© 2012 Dechert LLP AIFMD Countdown: Breakfast Briefings One year to go Gus Black Stuart Martin

2 Agenda Today 1.Timetable and implementation 2.Key impact areas 3.Planning strategies 4.Questions

© 2012 Dechert LLP AIFMD Countdown: Timetable and implementation

4 Timetable – Level 1 Level 1: Primary Directive became EU law on 21 July Must be implemented by Member States by 22 July 2013.

5 Timetable – Level 2 ESMA issued technical advice to the Commission on 16 November Level 2: ‘regulations’ – publication delayed –Have ‘direct effect’ –Contain wide ranging implementing measures

6 Timetable – Level 3 Level 3 Committees comprise representatives of national regulators Level 3 Committees give advice, recommendations and guidance on development of Level 2 measures

7 Timetable – Marketing Directive in force (P) EU AIF obtain passport Non-EU AIF obtain passport? No more private placements? IF ESMA make positive recommendation, and requisite implementing legislation is passed

Timetable - FSA Discussion Paper earlier this year (DP12/1) – general concepts Consultation Paper expected towards end of this year 8

Timetable – New FUND Sourcebook To cover: AIFM of UK and non UK AIF UK managers of UK and non UK UCITS UK UCITS and non UCITS retail funds 9

Timetable – Other FSA to-dos Refine concepts (e.g. “AIF”) New regulated activity of “managing AIF”? Amend other Sourcebooks; Listing Rules etc. Amend secondary legislation (e.g. financial promotion regime) 10

11 Timetable – Authorisation FSA should accept applications “from Q2 2013” Existing EU managers: submit application by 22 July Interim compliance obligations are unclear. Best timing for new managers?

© 2012 Dechert LLP AIFMD Countdown: Key Impact Areas – Questions to Consider

A change in role? Pre AIFMD AIF legally responsible for fund operation manager responsible for investment management and promotion (MiFID) Post AIFMD AIF's legal responsibilities remain But EU manager assumes more of an “operator” role 13

Are you in scope? Do you manage AIFs? Is your business an AIFM? -risk management or portfolio management Can you rely on any exemptions? -de minimis exemptions? -MIFID carve out via 3 rd country AIFM or self-managed AIF? 14

Authorisation For each fund consider: –Management and delegation structure –Who (if anyone) is the AIFM? –Marketing in EU? How possible is offshore or MiFID-only structuring? 15

Authorisation (cont’d) Group planning: –should your current MiFID manager be the AIFM? –should you create a new AIFM? When should you submit your application? Will additional regulatory capital be required? 16

Risk and Liquidity Management Who will monitor? How will functional separation be ensured? Are my systems compliant? 17

Valuation Will I value internally or externally? External: who will do it and at what cost Internal: how will I ensure functional separation? Are my systems and policies compliant? 18

Other Operational / Compliance How will I deal with new requirements on: –conflicts? –due diligence? –inducements? –execution, etc? What changes are required to compliance / internal audit function? 19

Delegation What is my current delegation structure? Is it compliant? e.g. –“objectively justified”? –sufficiently resourced and authorised? –third countries? New relationship with administrator 20

Marketing Will private placement still work for me after 2013? For which products? Do I see value in the passport on day one? Should I re-domicile funds onshore? 21

Depositary Who will be depositary (where required)? Interaction with prime broker and trading arrangements? Impact on pricing? Should I re-domicile onshore funds offshore? 22

Remuneration Which rules will apply to me? –Proportionality guidance awaited Will current arrangements be compliant? Are new arrangements future-proof? Will I need new compensation structures (e.g. RemCom)? 23

Specific Issues Are any of my funds “significantly leveraged”? –guidance awaited, 3x NAV? Will the “asset stripping” rules affect me and how will I comply? Will rules on investment in securitisation provisions affect me? 24

Transparency What will the impact on fund documents be? Interaction with existing investor reporting? Who will monitor compliance? 25

© 2012 Dechert LLP AIFMD Countdown: Planning

House – stock-take Which entities are in my group? How are they capitalised and regulated? Interaction with investment decision making process? What is status of my portfolios? (AIF or not AIF?) 27

House – group structure Group structure changes? New entities and authorisations? Will service provider contracts, employees, IP rights, software licences etc. be in the right place or easy to change? 28

House – general risk Group risk and liability profile changes? Insurance update? Impact on group tax arrangements and planning? 29

Counterparty – stock-take Who are my service providers? What do they do? Contract database? How will existing terms be impacted by new requirements? –Counterparty terms? –Investment strategy and objectives? 30

Counterparty – Planning Will I need new counterparties (e.g. depositary)? How do I manage the ‘paper blizzard’? 31

Planning – Product Will funds need re-structuring? Process for documentation updates? How will new rules affect: –Fees? –Product viability? –Investor base? 32

33 Product outcomes (cont) Will my strategy work in a platform that is outside the scope of AIFMD? –UCITS / Newcits? –managed accounts? Dual fund ranges – EU and a second cheaper, better performing non EU range? Development of an AIFMD brand?

Planning – general Who is responsible? Are senior management onboard? Strategy for staying informed? “First mover advantage” or “wait and see”? Are different jurisdictions joined-up? Staffing needs? 34

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. 35 QUESTIONS? Gus Black and Stuart Martin Dechert LLP