1.      INTRODUCTION

• This Risk Management Policy forms part of MyWealth Legatus SPC’s (hereinafter referred to as “MyWealth”) governance and control arrangements.

• Risk management is not an isolated activity. It is one element together with planning, project and performance management of effective governance and management. The focus is on those risks that could disrupt the achievement of MyWealth’s strategy.

• The purpose of this policy and the supporting guidance is to establish MyWealth’s underlying approach to risk management by clarifying the roles and responsibilities of the Board of Directors, the Finance and Audit Committee, Senior Management, and other Employees. It also describes the context for risk management as part of the overall system of internal controls and arrangements for periodic review. It aims to support those employees with involvement in anticipating, assessing, and managing risks so that they can take timely and well-founded risk-informed decisions.

2.      DEFINITIONS

• A risk is commonly defined as an effect of uncertainty on the achievement of objectives. In other words, risks are various events that can affect the achievement of objectives. Risk can have both negative and positive outcomes. Our aim is to manage the adverse effects and turn the risk into value.

• Risks are an everyday part of our activities. Our operations involve multiple partnerships, challenging environmental, organisational contexts and extensive geographic scope. The realisation of our mission and strategy depends on our ability to recognise risks and to define suitable measures for their treatment. Effective risk management is about effective decision making, not compliance. It is not limited to the identification and mitigation of negative risks, but also enables opportunities to be recognised that may involve some level of risk where they also have the potential to lead to positive outcomes, supporting the overall strategy.

• Risk management refers to all activities performed by MyWealth to anticipate, identify, assess, and control the uncertainties which may impact on MyWealth’s ability to achieve its aims, objectives, and opportunities. These will range from organisation-wide to specific projects or programmes, to the individual.

• The risk management policy aims to demonstrate that MyWealth is acting appropriately to anticipate risks; to assess risks; to avoid excessive risk; to embrace necessary or desirable risks with appropriate safeguards; that its response to risk, whether by insurance, control measures or avoidance, is proportionate and effective; that responsible staff are equipped to take risk-based decisions with confidence; and that we are intelligent in applying our risk appetite.

3.      THE POLICY STATEMENT

• OUR REPUTATION: Our Mission centres on creating and sharing knowledge and delivering projects that have a real impact. We must undertake research and knowledge work of the highest quality and secure maximum impact and influence for our activities. As such, our reputation for the quality of our work, our autonomy and ethical and intellectual integrity are of paramount importance. We will be bold in the nature of our work, in our technical thinking, in our methodologies and we will be innovative in how we seek to impact and influence. We will do everything we can to mitigate risks to our reputation.

• OUR PEOPLE: Much of our work takes place in locations that are inherently risky. We are responsible for the well-being of our employees. We, therefore, seek to ensure that we work with partners who are informed by robust risk assessments and that employees are trained and supported in their individual journeys.

• OUR FINANCIAL POSITION: As an independent company, we are dependent on securing externally funded products and programmes from a range of Clients and we do so in an increasingly competitive environment. We will manage our income and control our costs, remain competitive whilst delivering well-managed products and programmes on time and on budget. We will seek to minimize our financial exposure. We will not compromise our ethical standards. We will not undertake work that compromises our clients and our financial solvency.

• THE IMPACT OF OUR PRODUCTS AND PROGRAMMES: We are entrusted to generate positive rewards in the lives of people in resource-constrained economic environments. Because we work in a complex digital asset industry, that is far from guaranteed. Many of our products involve partners and collaborators often based overseas and/or operating in South Africa. To do this, we need to anticipate and manage all product market and programme risks at the pre-proposal, proposal, and inception stages. We need to make decisions about when to enter the crypto asset market environment and with whom, in good time but often on the basis of imperfect information. We need to be prepared to decide when we will take well-judged risks, when we will support responsible risk-taking and when not to action things because of the risks. When we do, we must use relevant management information to track progress and identify difficulties. We will support our employees to do this well. We will not undertake work where we assess the financial or delivery risks to be too high. We will not compromise our ethical standards in delivering quality products to our clients.

• NON-PERSONAL ADVICE We do not provide personal advice in relation to our products or services. We sometimes provide factual information, information about transaction procedures and information about the potential risks. However, any decision to use our products or services is made by you. No communication or information provided to you by MyWealth is intended as, or shall be considered or construed as, investment advice, financial advice, trading advice, or any other sort of advice. You are solely responsible for determining whether any investment, investment strategy or related transaction is appropriate for you according to your personal objectives, financial circumstances, and risk tolerance.

5.      MONITOR

• MyWealth is not your broker, intermediary, agent, or advisor and has no fiduciary relationship or obligation to you in connection with any crypto assets or other decisions or activities undertaken by you using MyWealth’s Services. We do not monitor whether your use of MyWealth’s Services is consistent with your financial goals and objectives. It is up to you to assess whether your financial resources are adequate for your financial activity with us, and to your risk appetite in the products and services you use.

6.     NON-TAX, REGULATORY OR LEGAL                ADVICE

• The taxation of Crypto Assets is uncertain, and you are responsible for determining what taxes you might be liable to, and how they apply, when transacting through MyWealth’s Services. It is your responsibility to report and pay any taxes that may arise from transacting on MyWealth’s Portal, and you acknowledge that MyWealth does not provide legal or tax advice relative to these transactions. If you have any doubts about your tax status or obligations when using MyWealth’s Services, or with respect to the Crypto Assets held to the credit of your MyWealth account, you may wish to seek independent advice.

• You acknowledge that, when, where and as required by applicable legislation, MyWealth shall report information regarding your transactions, transfers, distributions or payments to tax or other public authorities. Similarly, when, where and as required by applicable law, MyWealth shall withhold taxes related to your transactions, transfers, distributions, or rewards. Applicable legislation could also prompt MyWealth to request you for additional tax information, status, certificates, or documentation. You acknowledge that failure to answer these requests within the timeframe defined, may result in withholding taxes by MyWealth to be remitted to tax authorities as defined by relevant law. You are encouraged to seek professional and personal tax advice regarding the above and before making any digital asset transaction.

• Introduction

The following is based on the Products understanding of certain aspects of the law and practice currently in force in the Cayman Islands. These are based on laws, regulations, guidelines, published administrative rulings and judicial decisions currently in effect, all of which may change or be subject to different interpretations, possibly with retroactive effect. Any such changes could adversely affect the comments made below. There can be no guarantee that the tax position at the date of the Offering Documents or at the time of a Capital deployment will endure indefinitely. Prospective clients are urged to consult their own tax advisers in determining the possible tax consequences to them under the laws of the jurisdictions of which they are citizens, residents or domiciliary, jurisdictions in which they conduct business and jurisdictions in which they purchase, hold, redeem, or dispose of assets.

• Cayman Islands Taxation
  • The Cayman Islands at present impose no taxes on profit, income, capital gains or appreciations in value of the crypto asset. There are also currently no taxes imposed in the Cayman Islands by withholding or otherwise on the Clients on profit, income, capital gains or appreciation in respect of their Coins nor any taxes on the Clients in estate duty, inheritance, or capital transfer tax.
  • The product has received an undertaking that, for a period of twenty years from the date of the grant of the undertaking, no law which is thereafter enacted in the Cayman Islands imposing any tax to be levied on profits or income or gains or appreciations will apply to the product or their operations; and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable on or in respect of the crypto assets, debentures or other obligations of the product, or by way of the withholding in whole or in part of any relevant rewards. No capital gains or stamp duties are levied in the Cayman Islands on the issue, transfer, or redemption of crypto assets.

• Cayman Islands Tax Reporting
  • The Cayman Islands has signed an inter-governmental agreement to improve international tax compliance and the exchange of information with the United States (US IGA). The Cayman Islands has also signed, along with many other countries, a multilateral competent authority agreement to implement the OECD Standard for Automatic Exchange of Financial Account Information – Common Reporting Standard (CRS and together with the US IGA, AEOI).
  • Cayman Islands regulations have been issued to give effect to the US IGA and CRS (collectively, the AEOI Regulations). Pursuant to the AEOI Regulations, the Cayman Islands Tax Information Authority (TIA) has published guidance notes on the application of the US IGA and CRS.
  • All Cayman Islands “Financial Institutions” are required to comply with the registration, due diligence, and reporting requirements of the AEOI Regulations, unless they are able to rely on an exemption that allows them to become a “Non-Reporting Financial Institution” (as defined in the relevant AEOI Regulations) with respect to one or more of the AEOI regimes, in which case only the registration requirement would apply under CRS. The Product does not propose to rely on any Non-Reporting Financial Institution exemption and therefore intends to comply with all of the requirements of the AEOI Regulations.
  • The AEOI Regulations require the MyWealth to, among other things,

(i) register with the IRS to obtain a Global Intermediary Identification Number (in the context of the US IGA only),

(ii) register with the TIA, and thereby notify the TIA of its status as a “Reporting Financial Institution,”

(iii) adopt and implement written policies and procedures setting out how it will address its obligations under CRS,

(iv) conduct due diligence on its accounts to identify whether any such accounts are considered “Reportable Accounts,” and

(v) report information on such Reportable Accounts to the TIA. The TIA will transmit the information reported to it to the overseas fiscal authority relevant to a reportable account (e.g., the IRS in the case of a US Reportable Account) annually on an automatic basis.

• By investing in the product and/or continuing to purchase crypto assets, clients shall be deemed to acknowledge that further information may need to be provided to MyWealth, the compliance with the AEOI Regulations may result in the disclosure of client information, and client information may be exchanged with overseas fiscal authorities. Where a client fails to provide any requested information (regardless of the consequences), MyWealth reserves the right to take any action and/or pursue all remedies at its disposal including, without limitation, compulsory redemption of the client concerned.
• Clients should ensure that their tax affairs are in compliance in their jurisdiction(s) of residence and/or citizenship (as applicable).

• Tax Consideration
  • Where MyWealth invests in securities that are not subject to withholding tax at the time of acquisition, there can be no assurance that tax may not be withheld in the future as a result of any change in applicable laws, treaties, rules or regulations or the interpretation thereof. MyWealth may not be able to recover such withheld tax and so any such change could have an adverse effect on the Net Asset Value of the crypto assets. Where MyWealth sells securities short that are subject to withholding tax at the time of sale, the price obtained will reflect the withholding tax liability of the purchaser. In the event that in the future such securities cease to be subject to withholding tax, the benefit thereof will accrue to the purchaser and not to MyWealth.

• It is possible that certain dividends, interest, and other capital received by MyWealth from sources within certain countries may be subject to withholding taxes imposed by such countries. MyWealth may also be subject to capital gains taxes or other taxes in some of the countries where it purchases and sells securities or otherwise conducts business. It is impossible to predict in advance the rate of tax that will be paid since the amount of the crypto assets of MyWealth to be allocated in various countries is uncertain.

9.    SECURITY RISK

• It is not possible for MyWealth to eliminate all security risks. You are responsible for keeping your MyWealth Portal password safe, and you may be responsible for all the transactions under your MyWealth Account, whether you authorised them or not. Transactions in Crypto Assets may be irreversible, and losses due to fraudulent or unauthorised transactions may not be recoverable.

10.  MANAGING RISKS

• Risks regarded as Moderate or High in impact and probability should be identified in advance and a decision taken about whether to continue with the activity and if so, how to manage it to either realise the potential benefits or avoid the potential downsides. Risks change and evolve as products develop. Different risks will be managed with a particular focus. Some will be addressed through routine management, supported by MyWealth’s systems, procedures, and policies. The management has a particular role to play here in providing regular review of product implementation, including emerging issues that threaten successful delivery.

11.  RISK RELATED TO CRYPTO ASSETS

• Given the nature of Crypto Assets and their underlying technologies, there are several intrinsic risks, including but not limited to:
  • faults, defects, hacks, exploits, errors, protocol failures or unforeseen circumstances occurring in respect of a Digital Asset or the technologies or economic systems on which the Digital Asset rely;
  • transactions in Crypto Assets being irreversible. Consequently, losses due to fraudulent or accidental transactions may not be recoverable;
  • technological development leading to the obsolescence of a Digital Asset;
  • delays causing a transaction not be settled on the scheduled delivery date; and
  • attacks on the protocol or technologies on which a Digital Asset depends, including, but not limited to:
    • distributed denial of service;
    • sybil attacks;
    • phishing;
    • social engineering;
    • hacking;
    • smurfing;
    • malware; and

• When you communicate with us via electronic communication, you should be aware that electronic communications can fail, can be delayed, may not be secure and/or may not reach the intended destination.

• Changes in laws and regulations may materially affect the value of Crypto Assets.

• It is impossible to predict with certainty what additional governmental restrictions may be imposed on the markets and/or the effect of such restrictions on the Asset Manager’s ability to implement the Products objective. However,if MyWealth Managment believes that there is a likelihood of increased regulation of the global financial markets, and that such increased regulation could be materially detrimental to the performance of the crypto assets employing strategies generally similar to that of the Product.

15.  ROLES AND RESPONSIBILITIES

• The Board is responsible for overseeing risk management with a scheme of delegation to the Finance Resources and Audit Committee and policy implementation by the Director and senior employees. All senior employees are responsible for encouraging good risk management practice within their areas of responsibility and all project managers will need to have regard to risk for the products that they lead or support.

• The Board will:
  • Approve the overall policy statement;
  • Offer periodic advice on risk appetite and risk tolerance;
  • Satisfy itself about the assessment of strategic risks via annual consideration of the Strategic Risk List;
  • Monitor the management of significant risks to ensure that appropriate controls are in place;
  • Identify any strategic risks that require inclusion or updating in the Strategic Risk List to ensure that it reflects MyWealth’s overall strategy and operating context;
  • Approve major decisions, taking into account MyWealth’s risk profile or exposure;
  • Satisfy itself that less significant risks are being actively managed, and that appropriate controls are in place and working effectively to ensure the implementation of policies approved by the Board;
  • Review regularly the Institute’s approach to risk management and approve changes where necessary to key elements of its processes and procedures.

• The Finance and Audit Committee will:
  • Ensure the implementation of the risk management policy and advise on any modifications to the policy;
  • Receive advice from the Board on the need for inclusion or amendment of strategic risks;
  • Ensure that adequate information is provided for the Board and its committees, as appropriate, on the status of risks and controls;
  • Ensure that an annual report is provided to the Board on the effectiveness of the system of internal controls;

• The Strategic Management Team will:
  • Regularly review the Strategic Risk and submit this to the Board committee quarterly;
  • Advise on modifications to the policy;
  • Assess the adequacy of internal controls and advise the Board as necessary;
  • Decide on risk mitigation;
  • Advise on MyWealth’s appetite for risk and its tolerance of risk;
  • Inform all its strategic decisions with considerations of risk;
  • Ensure other Sub Committees take appropriate steps in respect of risk;
  • Keep the overall Strategic framework under review;
  • Advise on thresholds for risk assessment in proposals and projects;
  • Engage with the Institute’s internal and external auditors on internal controls;
  • Ensure appropriate training is available for employees;
  • Advise on any supporting policies;
  • Advise on thresholds for risk-based decisions;
  • Ensure appropriate insurance cover is in place to mitigate risks.
  • Implement policies on risk management;
  • Identify particular risks that arise in their area of responsibility e.g., a data protection breach; an employment relation challenge;
  • Develop and maintain a local Risk Register and forward a copy of the Register annually to Head of Finance;
  • Support their staff to develop and apply risk management principles and tools for individual products;
  • Regularly view risks with their staff and help Managers identify and manage risks appropriately.

• Asset Managers will:
  • Identify and manage risks in individual products;
  • Provide input to the local Risk Register and report on progress;
  • Support their employees to apply good risk management principles.
  • Engage in the business of discretionary crypto asset management and advising clients, which may include other products, in the purchase and sale of securities and financial instruments. In managing other clients’ assets or advising other clients, the Asset Manager may use the information and trading strategies which it obtains, produces, or utilises in the performance of services in respect of MyWealth.
  • The Asset Manager may have conflicts of interest in managing the portfolio of MyWealth because its compensation for managing and/or advising other accounts may exceed its compensation for managing the portfolio of MyWealth, thus providing an incentive to prefer such other products or accounts. Moreover, if the Asset Manager makes trading decisions in respect of such accounts and in respect of MyWealth at or about the same time, MyWealth may be competing with such accounts for the same or similar positions. The Asset Manager will endeavour to allocate all crypto asset opportunities on a fair and equitable basis between MyWealth and those other accounts.
  • The Asset Manager and/or any of its associates may invest, directly or indirectly, in assets which may also be purchased or sold by MyWealth. Neither the Asset Manager nor any of its associates shall be under any obligation to account to MyWealth in respect of any such transaction or any benefit received by any of them from any such transaction.
  • MyWealth has been established and promoted at the request of the Asset Manager. Accordingly, the selection of the Asset Manager and the terms of its appointment, including the fees and compensation payable under the Asset Management Agreement, are not the result of arms-length negotiations.
  • Other Clients of the Asset Manager and its Affiliates; The Investment Manager, its affiliates and their principals manage other accounts. These accounts may employ different or similar trading strategies and could increase the level of competition for the same trades or positions that MyWealth might otherwise make, including the priorities of order entry. This could make it difficult or impossible to take or liquidate a position of a particular security at a satisfactory price. Moreover, in such situations, MyWealth may not be able to engage in as large a portion of a transaction as it otherwise would.
  • Performance Fee; In addition to receiving a Management Fee, the Asset Manager may also receive a Performance Fee based on the appreciation in the Net Asset Value per crypto assets. The Performance Fee will increase with regard to unrealised appreciation, as well as realised gains and accordingly a Performance Fee may be paid on unrealised gains which may subsequently never be realised. The Performance Fee may create an incentive for the Asset Manager to do funds allocations for MyWealth which are riskier than would be the case in the absence of a fee based on the performance of MyWealth.

• Individual Clients of employees will:
  • Take care to apply good risk management practice in their day-to-day work;
  • Follow the principles and objectives set out in this policy;
  • Follow other policies that contribute to managing risks;
  • Take part in relevant training where this will help with confidence and capacity in risk management.

• Directors will:
  • The Director will not be liable to account to MyWealth for any rewards he derives from such a transaction or arrangement provided the nature and extent of any material interest has been disclosed to the other Directors.
  • A Director who has an interest in any particular business to be considered at a meeting of the Directors may be counted for the purpose of determining whether the meeting is duly constituted and may vote at such meeting provided that the interest has been disclosed.
  • Save as disclosed in the Offering Documents, no Director has any interest, direct or indirect, in the promotion of, or in any assets which are proposed to be acquired, disposed of by or leased to, MyWealth. Save as disclosed in the Offering Documents, no Director has a material interest in any contract or arrangement entered into by MyWealth which is unusual in nature or conditions or significant in relation to the business of MyWealth, nor has any Director had such an interest since MyWealth was incorporated.
  • The above does not purport to be a complete list of all potential conflicts of interest involved in Crypto Asset staking in MyWealth. The Directors will seek to ensure that any conflict of interest of which they are aware is resolved fairly.

16. POTENTIAL CONFLICTS OF INTEREST

• The Directors, the Investment Manager, the Administrator, any Prime Broker, any Custodian, any broker and their respective directors, officers and employees appointed by or in respect of the product may, from time to time, act as director, promoter, manager, investment manager, investment adviser, registrar, administrator, transfer agent, trustee, custodian, broker, distributor or placing agent to, or be otherwise involved in, other collective investment schemes which have similar investment objectives to those of the Fund. Similarly, one or more of them may provide discretionary fund management or ancillary administration, custodian, or brokerage services to investors with similar investment objectives to those of the Fund. Consequently, any of them may, in the course of their business, have potential conflicts of interests with respect to the Fund. Each will at all times have regard to its obligations to the Fund and will endeavour to resolve such conflicts fairly.

17.  INTERNAL CONTROLS

• Internal controls encompass a review of the risks inherent in each activity. The Finance and Audit Committee report to the Board on the adequacy of internal controls. As part of its remit, the Committee reviews the work of the Internal and External Auditors and of MyWealth’s management. The Committee is therefore well placed to advise the Board on the effectiveness of the internal control system.

• Currently MyWealth has an external consultant which it contracts to review and report the effectiveness and reliability of the internal control system.

• As part of the annual audit, MyWealth’s External Auditors will advise the Finance and Audit Committee on the operation of the internal financial controls.

18.  PERIODIC REVIEW

The Board will periodically review its risk appetite and risk tolerance.

• The Board will also periodically review the effectiveness of the internal control system and in doing so will:
  • Review the previous year and examine the Institute’s track record on risk management;
  • Consider whether MyWealth has made the right decisions on risks that are value enhancing and value protecting;
  • Consider the internal and external risk profiles of the coming year;
  • Consider whether the current internal control arrangements are likely to be effective.

• As part of its review, the Board will consider:
  • MyWealth’s objectives and its financial and non-financial targets;
  • MyWealth’s strategic ambitions and progress towards them;
  • The management approach to risk;
  • The appropriateness of the level of delegation of authority;
  • Public reporting;
  • Prioritisation of risks;
  • Timely identification and assessment of risks;
  • The ability of MyWealth to learn from its problems and apply its learning.

• Crypto Assets are peer-to-peer, decentralized, digital assets or currencies whose implementation relies on the principles of cryptography to validate the transactions and generation of the assets or currencies themselves. As such the creation and usage of Crypto Assets is not regulated or licensed and is subject to high levels of volatility and market abuse. Crypto Assets exist entirely in electronic form. Crypto Assets are held on personal hard drives or third-party servers, and as such are susceptible to all of the risks inherent in holding any electronic data, such as power failure, data corruption, security breach, communication failure and user error. As such Crypto Assets are subject to theft, destruction, or loss of value from hackers, corruption, or technology specific factors such as viruses that do not affect traditional currency, which is underwritten by central banks and monetary authorities.

• Further, there can be no assurance that the computer code underlying Crypto Assets and their generation will not turn out to be flawed, resulting in unanticipated gluts of new Crypto Assets or the corruption of existing holdings of Crypto Assets.

• Transactions in Crypto Assets are recorded and authenticated not by a central repository, but by a peer- to-peer network. While decentralization avoids certain common threats to computer networks (e.g., denial of service attacks), the use of a peer-to-peer system relies on participants in the Cryptocurrency network having greater numbers and computing power than coordinated attackers.

• This authentication strategy necessitates investment in substantial amounts of computing power, which in turn increases the burdens on participants in the Cryptocurrency network to stay ahead of attackers. Prospective investors should be aware that, if and as the popularity of Cryptocurrency increases, the burdens on participants in the Cryptocurrency network (which are defrayed by transactional costs) can be expected to increase, reducing the value of the Segregated Portfolios.

• Certain transactions in Crypto Assets also provide a high degree of anonymity, meaning they may be misused for criminal activities, including money laundering. This misuse could lead law enforcement agencies to close exchange platforms at short notice and prevent consumers from accessing or retrieving any funds that the platforms may be holding for them.

APPENDIX I: ASSESSING RISKS

1. Most relevant authorities on risk management advocate two main parameters for assessing risks. The parameters are:
   • Likelihood, i.e., how likely is it to happen.
   • Impact, i.e., how significant might the consequences be.
2. These almost always focus on risk mitigation and management of the possible/likely “downsides” rather than of the possible/likely “upsides” although the idea of focusing resources on the riskiest can apply to risks to be embraced as well as to those to be managed/mitigated.

3. MyWealth will use a traffic light system as illustrated below to assess risk.