3. they have a net worth, or joint net worth with their spouse, exceeding US$1,000,000 (excluding that person s principal place of residence); or

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1 Jersey Expert Funds Introduction The Expert Funds regulatory regime is attractive to promoters wishing to establish funds aimed at sophisticated, institutional and high net-worth investors. The Expert Fund classification under the Collective Investment Funds (Jersey) Law 1988 (the "Law") benefits from significantly less regulation than traditional unclassified collective investment funds, which enables Expert Funds to be established in a matter of days. The Expert Fund regime establishes a streamlined authorisation process, and permits the certification by a regulated Jersey financial services provider - typically the administrator - of the fund's compliance with the guidelines of the Jersey Financial Services Commission (the "Commission"). This contrasts extremely favourably with the often lengthy and involved in-principle consent, document review and final approval process for traditional collective investment funds otherwise carried out by the Commission. Qualification as an Expert Fund A collective investment fund will qualify as an Expert Fund if each investor signs an acknowledgement of receipt of a prescribed form of investment warning and the Expert Fund is only offered to investors falling within one of the following categories ("Expert Investors"): 1. they invest a minimum of US$100,000 (or currency equivalent); or 2. their ordinary business or professional activity includes the buying or selling of investments or the provision of investment advice or an employee, director, partner or consultant of such a person; or 3. they have a net worth, or joint net worth with their spouse, exceeding US$1,000,000 (excluding that person s principal place of residence); or 4. it is a company, partnership, trust or other association which has assets available for investment of not less than US$1,000,000 or every member or partner of which falls within the definition of expert investor; or 5. it is a fund service provider or an associate of a fund service provider to the Expert Fund or an employer, director, partner or consultant of such a person who is acquiring investment in the Expert Fund as part of their remuneration or incentive or by way of co-investment; or 6. it is a government, local authority, public authority or supra-national body in Jersey or elsewhere. An Expert Fund must fall within the definition of a "collective investment fund" for the purposes of the Law and can be structured as a company, a limited partnership or a unit trust. It may be either open or closed-ended. An Expert Fund must have an auditor appointed, and annual audited accounts must be prepared.

2 Page 2 Regulatory requirements and key features Investor protection Investor protection is maintained through the requirements that: 1. full disclosure be set out in any offering document issued by the Expert Fund; 2. any Jersey fund service provider to the Expert Fund must be licensed to do so by the Commission; and 3. prospective investors sign an agreed form of investment warning before their investment is accepted. Investor requirements All investors must qualify as expert investors and must sign an investment warning prior to investing in the fund. In addition, the Commission believes that those involved in establishing and providing services to an Expert Fund should be able to invest in the fund, and will adopt a flexible approach in relation to "carried interest" investments to be made by or on behalf of those connected with the Expert Fund. Structure Expert funds can take any form recognised under the laws of Jersey. Companies 1. The Companies (Jersey) Law 1991 is a modern statute, based upon internationally familiar English company law principles. 2. There is no minimum authorised or issued share capital requirement imposed. 3. A number of different types of company are available (see our briefings entitled "Companies in Jersey" and "Cell Companies in Jersey"). 4. Corporate Expert Funds must appoint two Jersey resident directors with appropriate experience in the asset class to be purchased by the Expert Fund. Unit trusts 1. In contrast to a company, a unit trust is not a separate legal entity as such, but a trust arrangement whereby legal ownership of the fund s assets is vested in a trustee who holds the assets of the fund on trust for the benefit of the unit-holders. 2. The unit trust will generally be constituted by means of a trust instrument made between a trustee company and an independent manager. Typically the manager will promote, manage and administer the scheme. Subscription proceeds will be paid to the trustee which will act as custodian of the investment assets of the fund. In addition, the trustee will generally supervise compliance by the manager with its obligations under the trust instrument. 3. The trust instrument will generally contain provisions regulating the issue, redemption and valuation of units, the appointment and removal of the trustee and the manager, their duties and remuneration, borrowing powers, investment restrictions and for the winding-up of the trust.

3 Page 3 4. Jersey has a modern statute-based trusts law. 5. For most practical purposes a unit trust scheme will operate and be regulated in the same manner as a corporate investment fund. Limited partnerships 1. Limited partnerships may be established and operated under comprehensive and modern legislation. Jersey offers a selection of limited partnerships, including general partnerships, plain-vanilla limited partnerships (with no separate legal personality), separate limited partnerships (which do have separate legal personality), incorporated limited partnerships (ie an incorporated partnership) and limited liability partnerships (where all parties enjoy a degree of limited liability) ("LLPs"). 2. A limited partnership may be an appropriate structure for a number of different purposes. A principal use will be to provide an additional form of investment vehicle for mutual funds, in particular for the private equity industry. A limited partnership can also be an attractive structure for various tax planning purposes as the partnership is generally treated as being fiscally transparent. 3. There is no maximum imposed on the number of limited partners of a limited partnership. 4. The general partner will manage the business of the partnership and have unlimited liability for its debts (save for with respect to an LLP). The liability of investors taking interests as limited partners (and who do not participate in the management of the business) will be limited generally to the amount of their investment. 5. The general partner must appoint two Jersey resident directors with appropriate experience in the asset class to be purchased by the Expert Fund. Investment manager/manager The investment manager should be of good standing and in particular should: 1. have relevant experience in managing assets similar to those of the Expert Fund; 2. have no criminal convictions or regulatory sanctions imposed on it; 3. be solvent; 4. be established and regulated in an OECD member state or state or jurisdiction with which the Commission has entered into a Memorandum of Understanding (or another jurisdiction - as agreed with the Commission - which subjects the manager to appropriate regulatory oversight); 5. be regulated in its home state/jurisdiction (or otherwise approved by the Commission); and 6. satisfy the Commission s general principles of corporate governance and span of control requirements (meeting the four-eyes principle if it cannot handle client monies, and the six-eyes principle if it can handle such monies). If an investment manager does not meet these requirements, it may approach the Commission for approval on a case-by-case basis, with the Commission taking a flexible approach, commensurate with offering adequate protection to the Expert Fund s investors and the Island s reputation.

4 Page 4 If a distributor is the "prime mover" behind the fund, then that distributor will be required to meet similar tests to those imposed upon the investment manager. Once the Commission approves the investment manager, provided there are no material changes to its circumstances, the Commission will not require the investment manager to seek its further approval to act as investment manager to additional Expert Funds. Offering documents The overriding principle of the Expert Fund regime is that any offering document must set out clearly and fully all material information that a prospective investor would reasonably require to enable them to make an informed judgement about investing in the Expert Fund. This should include the basis upon which the value of the Expert Fund is calculated and certain other criteria regarding the details of the offer and service providers which are typically found in most well-drafted offer documents. The offering documentation will be required to include the relevant investment warnings contained in the Commission s guidelines explaining that the Expert Fund is only suitable for expert investors as well as any investment warnings required by any applicable legislation, and will also be required to contain an acknowledgement that all investors must sign confirming that they fully understand and accept the risks of investing in that Expert Fund. Investment restrictions Full details of the investment strategy must be set out in the offering documentation. There are no investment or borrowing restrictions applicable to Expert Funds, provided that the approach to borrowing or gearing is clearly disclosed in the offering documentation. If the Expert Fund is permitted to borrow money in excess of 200% of its net asset value, full details of the manner in which the risk posed by such borrowing will be managed must be disclosed to the Commission and in the offering documentation. There are no limitations on marketing from a Jersey legal perspective or, in particular, on the number of persons to whom an Expert Fund can be marketed. Safe custody arrangements An Expert Fund must have adequate safe custody or prime brokerage arrangements in place in respect of the fund assets, although there is no requirement for these to be carried out by an independent Jersey custodian, other than for an open-ended Expert Fund. An open ended Expert Fund will be required to source its custody arrangements from a Jersey custodian or, if it is a hedge fund, it may appoint a prime broker that is part of a group with a credit rating of A1/P1 or better. Such prime broker need not be based in Jersey. Administration and monitoring of the investment manager Every Expert Fund must appoint an administrator, manager or (in the case of a unit trust) trustee that is regulated by the Commission and has a physical presence in Jersey. The administrator, manager or trustee is responsible for ensuring that the investment manager complies with the terms of the offering documentation and all applicable law when managing the Expert Fund. The responsibility of the administrator, manager or trustee (as applicable) shall include taking reasonable measures to satisfy itself that the actions of the investment manager do not breach the investment and borrowing restrictions applicable to the Expert Fund as set out in the prospectus, and to promptly notify the entity that appointed the investment manager of any concerns it has in that regard so that appropriate action may be taken. The "reasonable measures" that the administrator, manager or trustee takes to fulfil their responsibility may be outsourced in accordance with the Commission s policy, though the responsibility itself cannot be outsourced.

5 Page 5 The administrator, manager or trustee (as applicable) will be required to maintain in Jersey sufficient records in relation to the Expert Fund in order to fulfil its obligations. Each Jersey functionary of an Expert Fund must be licenced under the Financial Services (Jersey) Law 1998 to carry out "funds services business" and must be managed and operated in accordance with the terms of the codes of practice published by the Commission. The authorisation process Assuming that the fund complies with all of the criteria of the Expert Fund regime, the authorisation process itself is quick and straightforward and the relevant consents for a new Expert Fund should be issued with a matter of days. The administrator, manager or trustee of the Expert Fund must complete and sign an application form setting out the main features of the Expert Fund and confirming that the fund meets the Commission s requirements for Expert Funds. This application form must be countersigned by either the directors of a fund company or the general partner of a limited partnership fund, or by the manager or trustee of a unit trust fund, and then lodged with the Commission together with the draft offering documentation and prescribed fee. The Commission will review the application form to confirm that it has been completed properly, but will not carry out a regulatory review of the Expert Fund nor will it review the fund documentation, save in exceptional circumstances. If satisfied that the Expert Fund satisfies the Commission s criteria for an Expert Fund, the Commission will authorise the Expert Fund on the basis of the application form, and will then issue the relevant consents. Post launch ongoing requirements As an Expert Fund and certified fund for Jersey regulatory purposes, it must comply with the Expert Fund Guide and the Codes of Practice published by the Commission. All material changes to information provided to the Commission in connection with an Expert Fund should be notified to the Commission as soon as possible and, in any event, within 28 days of such change taking place. Any change to an Expert Fund that would not meet the criteria set out in the Expert Fund Guide or that would breach any certificate condition applicable to that Expert Fund will require the prior consent of a duly authorised officer of the Commission. Updated: 18 May 2017 For further information please refer to your usual contact or: Jersey - Nigel Weston, Partner nigel.weston@walkersglobal.com +44 (0) Jersey - Jonathan Heaney, Partner jonathan.heaney@walkersglobal.com +44 (0) Jersey - Sophie Reguengo, Senior Associate sophie.reguengo@walkersglobal.com +44 (0) The information contained in this memorandum is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter. Walkers works in exclusive association with Taylors in Bermuda, a full service commercial law firm providing advice on all aspects of Bermuda law.