Arabesque Asset Management Limited (Germany)Liquidiert

Arabesque Asset Management Limited (Germany)

Frankfurt am Main

Jahresabschluss
zum Geschäftsjahr vom 01.01.2018 bis zum 31.12.2018

Registered number: 08636689

Directors' report and audited financial statements For the year ended 31 December 2018

Company Information

Contents

Strategic report

Introduction

The Directors present their Strategic report for Arabesque Asset Management Ltd (the "Company") for the year ended 31 December 2018.

Principal activities and review of the year

The principal activity of the Company during the year ended 31 December 2018 was the provision of investment management services to Arabesque SICAV - Arabesque Prime and Arabesque SICAV - Arabesque Systematic.

The Company was authorised by the Financial Conduct Authority (the "ECK) to undertake investment management services on 4 June 2014.

The loss after tax for the year ended 31 December 2018 was £1,331,610 (2017: £2,308,973).

The results for the year ended 31 December 2018 and the financial position at 31 December 2018 of the Company, as shown on page 8, were considered satisfactory by the Directors. The Company is only in its fourth year of trading and is considered to still be in the start-up phase. During the year ended 31 December 2018 the Company has continued its marketing activities to increase the assets under management, which are forecast to increase in 2019. The forecast increase in assets under management has resulted in the Company forecasting profit being earned in 2019.

During the year ended 31 December 2018, the Company sold Intellectual Property it had developed to Arabesque S-Ray GmbH, a company under common ownership. This transaction is described in note 14 to the financial statements.

The Directors do not propose payment of an ordinary dividend for the year ended 31 December 2018 (2017: £nil).

Future developments

The Directors do not anticipate any change in the nature of the Company's principal activities for the foreseeable future.

Principal risks and uncertainties

The key business risks and uncertainties affecting the Company relate to the performance of the underlying funds managed by the Company and the impact that underperformance may have on the ability to acquire and retain investors and hence on the level of assets under management and the fees earned by the Company.

The Company is exposed to foreign currency risk as the principal currency in which the Company operates is Pound Sterling ("GBP") and investment management fees are received in Euros, and the Company's German branch incurs expenses in Euros.

Due to the Company making losses in its start-up phase, the Company has exposure to liquidity risk, as it may not have the necessary funding to pay its liabilities as they fall due. This risk is mitigated by continued monitoring of cash flow and the availability of additional funding from shareholders.

The Company is not exposed to any significant other market risks (being interest rate and price risk), credit or liquidity risk. Other risks, such as regulatory risk, legal risks and operational risk, are considered to have minimal potential impact.

The Referendum of the U.K.´s Membership of the European Union (E.U.) (referred to as Brexit), voting for the exit of the U.K. from the E.U., could cause disruptions to and create uncertainty surrounding our business. Including affecting our relationships with our existing and future counterparties. The effects of Brexit are still unknown and will depend on any agreements the U.K. makes to retain access to E.U. markets ether during a transitional period or more permanenty. The Company is monitoring and considering potential implications of Brexit.

Key performance indicators

The key performance indicators of the Company are the growth and level of assets under management and the perfomance of the assets managed.

This report was approved by the board on 25 ^th April 2019 and signet on its behalf.

Directors' report For the year ended 31 December 2018

The Directors present their report and the financial statements of Arabesque Asset Management Ltd (the "Company") for the year ended 31 December 2018.

Directors

The Directors who served during the year ended 31 December 2018 and up to the date of approval of this report were:

Mr. Omar Selim

Dr. Dom inic Selwood

Mr. Tarek H Selim (Resigned: 31 March 2018)

Pillar 3 disclosure

The Company is required by its regulator, the FCA, to make disclosure of risk management, regulatory capital and remuneration in accordance with Pillar 3 of the Capital Requirement Directive. This is disclosed as an appendix to the financial statements.

Disclosure of information to auditor

Each of the persons who are Directors at the time when this Directors' report is approved has confirmed that:

Going Concern

Although the Company has generated a loss for the period, budgets and forecasts have been prepared which demonstrate that the Company will be profitable in the next financial period. In the meantime, the shareholders have committed to make available any funding necessary to enable the Company to meet its liabilities as they fall due for the foreseeable future, and for a period of at least twelve months from approval of these financial statements. Accordingly, the financial statements are appropriately prepared an the going concern basis.

Auditor

The auditor, MHA Maclntyre Hudson, has indicated their willingness to continue in office. A resolution concerning to reappointment MHA Macintyre Hudson as auditor will be put to the Directors to approve these financial statements.

Directors' responsibilities statement

The Directors are responsible for preparing the Strategie report, the Directors' report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), Including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company´s transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to enable them 'to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Company's website Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from Legislation in other jurisdictions.

This report was approved by the board on 25 ^th April 2019 and signed on its behalf by:

Independent auditor's report to the members of Arabesque Asset Management Limited

Opinion

We have audited the financial statements of Arabesque Asset Management Limited (the "Company") for the year ended 31 December 2018, which comprise the Statement of comprehensive income, the Statement of financial position, the Statement of changes in equity and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

Other information

The directors are responsible for the other information included in the Directors' report and audited financial statements other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon..

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:

Matters on which we are required to report by exception

In the light of our knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report and the Directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

Responsibilities of the directors

As explained more fully in the directors' responsibilities statement set out on page 4, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken an the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located an the Financial Reporting Council's website at: https://www.frc.org.uk/Our-VVork/Audit/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for-auditors/Auditors-responsibilities-for-audit/Description-of-auditors-responsibilities-for-audit.aspx. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Statement of comprehensive income For the year ended 31 December 2018

All amounts relate to continuing operations.

There were no other items of Comprehensive Income for the current or prior year other than those shown above.

The notes on pages 11 to 21 form part of these financial statements.

Statement of financial positlön For the year ended 31 Decenther 2018

The financial Statements were approved and authorised for issue by the board and were signed on its behalf on 25 ^th April 2019

The notes on pages 11 to 21 form part of these financial statements.

Statement of changes in equity For the year ended 31 December 2018

The notes an pages 11 to 21 form part of these financial statements.

Statement of changes in equity For the year ended 31 December 2017

The notes an pages 11 to 21 form part of these financial statements.

Notes to the financial statements For the year ended 31 December 2018

1 Company information

Arabesque Asset Management Ltd (the "Company") is a private company limited by shares, registered in England and Wales. The registered office and place of business is 43 Grosvenor Street, London, W1K 3HL.

2 Accounting policies

2.1 Basis of preparation of financial statements

The financial statements have been prepared on a going concern basis, under the historical cost convention, in accordance with UK accounting standards incorporating Financial Reporting Standard 102 ("FRS 102"), the Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland and the Companies Act 2006.

The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Companys accounting policies (see note 3).

The following principal accounting policies have been applied:

2.2 Cash flows

The Company has taken advantage of the exemption available in para 1.12 of FRS 102 from preparing a cash flow statement, as the Company is a member of a group where the parent of that group, prepares publicly available consolidated financial statements which are intended to give a true and fair view and the Company is included in these consolidated financial statements.

The members of the Company have been made aware of this disclosure exemption and have made no objection.

2.3 Revenue recognition

Revenue, which is stated net of any value added tax, represents fees arising from the provision of investment management services.

Revenue is recognised on an accruals basis when the services have been performed and the following conditions are satisfied:

2.4 Expenses

Expenses are recognised on an accruals basis.

2.5 Tangible fixed assets and depreciation

Tangible fixed assets are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Depreciation is provided on the following basis:

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within administrative expenses in the Statement of comprehensive income.

2.6 Operating leases

Operating leases are those leases where the Company has the use of an asset but where the significant risks and rewards of ownership remain with the lessor and the lease term is not expected to be a significant portion of the useful life of the asset.

Rentals paid under operating leases are charged to the Statement of comprehensive income as incurred. Any incentives to enter in to an operating lease are credited to the Statement of comprehensive income as a reduction to the rental expense on a straight line basis over the lease term.

2.7 Taxation

Provision is made for corporation tax in the Statement of comprehensive income at the current rates on the excess of taxable income over allowable expenses and is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the date of the Statement of financial position in the countries where the Company operates and generates income.

Deferred balances are recognised in respect of all timing differences that have originated but not reversed by the date of the Statement of financial position other than those differences regarded as permanent. An asset is not recognised to the extent that the transfer of economic benefits in the future is uncertain. Any deferred tax assets and liabilities recognised are provided at the average rate of tax expected to apply when the asset and liability crystallises and are not discounted.

2.8 Going concern

Although the Company has generated a loss for the period, budgets and forecasts have been prepared which demonstrates that the Company will be profitable in the next financial period. In the meantime, the shareholders have committed to make available any funding necessary to enable the Company to meet its liabilities as they fall due for the foreseeable future, and for a period of at least twelve months from approval of these financial statements. Accordingly, the financial statements are appropriately prepared on the going concern basis.

2.9 Foreign currencies

The Company's functional and presentational currency is Pound Sterling as this is the primary economic environment in which the Company operates.

The income and expenses of the German office are incurred in Euro and translated to Pounds Sterling in accordance with the accounting policy.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the spot exchange rates at the dates of the transactions.

At each period end foreign currency monetary items are translated using the closing rate. Non-monetary items measured at historical cost are translated using the exchange rate at the date of the transaction.

Foreign exchange gains and losses resulting from the settlement of transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of comprehensive income.

Foreign exchange gains and losses are presented in the Statement of comprehensive income within 'administrative expenses'.

2.10 Financial Instruments

Financial assets

The Company's financial assets comprise basic financial assets, being trade and other receivables, amounts due from related parties and bank balances.

Cash is represented by deposits with financial institutions repayable without penalty an notice of not more than 24 hours.

Trade and other receivables are measured initially at transaction price and thereafter at the amount of cash or other consideration expected to be received, less any impairment. Any impairment loss is recognised in the Statement of comprehensive income.

Financial assets are derecognised when contractual rights to the cash flows from the financial asset expire or are settled, or when substantially all the risks and rewards of ownership have been transferred.

Impairment

An impairment loss is measured as the difference between an asset's carrying amount and the amount that the Company would receive for the asset if it were to be sold at the reporting date.

Financial liabilities

The Company's financial liability comprise basic financial liabilities, being trade and other payables and amounts due to related parties that are categorised as financial liabilities measured at amortised cost. These are measured initially at transaction price and thereafter at the amount of cash or other consideration expected to be paid.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. lf not, they are presented as non-current liabilities.

Financial liabilities are derecognised when the liability is extinguished, that is when the contractual obligation is discharged, cancelled or expires.

Offsetting

Financial assets and liabilities are offset and the net amounts reported in the Statement of financial position when there is an enforceable right to set off the recognised amounts and there is an intention to settle an a net basis or to realise the asset and settle the liability simultaneously.

2.11 Pensions

Defined contribution pension plan

The Company operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate entity. Once the contributions have been paid the Conipany has no further payment obligations.

The contributions are recognised as an expense in the Statement of comprehensive income when they fall due. Amounts not paid are shown in accruals as a liability in the Statement of financial position. The assets of the plan are held separately frorn the Company in independently administered funds.

3 Judgements In applying accounting policies and key sources of estimation uncertainty

The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the date of the Statement of financial position and the amounts reported for revenue and expenses during the year.

Critical judgements in applying the entity's accounting policies

The Company has not been required to apply any critical judgements in applying the accounting policies.

Critical accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates may not equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Useful economic lives of non-financial assets

The annual depreciation charge for tangible assets is sensitive to changes in the estimated useful economic lives and residual values of the assets. The useful economic lives and residual values are re assessed annually. They are amended when necessary to reflect current estimates, based an technological advancement, future Investments, economic utilisation and the physical condition of the assets. See note 9 for the carrying amount of the non-financial assets, and note 2.5 for the useful economic lives for each class of assets.

Impairment of Debtors

The Company makes an estimate of the recoverable value of trade and other debtors. When assessing impairment of trade and other debtors, management considers factors including the current credit rating of the debtor, the ageing profile of debtors and historical experience. See note 10 for the carrying amount of the debtors.

4 Turnover

An analysis of turnover by class of business is as follows:

Turnover arose from services provided in the United Kingdom to funds domiciled in Luxembourg.

5 Administrative expenses

Administration expenses include salaries, professional fees, rent, office expenses, travel expenses and foreign exchange losses or gains.

6 Operating loss

The operating loss is stated after charging:

7 Staff costs

Staff costs, including Directors' remuneration, were as follows:

The Directors received remuneration of £80,492 for their services to the Company during the year ended 31 December 2018 (2017: £107,050).

The average monthly number of employees, including the Directors, during the year was as follows:

8. Taxation

Factors affecting tax charge for the year

The tax assessed for the year is differs from the pro-rated standard rate of corporation tax in the UK of 19% (2017: 19.25%). The differences are explained below:

The Arabesque Group made a claim for £258,923 in relation to research and development tax credits for the year ended 31 December 2017, this amount was received during the year ended 31 December 2018:

Factors that may affect future tax charges

Deferred taxation

The unrecognised deferred tax asset arises as follows:

The deferred tax asset of £1,566,213 (2017: £1,288,155) has not been recognised as it is uncertain when there will be sufficient taxable profits against which these amounts can offset.

9 Tangible fixed assets

10 Debtors

Included in other debtors are rent deposits of £106,051 (2017: £73,706) which are repayable in more than one year.

All amounts due from group undertakings are interest free and repayable on demand.

The loan made to a director, Dominic Selwood, is repayable on demand and accrues interest at 3% per annum (see note 14).

11 Creditors: Amounts falling due within one year

All amounts due to group entities are interest free and repayable an demand.

12 Share capital

The Company issued 2,332,470 (2017: 2,265,016) Ordinary shares of £1 each during the year ended 31 December 2018. A further 925,023 Ordinary shares of £1 each have been issued since 31 December 2018.

13 Commitments under operating leases

At 31 December 2018 the Company had future minimum lease payments under non-cancellable operating leases as follows:

14 Related party transactions

Arabesque Asset Management Holding Limited, a company incorporated in the United Kingdom, is a related party as it is the 100% shareholder of Arabesque Asset Management Arabesque Asset Management Holding LimitedLtd.

During the year ended 31 December 2018 the Company paid expenses of £618,440 (2017: £2,349) on behalf of Arabesque Asset Management Holding Limited, and paid working capital to Arabesque Asset Management Holding Limited of £14,783 (2017: received from £95,732). As at 31 December 2018 the Company was owed £577,519 by Arabesque Asset Management Holding Limited (2017: owed to £26,139).

Arabesque Deutschland GmbH

Arabesque Deutschland GmbH, a company incorporated in Germany, is a related party of the Company by the virtue of having Directors in common and it is also a fellow subsidiary of Arabesque Asset Management Holding Limited the Company's 100% shareholder.

During the year ended 31 December 2018 the Company paid expenses on behalf of Arabesque Deutschland GmbH of £298,156 (2017: £nil) and Arabesque Deutschland GmbH paid expenses on behalf of the Company of £123,414 (2017: £ni1). The Company repaid £17,955 (2017: £31,724) of its debt to Arabesque Deutschland GmbH.

As at 31 December 2018 the Company was owed £118,291 by Arabesque Deutschland GmbH (2017: owed to £38,496).

Arabesque S-Ray GmbH

Arabesque S-Ray GmbH, a company incorporated in Germany, is a related party of the Company by the virtue of having Directors in common and it is also a fellow subsidiary of Arabesque Asset Management Holding Limited the Company's 100% shareholder.

During the year ended 31 December 2018 the Company paid expenses on behalf of Arabesque S-Ray GmbH of £159,179 (2017:. £nil). The Company also sold fixed assets to Arabesque S-Ray GmbH for a consideration of £90,770 during the year ended 31 December 2018 (2017: £nil).

Intellectual Property related to the development of the S-Ray product, which was developed by the Company, was transferred to the UK branch of Arabesque S-Ray GmbH during the year ended 31 December 2018 for a consideration of £1 (2017: £nil).

Arabesque S-Ray GmbH repaid £106,514 of the balance due to the Company during the year ended 31 December 2018 (2017: £nil).

As at 31 December 2018 the Company was owed £143,436 by Arabesque S-Ray GmbH (2017: £nil).

The Arabesque Partnership LLP

The Arabesque Partnership LLP (the "LLP"), an LLP incorporated in the United Kingdom, is a related party of the Company as it is the ultimate controlling party.

During the year ended 31 December 2018 the Company paid invoices on behalf of the LLP totalling £nil (2017: £14,715).

As at 31 December 2018 £nil (2017: £nil) was owed to the Company by the LLP.

Key management personnel

Key management personnel are considered to be the Directors - see note 7 for disclosure of Directors' remuneration.

During 2016 the obligations under an operating lease that was initially entered into by a fellow group company, Arabesque Deutschland Gmbh, were transferred to the Company as a part of the transfer of operations from Arabesque Deutschland Gmbh to the Company's German branch. During the year ended 31 December 2018 the Company incurred an expense of £138,004 (2017: £136,604) in respect of that lease.

Dominic Selwood is a related party of the Company as he is a director of the Company. During the year ended 31 December 2018 the Company loaned an additional £75,000 to Dominic Selwood, interest on the loan accrues at 3% and during the year ended 31 December 2018 interest of £6,376 (2017: £4,419) accrued on the loan. As at 31 December 2018 the principal amount outstanding on the loan was £250,000 (2017: £175,000) and the interest owed, which has been added to the principal amount was £14,252 (2017: £7,876).

15 Ultimate parent undertaking and controlling party

Arabesque Asset Management Ltd is a wholly owned subsidiary of Arabesque Asset Management Holding Limited, which is the immediate parent undertaking of the Company.

Arabesque Asset Management Holding Limited is controlled by The Arabesque Partnership LLP, a limited liability partnership incorporated in the United Kingdom, which is the ultimate controlling party of the Company and in whose consolidated financial statements the Company is included.

Disclosure Policy

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:

The Pillar 3 disclosure of Arabesque Asset Management Limited ("AAML" or the "Firm") is set out below. The regulatory aim of the disclosure is to improve market discipline.

AAML makes Pillar 3 disclosures annually, via its annual financial statements. The information contained in this disclosure is accurate as at 31 December 2018. lt has not been audited by AAML's external auditors and does not constitute any form of financial statement.

Certain information relating to BIPRU 11.5 may be omitted on the basis that it has been deemed to be immaterial or proprietary/confidential. The Firm regards information as material in the disclosure 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. Proprietary/confidential information may include information on products or systems which, if shared with competitors, would render the Firm's investments therein less valuable. Further, the Firm must regard information as confidential if there are obligations to customers or other counterparty relationships binding the Firm to confidentiality.

Background to the Firm

The Firm is authorised and regulated by the FCA and as such is subject to minimum regulatory capital requirements. The Firm is categorised by the FCA, for capital purposes, as a BIPRU firm. lt is an investment management firm and has no trading book exposures. The Firm is not required to prepare consolidated reporting for prudential purposes.

Capital Resources Requirement

Pillar 1 - Minimum Capital Requirements

As a BIPRU firm, AAML has adopted the standardised approach for the Pillar 1 regulatory capital calculation of credit risk. The Firm is not subject to Pillar 1 operational risk requirements under BIPRU 6.

The Pillar 1 capital requirement for a BIPRU firm is calculated as the higher of the:

The Firm has deemed the FOR to be the higher and this is therefore used for the Pillar 1 calculation.

As AAML does not deal as a principal and holds no current assets other than cash, in sterling or foreign currency, 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%.

Pillar 2 - ICAAP

The Firm's ICAAP includes an assessment of the design and performance of the internal controls in place to mitigate risks, the probability of the risk occurring, the potential financial and reputational impact, and the adequacy of the Firm's capital base.

The ICAAP is the process through which AAML determines that it is able to identify and manage_ its key risks on an on-going basis and ensure 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 Compliance Officer is responsible for the ICAAP within AAML and consulted with the Firm's Chief Financial Officer ("CFO") and other appropriate members of staff to ensure the accuracy of his findings.

The Firm's senior management formally reviews and approves a finalised ICAAP document on at least an annual basis (or more frequently if there are material changes to the Firm's business model and risk exposures). The senior management, as part of its review of the ICAAP, sets the Firm's risk appetite, validates that the Firm's key material risks have been considered and assessed, and validates the stress testing scenarios.

Capital Resources

The main features of the Firm's Capital Resources are as follows:

Risk Management Objectives and Policies

Senior management is ultimately responsible for the management of risk within the Firm and their individual responsibilities are clearly defined. Senior management report to the Firm's governing body on a frequent basis regarding the risks. AAML has clearly documented policies and procedures, which are designed to minimise risks to the Firm and all staff are required to confirm that they have read and understood them.

The Firm's ICAAP determines that it is able to identify and manage its key risks on an ongoing 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.

Following the completion of the ICAAP, the Firm has concluded that its Tier 1 capital is sufficient to cover its Pillar 1 and Pillar 2 requirements.

Remuneration

AAML must comply with the BIPRU Remuneration Code ("the Code"). The purpose of 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 contracts to ensure they comply with the Code.

Senior management are responsible for setting the Remuneration Policy Statement for all staff and the Compliance Officer is a member of the senior management team. No external consultants have been engaged on remuneration matters.

The Code can be applied in a proportionate way and the FCA have stated that it will normally be appropriate for firms such as AAML to disapply certain rules. As such, senior management has determined that the following rules are not proportionate to AAML and have not implemented these detailed rules:

Variable remuneration is not based solely on the financial performance of the individual. Senior management also considered the individuals' overall (non-financial) performance to the whole team and the overall results of the fund/firm. The performance of the individual is assessed over the entire year.

Quantitative Information

As at 31 December 2018 AAML received the following aggregate amount of remuneration in respect of investment management services provided to the Funds it manages:

Total remuneration was split between senior management and risk takers as outlined in the table below: