AIFMD Countdown: Breakfast Briefing No. 3

1. AIFMD Countdown:Breakfast Briefing No. 3 Gus Black Richard Frase Declan O’Sullivan

2. Implementation and delegation update Marketing Remuneration Agenda Today

3. Implementation UpdateDelegation Update 18794858_1.PPTX

4. Implementation Update • Statutory Regulation implementing Level I Directive • Level II Implementing Regulations (directly effective) • Minor amendments to primary legislation • Central Bank Consultation All by 1 January before EU Presidency

5. Implementation Update (cont’d) • Statutory Regulation implementing Level I Directive • Level II Implementing Regulations

6. Minor Amendments to Primary Legislation • Unit Trust Act 1990 • Companies Act 1990, Part XIII • Investment Limited Partnerships Act 1994 • Investment Funds, Companies and Miscellaneous Provisions Act 2005 (permitting CCFs)

7. Central Bank Consultation • Draft AIF Handbook, 30 October 2012 • Consolidated rulebook: • “RIAIF” requirements “Or I AIF” • “QIAIF” enhancements “Q I AIF” • AIFM requirements • AIF Management Company requirements • Fund Administrator requirements • AIF Depositary requirements • Finalised Handbook expected early 2013

8. Consultation Paper: Headlines • Removal of the Promoter approval process • Increased flexibility for RIAIFs (UCITS alternative) • Reduced investment restrictions for QIAIFs • ‘Fair treatment’ of unit-holders in different share classes • Creation of side pockets for investment purposes • Removal of Irish prime brokerage rules, OTC counterparty criteria and credit rating criteria • Abolition of PIF regime

9. Coming Soon • ICAVs • ILP Legislation

10. Delegation Update Article 85(d), draft Level II Regulations March 2012: “AIFM shall be deemed a letter-box entity and shall no longer be considered to be the manager of the AIF... [if] (d) the totality of the individually delegated tasks substantially exceeds the tasks remaining with the AIFM.” • Still being argued over

11. Marketing AIFs to European Investors 18794858_1.PPTX

12. EU AIFM marketing EU AIF EU AIFM marketing Non-EU AIF Non-EU AIFM marketing EU AIF Non-EU AIFM marketing Non-EU AIF Home state marketing Cross border marketing under passport Cross border marketing under private placement regime Unsolicited sales aka passive marketing aka reverse solicitation. The Permutations 18794858_1.PPTX

13. Timetable – Marketing Directive in force (P) 2011 2012 2013 2014 2015 2016 2017 2018 EU AIF obtains passport Non-EU AIF can obtain passport No more private placements? 18794858_1.PPTX

14. EU AIFM markets EU AIF in AIFM’s home state (art 31) • AIFM notifies home state regulator (and AIF regulator if different). • Home state regulator approves within 1 month. • Any material change to particulars must be reapproved by regulator. • EU AIFM markets EU AIF under passport in other EU states (art 32) • AIFM notifies home state regulator (and AIF regulator if different). • Home state regulator notifies host state regulator within 1 month. • Home state regulator notifies AIFM that it has done this. • AIFM can market in host state from date of notification. • Any material change must be reapproved by home state regulator. 18794858_1.PPTX

15. EU AIFM marketing non-EU AIF (art 36) • AIFM is based in EU and authorised under AIFMD • Non-EU AIF must comply with AIFMD except for depository rules • An “entity” must be appointed to monitor cash flows, safe-keep assets and ensure subscriptions and redemptions, and that calculation of units takes place in line with AIFMD requirements • Non-EU AIF’s home state must have cooperation arrangements. • Marketing is on a state by state basis and an individual state may impose additional restrictions 18794858_1.PPTX

16. Non-EU AIFM marketing EU and non EU AIFs (art 37) • Non-EU AIFM is authorised under AIFMD • AIFs must be managed by the authorised Non-EU AIFM • Non-EU AIFM must have an EU state of reference and a legal representative in that EU state (which must perform the compliance function) • State of Reference is (in outline) • the same state as the home state of the EU AIF • the state where most of the AIFM EU AIFs are established • the state where the largest amount of assets are managed; or • the state when the AIFM intends to develop effective marketing • If the AIFM does not follow its marketing strategy, or changes it, then the state of reference may also be changed. 18794858_1.PPTX

17. Non-EU AIFM passporting EU AIF (art 39) • If non-EU AIFM is authorised under AIFMD it may passport using the same notifications procedure as for EU AIFM subject to its home state meeting cooperation requirements. • Non-EU AIFM passporting non-EU AIF (art 40) • If non-EU AIFM is authorised under AIFMD it may passport using the same notification procedure as for an EU AIFM subject to its home state meeting cooperation requirements. 18794858_1.PPTX

18. Non-EU AIFM marketing without a passport (art 42) • Non-EU AIFM is not authorised under AIFMD • States may on a state by state basis allow marketing in their territory only if: • The non-EU AIFM complies with the AIFMD’s annual report, disclosure and reporting requirements and with requirements on control of non-listed companies • Its home state meets the cooperation requirements • States may impose stricter rules on a state by state basis. 18794858_1.PPTX

19. Permitted Categories of Investor • Statesshall ensure marketing is only permitted to professional investors, subject to right of individual states to establish retail marketing regimes under article 43. • Under article 43 EU states may allow AIFMs to market to retail investors in their territories and impose stricter requirements • Requirements may not be stricter for EU AIFs established in another EU state than for domestic AIFs 18794858_1.PPTX

20. Marketing Summary (1) 18794858_1.PPTX

21. Marketing summary (2) EU Funds with EU AIFMs Non-EU Funds or EU Funds with Non-EU AIFMs Implementation date. Passports made available to EU AIFMs for EU Funds. Private placement only Dual marketing system – EU passport or private placement Extension of passports to non-EU AIFMs and non-EU AIFs. Dual marketing system – EU passport or private placement ESMA to review the passport regime. Possible end of national private placement regime. Passport only ? Passport only ? 18794858_1.PPTX

22. Remuneration issues 18794858_1.PPTX

23. Remuneration • What is the regulatory agenda?

24. Remuneration • What is the current state of play? • Level 1 text • ESMA consultation • FSA consultation • Next steps

25. Remuneration - scope • Who is affected? • Portfolio management • Governing body members • Senior management • Control functions • Other highly paid staff • Other risk takers (who have a material impact on risk profile)

26. Remuneration – ten key questions • How will my comp structure have to change? • Will “proportionality” and “tailoring” help me? • Will I need a remuneration committee? • What are the disclosure requirements?

27. Remuneration – ten key questions • Why are “malus” and “clawback” important? • How do I deal with multiple funds? • How do I mitigate the tax impact?

28. Remuneration – ten key questions • How do I deal with risk takers who are also business owners? • Will there be a regulatory capital impact? • Can I avoid any/all of the above?

29. QUESTIONS? Your speakers today: gus.black@dechert.com richard.frase@dechert.com declan.osullivan@dechert.com 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.