Comparison of Bermuda, Cayman Islands, British Virgin Islands and Mauritius Funds

Comparison of Bermuda, Cayman Islands, British Virgin Islands and Mauritius Funds

Preface This publication has been prepared for the assistance of those who are considering the formation of a fund in an offshore jurisdiction such as Bermuda, the British Virgin Islands ( BVI ), the Cayman Islands ( Cayman ), or Mauritius. This publication deals in broad terms with the requirements of each jurisdiction for the establishment and operation of a fund. It is not intended to be exhaustive, but merely to provide brief details and information, which, we hope, will be of use to our clients. We have separate publications dealing with each jurisdiction, which can be provided upon request. We recommend that our clients seek legal advice in relation to each jurisdiction on their specific proposals before taking steps to implement them. Before proceeding with the incorporation of a fund in any of the jurisdictions, persons are advised to consult their tax, legal and other professional advisors in their respective jurisdiction. Conyers Dill & Pearman Page 2 of 17

BERMUDA CAYMAN B.V.I. MAURITIUS 1. INTRODUCTION As the establishment of investment funds, mutual funds and hedge funds in offshore jurisdictions continues to grow, it is becoming increasingly important to understand the advantages offered by each jurisdiction. Conyers Dill & Pearman has offices in each of Bermuda, BVI, Cayman and Mauritius and is able to advise on the establishment of a fund in each of these four jurisdictions. The purpose of this publication is to help our clients identify which jurisdiction is best for them. 2. TYPES OF FUNDS An investment fund in Bermuda may take the form of a company, unit trust scheme or limited partnership and will be recognised under the Investment funds Act 2006 (the IFA ) as one of the following: Excluded Funds Private funds and closed ended funds are excluded from the scope of the IFA and are not regulated by the BMA. A private fund is one that no more than 20 investors (no look through only registered holders are counted) and it does not promote itself by communicating an invitation to the public generally. Exempted Funds There are two categories of exempt funds: Class A and Class B. Once registered, such funds have minimal reporting obligations to the BMA. A fund will qualify to be a Class A Exempt Fund if its investment The Mutual Funds Law (the Law ) defines a mutual fund as a company, unit trust or partnership that issues equity interests, the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and enabling investors in the mutual fund to receive profits or gains from the acquisition, holding, management or disposal of investments. A mutual fund will be treated under the Law as one of the following three types of funds: Unregulated Fund A fund will not be regulated by the Law if (a) it is not a mutual fund within the statutory definition (for example, a closed ended fund) or (b) it does not have a significant link with Cayman. A mutual fund is deemed to have a significant link with Cayman if either it is incorporated or established in Cayman, or it makes an invitation to the public in Cayman to subscribe The Securities and Investment Business Act ( SIBA ) defines a fund as a business company, partnership, unit trust or other body which (a) collects and pools investor funds for the purpose of collective investment, and (b) issues fund interests that entitle the holder to receive on demand, or within a specified period after demand, an amount computed by reference to the value of a proportionate interest in the whole or in a part of the net assets of the entity. The definition includes hedge funds and other vehicles which otherwise satisfy the definition of a fund but will not generally catch close ended funds, such as private equity funds. A fund which is incorporated or formed under the Laws of the BVI or otherwise carrying on business from within the BVI must be registered or recognised under SIBA as one of the following types: Investment funds in Mauritius are governed by The Securities Act 2005 (the Act ), the Securities (Disclosure Obligations of Reporting Issuers) Rules 2007, The Securities (Licensing) Rules 2007, the Securities (Public Offers) Rules 2007 and The Securities (Collective Investment Schemes and Close ended Funds) Regulations 2008 (the Regulations ). The Financial Services Commission (the FSC ) is responsible for the implementation and compliance with the Act and Regulations in respect of Investment Funds. Investment funds are divided into two broad categories, those that are Collective Investment Schemes ( CIS ), which are generally funds with interests redeemable by investors at their option, and those that are Closed end funds ( CEF ), which are generally funds with interests which are not redeemable at the option of investors. Page 3 of 17

manager meets certain qualification standards and if its securities are offered to qualified purchasers (see definition below). Eligible investment managers include: (i) those licensed under Investment Business Act, (ii) those authorised or licensed by foreign regulator recognised by BMA; or (iii) those carrying on business in BMA recognised jurisdiction and who have gross assets under management of not less than $100 million (either individually or as part of a group). Class A Exempt Fund must have officer, trustee or representative in Bermuda who has access to books and records of investment fund; investment fund must appoint fund administrator, registrar, auditor and custodian or prime broker; and financial statements must be prepared in accordance with International Financial Reporting Standards ( IFRS ) or Generally Accepted Accounting Principles ( GAAP ) or such other standards deemed appropriate by BMA. Funds which do not meet investment manager qualifications for Class A Exempt Funds may elect to be designated as Class B Exempt Funds if they offer their securities to qualified purchasers. for its equity interests. Please note that there are extensive exemptions from the notion of offering equity interests to the public in the Cayman Islands, including offers to sophisticated and high net worth persons. A fund that is not incorporated or established in Cayman and makes an offer to the public in Cayman through a person who is the holder of a licence under the Securities Investment Business Act and (i) its interests are listed on an approved stock exchange or (ii) the fund is regulated by an approved overseas regulatory authority will also qualify as an unregulated fund. Private Fund A private fund is one is which the equity interests are held by not more than fifteen investors, the majority of whom are capable of appointing or removing the operator of the fund (either the Director, Trustee or General Partner, as the case may be). A private fund may conduct business without obtaining a licence under the Law, without appointing a licensed mutual fund administrator and without registering with the Cayman Islands Monetary Authority ( CIMA ). Professional Fund A professional fund is a fund whose shares are made available only to professional investors and the initial investment of each investor in the fund (other than certain exempted investors ) is not less than US$100,000 or its equivalent in another currency. Exempted investors is narrowly defined and includes employees of the manager or promoter of the fund and fund functionaries. A professional investor is defined as a person (i) whose ordinary business involves, whether for that person s own account or the account of others, the acquisition or disposal of property of the same kind as the property, or a substantial part of the property, of the fund; or (ii) who has signed a declaration that he, whether individually or jointly with his spouse, has net worth in excess of US$1,000,000 (or its equivalent in another currency) and that he consents to being treated as a professional investor. Private Fund A private fund is a fund whose constitutional documents specify either that it will have no more than 50 investors or that the making of an Collective Investment Schemes There are five kinds of CIS: Fully Regulated CIS, which are mainly offered to the public, are CIS that (i) do not fall within any of the exemptions applicable to Professional, Specialized and Expert CIS as set out below and (ii) generally do not hold a Global Business licence. A Regulated Global Scheme is a CIS that holds a Category 1 Global Business Licence and may or may not be regulated in another jurisdiction. It is authorised to carry out the activities of a CIS by the FSC, however, it does not fall within the specific categories of a Professional, Specialised or Expert CIS. Professional CIS are CIS that offer their shares (i) to sophisticated investors, or (ii) as a private placement. In addition, the FSC also has the discretion to classify CIS whose offerings do not fall within (i) and (ii) as a Professional CIS. Specialised CIS are CIS that invest in real estate, derivatives, commodities or other products authorised by the FSC. A CIS can apply to the FSC to be authorised as an Expert Fund based on the condition that the scheme is Page 4 of 17

Classified Funds 1. Institutional Funds A fund may be classified as an institutional fund if: (a) pursuant to its constitution and prospectus (i) it is only open to qualified participants; or (ii) it requires each participant to invest a minimum amount of $100,000 in the fund; and (b) it has an officer, trustee, or representative resident in Bermuda who has access to the books and records of the investment fund. A person is a qualified participant if: (a) he is an individual who has had a personal income in excess of $200,000 in each of the two years preceding the current year or has had a joint income with his spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the year in which he purchases an investment; or (b) he is an individual whose net worth or joint net worth with his spouse in the year in which he purchases an investment exceeds $1,000,000 (a high net worth investor ); or (c) he is an individual who has such knowledge of, and experience in, financial and business matters as would enable him to properly evaluate the merits and risks of a prospective purchase of Regulated Fund A regulated fund may qualify to conduct business in Cayman in three different ways, namely, by (i) obtaining a license from CIMA; (ii) appointing a licensed mutual fund administrator in Cayman to provide the fund s principal office; or (iii) simply registering as a regulated mutual fund with CIMA on the basis that the minimum initial investment per investor in the fund is at least US$100,000 (or the equivalent, for sophisticated investors), or the equity interests of such fund are listed on a recognized stock exchange. The majority of Cayman funds are registered funds. Master fund Master funds have registration requirements and are subject to regulation under the Law. Master funds are not eligible for exemption on the basis of having 15 or fewer investors. A master fund is defined as a company, partnership or unit trust that (a) is established or incorporated in Cayman; (b) issues equity interests to one or more investors; (c) holds investments and conducts trading activities for the principal purpose of implementing the overall investment invitation to subscribe for or purchase shares issued by the fund is to be made on a private basis only. An invitation made on a private basis includes an invitation which is made (a) to specified persons and is not calculated to result in shares becoming available to other persons or to a large number of persons; or (b) by reason of a private or business connection between the person making the invitation and the investor. Public Fund A public fund is a fund which is not recognised as a professional fund or a private fund. Recognised Foreign Funds A fund which is incorporated and already operating in another jurisdiction may apply to become a recognised foreign fund in the BVI. The only reason a foreign fund would apply for recognition as a foreign fund is if it intends to offer its shares to investors in the BVI or otherwise intends to carry out its business in or from within the BVI. Recognition will only be granted if the foreign fund is already subject to an authorisation and supervisory regime in the jurisdiction in which it is only available to expert investors. The Regulations define an expert investor as either (i) an investor that makes minimum initial investment for his own account in an amount of not less than USD100,000 or (ii) a Sophisticated Investor as defined by the Act. Closed end funds There are three kinds of CEF: (i) CEF s that are reporting issuers; (ii) CEF s subject to Part V of the Act and (iii) CEF s that are not reporting issuers. The first two are primarily those CEF s that are listed, make public offerings or have 100 or more investors and as a result of this they are more highly regulated. Most private equity/venture capital funds would be classified as being the third category which are CEF s that are not reporting issuers. These are regulated in the same way as a Professional CIS. Page 5 of 17

investments; or (d) it is a body corporate, unincorporated association, partnership or trust that has total assets of not less than $5,000,000, whether such assets are held solely by that entity or held partly by that entity and partly by any other body corporate of which it is a subsidiary or holding company; or (e) it is an entity all of whose shareholders, members or beneficiaries fall into the classes set out above. 2. Administered Funds A fund will qualify for classification as an administered fund if its administrator is licensed under the IFA and: (a) pursuant to its constitution and prospectus it requires participants to invest a minimum of $50,000 in the fund; or (b) it is listed on a stock exchange recognized by the BMA for this purpose. strategy of the regulated feeder fund and (d) has one or more regulated feeder funds either directly or through an intermediary entity established to invest in the master fund. A regulated feeder fund is defined as a regulated mutual fund that conducts more than 51% of its investing in a master fund either directly or through an intermediary entity. Registration as a master fund will involve the filing of the fund s certificate of incorporation (or equivalent) and a form MF4 as well as payment of a fee payable on initial registration and annually thereafter. Master funds that are within scope of the new regulatory regime will be required to file audited accounts (with local auditor sign off) with the Authority within 6 months of financial year end. constituted which, in the opinion of the Financial Services Commission (British Virgin Islands) (the FSC ), provides to investors in the BVI protection at least equivalent to the protection provided for investors of public funds and adequate arrangements exist for co operation between the authorities of that jurisdiction and the BVI. No private or professional fund may carry on business in the BVI unless it is recognised under SIBA and no public fund may carry on business in the BVI unless it is registered under SIBA. An exception is granted to professional funds, which may carry on business for up to 21 days prior to being recognized. 3. Standard Funds A fund will be classified as a standard fund if it does not fall within the other two classifications. The Minister of Finance has the power to amend the current qualifications for any class of fund, and may add additional classes of funds. Page 6 of 17

Specified Jurisdiction Funds The Investment Funds (Specified Jurisdiction Fund) (Japan) Order 2012 (the Order ) together with the Investment Funds (Specified Jurisdiction Fund) Japan Rules 2012 permit Bermuda domiciled funds established pursuant to the Order to be marketed to the Japanese public ( Japan Fund ). The Order has been specifically created to ensure that the rules applicable to Japan Funds domiciled in Bermuda will meet the requirements of the Japanese Securities Dealers Association Regulations which provide that Japanese investment dealers may only solicit customers to subscribe to securities of any foreign investment trust that is established in a jurisdiction, the laws and regulations and disclosure system of which are well provided. Japan Funds will be regulated by the BMA which will require additional information, governance and disclosure with respect to Japan Funds. 3. INCORPORATION PROCEDURE AND TIMING An application for the authorisation of a fund is made on an IF Application Form that is submitted to the BMA concurrently with or, if desired, subsequently to, a request for permission to incorporate, form A Cayman mutual fund being set up as a company would be incorporated as an exempted company under the Companies Law. It would be required to file with the Registrar of Companies two signed copies of the A fund structured as a business company under the BVI Business Companies Act is incorporated by filing with the Registrar of Corporate Affairs the memorandum and articles of association of the proposed Investment Funds in Mauritius, whether they be a CIS or a CEF, are generally set up as a company under the Companies Act 2001 (the Companies Act ). Companies incorporated in Mauritius for the Page 7 of 17

and/or establish the fund and blanket permission for the issue and transfer of the fund s units. Application for authorisation must also include evidence of the promoter s expertise and experience in investment management, background information on the ultimate beneficial owners of the initial issued capital (usually issued to the promoter) and a draft prospectus complete with all pertinent details. It takes approximately 2 to 5 working days to obtain the classification consent of the BMA. During that time, the promoters and the lawyers will be working on drafting the bye laws, agreements, and other necessary documents required for the launch of the fund. memorandum and articles of association. No governmental approvals are required for incorporation (provided that the proposed name is not contrary to the Companies Law) and the incorporation process can generally be completed within 24 hours after receipt of all necessary due diligence documentation. However, before the fund can launch, the articles of association, prospectus and agreements will need to be finalised. If the fund is to be a regulated fund, then before it can commence operations as a mutual fund it must file statutory particulars (usually accompanied by the prospectus and consent letters from the fundʹs auditor and administrator) with CIMA. CIMA must confirm approval of such documents before the fund can commence operations. company. The memorandum and articles of association prescribe the operational aspects of the fund, including dealing dates, valuation dates, the procedures for the issue and redemption of shares, the methods for pricing shares and valuing assets, and investment restrictions, if any. The fund may generally be incorporated within 24 hours once the memorandum and articles of association are in final form. However, additional time must be given before the commencement of the offer of shares in order to allow the prospectus and various agreements to be finalised and signed and for the necessary governmental approvals to be obtained. Professional and Private Funds Once incorporated, a company which proposed to carry on business as a professional or private fund must apply for recognition under SIBA. In order to be recognised, the professional or private fund must demonstrate to the FSC that it satisfies the requirements set out in SIBA. Generally, this obligation is satisfied by submitting to the FSC an application form, together with a certified copy of the memorandum and articles of association of the fund and the fund s prospectus. purpose of doing business primarily outside Mauritius are called global business companies, or GBC s and are governed by the Financial Services Act 2007 (the Financial Services Act ). Such entities are either licensed as category 1 ( GBC1 ) or category 2 companies. Investment Funds must be incorporated as a GBC1. They are also required to be licensed by the FSC in accordance with the nature of their offering and investments as per the categories set out above. In order to obtain such a licence, the FSC will require detailed know your client information, an offering document and a business plan. Once these documents are received it will take approximately one to two weeks for the licence to be granted and for the Registrar of Companies (the Registrar ) to incorporate the Company. The fund cannot start trading until this has happened. Page 8 of 17

The FSC may exempt the fund from preparing and submitting a prospectus if it is satisfied as to how information will otherwise be communicated to potential investors. From a timing perspective, it takes approximately the same amount of time to launch a fund in any of the four jurisdictions. 4. NAME RESERVATIONS In Bermuda, the proposed name of the fund can be reserved free of charge with the Registrar of Companies for a three month period. From a timing perspective, it takes approximately the same amount of time to launch a fund in any of the four jurisdictions. In Cayman the proposed name can be reserved for up to six months for a small monthly fee. Public Funds A fund which will not be recognised as a professional fund or private fund must apply for registration as a public fund under SIBA. In order to be registered, the public fund must demonstrate to the FSC that it satisfies the requirements of a public fund as set out in SIBA. A public fund may not carry on business or manage or administer its affairs until it is registered under SIBA. From a timing perspective, it takes approximately the same amount of time to launch a fund in any of the four jurisdictions. In the BVI, the proposed name can be reserved with the Registrar of Corporate Affairs for a period of 3 months for a nominal fee. From a timing perspective, it takes approximately the same amount of time to launch a fund in any of the four jurisdictions. The name of the proposed company may be reserved with the Registrar before the company is incorporated. The name reservation can usually be confirmed within 24 hours. The reservation of the name will be available for 2 months from the date of notice of reservation but may be renewed for a further period of 2 months. The Companies Act contains certain restrictions on names but a Page 9 of 17

GBC1 need not necessarily end with the word Limited or Limitée or the abbreviation Ltd or Ltée. 5. LOCAL REQUIREMENTS Every fund company must maintain a registered office in Bermuda. Each Bermuda exempted company is required to have at least one director and a secretary. A secretary of an exempted company may be an individual or a company. A director of an exempted company may be an individual or any type of legal person (including any company or association or body of persons, whether corporate or unincorporate). For practical reasons, it is most common for the office of director to be filled by an individual or a company. To satisfy the residency requirement contained in the Companies Act, the secretary or one of the directors must be ordinarily resident in Bermuda. Alternatively, a company may satisfy the residency requirement by appointing either an individual or a company to act as its resident representative in Bermuda. Every authorised fund must also appoint a registrar who is required to maintain in Bermuda a register of the participants. A Cayman mutual fund must maintain a registered office in Cayman. A corporate fund must have a minimum of two individual directors at all times, although there is no requirement that such directors be resident in Cayman. Corporate directors are permitted in certain circumstances. A fund incorporation as a BVI business company or limited partnership must have a registered office and registered agent in the BVI. With effect from October 12, 2010, a fund will also be required to appoint an authorised representative in the BVI. The authorised representative acts as the liaison between the FSC and the licensee, and is required to maintain certain records. Each professional and private fund must have at least two directors, at least one of whom must be an individual. A public fund may not have corporate directors. If the fund does not have a significant management presence in the BVI, it will be required to appoint a local authorised representative which will be a BVI entity or individual certified by the FSC for this purpose. The authorised representative acts as the liaison between the FSC and the licensee. SIBA does not impose specific requirements with regard to the location of the manager, investment Every GBC1 must have a registered office in Mauritius and any change in the address of the registered office must be notified to the Registrar. The Financial Services Act requires that a GBC1 shall have a minimum of two directors resident in Mauritius and it must appoint a secretary. A GBC1 must maintain a share register which may be divided into two or more registers and kept at different locations, if expressly permitted by its constitution, but the principal register must be kept in Mauritius. A GBC1 must keep accounting records that correctly record and explain the transactions of the GBC1 which at any time enable the financial position of the GBC1 to be determined with reasonable accuracy and which enable the directors to prepare financial statements which are to be audited. These records, together with, inter alia, the constitution, minutes and copies of resolutions, must be kept at the registered office in Mauritius. Page 10 of 17

6. BOARD AND SHAREHOLDER MEETINGS Unless waived by a resolution of its shareholders, a Bermuda fund that is set up as a company must hold an annual general meeting of voting members, but such meeting need not be held in Bermuda. Likewise, board meetings need not be held in Bermuda. There is no requirement for annual director meetings. A Cayman fund does not need to hold an annual general meeting. CIMA has issued a statement of guidance stating that directors should meet at least twice a year in person or telephonically and more often if appropriate where the circumstances, size, nature or complexity require and, where necessary service providers should be requested to attend meetings. If any such meetings advisor, administrator, custodian or other functionary of a fund. However, it does provide that certain terms, conditions, limitations or restrictions may be imposed upon the issue of a certificate of recognition or registration. A certificate will not, in principle, be subject to terms, conditions, limitations or restrictions when the fund concerned has appointed functionaries that are incorporated in the BVI or in a jurisdiction that has been recognized under SIBA. A foreign functionary that is incorporated in a non recognized jurisdiction may also be acceptable to the FSC, provided the jurisdiction is regarded as having a prudent system of regulation and supervision of funds business. If this is not the case, the FSC may exercise its discretion and refuse to recognize or register the fund. A BVI fund does not need to hold an annual general meeting. If one is convened, it is not necessary that it be held in BVI. Likewise, board meetings need not be held in the BVI. Meetings of the directors of a GBC1 may be held in or outside Mauritius but all board meetings must include at least 2 directors from Mauritius. Any action that may be taken by the directors at a meeting may also be taken by them by a resolution in writing signed and assented to by all directors. Save as provided below, Mauritius companies are required to hold an Page 11 of 17

7. AUDITORS A fund must appoint an auditor acceptable to the BMA. The auditor can be based anywhere in the world. are convened, it is not necessary that they be held in Cayman. A regulated fund must appoint an auditor based in Cayman. Unregulated and private funds do not have to appoint an auditor. Each professional and private fund is required to have an auditor that satisfies certain conditions prescribed by SIBA and the BVI Regulatory Code. It is possible to apply to the FSC for an exemption from the requirement to appoint an auditor but the FSC will need to be satisfied that there are adequate systems and controls in place for the protection of investors prior to granting such an exemption. annual meeting of shareholders once in every calendar year, no later than six months after the GBC1 s balance sheet date, and no later than 15 months after the previous annual meeting. However, a GBC1 does not have to hold that meeting within the first calendar year of its incorporation but must hold that meeting within 18 months of its incorporation. It is not necessary for a private GBC1 to hold an annual meeting of the shareholders where everything required to be done at that meeting is done by written resolution in lieu. Shareholders meetings need not be held in Mauritius. A GBC1 must appoint an auditor to audit its financial statements and the audited financial statements are filed with the FSC. Each public fund must have an auditor which has been specifically approved by the FSC. Page 12 of 17

8. PROSPECTUSES A Bermuda fund must file a copy of its prospectus with the Registrar of Companies prior to making an offer of its shares or as soon as reasonably practicable thereafter, unless the company s shares are already listed on an appointed stock exchange or accepted by a competent regulatory authority. Any material changes to the prospectus thereafter must be filed as supplemental particulars with the Registrar of Companies. The prospectus must contain the particulars as specified in The Companies Act 1981 and the IFA (unless it is exempted from the IFA). A regulated fund must produce an offering document containing all material information about the fund. The offering document must be filed with CIMA together with the statutory particulars. The Law requires that offering documents for a mutual fund must describe the offered interests in all material respects and contain such other information as is necessary to enable a prospective investor to make an informed decision as to whether or not to subscribe. A master fund is not required to adopt or file an offering document although it is required to disclose to the Authority certain prescribed information in the form MF4. A public fund is required to file with the FSC a copy of its prospectus, which must contain provisions as specified in SIBA. The prospectus of a professional or private fund must contain a form of investment warning stating that the requirements considered necessary for the protection of investors that apply to public funds do not apply to professional or private funds. The FSC may exempt the fund from preparing and submitting a prospectus if it is satisfied as to how information will otherwise be communicated to potential investors. Fully Regulated CIS and Regulated Global Schemes are required to have a prospectus in the prescribed format set out in the 4 th schedule to the Regulations. The prospectus must set out details with regard to a minimum amount of subscription and at least 5% of the total amount must be raised within 6 months failing which the funds shall be returned to the investors. The FSC may, on application, grant a further 6 months for the fund to reach the minimum amount. The prospectus must also set out valuation procedures as well as procedures for valuing illiquid assets. Professional CIS, Specialised CIS and Expert Funds will need an offering document in order to be licensed by the FSC but the offering document does not need to be in the format set out in the 4 th schedule to the Regulations. CEF s that are reporting issuers and CEF s subject to Part V of the Act are also required to have a prospectus in the prescribed format set out in the 4 th schedule to the Regulations. In addition, the prospectus must comply with Part V of the Act and shall include the disclosures set out in the 5 th schedule to the Regulations. CEF s that are not reporting issuers are regulated in the same way as a Page 13 of 17

9. FUNCTIONARIES Authorised funds are required to appoint certain service providers, including an investment manager, administrator, registrar and custodian/prime broker, none of whom, except in the case of a standard fund, need to be resident in Bermuda provided there is some other Bermuda nexus. In the case of a standard fund, except where the administrator is carrying on fund administration business in Bermuda, the custodian of the standard fund must be a person licensed by the BMA. Generally speaking, a mutual fund will appoint an investment manager. The investment manager may be an affiliate of the promoters or operators. The investment manager renders management advice to the mutual fund and the acquisition or disposal of any investment is usually effected by the fund s custodian or prime broker. In most cases a custodian or prime broker will be appointed. A regulated mutual fund may qualify to conduct business by employing a licensed mutual fund administrator to provide the fund s principal office in the Cayman Islands and complying with other requirements applicable to all regulated mutual funds. It should be noted that a licensed mutual fund administrator must comply with certain obligations and duties pursuant to the law. A professional fund and a private fund must at all times have a fund manager, a fund administrator and a custodian, and the application for recognition must include information regarding each of these functionaries. The custodian of a professional or private fund must be functionally independent from the manager and administrator unless the custodian has sufficient systems and controls in place to ensure functional independence. It is possible to apply to the FSC for an exemption from the requirement to appoint a custodian, manager or auditor (although not an administrator). However, the FSC will need to be satisfied that there are adequate systems and controls in place for the protection of investors prior to granting such an exemption. Professional CIS and accordingly will need a prospectus in order to be licensed by the FSC but it does not need to be in the format set out in the 4 th schedule to the Regulations. A public fund is required to have a manager, administrator and custodian. Each functionary of a public fund is required to be functionally independent from every Page 14 of 17

9. ONGOING GOVERNMENT REGULATIONS Once a company has been incorporated as a fund, unless it is an exempted fund, it must apply to the BMA for approval in respect of any material changes to its prospectus or offering document or to replace a service provider. The BMA must also be notified of any proposal to replace a director of the company. A fund must make provision for the preparation and distribution of a financial report to investors including copies of its audited financial statements. Financial statements must be prepared in accordance with generally accepted accounting principals and audited in accordance with generally accepted auditing standards, either of which may be those of a jurisdiction other than Bermuda. There is no requirement to file audited accounts. The IFA gives the BMA the power to require a fund operator to furnish it with such reports on the fund s activities as the BMA may reasonably require. In particular, standard funds A regulated fund must file with CIMA an amended offering document or amended statutory particulars, as the case may be, if there is a material change to the relevant document, within 21 days of such change. A regulated fund must file a copy of its annual audited accounts with CIMA, unless an exemption is requested and granted. Regulated funds are required to file an annual report with CIMA. other functionary of the fund. It is possible to apply to the FSC for an exemption from the requirement to appoint a custodian (although not a manager or administrator). Each professional and private fund is required to prepare financial statements complying with the International Financing Reporting Standards promulgated by the International Accounting Standards Board, UK GAAP, US GAAP, Canadian GAAP or internationally recognised and generally accepted accounting standards equivalent to any of the foregoing. Each professional and private fund is required to provide a copy of its audited financial statements to the FSC within six months after its financial year end. Written notice is required to be given to the FSC within 7 days of any resignation or termination of a functionary of a professional or private fund. Further, no new functionary may be appointed without at least 7 days prior notification to the FSC of the proposed appointment. A fund does not breach the requirement of the Regulations if a functionary resigns, is terminated or otherwise ceases to act A GBC1 must give notice to the Registrar within 14 days of the issue of any such share or the reduction in stated capital. Every GBC1 must file with the Registrar a statement of the particulars of any charge, or of making any issue of debentures charged on or affecting any property of the GBC. A GBC1 is resident in Mauritius for tax purposes and is liable to taxes at a rate of 15%. However, such a company benefits from a deemed foreign tax credit which results in an effective tax rate of only 3%. Underlying tax credits may also be available. GBC1 s may also have to file quarterly tax statements via the Advance Payment System and make interim quarterly tax payments. A GBC1 must have at least two directors resident in Mauritius, maintain its principal bank account in Mauritius, keep and maintain its accounting records at its registered Page 15 of 17

must make monthly reports to the BMA advising of any changes in net asset value, new subscriptions and redemptions while institutional funds and administered funds must file such reports on a quarterly basis. A fund is required to submit to the BMA within six months after the financial year end, a statement confirming that the fund has been in compliance with the IFA, fund rules and fund prospectus rules. as a functionary and a replacement is appointed within 7 days of the original functionary ceasing to act. The FSC is also required to be notified of any change to the directors, authorised representative or auditor of a professional or private fund, any change in the address of the fund s place of business, any amendment to the constitutional documents of the fund, the issue of an offering document that was not previously provided to the FSC and any amendment to such offer document. Certain additional ongoing requirements are specific to public funds. In particular, a public fund requires the FSC s prior consent for any material change to its prospectus or structure, including any change of a director, functionary or auditor. There are also additional requirements regarding the prospectus of a public fund and where any of the information required to be disclosed in the prospectus ceases to be accurate in a material particular, the fund must publish and file an amendment to the prospectus within 14 days. office in Mauritius, and prepare its financial statements and have same audited in Mauritius. Fully Regulated CIS and Regulated Global Schemes are required to file with the FSC the audited annual accounts and quarterly interim financial statements. Expert Funds are required to file audited financial statements with the FSC. Unless the CEF holds a Category 1 Global Business Licence, it is required to file with the FSC its annual audited financial statements and its quarterly financial statements, which shall include the disclosures required by the 6 th and 7 th schedules to the Regulations. Page 16 of 17

This publication should not be construed as legal advice and is not intended to be relied upon in relation to any specific matter. It deals in broad terms only and is intended merely to provide a brief overview and give general information. Conyers Dill & Pearman, December 2014 About Conyers Dill & Pearman Conyers Dill & Pearman is a leading international law firm advising on the laws of Bermuda, the British Virgin Islands, the Cayman Islands and Mauritius. Conyers has over 130 lawyers in eight offices worldwide and is affiliated with the Conyers Client Services group of companies which provide corporate administration, secretarial, trust and management services. www.conyersdill.com Page 17 of 17