Regulatory Disclosure

Introduction
The following disclosures are made in accordance with the disclosure rules as set out in section 11 of the FSA’s Prudential sourcebook for Banks, Building Societies and Investment firms.

The FSA has implemented a prudential framework for investment management firms through three “pillars”:

• Pillar 1 sets out the minimum capital requirements for the investment manager;
• Pillar 2 is an assessment of whether additional capital is needed over and above the amount 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. These disclosures apply solely to Vision Capital LLP (“the firm”) and do not apply to the funds managed by the firm.

Risk Management
The firm believes its risk management framework is appropriate for the size and complexity of the firm and that the firm’s capital is adequate to meet the risks assessed.  Overall responsibility for identifying material risks to the firm and putting appropriate mitigating controls in place rests with the Chief Operating Officer; risks and mitigating controls are periodically reassessed under the firm’s Internal Capital Adequacy Assessment Process (“ICAAP”).

The specific types of risks faced by the firm are operational risk, business risk, credit risk, and market risk; and capital planning takes these risks into account.

• Operational risk is 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 minimize operational risk through an appropriate controls framework.
• 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 investment decisions, resulting in poor fund performance and damage to the firm’s reputation.
• The firm is not exposed to credit risk other than in respect of fees receivable and cash held on deposit (at a large UK institution).  Management fees are drawn quarterly from each fund. The firm uses the simplified standardised approach when calculating risk weighted exposures, in accordance with the provisions of BIPRU 3.5.
• 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.
  

Capital Adequacy
As at 31 December 2008, the firm’s regulatory capital resources of £1.8 million comprised solely core Tier 1 Capital.

As a limited licence firm, Vision Capital’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 variable costs, and it is this number which determines the firm’s capital requirement.  As at 31 December 2008 the firm’s FOR was £1.5 million.  

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 FOR to be reassessed.  The firm ensures that at all times it has sufficient capital to meet its FOR and formally verifies this on a monthly basis as part of its Management Accounts.

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. This analysis concluded that the firm has adequate capital against the identified key risks under its Pillar 1 requirement, that its capital resources are sufficient to support its operations over the next year, and no additional capital injections are necessary. Therefore, the Pillar 1 requirement is the minimum regulatory capital which the firm will hold.