1. 1 Simon Schilder Ogier September 2009 Role, Regulation and Structuring of Offshore Funds in the Current Market Environment

2. 2 Background  Offshore jurisdictions currently subject to increased scrutiny  Why use offshore funds?

3. 3 Role of Offshore Funds  Tax neutrality  Appropriate level of Regulation  Expertise and sophistication of service providers

4. 4 Regulation  Changing regulatory landscape  Alternative Investment Fund Manager Directive  US Hedge Funds Transparency Act  Organisation for Economic Co-operation and Development (OECD) – Tax Information Exchange Agreements  Securities and Investment Business Act (SIBA)

5. 5 Structuring  Use of Liquidity control mechanics within fund documents  Gates  In-kind redemptions

6. 6 Structuring cont…  Suggested draft changes for in-kind redemption provisions “Payment of the Redemption Price to a shareholder on redemption will be made in cash or, in the discretion of the directors (following consultation with the Investment Manager), in securities (which may include short positions, as well as long positions) selected by the directors (following consultation with the Investment Manager), or partly in cash or partly in securities (which may include short positions, as well as long positions) selected by the directors (following consultation with the Investment Manager). In-kind distributions may be made directly to the redeeming shareholder, or alternatively: (a) may comprise interest in special purpose vehicles established by the Fund for the purpose of liquidating the securities which are being transferred (either outright or by a participation interest) by the fund; or (b) may be distributed into a liquidating trust or account and sold for the benefit of such redeeming shareholder, in either such case (i) payment to such shareholder of that portion of its redemption attributable to such securities will be delayed until such time as such securities can be liquidated and (ii) the amount otherwise due such shareholder shall be increased or decreased to reflect the performance of such securities through the date on which the liquidation of such securities is effected, and any applicable fees and expenses.”

7. 7 Structuring cont…  Use of side pockets  Suspension of redemptions/suspension of redemption payments

8. 8 Structuring cont…  Lessons learnt from decision in Strategic Turnaround Fund Partnership Limited  Cayman court considered redemption process  Decision creates a number of anomalies which should be corrected in drafting of fund documents going forward

9. 9 Structuring cont…  Suggested draft change for redemption provisions following decision in Strategic Turnaround Fund Partnership Limited “Upon the Redemption Day on which a share is redeemed, the holder shall cease to be a Member in respect of such share and shall not be entitled to any rights in respect thereof (and accordingly his name shall be forthwith removed from the Register with respect thereto and the share shall be cancelled and available for immediate reissue. Notwithstanding the preceding sentence a person whose share or shares have been redeemed, shall, in respect of such share or shares: (i) have the right to receive as a creditor (1) the Redemption Price… and (2) any dividend which had been declared in respect thereof before such Redemption Day; and (ii) continue to be bound by the provisions of these Articles regulating the payment of the Redemption Price including the right of suspension of such payment hereunder.”

10. 10 Structuring cont…  Flexibility of suspension provisions  Retain ability to continue to calculate NAV whilst maintaining a suspension of redemptions  Increased Investor Transparency  Valuation committees  Independent board of directors  Managed accounts

11. 11 The Future?

12. 12 Our Global reach Over 800 staff including 39 partners, 180+ lawyers and 300 professional administrators across nine jurisdictions

13. 13 Simon Schilder simon.schilder@ogier.com