FUND DIRECTORS GUIDE3rd Edition, 2015

Executive Summary

Sponsored by

IntroductionThe role and responsibilities of hedge fund directors and boards have changed significantly since the financial crisis.

We hope that the 2015 Edition of the Fund Directors Guide will provide timely and useful guidance to existing and potential directors of hedge funds to help them better understand their role and responsibilities as directors, as well as providing information for investment managers about what they should reasonably expect from fund directors.

The production of this updated Fund Directors Guide would not have been possible without the generous giving of their time by a number of our members, and I would like to thank them all for their support.

Jack Inglis,AIMA CEO

About the GuideThe Fund Directors Guide (the Guide) is the initiative of AIMAs Sound Practices Committee. AIMA first published the Guide in June 2005 and last revised it in 2008 under the title AIMAs Offshore Alternative Fund Directors Guide. The Guide has three principal audiences in mind, which are, in no particular order of importance:

investment managers and promoters of alternative funds;

individuals who are considering becoming directors of an alternative fund; and

the appointed board of directors of an alternative fund.

The Guide examines some of the practical, legal and tax considerations when selecting and appointing directors of an alternative fund; it explains the basic tasks that fund directors should carry out and suggests ways in which fund directors could manage their relationships with the funds service providers. It contains general advice on several important issues, including the review of the annual audited accounts and issues relating to directors and officers liability insurance. Naturally, the potential impact of taxation on a fund is an important driver; consequently, the Guide considers the impacts of taxation in various specific jurisdictions affecting the fund, service providers and the directors.

The Guide has been updated in light of the major new regulatory and tax developments (such as the AIFMD and FATCA) and adds new sections covering the general approach to fund governance, monitoring of trading practices, insider trading and business continuity planning. We have revised the main body of the Guide to be more jurisdiction neutral and added appendices to address some of the different jurisdictional requirements and practices affecting Cayman Islands, Ireland, Luxembourg and US funds.

Fund Directors Guide, 2015 Edition - Executive Summary

Fund Directors Guide, 2015 Edition - Executive Summary

Contents of the Guide The Guide covers a wide variety of topics. Where a topic has been included for the first time in the third edition, the topic has been italicised in the list below.

Fund Governanceo Defining Fund governanceo Mission of the Boardo Fiduciary obligationso Investor expectations

The Boardo Independent Directorso Skills, experience, diversity and other commitmentso Other Board composition considerationso Choosing a chairpersono Recommended practiceo Directors remunerationo Whether or not to use committeeso Ability to retain independent counselo Director due diligence

Role of the Boardo Conflicts of interesto Review of investment performance and approach to risk managemento Monitoring adherence to investment policy and restrictionso Monitoring of trading practiceso Monitoring NAV calculationo Monitoring marketing and investor relationso Anti-money laundering responsibilitieso Review of the appointment and performance of other service providerso Provision of information to shareholderso US Commodity Futures Trading Commission (CFTC) and delegation issueso Compliance with listing rules and continuing obligationso Side letterso Approval of prospectus and constitutional documentso Exercising discretionary waiverso Governance in between formal Board meetingso Use of experts and advisors by the Board and the costs of doing soo Oversight of insider trading and market manipulation risks

o Business continuity, disaster recovery planning and cyber securityo FATCA and similar automatic exchange of information regimes

Board Meetingso Frequency of meetingso Physical vs. telephone/video conference Board meetingso Location of Board meetingso Control of the agendao Standards set/suggested by courts for Board deliberationso Quality of informationo Disagreemento Recordkeepingo Example: Board meeting agenda

Relationship between the Board and investment manager

o Matters over which the investment manager has discretion and matters which are reserved to the Boardo Nature and frequency of information supplied to the Board regarding performance and subscriptions and redemptionso Transactions with affiliates/related parties of the investment managero Board monitoring responsibilities

Relationship between the Board and the auditor

o Selection of the auditorso Supervision of the Funds accounts and the audit processo Letters of representation

AIFMD considerationso Overviewo EU AIFMo Non-EU AIFMo Role of the AIFs Boardo Summary of AIFMD requirementso Relationship between the Board and the depositaryo AIFMD considerations for Directors

Directors and officers liability insuranceo General guidance and level of covero Director indemnificationo Key exposures to consider

Other resources

Order formElectronic copies of the full Fund Directors Guide (3rd Edition, 2015) are available to AIMA member contacts via the AIMA website. The electronic copies are subject to a limited licence and are reserved for the use of AIMA members only. Each AIMA member firm will receive one free hard copy of the Guide. Additional hard copies are available for purchase by members and non-members at the prices shown below. To order hard copies, please complete the following form and submit it to info@aima.org

DisclaimerThe Guide is not a substitute for specific advice, whether legal, regulatory, tax or other advice, nor for professional judgement. It does not seek to provide detailed advice or recommendations on the wider ranging corporate governance issues.

The Alternative Investment Management Association Ltd, 2015

About AIMAAs the global hedge fund association, the Alternative Investment Management Association (AIMA) has over 1,500 corporate members (with over 8,000 individual contacts) worldwide, based in over 50 countries. Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. AIMAs manager members collectively manage more than US$1.5 trillion in assets.

www.aima.org

AIMAs Fund Directors Guide (2015)

Cost per copy Quantity Total cost

AIMA members 30Non-members 150

Card Type:

Card Number:

Expiry Date:

Issue no. (if relevant):

Card Security Code:

Name of cardholder:

Job title:

Company:

Address of cardholder:

Tel:

Fax:

Email:

Companys activity:

Net proceeds from the sale of the additional hard copies of the Guide will be donated to Hedge Funds Care. Postage and packaging will be charged at cost. Credit card payments will be processed in Sterling () and only American Express, Visa, Visa Debit or MasterCard are accepted.

About Schulte Roth & ZabelSchulte Roth & Zabel is a full-service law firm with offices in London, New York and Washington, DC. As one of the leading law firms serving the financial services industry, the firm regularly advises clients on investment management, corporate and transactional matters, and provides counsel on securities regulatory compliance, enforcement and investigative issues. The firms practices include investment management; regulatory & compliance; securities & capital markets; bank regulatory; business reorganisation; cybersecurity; distressed investing; distressed debt & claims trading; employment & employee benefits; energy; environmental; finance; individual client services; intellectual property, sourcing & technology; litigation; mergers & acquisitions; real estate; structured products & derivatives; and tax.

Fund Directors Guide, 2015 Edition - Executive Summary