Pillar 3 Disclosure and Policy

STENHAM ADVISORS PLC (“The Firm”) Pillar 3 Disclosure and Policy – July 2010

The following information is provided pursuant to the Pillar 3 disclosure rules as laid out by the Financial Services
Authority (“FSA”) in section 11 of its Prudential sourcebook for Banks, Building Societies and Investment Firms
(“BIPRU”).

Background

The FSA has implemented a prudential framework for investment firms through changes to the FSA Handbook of
Rules and Guidance (specifically in BIPRU). The framework consists of three “pillars”:

• Pillar 1 sets out the minimum capital requirements;
• Pillar 2 is an assessment of whether additional capital is needed over and above that determined under Pillar 1;
and
• Pillar 3 requires the investment manager to publish its objectives and policies in relation to risk management,
and information on its risk exposures and capital resources.

The rules provide that disclosures are only required where the information would be considered material to a user
relying on that information to make economic decisions. The Firm is a “BIPRU €125,000 limited licence firm” not
authorised to deal with retail clients or take proprietary trading positions. As a consequence the main risks facing
the Firm relate to its operations and its business environment. Whilst the Firm does have some exposure to credit
and market risk, this is not considered to be material.

The disclosures below are the required Pillar 3 disclosures and apply solely to the Firm.

Although the Firm believes the risk management framework outlined herein is appropriate for the size and
complexity of the Firm and that the Firm’s capital is adequate to meet the risks assessed, it cannot guarantee that
this will actually be the case in the event any particular risk arises. There will always be some unlikely risks with
unusually high impact which may require additional capital should they arise.

Risk management

The Firm operates a risk management framework that sets out the responsibilities and escalation procedures for the
identification, monitoring, and management of operational and business risks. Capital planning takes these
identified risks into account.

Specific personnel are assigned responsibility for the risks across the Firm’s offices and business units. The Firm’s
Financial Manager takes overall responsibility for identifying material risks to the Firm and putting appropriate
mitigating controls in place.

Risks and mitigating controls are periodically reassessed, taking into account the Firm’s risk appetite. Where risks
are identified which fall outside of the Firm’s risk tolerance levels, or where the need for remedial action is identified
in respect of identified weaknesses in the Firm’s mitigating controls, then actions are taken to improve the control
framework.

The Board meets periodically to review the quality of the control framework and to satisfy itself that appropriate
controls are in place and that mitigating actions are moving forward.

Operational risk
This is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events, including legal risk. The Firm seeks to minimise operational risk through a controls framework,
particularly when engaging in new business ventures or trading new products. The Firm considers risks which may
impact the Firm directly or indirectly. The most significant operational risks facing the Firm would most likely be a
catastrophic systems failure and unexpected losses due to malfunctioning market and liquidity controls.

Business risk
Business risk arises from external sources such as changes to the economic environment or one-off economic
shocks, and also from internal sources such as poor decisions or suboptimal allocation of capital resulting in poor
performance and damage to the Firm’s reputation.

Various different scenarios are modelled in order to assess the impact of adverse economic conditions on the Firm’s
financial position. This enables the Firm to monitor its business risk and to assist in its capital planning.

Credit risk
The Firm is not exposed to credit risk other than in respect of fees/commission receivable and cash held on deposit
at large international credit and regulated institutions. Fees are calculated monthly by an external administrator
based on month end funds under management. Most fees and commissions are received by the Firm monthly in
arrears. Consequently the Firm has a limited number of credit exposures in respect of which it uses the simplified
standardised approach when calculating risk weighted exposures, in accordance with the provisions of BIPRU 3.5.
Credit risk is not considered to be material for the purposes of this disclosure.

Market risk
The Firm takes no market risk other than foreign exchange risk in respect of its accounts receivable and cash
balances held in currencies other than GBP. The Firm calculates its foreign exchange risk by reference to the
provisions of BIPRU 7.5. Foreign exchange risk is not considered to be material for the purposes of this disclosure.

Liquidity
Liquidity risk would only arise in the Firm should a credit, market or other risk arise, resulting in financial loss. The
Firm has robust liquidity management and corporate governance procedures for continuous monitoring to enable
remedial action if and when required.

Insurance
The Firm has full cover in place to cover all risks pertaining to its business. The level of cover is reviewed at least
annually and as and when there are changes in risk levels. In addition the Group’s Audit Committee monitors the
appropriateness of the cover and financial stability of the Insurer.

Residual
Residual risk means the risk that credit risk mitigation techniques used by the firm prove less effective than
anticipated. The Firm’s Credit Risk is perceived to be low.

Reputational
The Firm has never been involved in a serious public loss of reputation and therefore considers the likelihood of a
negative occurrence in respect of its reputation to be low. That notwithstanding, the Firm has, in a future sensitivities
analysis accounted for a 25% drop in its income arising from (although not exclusively) the departure of a significant
part of its client base.

Legal action
The Firm has never been litigated against by one of its clients and given the lack of any complaints arising from its
existing clients as well as the small total number of clients, the Firm considers this risk to be very low.

Capital adequacy

As at 31 March 2010, the Firm’s regulatory capital resources of £2.107m are made up as follows:
 

The Firm’s Pillar 1 capital requirement is calculated in accordance with the General Prudential Sourcebook
(“GENPRU”) as the higher of the Fixed Overhead Requirement (“FOR”), the sum of market and credit risk
requirements, and the base capital requirement of €125,000. The FOR is calculated in accordance with GENPRU
2.1.53-59 and equates to one quarter of the Firm’s annual expenses excluding discretionary costs, and it is this
number which determines the Firm’s capital requirement. As at 31 March 2010 the Firm’s Pillar 1 requirement was
£835k.

The Firm takes a prudent approach to the management of its capital base and monitors its expenditure on a monthly
basis in order to take account of any material fluctuations which may cause its Fixed Overheads Requirement to be
reassessed. The Firm ensures that at all times it has sufficient capital to meet its Fixed Overheads Requirement and
formally verifies this on a monthly basis.

Under Pillar 2 of the FSA’s capital requirements, the Firm has undertaken an assessment of the adequacy of capital
based upon all the risks to which the business is exposed (“ICAAP”). As at 31 March 2010, this analysis concluded
that additional allocation of capital is not required against the identified key risks and that holding internal capital
equal to the Firm’s FOR plus a buffer would provide sufficient capital resources to support its operations over the
next year, and that no additional capital injections are necessary.