Background

April 2022

Rye Bay Capital LLP (’Rye Bay Capital’ or the ‘Firm’) is authorised and regulated by the Financial
Conduct Authority (the ‘FCA’). The Firm is a full scope Alternative Investment Fund Manager (‘AIFM’)
and is categorised by the FCA, for capital purposes, as a Collective Portfolio Management Investment
(“CPMI”) firm. The Firm is not required to prepare consolidated reporting for prudential purposes.

The Capital Requirements Directive (“CRD”) is the framework for implementing Basel II in the
European Union. Basel II implements a risk sensitive framework for the calculation of regulatory
capital. This was implemented in the United Kingdom through changes to the Financial Conduct
Authority (“FCA”) Handbook of Rules and Guidance, and specifically through the creation of the
General Prudential Sourcebook (“GENPRU”) and the Prudential Sourcebook for Banks, Building
Societies and Investment Firms (“BIPRU”), specifically BIPRU 11.

The framework consists of three pillars:

  • Pillar 1 – sets out the minimum capital requirements for the investment manager;
  • Pillar 2 – deals with the Internal Capital Adequacy Assessment Process (“ICAAP”) undertaken
    by the Firm to assess the adequacy of capital held in relation to its material risks; and
  • Pillar 3 – requires the Firm to publicly disclose its policies on risk management, capital
    resources and capital requirements.

Rye Bay Capital makes Pillar 3 disclosures annually, via the company’s website,
www.ryebaycapital.com. The information contained in this disclosure is accurate as at the Accounting
Reference Date (‘ARD’), 30th November 2021. The disclosure has not been audited by Rye Bay
Capital’s external auditors and does not constitute any form of financial statement.

Materiality & Confidentiality

The Firm regards information as material in disclosures, if its omission or misstatement could change
or influence the assessment or decision of a user relying on that information for the purpose of
making economic decisions. The Firm regards information as proprietary/confidential if sharing that
information with the public would undermine its competitive position.

Capital Resources Requirement

Pillar 1 – Minimum Capital Requirements;

As a CPMI firm, Rye Bay Capital has an initial capital requirement of €125k and an ongoing capital
resource requirement which comprises the greater of:

i. sum of market risk and credit risk (for non-AIFM business); and

ii. the funds under management requirement (the sum of the Firm’s base own funds
requirements of €125k plus 0.02% of the amount by which the Firm’s funds under
management (related to the Funds) exceed €250m); and

iii. the own funds based on fixed overheads requirement (“FOR”); plus (for the latter two items)

Whichever is applicable of:

i. the professional negligence capital requirement (“additional own funds requirement”); or

ii. the professional indemnity insurance (“PII”) capital requirement.

Rye Bay Capital calculates the credit risk applicable to its non-AIFM activities under the simplified
approach.

The Firm has deemed the FOR to be the higher of these values and this is therefore used for the
purposes of the Pillar 1 calculation. The FOR based upon the 30 th November 2021 audited financial
statements amounted to £335,000.

As the Firm does not deal as a principal and holds no current assets other than cash & cash
equivalents, the Firm’s non-trading book market risk requirement is the Foreign Currency Position
Risk Requirement for which the Firm multiplies the sum of the absolute values of its ‘open currency
position’ by 8%. Capital Resource Summary as at the ARD:

With a surplus of approx. 48%, the Firm considers this amount to be sufficient regulatory capital to
support the business and we have not identified any areas which would require the Firm to provision
for additional risk based capital.

Risk Management Objectives and Policies

The Firm’s Executive Committee (‘EC’) have approved the appointment of two Designated Members
(‘DMs’), the Chief Investment Officer & Chief Operating Officer (‘COO’). The DMs are ultimately
responsible for ensuring compliance with all regulatory requirements and comprehensively reviewing
all risk issues at the Firm. The Firm’s COO is responsible for systems and controls and for reporting of
various risk management matters including: overseeing the risk management activities at the Firm.
The COO is functionally separated from the investment management team. 

Rye Bay Capital has clearly documented policies and procedures which are designed to minimize
risks to the Firm and all staff are required to confirm that they have read and understood them.

Pillar 2 – ICAAP

Rye Bay Capital undertakes an ICAAP at least annually, which is the process through which Rye Bay
Capital determines that it is able to identify and manage its key risks on an on-going basis and that it
has sufficient capital in respect of such risks. The process is forward looking and is an integral part of
the management of the Firm.

The EC formally reviews and approves a finalised ICAAP document at least annually. The EC, as part
of its review of the ICAAP, sets the Firm’s risk appetite, confirms that the Firm’s key material risks
have been considered and assessed, and validates the stress testing scenarios.

Following the completion of the ICAAP for the year ended 30th November 2021, the Firm has
concluded that its Tier 1 capital is sufficient to cover its Pillar 1 and Pillar 2 requirements.

Remuneration

Given the nature and size of the business, remuneration for all personnel is approved by the DMs.
The Firm reviews the performance of all partners/ employees and based thereon, and in accordance
with any contractual obligations/ compliance with the FCAs rules on remuneration, the DMs determine
the overall level of remuneration.

The purpose of the AIFMD Remuneration Code (‘the Code’) is to ensure that firms have risk focused
remuneration policies, which are consistent with and promote effective risk management and do not
expose themselves to excessive risk. The Firm has reviewed all existing employment related
contracts to ensure ongoing compliance with the Code.

The Firm has identified ‘Code Staff’ as defined by the FCA as being those who have a material impact
on the risk profile of the Firm or the AIFs managed by the Firm, or anyone whose remuneration takes
them into the same bracket as senior management or risk takers. Based on the Firm’s profile, the
DMs consider that it has one business area, investment management.  For the financial year to 30th
November 2021, the total remuneration for these staff amounted to £15.95m.