1. © 2012 Dechert LLP AIFMD Countdown: Breakfast Briefing No. 3 Gus Black Richard Frase Declan O’Sullivan

2. 2 Agenda Today 1.Implementation and delegation update 2.Marketing 3.Remuneration

3. © 2012 Dechert LLP Implementation Update Delegation Update 18794858_1.PPTX

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

5. Implementation Update (cont’d) A.Statutory Regulation implementing Level I Directive B.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. © 2012 Dechert LLP Marketing AIFs to European Investors 18794858_1.PPTX

12. The Permutations 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.

13. Timetable – Marketing 20112012201320142015201620172018 Directive in force (P) EU AIF obtains passport Non-EU AIF can obtain passport No more private placements? 18794858_1.PPTX

14. 1)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. 2)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 14

15. 3)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 15

16. 4)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 16

17. 5)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. 6)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 17

18. 7)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 18

19. Permitted Categories of Investor States shall 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 19

20. Marketing Summary (1) EntityEU PassportIndividual Private Placement Regimes EU AIFM and EU AIFComply with full Directiven/a EU AIFM/non EU AIFComply with full Directive, plus 3 rd country conditions Comply with full Directive excluding depositary rules 3 rd country conditions. States may impose stricter rules. Non-EU AIFM/EU AIF Non-EU AIFM/non-EU AIF Comply with full Directive, plus 3 rd country conditions plus state of reference Chapter IV: Transparency requirements Annual Report Disclosure to Investors Reporting Obligations to competent authorities 3 rd country conditions. States may impose stricter rules. Small EU AIFN/ADomestic regime only. 18794858_1.PPTX 20

21. 18794858_1.PPTX Marketing summary (2) Non-EU Funds or EU Funds with Non-EU AIFMs Extension of passports to non-EU AIFMs and non-EU AIFs. EU Funds with EU AIFMs Dual marketing system – EU passport or private placement Implementation date. Passports made available to EU AIFMs for EU Funds. 2010 2011 2012 2013 2014 2015 2016 2017 2018 ESMA to review the passport regime. Possible end of national private placement regime. Passport only ? Dual marketing system – EU passport or private placement Private placement only

22. © 2012 Dechert LLP Remuneration issues 18794858_1.PPTX

23. Remuneration What is the regulatory agenda? 23

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

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) 25

26. Remuneration – ten key questions 1.How will my comp structure have to change? 2.Will “proportionality” and “tailoring” help me? 3.Will I need a remuneration committee? 4.What are the disclosure requirements? 26

27. Remuneration – ten key questions 4.Why are “malus” and “clawback” important? 5.How do I deal with multiple funds? 6.How do I mitigate the tax impact? 27

28. Remuneration – ten key questions 8.How do I deal with risk takers who are also business owners? 9.Will there be a regulatory capital impact? 10.Can I avoid any/all of the above? 28

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