1. Practical Risk Considerations for Fund Directors Antonio Thomas, Partner ManagementPlus Group

2. Agenda What Can Go Wrong? Issues facing fund Directors under AIFM Practical Suggestions Page 2

3. What Can Go Wrong?

4. Recent case: Weavering Macro Fixed Income Fund Limited (Cayman) Hedge Fund masking trading losses via fictitious swaps with related party (c. $450M). Grand Court in Cayman held (2011) that WMFIFL directors were guilty of wilful neglect or default. The Court restated existing law and practice that directors must: – Take an active role in supervising the fund's affairs and its business. – Apply their minds and independent judgement to the decisions they make and to the documents the fund's service providers ask them to sign. – Perform their duties in an active, diligent, inquisitorial and professional fashion, applying their own independent judgement in a business like manner. – Develop and implement appropriate procedures that enable them to carry out their functions (and to demonstrate that they have done so). Page 4

5. Issues Facing Fund Directors under AIFMD

6. Who should sit on the board of AIF and why are they there Responsibilities of AIF vs AIFM Who has the ultimate responsibility How is that translated in day to day oversight How is that documented Who has the final decision (valuation, risk etc.) Page 6

7. Current debates in the Fund business Responsibilities of AIF vs AIFM (valuation who has the ultimate responsibility, MLRO where does it sit) AIF Board Composition (independent vs in-house or mix inc. AIFM) Competencies, specific experience, availability and location Physical Board meetings vs Circular Resolutions, frequency Oversight, who does it and what level (AIF Board or AIFM, 3 rd Parties) Role of Depositary Page 7

8. Practical suggestions

9. Tools for defining the Role of the Director TOR - summary of the board’s scope and responsibility vs other bodies e.g Audit, Investment, Valuations Committee etc DSA – Directors Service Agreement for each member including scope Reporting – board packs, intra board meeting reporting, liquidity, monthly investment managers report Official Fund documents PPM Regulatory reporting Passporting notifications Shareholder documentation Reporting accounts Valuation policy Page 9

10. Conclusions Understand your obligations in the specific context Establish clear boundaries between AIF Board and AIFM and escalation procedures Be active and engaged with sponsor and AIFM Identify and use various resources on corporate governance and risk reporting Try to anticipate crises and have an established protocol / procedures to deal with them before they happen where possible Page 10

11. QUESTIONS ? THANK YOU antonio.thomas@mplgroup.com