s.172 CA 2006 Statement SECTION 172(1) STATEMENT The directors provide the following statement pursuant to the Companies Act 2006 (as amended by Companies (Miscellaneous Reporting) Regulations 2018) (the “Act”) to describe how they have acted in accordance with their duty under s.172 of the Act to promote the success of the company for the benefit of its members as a whole, and in so doing, how they have had regard to those factors set out in 172 (1) (a) to (f) of the Act during the financial year. Section 172 requires a director to have regard to the following matters, among others, when discharging their duty: the likely consequences of any decision in the long term the interests of the Company’s employees the need to foster the Company’s business relationships with suppliers, customers and others the impact of the Company’s operations on the community and the environment the desirability of the Company maintaining a reputation for high standards of business conduct; and the need to act fairly between members of the Company. The Board is collectively responsible for managing the affairs of the Company to achieve its long-term prosperity by making important decisions, monitoring the underlying performance of the Company as well as being a means for establishing ethical standards. Understanding the interest of key stakeholders is an important part of the Company’s strategy and helps inform the directors’ decision making throughout the year. Board meetings are held as required where the directors will consider the Company’s principal activities and make decisions. Meetings are scheduled to provide adequate time for consideration and discussion by the directors of the interests of stakeholders, and for the directors to seek further information from management, as required. As a part of those meetings, the directors receive information in a range of different formats to assist them in discharging their responsibilities under Section 172 when making relevant decisions. This information may include, among other things, reports and presentations on financial and operational performance, business updates, budget planning and forecasts, HR matters, as well as specific areas of engagement, such as employee opinion surveys. When making decisions, the Board seeks to understand the impact on each of its stakeholders, including the likely consequences of a decision in the long term, whilst acknowledging that a decision will not necessarily be favourable for all stakeholders, as there may be competing interests between them. The Company is part of the wider Close Brothers Group (the “Group”), and as such it follows a range of group-wide policies in place to protect employees and provide a safe working environment, to ensure compliance with all regulatory requirements and adherence to the highest professional and ethical standards in dealing with customers, suppliers and colleagues, as well as ensuring that it continues to be cognisant of its social and environmental responsibilities. In doing so, and by balancing the interests of the Company’s stakeholders when making decisions, the Board seeks to maintain a reputation for high standards of business conduct. Further information on these group-wide policies can be found in the annual report and financial statements of the Company’s ultimate holding company, Close Brothers Group plc. The directors seek to engage directly with stakeholders wherever possible on certain issues, though the size of the Group means that stakeholder engagement often takes place at an operational or Group level. This approach creates greater efficiency and facilitates a greater positive impact on environmental, social and other issues than may be possible at an individual company level, as well as ensuring consistency of approach across the Group. Where engagement has taken place at operational level, the outcome of that engagement has been brought to the Board for its consideration where relevant throughout the year. During the financial year, engagement with stakeholders has been modified in response to the Covid-19 regulations and Government guidance and has taken place virtually where appropriate. Additional details on engagement at Group level with stakeholders, including employees, suppliers, customers, the community and environment can be found in the Strategic Report section of the Annual Report and Financial Statements of Close Brothers Group plc. The table and case studies below set out further examples of the ways in which the Board has engaged directly and indirectly with stakeholders during the financial year, as well as detailing how the directors have had regard to employee interests and the need to foster the Company’s business relationships with suppliers, customers and others, and the effect of that regard, including on principal decisions taken throughout the year, as well as matters set out in Section 172 (1)(a)-(f) when discharging their duties under Section 172. OUR STAKEHOLDERS OUR STAKEHOLDERS AND WHY WE FOCUS ON THEM STAKEHOLDER’S KEY PRIORITIES HOW WE ENGAGE WITH THEM KEY ENGAGEMENT DURING THE YEAR Colleagues Close Brothers has over 3,700 employees around the UK, Ireland, the Channel Islands and Germany. We want a diverse and motivated workforce so that they can contribute to deliver the highest level of service to our customers, clients and partners. Engagement with employees helps to attract, build and retain a high calibre talent pool and ensure that our employees remain enthusiastic about their work and Close Brothers A safe working environment A fair, supportive, diverse and inclusive culture where employee feedback is valued Ensuring appropriate rewards for their contributions A commitment to invest in training and development Engagement with our colleagues takes place daily through line managers, with senior management regularly speaking at Town Halls and other business-wide forums. Regular employee opinion surveys are undertaken and closely monitored, management frequently hold employment engagement activities to provide updates on business performance and gather real time feedback, which is listened to and acted upon. Training and mentoring programmes are in place to support the development of all employees. As lockdown restrictions have changed and government guidance on returning to workplaces has evolved, communication with employees has been key. Throughout the year, our focus has been on employee wellbeing and morale, ensuring our employees feel supported and engaged, both at a team and business level, as well as understanding our position in relation to returning to work. Customers, Clients and Partners The needs of our customers, clients and partners are at the heart of our business and are core to our purpose of helping the people and businesses of Britain thrive over the long term. Our long-term success depends on the strength of our relationships with customers, clients and partners. As such, central to all decision-making is understanding how our actions can help them and their businesses thrive. A customer-led proposition Strong personal relationships and specialist expert knowledge Consistent customer service in all market condition High service levels and flexible solutions Regular reporting and discussion of matters and updates relating to customers, clients and partners Ongoing measuring and monitoring of customer experience against key customer principles and conduct risk framework Analysis of feedback via customer forums Visits to and meetings with clients, customers and partners Monitoring and analysis of complaints and activity to ensure we treat customers fairly and deliver on our promises Consideration of policies and participation in training in relation to the identification of vulnerable customers and the fair treatment of customers Specific consideration of issues for customers, clients and partners arising from the Covid-19 pandemic, including information in relation to customer forbearance Maintaining close contact with our customers, clients and partners throughout the year has been paramount as we continued to support those who have found themselves in difficulty through forbearance and other Covid-19 concessions. We regularly discussed our customers’ positions with them to ensure we were best supporting their needs as they evolved. Employees The Board recognises the importance of the contribution made by our employees, who deliver the highest levels of service for our customers and clients Engagement with employees helps to build a deep and diverse talent pool, attract and retain talent and ensure that employees remain enthusiastic about their work and their organisation Regularly listening to employees’ feedback ensures they feel valued with their views recognised and acted upon. A customer-led culture A fair and open working culture A supportive culture where employee feedback is valued, and their views are recognised and acted upon Appropriately rewarded for their contributions A commitment to invest in training and development Review and analysis of annual all-employee opinion survey results, and consideration of follow-up action plans Review and analysis of additional all-employee opinion surveys during the Coronavirus-pandemic, including on well-being and return to workplace planning Quarterly review of culture dashboard by local Risk and Compliance Committee, including consideration of employee and conduct metrics Participation by directors and management in regular employee engagement activities, including town halls and Q&A sessions Updates from management on various metrics and feedback tools in relation to employees Regular communications to employees on the performance and operation of the business Regular updates and engagement on matters relating to Covid-19, including operational implications of the lockdown / return to the workplace Implementation of comprehensive whistle- blowing procedures and encouragement to employees to report relevant matters Oversight of and participation in training, development and mentoring programmes for employees Encouragement to participate in Group-wide Save as You Earn and Buy as You Earn schemes to encourage employee ownership in the wider Group Engagement with employees via Group-wide diversity & inclusion initiatives and working groups We maintained a high level of engagement during the year with our Employees. We had multiple Opinion surveys to get feedback and input from our employees and various tasks and plans. Regular communications to employees on the performance and operation of the business and government updates relating to Covid-19. Suppliers Our business is supported by a large number of suppliers, enabling us to provide high standards of service to our customers, clients and partners. Engagement with our suppliers enables the business to develop and maintain long-term and sustainable relationships. This engagement also helps enable our suppliers to better understand and align to our key policies and procedures and operate responsibly. Appropriate and clear payment procedures Strong and sustainable relationships with Close Brothers Workable operating requirements Engagement with key suppliers during the Covid- 19 pandemic Review and consideration of material contracts with suppliers and ongoing supplier relationship management established processes for the management of supply chain risks and issues, with escalation to the Board and management as appropriate We maintained a high level of engagement during the year with our Suppliers during our day to day purchases building and maintaining strong relationships. Regulators and Government The company values an open and transparent relationship with all our regulators, particularly the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”), as well as government authorities and trade associations. It is important we maintain a culture that is focused on retaining and encouraging high standards of business conduct and regulatory compliance and openness. Engaging with the relevant regulators and associations helps to ensure the business is aligned to the evolving regulatory framework. Fair treatment of customers and clients Awareness of evolving regulatory landscape Recognition of the importance of resilience and risk management Recovery Resolution Plan Regular reporting and discussion on regulatory developments, correspondence and interactions Regulatory risk and compliance reporting to local Risk and Compliance Committee Consideration of the regulatory horizon including via risk and compliance reports Consideration of relevant policies and standards that support compliance with regulatory and compliance requirements Participation in broader Group regulatory initiatives and programmes Oversight of training for all employees on applicable regulatory requirements We had close engagement with the regulators as part of our preparations for applying to use the Internal Ratings Based approach, with our application submitted to the PRA in December 2020 and initial interviews conducted in 2021. We have closely followed regulatory guidance in relation to customer forbearance and consulted with the regulator ahead of our dividend payments. Communities and Environment The Company is committed to contributing lasting value and making a positive impact on the society in which we operate and the environment more broadly. Engaging with local communities helps the board and our employees develop our understanding of our clients, customers and partners so that we can support them and help them to achieve their ambition, whilst also building employee engagement. Strategy or approaching sustainability issues Support for community initiatives Actively encouraging employees to contribute to community and charity events and to fundraise and volunteer for charities, including the broader Group’s charity partners Board and management participation in local charitable and volunteering activities Consideration of the Group’s wider environmental strategy, activities and goals, and the contribution that the Company can make to make a positive contribution to the world around us During the year, we communicated our support for the ambitions of the Paris Agreement to reach net zero by 2050 and our target of reaching net zero by 2030 for our direct operational emissions (scope 1&2), alongside our plan to assess our indirect emissions impact (scope 3). We continued to run our established social mobility programmes, supporting up- and-coming talent in local communities and providing access and opportunities for those from less-advantaged backgrounds. Shareholder The Company is a wholly owned member of the Close Brothers Group plc, forming part of the Banking division; as such it operates as part of the broader Group in delivering its purpose and strategic objectives, in line with Group-wide processes, governance and culture Engagement supports the Company’s understanding of, and contribution to, broader Group activities and strategic aims, and ensures delivery of long-term sustainable value for our shareholder in line with Group policies and standards Focus on broader Group purpose and strategic aims Alignment with Group-wide risk, governance, compliance and financial priorities Consistent approach to stakeholder considerations and outcomes Engagement with senior management at Group level, including representation on the Board and other governance forums to ensure the Board has a clear understanding of its role and contribution as part of the wider Group Updates to Group level committees, including the Close Brothers Group Plc Board on the operation and performance of the Company Participation in Group-wide initiatives and programmes (including those that support consideration of the Company’s other stakeholder groups including customers, employees and suppliers) Budget and financial plans developed as part of wider Group process Participation in broader enterprise-wide risk, regulatory and compliance initiatives We maintained a high level of engagement during the year with our investors through virtual meetings at Group level. We hosted an Investor Event in June 2021, with presentations covering the group and its businesses and providing investors an opportunity to ask questions of the management team. We also engaged potential and existing fixed income investors during roadshows throughout the year, as well as communicating regularly with credit rating agencies. We maintained our regular programme of communication organised by our investor relations team including investor roadshows, analyst presentations and keeping the market up to date in line with regulation. Below are some examples of the ways in which the Board has engaged directly with stakeholders during the financial year, how stakeholder interests have been considered in the Board’s decision-making and wider role, and how the directors have had regard to the matters set out in section 172(1)(a)-(f) when discharging their duties under section 172. The Company has a sole member, Close Brothers Limited, and as such the duty of directors to have regard to the need to act fairly as between members of the company is limited. Principal Board decision: New business premises In the prior year, the Board extended the lease on the George Street office for less than a year to allow more time to form a solution with regards to business premises amidst an uncertain working environment. In the current year, the directors, in conjunction with the Executive Committee, focussed on the search for alternative office spaces in London. The Board relied upon a combination of factors to inform their judgment in selecting new business premises: An inclusive and team approach to gather views and obtain support from staff, clients, and the local community. Some members of staff have been invited to site viewings to give them opportunity to feed back their views to the Committee. A cost review of a number of shortlisted sites Consultations with the Group’s Facilities department for additional guidance A site in Wigmore Street has been selected with an aim to have the new office available for staff use later in the year. The lease is expected to be signed imminently after the approval of these financial statements. Principal decision: Covid-19 forbearance In the prior year, the Board made a decision to support our clients during Covid-19 by continuing to lend and accept new loan applications, as well as granting forbearance to assist customers in temporary financial distress. We continuously monitor the impact of our decision and engage positively with stakeholders. With the housing market being allowed to operate following the first lockdown, the adverse impact of the pandemic on the majority of our clients had been limited. The majority of customers who have been granted forbearance have fully repaid or have recommenced payments once their temporary concession came to an end. Only a small number of customers remain in forbearance and we are in close contact with them to discuss their position and identify the most appropriate financing solution. The Board assessed the appropriateness of Covid-19 forbearance taking into account the current status as described above as well as client and lending team feedback. The directors concluded that it is in the best interests of the Company to cease fee forbearance under the current arrangement for any loans that drew down after 1 July 2020. However, customers that require further assistance will continue to be managed on a case-by-case basis under the Company’s standard forbearance policy. 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