Pillar III Disclosure
AC Capital Partners Ltd. - Pillar III DisclosuresThe Capital Requirements Directive sets out the new disclosure requirements for operating risks under Pillar 3 to complement the minimum capital requirements under Pillar 1 and the supervisory review process under Pillar 2. The aim of Pillar 3 is to promote market discipline by allowing market participants to access information on risk exposures and risk management policies adopted by AC Capital Partners Ltd. (the Company) The regulations for the disclosures required under Pillar 3 are set out in Annex XII of the Directive 2006.48 / European communities (Capital Adequacy of Credit Institutions) Regulations 2006 / under regulation 72.3. The following qualitative disclosures are made in conformance with these regulations unless the disclosure is regarded as immaterial or proprietary or confidential.
1. DisclosuresAll risks identified by the Company are addressed below. Other risks not addressed are considered to be not applicable or immaterial.
1.1 General requirements Part 2:Scope of application of the directive requirements
AC Capital Partners Ltd is a company registered in Ireland and authorised by the Financial Regulator in Ireland. The nature of the Companys business is investment management, the risks to which the Company is exposed are principally those of a fiduciary and operational nature and managed according to the internal guidelines. The Company is a EUR 125,000 licensed company and lodges its accounts with the Companies Registration Office. (Company Registration no. 379485)
There is no deficit of capital.
1.2 General requirements Part 3:Capital Resources
The capital resources of the Company are made up of Ordinary Share Capital and the profit and loss reserve account, where applicable current year losses and dividends are also taken into account. The capital therefore qualifies as Tier 1 capital.
As at 31 December 2009, own funds of the Company was made up of:
2009
Original Requirement: Euro 125,000.00
Retained Reserves: Euro 883,000.00
Total eligible own funds Euro 1,008,000.00
As at 31 December 2008, own funds of the Company was made up of:
2008
Original Requirement: Euro 125,000.00
Retained Reserves: Euro 2,426,000.00
Total eligible own funds Euro 2,551,000.00
1.3 General Requirements Part 4 and the overall Pillar 2 rule:Disclosure compliance
Under Pillar II, the Company is required to enact an Internal Capital Adequacy Assessment Process (ICAAP). This is an ongoing process. The ICAAP document is presented to the Board of Directors of the Company for formal review and approval. The data and assumptions used in the assessment of risk and capital adequacy are continually assessed and updated. Should new risks materialise or be identified by the Company, then these risks are incorporated into the overall review process.
As an investment manager the major risks the Company is exposed to are fiduciary and operational risk. There is also additional exposure to credit and reputation risk.
1.4 General Requirements Part 5 and Part 6:Counterparty credit risk exposures and credit risk and dilution risk.
1.4.1 The Company adopts the standardised approach to credit risk.The Company has the following exposures:
- Prepaid vendors
- If a fund or funds became insolvent then fees owing might be irrecoverable.
- Excess funds are placed with the Company s bankers and are therefore exposed to counterparty risk.
Specific procedures are in place to cover these exposures including prompt collection of outstanding fees and placing of excess funds with OECD credit institutions.
1.4.2 Definition of Past Due and Impaired (Part 6.a & g)The Company has a definition of Past Due and Impaired. Past Due for fees is defined as remaining unpaid 60 days after the payment date. Impaired is defined as where the Company has determined that the debt is past due and there is a specific risk that the amount due is partially or fully unrecoverable.
The Company had as of 31 December 2009
Past Due exposures of: Euro 58,000.00
Of which Impaired exposures: Euro 0.00
The Company had as of 31 December 2008
Past Due exposures of: Euro 303,000.00
Of which Impaired exposures: Euro 0.00
1.4.3 Value adjustments and provisions (Part 6.b & h)Not considered material
1.4.4 Total amount of exposures after accounting offsets as at 31 December 20092009
Prepaid Vendors: Euro 115,000.00
Fees Outstanding: Euro 572,000.00
Balances with OECD banks: Euro 6,076,000.00
Total: Euro 6,763,000.00
2008
Prepaid Vendors: Euro 78,000.00
Fees Outstanding: Euro 1,520,000.00
Balances with OECD banks: Euro 10,916,000.00
Total: Euro 12,514,000.00
Average amount of exposures after accounting offsets:
2009
Prepaid Vendors: Euro 87,000.00
Fees Outstanding: Euro 642,000.00
Balances with OECD banks: Euro 5,585,000.00
Total: Euro 6,314,000.00
2008
Prepaid Vendors: Euro 109,000.00
Fees Outstanding: Euro 1,471,000.00
Balances with OECD banks: Euro 9,376,000.00
Total: Euro 10,956,000.00
1.4.5 Geographical distribution and exposure by counterparty type (Part 6.d,e)2009
Fees NON EU: 100%
Cash and equivalents EU Banks 100%
2008
Fees NON EU: 100%
Cash and equivalents EU Banks 100%
All fees outstanding at year end were due from Non-EU sources and all balances with OECD banks were held with EU-Banks. The Past Due amount relates to fees from a Non-EU fund. The Company does not consider them impaired.
1.4.6 Residual Maturity Breakdown (Part 6. f)All exposures are current and fall due within one year.
1.4.7 Effect of Credit and Market Risk on Capital AdequacyThe capital requirement of the Company is the higher of the fixed overhead requirement and sum of the large exposure, market and credit risk. For the purpose of this calculation disclosures relating to credit and market risk are considered to be immaterial in consideration in the assessment of the business.
1.5 General Requirements Part 7 to 10: Disclosure on Calculation of counterparty risks.AC Capital Partners Ltd. uses the standardised approach under Basel II.
1.6 General Requirements Part 11: Disclosure of Operational Risksa) AC Capital Partners Ltd. is a EUR 125,000 licensed Company, is registered with the Regulator and calculates its capital adequacy using 3 months operating expenses as a reference as determined by the Regulator.
b) Policies and standards: The operational risks are covered by the underlying operational procedures to ensure the Companys processes and controls operate correctly and effectively.
- Assessment process: There are a number of stages to the operational risk assessment process which includes: Risk identifiers including financial and non-financial events, metrics as well as internal and external audit reports.
- The Board of Directors of the Company meets four times a year and discusses operational risks at these meetings.
1.7 General requirements Part 12: Disclosure of exposures to EquitiesThe Company does not have any equity exposures.
1.8 General requirements Part 13: Disclosure of exposure to interest rate riskThe Company does not trade on its own account and therefore does not create any market risk, including interest rate risk in respect of its own business apart from risks on deposits with OECD credit institutions under 12 months.
Fees may be received in multiple currencies that require conversion to EUR for payment to the Company. The overall level of fees received in currencies other than EUR is under 5% and is not hedged.
These disclosures were approved by the Board of Directors on 26 May 2010.