© 2012 Dechert LLP AIFMD Countdown: Level Two Is Here

© 2012 Dechert LLP AIFMD Countdown: Timetable Recap

3 AIFMD became EU law on 21 July 2011 Must be implemented by 22 July 2013 Transitional period until July 2014

4 Level 2: Regulations Published on 19 December 2012 Have ‘direct effect’ Contain wide ranging implementing measures

© 2012 Dechert LLP AIFMD Countdown: Scope

Scope and Authorisation Do you manage AIFs? Can you rely on any exemptions? -de minimis? -delegate only? 6

© 2012 Dechert LLP AIFMD Countdown: Key Impact – Marketing Funds in Europe

8 Timetable – Marketing Directive in force (P) EU AIF marketed by EU AIFM obtain passport EU AIF managed by non-EU AIFM and Non-EU AIF obtain passport? No more private placements? IF ESMA make positive recommendation, and requisite implementing legislation is passed Changes to national private placement regimes?

Marketing by Asian managers in Europe 9 Non-EU AIFM marketing –Member states may allow if: The AIFM complies with the AIFMD’s disclosure, reporting and transparency requirements and with requirements on control of non-listed companies Its home state meets the cooperation requirements –Member States may impose stricter rules...

_1.PPTX Marketing summary Non-EU Funds or EU Funds with Asian AIFMs Extension of passports to non-EU AIFMs and non-EU AIFs. EU Funds with EU AIFMs Dual marketing system – EU passport or private placement Implementation date. Passports made available to EU AIFMs for EU Funds ESMA to review the passport regime. Possible end of national private placement regime. Passport only ? Dual marketing system – EU passport or private placement Private placement only

Transparency New disclosure requirements: Impact on fund documents and IR? Who will deliver compliance? 11

© 2012 Dechert LLP AIFMD Countdown: Key Impact – Delegation

Delegation What is your current delegation structure? Is it compliant? –e.g. “third country” issues –Delegation by EU AIFM to non-EU sub-manager –Delegation by non-EU AIFM to EU sub-manager Letter box entities 13

Delegation Fund Primary Manager Sub- manager or AIFM ? ?

© 2012 Dechert LLP AIFMD Countdown: What EU AIFMs are facing over the short term, and Asian managers may face in the long term…

© 2012 Dechert LLP AIFMD Countdown: Key Impact Areas – Organisational changes

General Operating Principles (1) What are “operating conditions”? Derived from operating conditions for MiFID and UCITS managers – so reflect compliance policies, such as best execution and personal account dealing Some obligations relate to the AIF itself, and not the AIFM 17

General Operating Principles (2) Quality and commitment of governing body/personnel No “undue costs” charged to investors Fair treatment of investors Due diligence requirements Appointment of prime brokers and counterparties 18

Organisational Matters – Conflicts of Interest AIFM/MiFID investment managers/UCITS management companies convergence – business as usual? Key features of conflicts policy Disclosure and internal reporting Impact on personnel structures AIF voting rights 19

Organisational Matters – Risk Management Tracks equivalent requirements for MiFID investment managers and UCITS management companies What does “functional and hierarchical separation” mean? 20

Organisational Matters – Liquidity Management A new requirement under AIFMD Match portfolio liquidity to redemption profile and counterparty commitments Guidance on liquidity measurement arrangements, liquidity limits and use of redemption gates and other liquidity management tools Guidance for funds of funds 21

Organisational Matters – Internal Procedures and Valuation Internal business arrangements Data processing and record keeping Permanent compliance/Internal audit functions Personal transactions Valuation/Calculation of NAV Use of models/Frequency of valuation/Professional guarantees for external valuers 22

© 2012 Dechert LLP AIFMD Countdown: Key Impact Areas – Depositary and Other Issues

Immediate concerns for EU AIFMs – 2015 concern for Asian AIFMs Depositary provisions Transparency and disclosure requirements Other 24

Depositary Who? New prime broker model? Impact on pricing? Re-domicile onshore funds offshore? 25

Other Issues Remuneration Private Equity Restrictions Leveraged Funds... and more! 26

dechert.com Almaty Austin Beijing Boston Brussels Charlotte Chicago Dubai Dublin Frankfurt Hartford Hong Kong London Los Angeles Luxembourg Moscow Munich New York Orange County Paris Philadelphia Princeton San Francisco Silicon Valley Tbilisi Washington, D.C. 27 QUESTIONS?