1. GREENBERG TRAURIG, LLP ATTORNEYS AT LAW WWW.GTLAW.COM ©2010. All rights reserved. LEGAL CONSIDERATIONS FOR ADVISER OUTSOURCING ARRANGEMENTS Contact: Arthur Don, Shareholder Phone: (312) 456.8438 Email: dona@gtlaw.com

2. - 2 - KEY DIFFERENCES BETWEEN “BACK OFFICE” AND “MIDDLE OFFICE” ARRANGEMENTS  Scope of services and scope of arrangement and scope of negotiations  Implementation plan is critical  Otherwise, same general contractual standards apply  Scope of contracts: with exhibits, can run hundreds of pages

3. - 3 - NEGOTIATION OF CONTRACT  Definition of Services critical  RFI/RFP process can help define services as well as certain contractual terms  First draft usually provided by service provider  Adviser should negotiate with team of counsel (in house and outside) and internal experts  Due diligence and overall risk management considerations

4. - 4 - SERVICE RELATED PROVISIONS  Menu of Services  Service Level Standards  Service changes: □ Required by law □ Custom enhancements  Implementation plan (including transition planning) and timing

5. - 5 - STANDARD PROVISIONS  Typical reps and warranties  “Dependencies” requirements for adviser  Limitations on subcontracting out services □ Affiliates generally permitted □ Non affiliates either preapproved or not unreasonably withheld  Key personnel clauses, and ability to change managers  International issues with foreign arrangements

6. - 6 - SPECIAL CONSIDERATIONS FOR INDUSTRY  Disaster recovery plans  Technology issues (must have IT and business input)  Error policies (esp. trade error resolutions)  Required records retention (2009 SEC positions)  Privacy rules and compliance  Insider trading and securities law compliance  RICs – Disclosure? Board review/approval?

7. - 7 - REPORTING AND AUDITING  Regular reports  Special reports  CCO and internal audit abilities by adviser (or reports)  SAS 70 or equivalent comfort

8. - 8 - DISPUTE RESOLUTION AND LIABILITIES  “Up the ladder” internal resolution  After C-level attempts to resolve fail: Mediation, arbitration and/or court  Standard of care (e.g., negligence, gross negligence)  Limitations of liability  Indemnifications (mutual) (I.P. licenses)  Insurance

9. - 9 - TERM AND TERMINATION  Term – multiyear  Termination by adviser □ For cause □ For other reason □ For non-core service functions  Termination by service provider