention of the experienced teams at each of the acquired businesses adding 154 staff. The number of consultants increased to 185 (2021: 139) as we continued to train and recruit new consultants as well as experienced consultants to expand upon our distribution network. 

As previously announced, we continue to invest in building capacity across our IT, administration and compliance teams, with further investment in training across all parts of the Group. 

Other administrative expenses

Other administrative expenses increased to £19.8m (2021: £13.3m), with £3.7m (2021: £2.6m) of costs incurred on the acquisitions completed or aborted during the year. Other overheads, including the regulatory fees and levies incurred by the Group, were broadly in line with the prior year with cost inflation partially offset by cost savings in marketing, travel and premises costs. Management have been monitoring costs closely and plan to mitigate increases where possible.

Share-based payments

Share-based payments costs of £1.7m (2021: £1.5m) represent the cost of options expected to vest under the Company's long-term incentive plans and the cost of matching shares awarded to employees under the Company's Share Incentive Plan.

Net finance costs

The Group has maintained a positive net cash position throughout the year, with increased net finance costs of £0.9m (2021: £0.2m) reflecting credit interest of £0.08m (2021: £0.03m) offset by £0.9m (2021: £0.1m) of non-cash notional finance charges on the unwinding of discounts on long‑term provisions and £0.1m (2021: £0.1m) of interest on the lease liabilities recognised under International Financial Reporting Standards ("IFRS") 16. 

Taxation

The effective rate of taxation on reported profit on ordinary activities was 49.1% (2021: 73.0%), above the standard rate of tax of 19.0% (2021: 19.0%). This is primarily due to significant non-deductible expenses from contingent and transaction specific consideration arrangements accounted for as remuneration and acquisition-related fees. In addition, certain expenses associated with sponsorship and other business development activities were not deductible for tax purposes. 

The net deferred taxation liability carried forward at 31 May 2022 was £26.7m (2021: £8.5m). 

Profitability and earnings per share

Profit before tax was up 56.9% to £8.0m (2021: £5.1m), with adjusted profit before tax up 107.7% to £29.5m (2021: £14.2m). The increased revenues were partially offset by the impact on employee benefits expense of the businesses acquired during the last two years, and increased discretionary staff bonuses, professional fees, insurance and acquisition-related costs. These changes translated into an increase in operating profit before financing of 73.8% to £7.3m (2021: £4.2m) and adjusted EBITDA up 88.4% to £32.6m (2021: £17.3m), with adjusted EBITDA margin of 30.1% (2021: 27.7%). 

The Board considers adjusted EBITDA to be a relevant measure for investors who want to understand the underlying profitability of the Group, adjusting for items that are non-cash or affect comparability between periods as follows:

16. Earnings before interest, taxation, depreciation, amortisation and impairment. 

17. Figures in table may not add due to rounding. 

Adjusted PBT, adjusted PAT and adjusted EPS are additional measures the Board considers to be relevant for investors who want to understand the underlying earnings of the Group, excluding items that are non-cash or affect comparability between periods as follows:

18. Figures in table may not add due to rounding. 

19. Before acquisition-related costs, amortisation and impairment of acquired intangibles, gain on bargain purchase, deferred consideration as remuneration and acquisition-related finance costs.

As explained in Note 17, client portfolios and brands acquired through business combinations are recognised as intangible assets. The amortisation charge for the year of £7.2m (2021: £2.8m) associated with these intangible assets has been excluded from adjusted PAT and adjusted EPS because the Board reviews the performance of the business before these charges, which are non-cash and do not apply evenly to all business units. 

Adjusted EPS[19] was up 17.5% to 48.3p (2021: 41.1p), while basic EPS was up 62.7% to 8.3p (2021: 5.1p), driven by the positive impact of recent acquisitions and organic growth. EPS was also impacted by a higher effective tax rate of 49.1% (2021: 73.0%) and the issue of 489,788 (2021: 340,788) shares under the Company's share plans. During the year, 5,325,705 (2021: 970,409) shares were issued as consideration for acquisitions, with 16,969,697 (2021: nil) shares issued via a placing. Diluted EPS was 8.3p (2021: 5.1p). 

Dividends

The Board is pleased to recommend a final dividend of 17.8p per share (2021: 13.5p). This makes a proposed total dividend for the year of 26.1p (2021: 21.0p) a year-on-year increase of 24.3% (2021: 5.0%), demonstrating our desire to deliver value to shareholders and confidence in the outlook for our business.

The Board remains committed to growing the dividend, while maintaining an appropriate level of dividend cover. If approved, the final dividend will be paid on 3 November 2022 to shareholders on the register at the close of business on 23 September 2022, with an ex-dividend date of 22 September 2022. 

The Company offers its UK, Channel Islands and Isle of Man resident shareholders the option to invest their dividends in a Dividend Reinvestment Plan ("DRIP"). The DRIP is administered by the Company's registrar, Link Group ("Link"), which uses cash dividend payments to which participants in the DRIP are entitled to purchase shares in the market, which means the Company does not need to issue new shares and avoids diluting existing shareholdings.

For the DRIP to apply to the proposed final dividend for the year ended 31 May 2022, shareholders' instructions must be received by Link by close of business on 13 October 2022.

Cash flow

Cash balances at 31 May 2022 totalled £53.9m (2021: £21.9m). Cash generated from operations was £19.6m or 111% of EBITDA (2021: £20.4m or 202%), including an increase in the Group's working capital requirement[20] of £8.9m (2021: £5.2m decrease), comprising:

· A £1.8m increase (2021: £5.0m increase) in trade and other payables, primarily due to:

-  £2.9m increase in accruals and deferred income following an increase in staff and Directors' bonuses accrued for the year ended 31 May 2022, to be paid following the year-end;

-  £0.7m reduction in other payables relating to the payment of a balance of initial consideration payable for acquisitions in 2021; and

-  £0.4m reduction across other balances within trade and other payables.

· A £5.3m increase (2021: £1.0m reduction) in trade and other receivables, primarily due to:

-  £2.7m increase in trade receivables due to significant invoices raised in subsidiaries Custodian Capital and Maven pre-year end;

-  £1.9m increase prepayments and accrued income due delayed invoicing of fund management fees in Custodian Capital; and

-  £0.7m increase in other receivables.

· A £5.4m reduction in provisions during the year (2021: £0.7m decrease), primarily due to:

-  £5.9m reduction in provisions for contingent remuneration following the previous acquisition of SSAS Solutions (UK) Ltd, Hurley Partners Limited and Pole Arnold Financial Management Limited; and

-  £0.5m increase across other provision balances, including increases to provisions for client claims.

Adjusted cash generated from operations[21], which excludes items that are incurred as a result of the Group's acquisition activities, increased by 43.3% to £31.1m (2021: £21.7m), representing 95% of Adjusted EBITDA (2021: 125%).

Outstanding trade receivables increased to 37 days (2021: 30 days), with credit management continuing to be an area of focus, as well as moving from fee invoicing to deduction of income from client's holdings with platform providers where the opportunity arises. Outstanding trade payables increased to 15 days (2021: 14 days).

Net cash outflows from investing activities increased to a £65.3m (2021: £15.7m) with £64.0m (2021: £13.0m) of initial consideration paid on acquisitions completed in the period net of cash acquired. Investing activities also included £1.3m (2021: £2.7m) of other investments, including an increased stake in the Group's technology partner Tiller and the acquisition of the client portfolio of Ferguson Financial Management Limited.

Net cash from financing activities resulted in an £81.0m inflow (2021: £6.2m outflow), with proceeds from the issue of share capital of £109.4m (2021: £0.6m) following the placing of new ordinary shares in June 2021. This inflow was partially offset by the repayment of Ludlow's borrowings post-acquisition of £15.9m (2021: £nil) and dividends paid of £11.0m (2021: £5.7m) driven by the increased number of shares in issue following the placing and the dividend per share paid increasing in line with the Group's progressive dividend policy.

20. Working capital defined as trade and other receivables less trade and other payables.

21. Cash generated from operations before acquisition-related costs paid and contingent remuneration paid.

Regulatory capital

The Group and Company continue to enjoy significant headroom on their regulatory capital and liquidity requirements, with completion of the fundraise in June 2021 allowing the Group to continue pursuing further acquisition opportunities. 

The Group's regulatory capital requirements have increased as a result of further growth and diversification of its activities in recent years. In addition, the Group's capital is reduced when it makes acquisitions due to the requirement for intangible assets arising on consolidation in the Group's accounts, or investments in subsidiaries in the Company's accounts, to be deducted from Common Equity Tier 1 ("CET1") Capital.

In January 2022, following the introduction of the Investment Firm Prudential Regime ("IFPR"), the value of the Group's CET1 Capital was reduced due to the removal of reliefs on deduction of deferred tax assets and significant investments in financial services entities that were available under the previous regime. The Company has obtained approval from the FCA for the application of the Group Capital Test, which allows investment firms relief from some of the prudential consolidation requirements. This is a more straightforward capital treatment where the parent simply needs to hold enough regulatory capital to support its capital investment in its subsidiaries. 

Segmental review

Investment and asset management

The Group's gross discretionary assets, including the multi-asset funds that sit at the heart of our DPM service, Custodian REIT, the Mattioli Woods Property Securities and Responsible Equity funds, the funds managed by Maven and the Group's associate company, Amati, totalled £5.1bn (2021: £4.1bn) at the year-end including £341.4 net inflows, with movements during the year as follows:

Crossholdings comprises holdings in DPM[24], in Amati funds[25]and in other non-DPM crossholdings

22. Mattioli Woods Property Securities Fund.

23. Mattioli Woods Responsible Equities Fund.

24. Comprises £13.5m (2021: £26.6m) in Custodian REIT, £ nil (2021: £44.0m) in MW SPF, £60.5m (2021: nil) in MW PSF and £70.3m (2021: £73.3m) in Amati funds. 

25. Crossholdings between Multi-Asset Fund ("MAF"): TB Amati Smaller Companies Fund and the Amati AIM VCT plc £16.4m (2021: £17.2m) and non-MAF cross holdings £8.9m (2021: nil).

Investment and asset management revenues generated from the Group's investment services, which include advising clients on both pension and personal investments, our DPM service and management of multi-asset and other specialist funds, increased 51% to £50.5m (2021: £33.4m). Fees for services provided by the Group's subsidiary Custodian Capital to Custodian REIT are included in the 'Property management' segment, with fees generated by the Group's subsidiary Maven included in the 'Private equity asset management' segment. 

Income from both initial and ongoing portfolio management charges increased to £26.4m (2021: £23.1m), with £482.8m (2021: £204.2m) of inflows into our DPM service during the year. 

Annual management charges on the Mattioli Woods Structured Products Fund ("MTW SPF") and individual structured plans were £0.4m (2021: £1.1m), with the reduction in revenues due to the wind-down of the MTW SPF during the year partially offset by the release of four individual plans in the year totalling £9.3m.

Adviser charges based on gross assets under advice of £3.5bn (2021: £2.6bn) increased to £20.9m (2021: £9.0m), driven by the revenue contribution from acquisitions in the year with gross assets under advice of £1.8bn.

While growth in total assets under management and advice continues to enhance the quality of earnings through an increase in recurring revenues, the proportion of the Group's total revenues which are recurring reduced to 86.5% (2021: 92.7%) due to the exceptional performance of Maven in generating non-recurring, but repeatable income of £8.9m, including £6.9m of performance and exit fees from VCT and investor partner transactions. As with other wealth and asset management firms, these income streams are linked to the value of funds under management and advice, and are therefore affected by the performance of financial markets, with the negative impact of market movements on the value of client assets more than offset by the impact of acquisitions and positive net inflows during the year.

Pension consultancy and administration

Pension consultancy and administration revenues were up 4.8% to £19.7m (2021: £18.8m), with a total of 11,084 (2021: 11,071) SIPP and SSAS schemes administered by the Group, following a 2.7% increase in the number of advised pensions being offset by an expected (4.2%) reduction in the number of schemes operated on an administration-only basis. Client activity returned to close to pre-pandemic levels, supporting the growth in revenue.

Direct[26] pension consultancy and administration fees increased 7.3% to £16.1m (2021: £15.0m). Retirement planning remains central to many of our clients' wealth management strategies and the number of direct schemes increased to 7,098 (2021: 6,912), with 448 new schemes gained in the year (2021: 408). Our focus remains on the quality of new business, with the value of a new scheme averaging £0.3m (2021: £0.3m). We continue to enjoy strong client retention, with a slight decrease in the external loss rate[27] to 2.1% (2021: 2.3%) and the overall attrition rate[28] remaining at 3.4% (2021: 3.4%).

The number of SSAS and SIPP schemes the Group operates on an administration-only basis fell to 3,986 (2021: 4,159) at the year-end. In prior years the Group has been appointed to administer a number of SIPPs following the previous operators' failure. Work continues in connection with schemes previously administered by Stadia Trustees Limited, HD Administrators, Pilgrim Trustees Services Limited and The Freedom SIPP Limited, with a 4.8% fall in scheme numbers reducing third party administration fees to £3.6m (2021: £3.8m). 

The Group's banking revenue was £0.05m (2021: £0.05m) with the Bank of England's base rate at a historic low of 0.1% for the first half of the year, before rising to 1.0% by 31 May 2022. The Group's banking revenue is currently expected to be negligible going forward but is an opportunity for future growth subject to structural changes in our banking arrangements for clients.

Segment margin reduced to 20.5% (2021: 30.8%), primarily due to new revenue share arrangements for our consultancy team to ensure we remain competitive in the market.  

We anticipate continued regulatory scrutiny of the pension market, with some other SIPP and SSAS operators in the spotlight due to issues arising with DB transfers and esoteric or non-standard investments. However, the market opportunity remains strong, with SIPP and SSAS arrangements favoured as a way of allowing individuals to have greater access, control, flexibility and responsibility over their pension savings. SIPPs are increasingly the pension vehicle of choice for the mass affluent and we take great pride in seeing our clients withdrawing funds to enjoy in their retirement. 

Due to the broader market shift away from accumulation and steady savings, we anticipate there will be some natural outflows from our clients' SIPP and SSAS schemes, particularly as the 'baby boom' generation reaches retirement. However, we expect any such decumulation to have a positive impact on the Group's results, with our multi-generational approach, linking our strength in the provision of advice around the cascading of wealth down through the generations, inheritance tax and other planning. 

26. SIPP and SSAS schemes where Mattioli Woods acts as pension consultant and administrator.

27. Direct schemes lost to an alternative provider as a percentage of average scheme numbers during the year. 

28. Direct schemes lost as a result of death, annuity purchase, external transfer or cancellation as a percentage of average scheme numbers during the year.

Private equity asset management

Revenue in the year totalled £26.2m or 24% of Group revenue, with Maven's results recognised from 1 July 2021. Recurring revenues of £17.6m were supplemented by £8.5m of non-recurring, but repeatable revenues primarily generated from fund, VCT and investor partner performance and exit fees in the period, highlighting the quality of Maven's investment team and further supporting the acquisition rationale.

Maven's trading for the year was ahead of our expectations, partly driven by delivery of some revenue and cost synergies. A few months after completion of the Maven acquisition, the Group completed its first co-investment between qualifying Mattioli Woods and Maven clients, which was oversubscribed. The Group has a pipeline of further co-investment opportunities to launch in the coming year, which will enable both the Maven team to access the significant distribution network of Mattioli Woods, and Mattioli Woods clients access to the range of investment opportunities offered by Maven.

Property management

Property management revenues were £6.3m (2021: £4.9m), with Custodian Capital having assets under management and administration of £618.1m (2021: £516.9m) at 31 May 2022. The increase in assets under management was driven by significant commercial property valuation increases, particularly in the industrial and logistics and retail warehouse sectors, which have been the key target sectors for Custodian REIT since IPO. Custodian REIT also issued £19.1m new shares during the period to acquire DRUM Income Plus REIT plc at a 28% discount to its net asset value, demonstrating Custodian Capital's ability to deliver successful corporate consolidation within its peer group. 

Recurring annual management charges represented 98.5% (2021: 97.9%) of property management revenues, the majority of which are derived from Custodian Capital's services to Custodian REIT.

In addition, Custodian Capital continues to facilitate direct property ownership on behalf of pension schemes and private clients and manages our Private Investors Club alternative investments, which have been provided to suitable clients by way of private investor syndicates. Following the onset of the pandemic we temporarily paused the launch of new private investor syndicates due to market and economic uncertainty at that time. We are in the process of merging the Private Investors Club into Maven, and although no new syndicates completed during the current or prior financial year, since the year-end £4.5m has been raised for a new investment and a number of new opportunities are in the pipeline, which will be marketed to suitable clients.

Employee benefits

Employee benefits revenues were £5.7m (2021: £5.5m), with positive market conditions driven in part by the post-pandemic recovery. New client wins were up, alongside increased uptake of strategic benefit consultancy projects from existing clients. This was supported by strong client retention throughout the year and accretion in premiums for risk and healthcare cover.

Employers are increasingly encouraging staff wellbeing and retirement savings as part of remuneration packages and we believe greater emphasis will be placed on these as adoption of flexible working practices become more commonplace. This focus on employee benefits and retention of key staff will provide opportunities for growth over the coming years.

Acquisitions

We have developed considerable expertise and a strong track record in the execution and subsequent integration of acquisitions. At the year-end, we had invested over £238m since our admission to AIM in 2005, bringing 32 businesses or client portfolios into the Group.

All businesses acquired during the year, and in the prior year, are integrating well and continue to trade ahead of our expectations at the date of acquisition. All acquisitions have contributed positively to the Group's trading results, increasing earnings and enhancing value and in doing so supporting the acquisition rationale.

We plan to build on our track record of successful acquisitions by continuing to assess and progress opportunities that meet our strict criteria. Consolidation within wealth management, asset management and SIPP administration is expected to continue for the foreseeable future, with many more opportunities coming to market.

Relationships

The Group's performance and shareholder value are influenced by other stakeholders, principally our clients, suppliers, employees, regulators, the Government and our strategic partners. Our approach to all these parties is founded on the principle of open and honest dialogue, based on a mutual understanding of needs and objectives. 

Relationships with our clients are managed on an individual basis through our client relationship managers and consultants. Employees have performance development reviews and employee forums also provide a communication route between employees and management. Mattioli Woods also participates in trade associations and industry groups, which give us access to client and supplier groups and decision-makers in the Government and other regulatory bodies. Mattioli Woods is a member of the Association of Member-directed Pension Schemes and the Quoted Companies Alliance. 

Resources

The Group aims to safeguard the assets that give it competitive advantage, including its reputation for quality and proactive advice, its technical competency and its people. 

Our core values provide a framework for integrity, leading to responsible and ethical business practices. Structures for accountability from our consultancy and administration teams through to senior management and the Group's Board are clearly defined. The proper operation of the supporting processes and controls are regularly reviewed by the Audit Committee and the Risk and Compliance Committee and take into account ethical considerations, including procedures for 'whistle-blowing'. 

Our people

I sincerely thank and remain humbled by the continued professionalism, commitment, endeavour and agility that our people have shown in managing our clients' affairs throughout another challenging year. 

As our business continues to evolve and grow, the Board recognises the importance of good communication and will seek to ensure the strong client-centric behaviours embedded within the business are preserved. The benefit of changes made to our governance structure in the prior year are now being realised. 

David Kiddie has been appointed Independent Non-Executive Chair and brings many years of both international senior executive and investment management experiences that will benefit the Group. Outside of board meetings, Non-Executive Directors have held a number of meetings with employees and shareholders to share experiences more directly. 

Total headcount at 31 May 2022 had increased to 847 (2021: 663), primarily as a result of recent acquisitions and recruitment. We remain committed to developing our people, including the professional development and training of our pension consultants, and maintaining capacity to deliver further growth. We continue to enjoy a strong team spirit and facilitate employee equity ownership through the Mattioli Woods plc Share Incentive Plan ("the Plan") and other share schemes. At the end of the year, 65% of eligible staff had invested in the Plan (2021: 63%) and we continue to encourage broader staff participation. 

The Mattioli Woods Employee Benefit Trust ("the Trust") holds shares for the benefit of the Group's employees and, in particular, to satisfy the vesting of awards made under the Company's various share schemes. The market purchase of shares by the Trust can help to avoid dilution of shareholders by reducing the need for the Company to issue new shares. 

Forward-looking statements

The strategic report is prepared for the members of Mattioli Woods and should not be relied upon by any other party for any other purpose. Where the report contains forward-looking statements these are made by the Directors in good faith based on the information available to them at the time of their approval of this report. Consequently, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risks underlying such forward-looking statements and information. The Group undertakes no obligation to update these forward-looking statements. 

Principal risks and uncertainties

The Board is ultimately responsible for risk management and regularly considers the most significant and emerging threats to the Group's strategy, as well as establishing and maintaining the Group's systems of internal control and risk management and reviewing the effectiveness of those systems. The Board and senior management are actively involved in a regular risk assessment process as part of our risk management framework, supported by the new requirements of the Investment Firm Prudential Regime ("IFPR") internal capital and risk assessment ("ICARA") process. The ICARA assesses the principal risks facing the Group. Stress tests include consideration of the impact of a number of severe but plausible events that could impact the business. The ICARA also takes account of the availability and likely effectiveness of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks. 

Day-to-day, our risk assessment process considers both the impact and likelihood of risk events that could materialise and affect the delivery of the Group's strategic goals. Risk owners regularly review and update where needed the controls in place to mitigate the impact of the risks, with independent review and challenge given by the Risk Management Team. Throughout the Group, all employees have a responsibility for managing risk and adhering to our control framework. 

There are a number of potential risks that could hinder the implementation of the Group's strategy and have a material impact on its long‑term performance. These arise from internal or external events, acts or omissions that could pose a threat to the Group. The principal risks identified as having a potential material impact on the Group are detailed below, together with the principal means of mitigation. The risk factors mentioned do not purport to be exhaustive as there may be additional risks that materialise over time that the Group has not yet identified or deemed to have a potentially material adverse effect on the business: 

Emerging risks, including legislative, regulatory change and biothreats emerging from the COVID-19 pandemic, have the potential to impact the Group and its strategy.  The Board, Audit Committee and Risk and Compliance Committee continue to monitor emerging risks and threats to the financial services sector including, for example, the increased number of attempted cyber and attempted phishing attacks, regulatory change, climate change and scenarios potentially arising from political and economic developments, including implications from ongoing world conflicts, and change in political leadership. We intend to continue to focus on operational resilience and enhancing the control environment over the next 12 months. 

Section 172 statement

The Directors consider that in conducting the business of the Company over the course of the year they have complied with Section 172 (1) of the Companies Act 2006 ("the Act") by fulfilling their duty to promote the success of the Company and act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole.

Engaging with stakeholders

The continued success of our business is dependent on the support of all of our stakeholders. Building positive relationships with stakeholders that share our values is important to us and working together towards shared goals assists us in delivering long-term sustainable success. 

To fulfil their duties, the senior management team, the Directors of each subsidiary company and the Directors of the Group itself take care to have regard to the likely consequences on all stakeholders of the decisions and actions they take, with a long-term view in mind and with the highest standards of conduct, in line with Group policies. Where possible, decisions are carefully discussed with affected groups and are therefore fully understood and supported when taken. 

Reports are regularly made to the Board by the senior management team about the strategy, performance and key decisions taken, which provides assurance that proper consideration is given to stakeholder interests in decision-making, and the Board uses this information to assess the impact of decisions on each stakeholder group as part of its own decision-making process. 

The Group's governance structure allows the Board and the senior management team to have due regard to the impact of decisions on the following matters specified in Section 172 (1) of the Act:

Methods used by the Board

The main methods used by the Directors to perform their duties include:

· Board strategy days to review all aspects of the Group's business model and strategy and assess the long-term sustainable success of the Group and its impact on key stakeholders. An executive team strategy day was held during the year, with a Board strategy day and a number of other strategy days and sessions planned to take place in the current year;

· The Board meets regularly throughout the year as well as on an ad hoc basis, as required by time critical business needs, such as acquisitions. Board members regularly meet with members of the senior management team;

· The Board is responsible for the Company's ESG activities set out in the Strategic report. Iain McKenzie is appointed as the designated executive with responsibility for ESG;

· The Board's risk management procedures set out in the Corporate governance report identify the potential consequences of decisions in the short, medium and long-term so that mitigation plans can be put in place to prevent, reduce or eliminate risks to the Company and wider stakeholders;

· The Board sets the Company's purpose, values and strategy, detailed in the 'Our approach' and 'Strategy' sections of the Strategic report, and the senior management team ensures they align with its culture;

· The Board carries out direct shareholder engagement via the AGM and Directors attend shareholder meetings on an ad hoc basis;

· External assurance is received through internal and external audits and reports from brokers and advisers; and

· Specific training for existing Directors and induction for new Directors is as set out in the Corporate governance report.

Principal decisions in the year

Mattioli Woods comprises a number of operating segments, through which the Executive team engages with each segments' unique stakeholders as well as other businesses in the Group. The governance framework in place during the year delegated day-to-day operational authority to the Management Engagement Committee, subject to a list of matters reserved for decision by the Governance Committee or the full Board only, up to defined levels of cost and impact. 

The Board has a formal schedule of matters specifically reserved to it for decision, including strategic planning, 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.

The principal non-routine decisions taken by the Board during the year were:

· Final approval of the equity fundraise for £112m to fund the acquisitions of Maven, Ludlow and a pipeline of bolt-on acquisitions including the subsequent acquisitions of Richings Financial Management and Ferguson Financial Management. The Board considered the strategic rationale for each acquisition, the associated risks and the performance impact on the Group. Acquisitions during the year are further detailed in Note 3 to the financial statements;

· The review and decision not to progress with a number of other potential acquisitions during the year;

· The appointment of Moore Kingston Smith LLP ("MKS") as Group auditor for the financial year ended 31 May 2022. The Board had oversight of a detailed tender process undertaken by the Company's Audit Committee. The Board based its decision upon the development of the Group's core business and positive impact of recent acquisitions, which have changed the Group's audit needs, with the primary focus on finding an audit firm that shares the Group's commercial and client-focused culture whilst retaining their independence in accordance with relevant ethical requirements;

· Approval to wind-down the Mattioli Woods Structured Products Fund based upon a review of client outcomes through performance of the fund compared to the benchmark index and cost of investment. The Board focused on ensuring all clients were treated with respect and equally during the wind-down, with alternative investment options offered to clients; 

· Each year the Board conducts a review of its effectiveness and as part of this review approved changes to the Group's governance and management structure, including changes to committee structures and memberships. The Board believes that the revised structure will provide the appropriate knowledge, oversight and commercial challenge to support further growth, integration of acquired businesses and improvements in operational efficiency; 

· The appointment of David Kiddie as independent Non-Executive Chair. The Board considered the balance of skills and leadership required for this role based on the respective roles and experience of each board member and the on-going requirements of the business; and

· Determination of dividend. The Board recommends a final dividend of 17.8p per share (2021: 13.5p). This decision was taken in conjunction with a review of returns to all key stakeholders, including staff in the form of salary awards and bonus payments.

Due to the nature of these decisions, a variety of stakeholders had to be considered as part of the Board's discussions. Each decision was announced at the time, so that all stakeholders were aware of the decisions. 

Stakeholders

The Directors are aware there are a number of other stakeholders, in addition to shareholders, who will be affected by the actions of the Group. The below table outlines how we consider these stakeholders and how we engage with them:

Further information on the ways in which the Board engages with stakeholders is set out in the Corporate governance report and the Strategic report. 

Environmental performance and strategy

Due to the Group's activities, Mattioli Woods impacts the local and global environment, and it is committed to monitoring the environmental performance of its assets and using this information to develop robust strategies to minimise its environmental impact where possible. The Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 implement the Government's policy on Streamlined Energy and Carbon Reporting, requiring disclosure of the environmental performance of the Group's assets through calculating the Group's greenhouse gas ("GHG") emissions and subsequently, setting strategies to minimise these emissions. The following information summarises the Group's environmental performance over the year. 

Methodology

GHG emissions are quantified and reported according to the Greenhouse Gas Protocol. Consumption data has been collated and converted into CO2 equivalent ("CO2e") using the UK Government 2021 Conversion Factors for Company Reporting to calculate emissions from corresponding activity data. To collect consumption data, the Group has reviewed utility invoicing and its staff expense software to track business mileage in Group-owned vehicles and own vehicles. 

This information has been prepared in accordance with the GHG Protocol's Scope 2 Guidance on both location-based and market-based Scope 2 emissions figures. Data collected relates to the most recent 12 month period where data was available. 

We have calculated energy intensity and emissions intensity using total floor area which is considered to best represent the scale of the business compared to using alternative measure such as headcount, as the majority of energy usage is from buildings, with the impact of the COVID-19 pandemic reducing the level of fuel consumption by Group vehicles in the short-term. 

As part of the data collection, a materiality assessment was applied to determine which indicators were relevant to the Group. We have assessed each indicator in terms of its impact on the Group and its perceived importance to stakeholders. 

Sustainability is a key priority for Mattioli Woods and we are working towards putting in place an environmental vision and strategy, including the development and implementation of key performance indicators and long-term targets for Scope 1 and 2 emissions. No electricity or gas consumption is currently directly from renewables. This strategy will also involve setting a plan of building and car fleet optimisation opportunities. 

Reporting boundaries and limitations

The GHG sources that constitute our operational boundary for the reporting period are:

· Scope 1: Natural gas combustion within boilers, gas oil combustion within generators and road fuel combustion within owned vehicles. 

· Scope 2: Purchased electricity consumption for our own use. 

· Scope 3: Water consumption and fuel consumption from employee-owned cars for business use. 

Fuel connected with employee train travel for business use has been excluded as amounts are likely to be immaterial and we consider it impractical to make estimations as only the cost of travel is recorded in the Group's expense records. Fugitive gases from office air conditioning are also considered immaterial. 

Assumptions and estimations

In some instances data is missing, including:

· Electricity costs for Mattioli Woods' Leatherhead and Edinburgh offices and Maven's Birmingham, Bristol, London, Nottingham, Newcastle, Edinburgh and Durham offices (which in aggregate represent circa 6.4% of the Group's total floor area), which are included in rent and service charges; and

· Gas and water costs for Mattioli Woods' Leatherhead, Manchester and Enderby offices, Ludlow's Liverpool, Southport and Preston offices and Maven's Glasgow, Birmingham, Bristol, London, Manchester, Nottingham, Newcastle, Edinburgh and Durham offices (which in aggregate represent circa 21.2% of the Group's total floor area), which are included in rent and service charge payable.

In such cases, estimations have been applied to fill the gaps, calculated through data from other similar offices as a proxy. 

Performance

The table below shows absolute performance of our Scope 1, 2 and 3 emissions for the year, which represents the Group's third year of reporting under the Companies (Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018:

Corporate social responsibility

Our commitment to operating responsibly

As we emerge from the pandemic, we continue to work through the challenges placed in part by the ongoing level of market uncertainty. Our dedicated team has allowed us to rise to these challenges and continue making a positive contribution to our stakeholders - our clients, shareholders, staff, suppliers and chosen charity partners alike. We believe this is responsible business in action. In 2022, our Risk and Compliance Committee reviewed where the Group currently stands and have developed a strategy defining how we will prioritise and accelerate environmental, social and governance workstreams in the business.

Our approach to achieving good governance comes from a passion to ensure we do the right things for our clients and this is embedded in the culture of the Mattioli Woods team, where staff are encouraged to thrive and develop in their roles and the business in turn supports them in their own career development. Our record of growing our own and promoting from within adds to the sense of teamship which underpins everything we do, a prime example being the Board appointment of Michael Wright at the beginning of the year, who joined the business as a graduate in 2004. 

Sustainability

The Group has continued to grow and we recognise that we have a responsibility to support our profitable expansion by operating in a sustainable manner. As we continue to manage the impacts of, and learn from, the recent COVID-19 pandemic, we have demonstrated we can deliver great client outcomes in different ways, with the majority of our staff working flexibly for most of the year. This will inform our thinking as to how we can deliver strong and sustainable shareholder returns, including investing in new technology to facilitate sustainable growth over the longer term. We consider our ability to address ESG risks for the business and consider how these could affect our stakeholders as important to our future success and a subject that we are focused on addressing.

Our environmental footprint has grown through the acquisitions completed in the last two years. We plan to consolidate our footprint as integration of acquired businesses continues, ensuring that wherever possible we minimise any negative impacts in this area. The modern design and construction methods used in our Leicester office means we are harnessing the latest technology to support our environmental aims and, while this is a major contributor in itself, we recognise that smaller changes to how we do things can make incremental contributions on our journey to net zero. These include reducing the amount of paper we use through the adoption of technology, including an on-line portal to deliver client valuations, supporting our move to a paperless environment. In addition, our consultancy team is making increasing use of hybrid and efficient fuel technology in the vehicles they use. 

The Mattioli Woods Responsible Equities Fund was launched this year and continues to perform well, we are continuing to explore how we can offer our clients access to additional bespoke "ESG responsible" investment propositions. 

Charities and communities

Making a difference within our local communities matters to us and we continue to have a high level of engagement in this area. Each year, we sponsor businesses, sports and community awards. Our business has benefited greatly from winning numerous awards and we feel it is right to help other businesses reap the rewards of such accolades. In addition, we sponsor a variety of local clubs, business and sports related events across the country. 

In 2019, we launched a national partnership with Alzheimer's Research UK, a charity focused on boosting research, improving treatments and raising awareness about dementia. Like many charities, the impact of the COVID-19 pandemic on Alzheimer's Research UK was significant and some of the activities we had planned to support had to be put on hold.

We believe dementia is one of the biggest problems facing health services today and one that is impacting the lives of many of our employees and clients. We will continue to explore ways of engaging employees, clients and partners to raise money for Alzheimer's Research UK and other charities where and when we can. 

We actively engaged both during and post-pandemic and our successful agreement with the charity came to an end at the end of the financial year.

To continue our strong charitable connections, we recently announced that the British Heart Foundation will be our national charity partner for the new financial year, a charity that embodies the values and culture of the Group and who we plan to support nationally.

Every year, the Group's associate company Amati has a commitment to donate 10% of its profits to good causes. We want to further that tradition and this year asked our staff to suggest good causes they felt deserving of a donation. This meant we could contribute to numerous other charities throughout the UK that are local to where our staff live, which has helped to further enhance our impact on the communities where we live, with total charitable donations by the Group and its employees (through payroll giving) totalling £0.2m (2021: £0.2m) for the year. 

We have also been able to offer work experience placements and summer internships to provide individuals with experience in financial services, some of which have resulted in permanent employment.

We recognise that our tax contributions also play an important role for the communities in which we operate, with the Group's total tax contribution summarised as follows:

Developing our people

The Group continues to create opportunities for new recruits and we operate a trainee consultant programme for aspiring advisers. We have continued to operate our 26-week plan to foster small groups of trainee advisers in a classroom setting, two days a week and have successfully delivered these remotely. Each week is themed, including topics such as tax, pensions and investments, and aims to get trainees who have been with the Company for 18 months and have completed their level 4 qualification to the point where they are able to develop financial plans. 

Trainees work alongside consultants in administrative roles and attend consultant-led client meetings. The scheme will continue to be rolled out for new groups of employees who demonstrate the potential to move into consultant roles at the firm. Mattioli Woods' graduate and apprenticeship schemes have been running for a number of years and, together with the trainee consultant programme, highlighting the firm's motivation to 'grow our own', and we plan to increase the number of applicants accepted by the Group as we encourage new talent to begin and develop their careers with us. 

The Group also operates graduate and apprenticeship schemes in other teams including Finance, HR and Marketing, where on the job learning is supported by study toward an externally recognised qualification.

Equal Opportunities Employer including diversity and inclusion

We are committed to promoting equality of opportunity for all employees and job applicants. We aim to create a working environment in which all individuals are able to make best use of their skills, free from discrimination or harassment, and in which all decisions are based on merit.

At Mattioli Woods, we wish to ensure that our employees can achieve their potential and therefore we encourage promotions and to progress from within. We aim to ensure that no job applicant suffers discrimination because of any of the protected characteristics. Our recruitment procedures are reviewed regularly to ensure that individuals are treated on the basis of their relevant merits and abilities. Job selection criteria are regularly reviewed to ensure that they are relevant to the job and are not disproportionate.

We are an equal opportunities employer and understand that talent is not directed by ethnicity, race, gender / gender identity, sexual orientation, religion, age, disability, pregnancy, maternity, background or social class.

Our vision is to have a respectful and supportive workplace that enables us to attract and retain a diverse and inclusive workforce that represents our clients and the communities across the country. We believe we can achieve this by attracting, retaining and developing a talented workforce, and recruiting candidates who believe in our vision and culture.

The principles of non-discrimination and equality of opportunity also apply to the way in which employees treat clients, customers, suppliers, shareholders and all other stakeholders.

Modern slavery

Mattioli Woods welcomed the introduction of the Modern Slavery Act 2015 and recognises it has a responsibility to take a robust approach and commitment to preventing modern slavery and human trafficking in all its activities, and in our supply chains.

To enable us to assess whether a particular activity is at high risk of facilitating modern slavery or human trafficking:

· Mattioli Woods holds a register of all its operations, regularly reviewing this in the context of its supply chain and business operations; and

· There are no high-risk activities identified which relate to modern slavery or human trafficking. The Group operates in the UK in financial services and does not source products or services from higher risk regions.

To understand and respond to potential modern slavery and human trafficking risks, our employees are given training while our suppliers are also made aware of our expectations. A copy of our Modern Slavery and Human Trafficking Statement can be found on our website. 

We also review our salaries on an annual basis to ensure our employees are not paid below the national minimum wage. We are an established partner with Living Wage Foundation, priding ourselves on ensuring that all our employees are paid above the national minimum wage. We provide a package of benefits to all employees, including pension auto-enrolment, income protection and health care irrespective of the employee's role in the Group.

In September 2021, all employees' benefits were reviewed with some of the benefits being enhanced. In addition, there is an annual salary review which can result in the grant of a pay award, as well as a discretionary bonus.

Anti-bribery policy

We value our reputation for ethical behaviour and upholding the utmost integrity and we comply with the FCA's clients' best interests rule. We understand that in addition to the criminality of bribery and corruption, any such crime would also have an adverse effect on our reputation and integrity. 

Mattioli Woods has a zero tolerance approach to bribery and corruption and we ensure all of our employees and suppliers are adequately trained as to limit our exposure to bribery by:

· Setting out clear anti-bribery and corruption policies;

· Providing mandatory training to all employees;

· Encouraging our employees to be vigilant and report any suspected cases of bribery in accordance with the specified procedures; and

· Escalating and investigating instances of suspected bribery and assisting the police or other appropriate authorities in their investigations.

Gender pay reporting

The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 requires all employers with 250 or more employees in the UK to publish details of their gender pay gap. Its aim is to achieve greater transparency about gender pay difference. The analysis is based on data as at 5 April of each year and shows the differences in the average pay between men and women. We will issue a further Gender Pay Gap report in April 2023.

Approval

The Strategic Report contains certain forward-looking statements, which are made by the Directors in good faith based on the information available to them at the time of their approval of this Annual Report. Statements contained within the Strategic Report should be treated with some caution due to the inherent uncertainties (including but not limited to those arising from economic, regulatory and business risk factors) underlying any such forward-looking statements. The Strategic Report has been prepared by Mattioli Woods to provide information to its shareholders and should not be relied upon for any other purpose. 

The above disclosures from financial highlights to this point constitute the strategic report, which has been approved by the Board of Directors and signed on its behalf by:

Ian Mattioli MBE

Chief Executive Officer

12 September 2022

Governance overview

The Board is committed to achieving high standards of corporate governance, integrity and business ethics. We recognise the need to ensure an effective governance framework is in place to give all our stakeholders confidence that the business is effectively run, ensuring good outcomes for our clients and looking after the interests of the Group's shareholders and other stakeholders. 

Board structure

The Board has established a sub-committee structure comprising Risk and Compliance, Audit, Remuneration and Nomination Committees. During the financial year ended 31 May 2022 the Group undertook an internal review of the effectiveness of the Board, its sub-committees and the senior management framework. We created a new executive team forum designed to improve execution of strategy, corporate governance and risk management frameworks as determined by the Board, as well as bringing together a senior executive team with responsibility for operational oversight of all key areas in the Group, illustrated as follows:

The executive and senior management team is structured by a primary Executive Committee, which is supported by a structured number of commercial and operational committees across the Group. 

The Group's investment and asset management business is managed through the Investment and Asset Management Committee, which ensures risk and investment controls are applied consistently throughout the Group, across all our various products and services. 

Each operating subsidiary is managed by its own board, which reports to the relevant commercial and operational committee, with clear line of sight to the Executive Committee. We believe this is the optimal management structure to secure continued growth. 

Corporate governance code

The Board has adopted the Quoted Companies Alliance ("QCA") revised corporate governance code ("QCA Code"), which requires the Group to apply 10 principles focused on the pursuit of medium to long-term value for shareholders and also to publish certain related disclosures. 

Corporate governance principles applicable to the Group

The 10 QCA Code corporate governance principles, which apply to the Group, are:

1. Establish a strategy and business model which promotes long-term value for shareholders. 

2. Seek to understand and meet shareholder needs and expectations. 

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success. 

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation. 

5. Maintain the Board as a well-functioning, balanced team led by the Chair. 

6. Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities. 

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement. 

8. Promote a corporate culture that is based on ethical values and behaviours. 

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board. 

10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders. 

Application of the QCA Code and required disclosures

The QCA Code requires us to apply the principles set out above and to publish certain related disclosures in our Annual Report, on our website, or a combination of the two. We have followed the QCA Code's recommendations and have provided disclosure relating to all principles in a corporate governance statement on our website and summarise our compliance with the following principles in this Annual Report. 

Strategy and business model - QCA Principle One

The Group's strategy and business model is described in our Strategic Report. 

Effective risk management - QCA Principle Four

The Group embeds risk management throughout the organisation and this is described in our Corporate Governance Report. 

Board balance and skills - QCA Principles Five and Six

The Board, led by the Chair, has the necessary skills and knowledge to discharge their duties and responsibilities effectively, setting clear expectations and ensuring stringent measures for corporate governance standards are met, particularly in relation to executive remuneration, risk, compliance and audit. The Executive and Non-Executive Directors' skill sets are complementary, and together provide a blend of broad commercial, operational, investment, legal, and financial expertise. The skill set is suitably broad and sufficiently high calibre such that all decision making at Board level is robust and mindful of the fiduciary responsibilities that need to be discharged to all shareholders. 

In addition, the Directors are aware of the importance of keeping abreast of the industry's current activities and industry conferences, webinars and events throughout the year to keep their skills, contacts and knowledge current and simultaneously engage with the regulator, other operators and service providers to the financial services industry. 

Board effectiveness - QCA Principle Seven

The Board began the process to undertake a self-evaluation during the financial year ending 31 May 2022 which is expected to complete in the year ending 31 May 2023 and annually thereafter. The criteria against which the Board collectively and individually will be assessed includes Board composition, roles and responsibilities, meetings and administration, Board committees, Board discussions, Board relationships and stewardships, monitoring and evaluation, strategy and internal control. 

The aim of the Board evaluation is to review the effectiveness of the Board's performance and assess its strengths as well as areas for development. The Board has considered the Company's approach to succession planning and will work with the Nomination Committee on the Board evaluation process. The Executive Management Team and, at a more junior level, senior departmental managers address progression of employees through annual appraisals and competency reviews. The Group's structured 'Financial Assess' training programme further assists key managers with training and learning opportunities. 

Ethical culture - QCA Principle Eight

The Group's client centric and ethical culture are discussed in the Chair's statement and also in the Chief Executive's review, and the business model is described in our Strategic Report. 

Governance and communication with stakeholders - QCA Principle Ten

The governance structures and committees utilised across the Group are discussed in the Corporate Governance report. Details of interactions with stakeholders are shown in the Section 172 report. In addition, the Directors' Remuneration report is shown below.

Board of Directors

The PLC Board was strengthened in the previous year to ensure that we continue to have a balanced and diverse board, with plans to further enhance these being developed. Following the conclusion of an independently led recruitment process, David Kiddie was appointed as Independent Non-Executive Chair in March 2022, bringing significant asset management and investment oversight expertise and international senior executive experience.

The Board currently comprises four executive Directors and four independent Non-Executive Directors, including the Chair. The Company has a balanced Board, which we believe represents the right governance structure for the business having been independent for several years with majority Independent Non-Executive Directors. The current Board includes a Senior Independent Director in addition to the other Non-Executive Directors.

The Nominations Committee leads on the succession plan for all Board members including recruitment as seen in the appointment of the new independent Non-Executive Chair.

A short biography of each Director is set out below. 

David Kiddie - Independent Non-Executive Chair

Appointed to the Board: 2021

Tenure at Mattioli Woods: 2 years

Brings to the Board:

· Significant experience and expertise in asset management and investment oversight

· Strategic planning and leadership

· Focus on governance, oversight and regulatory environment

Previous roles:

· Chief Executive UK and Head of Institutional Business, BNP Paribas Investment Partners

· Chief Investment Officer, AMP Capital Investors, ABN AMRO Asset Management and Rothschild Asset Management

· Head of Equities, Baring Asset Management

· Group Executive, Perpetual Investments (Australia)

Accreditations:

· BA Hons Economics, University of Kent

External appointments:

· Non-Executive Director of Marlborough Investment Management Ltd

· Non-Executive Director of Trade Union Fund Managers Limited and Trade Union Financial Management Services Limited

· Executive Director of David Kiddie Investment Solutions Limited

Ian Mattioli MBE - Chief Executive Officer

Co-founded Mattioli Woods in 1991

Tenure at Mattioli Woods: 31 years

Brings to the Board:

· 35+ years' experience in financial services, wealth management and property businesses

· Co-founded Mattioli Woods, with Bob Woods, in 1991

· Vision and strategy

· Development of investment proposition

· Founder of Custodian REIT plc

Accreditations:

· Awarded an MBE for services to business and the community in 2017

· LSE AIM Entrepreneur of the Year Award, 2008

· CEO of the Year Award, City of London Wealth Management Awards, 2018

· Awarded Honorary Degree (Doctorate of Laws), University of Leicester, 2022

· Appointed High Sheriff of Leicestershire for 2021-22

External appointments:

· Non-Executive Chair of K3 Capital Group plc

· Non-independent Director of Custodian REIT plc

Ravi Tara - Chief Financial Officer

Appointed to the Board: 2021

Tenure at Mattioli Woods: 3 years

Brings to the Board:

· Strategic planning and value creation

· Financial management and oversight of operations

· Investor relations management

· Operational efficiency and improvement

· Mergers and acquisitions and integration experience

· Inspiring leadership and development of teams

· Change management

Previous roles:

· Capita plc

· Weetabix Food Company

· JP Morgan

· Barclays Capital

· PwC

Accreditations:

· Chartered Accountant

· Fellow of the Institute of Chartered Accountants in England and Wales ("ICAEW")

· A member of the ICAEW's Corporate Finance Faculty

Michael Wright - Group Managing Director

Appointed to the Board: 2021

Tenure at Mattioli Woods: 18 years

Brings to the Board:

· Over 17 years' experience in financial services

· Experienced adviser, assisting controlling directors, owner-managers and affluent individuals

· Inspiring leadership and operational management

· Acquisition and integration expertise

· Change and efficiency management

Accreditations:

· Diploma in Financial Planning

· LLB Law Degree, University of Leicester

External appointments:

· Vice-President of Gresley Male Voice Choir

Iain McKenzie - Chief Operating Officer

Appointed to the Board: 2021

Tenure at Mattioli Woods: 4 years

Brings to the Board:

· People and change management

· Operational and process efficiency

· Understanding of business functions and risk management

· Strategic planning and project management

· Data analysis and performance metrics

· Organisational and leadership abilities

Previous roles:

· Business consultancy

· Senior management

Accreditations:

· BA Design Management, De Montfort University, Leicester.

External appointments:

· Director of Leicestershire Business Voice

Anne Gunther - Senior Independent Director and Chair of Audit Committee

Appointed to the Board: 2016

Tenure at Mattioli Woods: 6 years

Brings to the Board:

· 40+ years' experience in retail financial services

· Wide executive experience from lending to wealth management

· FTSE 100 IPO experience

· Mergers and acquisitions experience

Previous roles:

· Managing Director - Direct, Lloyds TSB

· Chief Executive, Standard Life Bank

· Chief Executive, Standard Life Healthcare

· Member of group executive, Standard Life

· Founding Director, Standard Life Wealth

· Chair, Warwick Business School

Accreditations:

· Honorary doctorate, Edinburgh University

· Chartered Banker

· MBA, Warwick Business School

· BSc Hons Physics, Nottingham University

External appointments:

· Non-Executive Director of Water Plus Group Limited (a jointly owned subsidiary of United Utilities plc and Severn Trent plc)

· Non-Executive Director of West Brom Building Society

Edward Knapp - Non-Executive Director and Chair of Risk Committee

Appointed to the Board: 2021

Tenure at Mattioli Woods: 2 years

Brings to the Board:

· Significant commercial and strategic insight and transformation expertise

· Digital, technology and IT development within financial services

· Risk and compliance oversight and control

· Asset management and advisory expertise

Previous roles:

· Managing Director and Global Head of Business Management, Technology, HSBC

· Chief Operating Officer and Global Head of Business Management, Risk, Barclays

· Senior Adviser, McKinsey & Company

Accreditations:

· BA Mathematics, Balliol College, University of Oxford

External appointments:

· Non-Executive Director of F&C Investment Trust Plc

· Senior Adviser to Board of Perenna FinTech and previously Revolut

· Director of Asia House

Martin Reason - Non-Executive Director and Chair of Remuneration Committee

Appointed to the Board: 2021

Tenure at Mattioli Woods: 2 years

Brings to the Board:

· Development of strategic plan focussing on client outcomes and marketing 

· Risk management and controls 

· Process design and operational efficiency

· Remuneration and people strategies

Previous roles:

· Chief Executive Officer, Melton Mowbray Building Society

· Managing Director, Merrill Lynch HSBC

· HSBC/Midland Bank

· Managing Director, Pakawaste Group

Accreditations:

· High performance leadership diploma, Cranfield School of Management

· BSc Hons Banking and Finance

External appointments:

· Chair of Sitigrid Ltd

Time commitments of Board members

The Group embraces the benefits that are brought by a Board from a range of business backgrounds and who are actively involved in other businesses. The Board also recognises its members must be able to dedicate sufficient time to the Company. The Board has considered the time commitments of each Director and is comfortable that each has sufficient available capacity to carry out the required duties for Mattioli Woods:

· David Kiddie's time commitment from his other Directorships averages four working days per month;

· Ian Mattioli's time commitment from his roles as Non-Executive Chair of K3 Capital Group plc and Non-Executive Director of Custodian REIT plc average two and one and a half working days per month respectively; 

· Michael Wright's time commitment from other Directorships averages one day per quarter;

· Iain McKenzie's time commitment from other Directorships averages two days per month;

· Anne Gunther's time commitment from her other Directorships averages four and a half working days per month;

· Edward Knapp's time commitment from his other Directorships averages four working days per month; and

· Martin Reason's time commitments from his other Directorship averages four days per month respectively.

Corporate governance report

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, 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. As part of our ongoing focus on corporate governance the Board reserved matters and committee terms of reference were reviewed and updated during the year, in light of the focus on stakeholder engagement and linking a company's purpose and values to its strategy. 

Other matters are delegated to the Executive Management team, supported by policies for reporting to the Board. The Company maintains appropriate insurance cover in respect of legal action against the Company's Directors, but no cover exists in the event that a Director is found to have acted fraudulently or dishonestly. 

The agenda and relevant briefing papers are distributed by the Company Secretary on a timely basis, usually a week in advance of each Board meeting. 

The roles of Chair and Chief Executive are distinct, as set out in writing and agreed by the Board. The Chair is responsible for the effectiveness of the Board, directing strategy and ensuring communication with shareholders. The Chief Executive is responsible for overseeing the delivery of this strategy and the day-to-day management of the Group by the Executive Management team. The Board is committed to developing the corporate governance and management structures of the Group to ensure they continue to meet the changing needs of the business. 

The Non-Executive Directors are considered by the Board to be independent of management and free from any relationship which might materially interfere with the exercise of independent judgement. The Board does not consider the Non-Executive Directors' shareholdings to impinge on their independence. The Non-Executive Directors provide a strong independent element to the Board and bring experience at a senior level of business operations and strategy. Anne Gunther is the Senior Independent Director.

All Directors have access to the Company Secretary, who is responsible for ensuring that Board procedures and applicable rules and regulations are observed. Any Director, on appointment and throughout their service, is entitled to receive any training they consider necessary to fulfil their responsibilities effectively including training on quoted company requirements from the Nominated Adviser, Canaccord Genuity Limited. 

The Board meets regularly throughout the year as well as on an ad hoc basis, as required by time critical business needs, and is the principal forum for directing the business of the Group. 

Board committees

The Board has delegated authority to four committees. The Chair of each committee provides a report of any meeting of that committee at the next Board meeting. The Chair of each committee is present at the AGM to answer questions from shareholders. 

Risk and Compliance Committee

The Risk and Compliance Committee comprises Edward Knapp (Chair), Anne Gunther, David Kiddie, Martin Reason and Joanne Lake up to the point of her stepping down from the Board in April 2022. Committee meetings are normally attended by George Houston (Group Compliance Officer) as Compliance Oversight Function, the Chief Executive, Group Managing Director, Chief Operating Officer, and by representatives of the external and internal auditors by way of invitation. In addition, senior managers and representatives from the internal audit, risk and compliance functions attend committee meetings as necessary. 

The Risk and Compliance Committee is principally responsible for monitoring identified risks and the effectiveness of mitigating action, keeping risk assessment processes under review, reviewing the impact of key regulatory changes on the Group, assessing material breaches of risk limits and regulations as well as reviewing client complaints. 

Risk management framework

The Group's risk management framework is designed to ensure risks are identified, managed and reported effectively. The Group has invested in its risk management framework to meet the requirements of key regulatory changes and the risk management framework remains subject to ongoing review. 

We continue to apply a 'three lines of defence' model to support our risk management framework, with responsibility and accountability for risk management summarised as follows:

· First line: Senior management and operational business units are responsible for managing risks, by developing and maintaining effective internal controls to mitigate risk. First-line systems and controls are employed to ensure business activities are conducted in compliance with internal policies and procedures. First-line supervision teams carry out monitoring of business activities on a day-to-day basis. 

· Second line: The risk, compliance and anti-money laundering functions maintain a level of independence from the first line. They are responsible for providing oversight and challenge of the first line's day-to-day management, monitoring and reporting of risks to both senior management and governing bodies.

· Third line: The internal audit function is responsible for providing independent assurance to both senior management and governing bodies as to the effectiveness of the group's governance, risk management and internal controls.

Output from first, second and third-line monitoring is reported to the managers and management information is reported to the Executive Risk and Compliance Committee and the Risk and Compliance Committee. 

Risk appetite

Risk appetite is defined as both the amount and type of risk the Group is prepared to accept or retain in pursuit of our strategy. Our appetite is subject to regular review to ensure it remains aligned to our strategic goals. At least annually, the Board, Executive Risk and Compliance Committee and the Risk and Compliance Committee will formally review and approve the Group's risk appetite statement and assess whether the firm has operated in accordance with the stated risk appetite measures during the year. 

Notwithstanding its continued expectations for business growth, the Board retains a relatively low overall appetite for risk, ensuring that our internal controls mitigate risk to appropriate levels. 

Risk assessment process

Identified risks are tracked in a department-level risk register and used as the basis for a consolidated risk register that provides the Risk and Compliance Committee with an overview of the key risks across the organisation. The Board and senior management are actively involved in a continuous risk assessment process as part of our risk management framework, supported by the new annual ICARA process which assesses the principal risks facing the Group.

Stress tests include consideration of the impact of a number of severe but plausible events that could impact the business. The work also takes account of the availability and likely effectiveness of mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks. 

The Group's risk assessment process considers both the impact and likelihood of risk events which could materialise, affecting the delivery of strategic goals and annual business plans. A top-down and bottom-up approach ensures that our assessment of key risks is challenged and reviewed on a regular basis throughout the year, with the Board and its committees receiving regular reports and information from senior management, operational business units and the risk oversight functions.

Activities during the year

The committee met six times during the year, with the committee's activities during the year including:

· Review and challenge of the key components of the Group's risk management framework;

· Review and challenge of the Group's treating customers fairly ("TCF") and conduct risk policies and outcomes;

· Review and challenge of the Group's vulnerable client processes;

· Review and challenge of the Group's product governance processes;

· Review of recommendation of the Group's risk appetite statement including key risk indicators and tolerance for key risks to the Board and review of the risk register;

· Review and challenge of the ICAAP, exploring scenarios and stress tests to determine an appropriate regulatory capital requirement prior to recommendation to the Board;

· Review of the Group's training and competence regime;

· Oversight of the implementation of Markets in financial instruments directive 2 ("MiFID II");

· Approval of the Compliance monitoring plan for the year including implementation of identified actions for improvement; and

· Approval of the Compliance manual.

Audit Committee

The Audit Committee comprises Anne Gunther (Chair), Edward Knapp, Martin Reason and Joanne Lake until her stepping down from the Board in April 2022. Anne Gunther is a Chartered Banker and the Board is satisfied that all members of the committee have recent and relevant financial experience. The Board believes the committee is independent, with all members being Non-Executive Directors. 

The key responsibilities of the Audit Committee are:

· To review the reporting of financial and other information to the shareholders of the Company and to monitor the integrity of the financial statements;

· To review the Group's accounting procedures and provide oversight of significant judgement areas;

· To review the firm's internal controls and effectiveness of the internal audit function;

· To review the effectiveness of the external audit process and the independence and objectivity of the external auditors;

· To review audit fees and proposals for future years; and

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

Committee meetings are normally attended by the Chief Executive, Chief Financial Officer, Head of Financial Reporting, Chief Operating Officer, Group Compliance Officer and by representatives of the external and internal auditors by way of invitation. The presence of other senior executives from the Group may be requested. The committee meets with representatives of the internal and external auditors, without management present, at least once a year. 

Activities during the year

The committee met five times during the year, where it considered the significant financial and audit issues, the judgements made in connection with the financial statements and reviewed the narrative within the Annual Report and the Interim Report. 

During the year the Audit Committee continued to monitor the operation of the internal audit function which has been outsourced to RSM Risk Assurance Services LLP since December 2018. In light of an ever-changing regulatory environment, outsourcing gives the Group access to greater skills externally, while having the ability to shrink or expand our internal audit activities to meet the ongoing demands of the business and in response to the impact of the uncertainty created by the pandemic. 

The committee also considered the tender and subsequent appointment of, and fees payable to, the external auditors and discussed with them the scope of the interim review and annual audit for the Group and subsidiaries of the Group. 

Specific audit issues the committee discussed included:

· Oversight and approval of the process to change external auditor as delegated from the Board. This included leading the tender process through to assessment of the various audit proposals and selection of the preferred auditor;

· Assessment of whether each entity and the Group as a whole are going concerns, including whether forecast performance would result in an adequate level of headroom over the Group's available cash facilities;

· Review of the whether any impairment needed to be recognised in respect of the intangible assets of the Group, including the assumptions underlying the calculation of the value in use of the cash generating units tested for impairment;

· Management's approach to estimating the recoverability of WIP, including the recovery rate applied and the length of historical data used to calculate that recovery rate;

· Provisions recognised in respect of contingent consideration payable on past business combinations and management's key assumptions and estimates applied in reaching these recognition and measurement decisions; and

· Review and approval of the internal audit plan.

Significant judgements and estimates

Significant critical accounting judgements and key estimates in connection with the Group's financial statements for the year ended 31 May 2022 and other matters considered by the committee included:

External auditor

An analysis of fees payable to the external audit firms in respect of audit and non-audit services during the year is set out in Note 7 to the financial statements. The Company is satisfied the external auditor is independent in the discharge of their audit responsibilities, following diligence conducted as part of the appointment process. 

Internal audit

The internal audit function is responsible for providing assurance over the design and operational effectiveness of the internal controls related to the Group's key activities. Our internal audit activity is based around a strategic, risk-based approach to cyclical internal audit with consideration of the Group's key strategic priorities and risks. This approach is designed to provide assurance over key areas including; governance, risk management and control. During the year the internal audit function engaged in a number of activities, including:

· Developing our internal audit plan based on an analysis of the Group's corporate objectives, risk profile and assurance framework, as well as other factors such as emerging issues in our sector;

· Delivering audits providing assurance over the Group's governance arrangements, financial crime and whistleblowing activities, complaints, HR and training activities, wealth management services, cyber risk, investment services as well as client communications, costs and charges;

· The internal audit team has also continued to provide assurance activities in respect of the CREIT and going forward, the 2022/23 plan extends to coverage of Maven activity; and

· Looking ahead, the internal audit function has developed a forward-looking plan to provide the Group with assurance over key areas of regulatory focus into 2022/23 including; the Investment Firms Prudential Regime (IFPR), vulnerable clients, operational resilience and product governance and pricing. The Plan is complemented with additional reviews on core business areas e.g. client invoicing, integration management and conflicts of interest as well as work due under a cyclical approach; regulatory reporting.

As the third line of defence, the internal audit function (together with the external auditors in connection with their audit of the financial statements) continues to build risk awareness within the organisation by challenging the first and second lines of defence to continue developing and enhancing the internal control framework. 

Remuneration Committee

The Remuneration Committee comprises Martin Reason (Chair), David Kiddie, Anne Gunther and Joanne Lake until her stepping down from the Board. The committee meets not less than twice a year. It 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 also administers the operation of the share option and share incentive schemes established by the Company. 

The members of the Remuneration Committee have no personal interest in the outcome of their decisions and seek to serve the interests of shareholders to ensure the continuing success of the Company. The remuneration of the Non-Executive Directors is determined by the Board itself. No Director is permitted to participate in decisions concerning their own remuneration. 

The committee met four times during the year with key items considered including:

· Review and approval of the Group's remuneration policy;

· Annual review of Executive Directors' and other senior managers' base salaries and bonus arrangements including specific approvals for changes or payments made during the year;

· Awards to be granted under the share option and incentive schemes established by the Company;

· Trends and benchmarking of executive pay in the wider market; and

· Appointment of external advisers to provide analysis relating to the company's remuneration compliance requirements.

The Committee continues to review the Group's long-term incentive plans to ensure it can continue to attract, retain and incentivise appropriately qualified staff to achieve its goals. 

Nomination Committee

The Nomination Committee comprises David Kiddie (Chair), Anne Gunther, Edward Knapp, Ian Mattioli and Joanne Lake until her stepping down from the Board. The 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 close consultation with the Executive Directors and met four times during the year, with the main items being considered including Board structure including proposed changes to Chair role and committee composition, review of key matters including Board and management succession planning, talent management and development and leadership development, undertaking a board evaluation during the year and considering engagement of an external service provider for the 2022 board evaluation.

Meetings and attendance

All Directors are encouraged to attend all Board meetings and meetings of Committees of which they are members. Directors' attendance at meetings during the year (including the AGM) was as follows:

29. David Kiddie appointed as Independent Non-executive Chair on 14 March 2022

30. Joanne Lake stepped down from Board on 8 April 2022.

Other committees

These committees form part of the Corporate Governance framework but are not sub-committees of the Board. The main committees comprise the Governance Committee, the Management Engagement Committee, the Investment Committee and the Executive Risk and Compliance Committee. 

Governance Committee

The Board strongly believes that robust governance and strong, responsible, balanced leadership by the Board are critical to creating long-term shareholder value and business success. The committee's role is to assist the Board in shaping the strategy, culture and ethical values of the Group, while supporting the Management Engagement Committee in the day-to-day management of Mattioli Woods and its subsidiaries. 

The key responsibilities of the committee are to:

· Take a leadership role in shaping the corporate governance principles, culture and ethical values of the Group in line with the Group's strategic priorities;

· Oversee the brand and reputation of the Group, ensuring that reputational risk is consistent with the risk appetite approved by the Board and the creation of long-term shareholder value;

· Develop strategy and growth initiatives, such as possible acquisitions and new products and services;

· Implement the agreed strategy and support the day-to-day management of the Group by the Management Engagement Committee;

· Review and discuss the annual business plan and budget prior to its submission to the Board for approval;

· Oversee the Group's compliance with its statutory and regulatory obligations, including conduct of the firm and TCF; and

· Oversee the Group's conduct in relation to its corporate and societal obligations, including setting the guidance, direction and policies for the Group's TCF, corporate responsibility agenda and related activities and advising the Board and management on these matters.

The Governance Committee is Chaired by the Chief Executive and comprises functional heads from the appropriate disciplines. Committee meetings are normally attended by the Group Managing Director, Chief Financial Officer, Chief Operating Officer and by other senior executives from the Group as requested. 

Management Engagement Committee

The Board has delegated its day-to-day operational authority to the Management Engagement Committee, subject to a list of matters that are reserved for decision by the Governance Committee or the full Board only. The Management Engagement Committee is primarily responsible for:

· Managing and monitoring all aspects of the Group's business on a continuing basis;

· Implementing the business strategy and business plans agreed by the Board from time to time;

· Ensuring that day-to-day operations are conducted in accordance with the relevant regulatory and statutory requirements;

· Monitoring the management and performance of the Group's business units and operating subsidiaries (including their results compared to budget, risks and regulatory compliance); and

· Reviewing employee talent management and development programmes, ensuring they consider the benefits of diversity, including gender, social and ethnic backgrounds, cognitive ability and personal strengths. 

The Management Engagement Committee meets at least monthly but more frequently if required. The committee is Chaired by the Executive Directors on behalf of the Chief Executive and committee meetings may be attended by any number of a broad range of senior managers from across the Group, depending on the meeting agenda. 

Investment Committee

The Board has delegated authority to the Investment Committee to oversee the Group's investment management approach, developing the 'house view' on economics, investment markets and asset allocation; and considering how the Group should best apply these views. 

In particular, the Investment Committee is responsible for developing and implementing the Group's asset management strategy, for developing and monitoring all aspects of the Group's investment business on a continuing basis, receiving reports from the board of Custodian Capital, the Multi-Asset Team (including the Asset Allocation Committee) and from the Managers of the Group's single strategy Funds including Individual Structured Products. The Committee is also responsible for ensuring that the Group's day-to-day investment and asset management operations are conducted in accordance with the relevant regulatory and statutory requirements through the investment management, investment research and investment operations teams. 

The Investment Committee meets at least six times a year but more frequently if required. The Committee is Chaired by the Chief Investment Officer and comprises senior members of the investment, wealth management, technical and compliance functions.

Executive Risk and Compliance Committee

The Board has delegated authority to the Executive Risk and Compliance Committee to oversee the operation of the Group's risk and compliance framework and activity. The Executive Risk and Compliance Committee is responsible for ensuring that risk, compliance and internal audit are considered, reviewed and actions implemented across all areas of the Group including wealth management advice, asset management, pension administration and employee benefits. The committee is also responsible for ensuring that risks are fully considered in context of the Group's ICARA and the impact on the Group's capital requirements. 

The Operational Risk and Compliance Committee meets at least four times a year but more frequently if required. The committee is Chaired by the Compliance Oversight Function and comprises senior members of the Group's management and risk and compliance function. 

Induction, training and performance evaluation

New Directors receive an induction on their appointment covering the activities of the Group, its key business and financial risks, the terms of reference of the Board and its committees and the latest financial information.

The Chair ensures Directors update their skills, knowledge and familiarity with the Group as required to fulfil their roles on the Board and its committees. Ongoing training is provided as necessary and includes updates from the Company Secretary and Nominated Adviser on changes to the AIM Rules, requirements under the Companies Acts and other regulatory matters. All Directors have access to independent professional advice at the Company's expense where they judge it necessary to discharge their duties, with requests for such advice being authorised by the Chair or two other Directors, one of whom is a Non-Executive. 

Evaluation of the Board's performance

During the year ended 31 May 2022 an internal review of the Board's effectiveness was undertaken and led by the senior independent Director. This involved one-to-one interviews with Directors and a review of Board and Board committee papers and minutes. The key points raised in the review were around board composition and succession planning. 

The Board plans to undertake a self-evaluation during the financial year ended 31 May 2023, which will be led and facilitated by an external third party provider. 

Individual appraisal of each Director's performance is undertaken either by the Chief Executive Officer or Chair each year and involves meetings with each Director on a one-to-one basis. The Non-Executive Directors Chair carries out an appraisal of the performance of the Chief Executive Officer, with the Senior Independent Director conducting the same exercise for the Chair.

Retirement and re-election

All Directors are subject to election by shareholders after their appointment and to re-election thereafter at intervals of no more than three years under the Company's articles of association. However, as a matter of good practice and as recommended under the QCA Corporate Governance Code, board policy is for all Directors to stand for re-election at each AGM. 

Non-Executive Directors' appointments are initially for 12 months and continue thereafter until terminated by either party giving six months' prior written notice to expire at any time on or after the initial 12-month period. The terms and conditions of appointment of the Non-Executive Directors are available for inspection at the Company's registered office during normal business hours and prior to the AGM. 

Communications with shareholders

The Board is committed to maintaining an ongoing dialogue with the Company's shareholders. The principal methods of communication with private investors remain the Annual Report and financial statements, the Interim Report, the AGM and the Group's website (www.mattioliwoods.com). 

It is intended that all Directors will attend each AGM and shareholders will be given the opportunity to ask questions at the AGM on 28 October 2022. In addition, the Chair, Chief Executive Officer, Chief Financial Officer and Group Managing Director welcome dialogue with individual institutional and retail shareholders to understand their views and feed these back to the Board. General presentations are also given to analysts and investors covering the annual and interim results as well as additional presentations dependent upon the circumstances and include for acquisition activity, investment in the Group or for fund-raising. 

Internal control and risk management

The Board is ultimately responsible for the Group's systems of internal control and for reviewing its effectiveness. Such systems are designed to manage rather than eliminate risks and can only provide reasonable not absolute assurance against material misstatement or loss.

In accordance with the guidance of the Turnbull Committee on internal control, an ongoing process has been established for identifying, evaluating and managing significant risks faced by the Group. This process has been in place throughout the year under review and up to the date of approval of the Annual Report and financial statements.

The Board routinely reviews the effectiveness of the systems of internal control and risk management to ensure controls react to changes in the nature of the Group's operations.

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 transactions, acquisitions, material expenditure and capital expenditure within the Group. 

On behalf of the Board

Ravi Tara

Chief Financial Officer

12 September 2022

Directors' remuneration report

Remuneration policy

Mattioli Woods recognises the importance of its employees to the success of the Group and consequently the remuneration policy is designed to be market competitive to attract, motivate and retain high-calibre individuals. The main focus of the Group's remuneration policy is to align the interests of the Executive Directors with the Group's strategic priorities and the long-term creation of shareholder value.

The Remuneration Committee reviews the regulatory and legislative framework with the aim of ensuring that the remuneration policy is in line with best practice, including the FCA codes of practice ("the FCA Codes") which set out the standards and policies that regulated firms are required to meet when setting pay and bonus awards for staff.  External data is used to validate rather than to benchmark the total rewards granted and the Remuneration Committee takes into consideration the current economic climate, remuneration policies of comparable businesses and pay and employment conditions elsewhere in the Group when considering Executive Directors' and other senior managers' pay. 

The remuneration arrangements are designed to:

· Promote value creation;

· Support the business strategy;

· Promote the long-term success of the Group;

· Deliver a competitive level of pay for the Executive Directors and senior management;

· Encourage the retention of staff through deferred variable compensation, where appropriate;

· Ensure greater alignment between the interests of the Executive Directors and the long-term interests of shareholders through significant long-term equity participation;

· Be fair for both the Director and the Group, with some element of discretion;

· Comply with financial services rules and regulations;

· Discourage excessive risk taking and short-termism;

· Encourage more effective risk management; and

· Support positive behaviours and a strong and appropriate conduct culture. 

The Group's policy is to remunerate Executive Directors and senior management through basic salary and benefits, annual performance-related discretionary bonuses and participation in long-term incentive plans which promote the creation of sustainable shareholder value. The total reward is designed to include a balance of fixed and variable pay with an element of deferral attached to a proportion of the variable pay element. 

Fees for the Non-Executive Directors are determined by the Board and are reviewed annually, having regard to fees paid to Non-Executive Directors in other UK quoted companies, the time commitment and responsibilities of the role. Non-Executive Directors do not receive bonuses or share entitlements, although they are able to purchase shares in the Group. No Director is permitted to participate in decisions concerning their own remuneration. 

The effective date for annual changes in Directors' remuneration is 1 September, in line with the Group's other employees, unless otherwise agreed by the Remuneration Committee.

Shareholders will be asked to approve the Directors' Remuneration Report, including the remuneration policy which applies to the Directors and employees of the Group, at the Company's next AGM on 28 October 2022. 

Single total figure of remuneration for each Director (audited)

Directors' remuneration payable in respect of the years ended 31 May 2022 and 2021 was as follows: