STRUCTURING INVESTMENT FUNDS

1. STRUCTURING INVESTMENT FUNDS

2. Current Legislative Regime Mutual Funds Act & Regulations, 1995 Authorised Funds Licensed Funds Exempt Funds Unrestricted Administrators Licensed Bank & Trust Cos Stand-alone Administrators Restricted Administrators

3. The New Bill

4. Key Definitions Investment Fund unit trust, company or partnership that issues or has equity interests the purpose or effect of which is the pooling of investor funds with the aim of spreading investment risks and achieving profits or gains from the acquisition, holding, management or disposal of investments.

5. Key Definitions Investment Fund Bahamian Nexus: �Bahamas-Based� Trustee, General Partner, Directors, Administrator, Investment Manager or Investment Advisor in The Bahamas; or Constitutive Documents governed by Bahamian law.

6. Key Definitions Investment Fund does not include unit trust, company or partnership where the holder of an Equity Interest does not have the option to redeem his Equity Interest or require the issuer to repurchase his Equity Interest. Closed-end structures have option to elect to be licensed as an Investment Fund.

7. Key Definitions Equity Interest a share, trust unit or partnership interest that carries an entitlement to participate in the profits or gains of the issuer and is redeemable or subject to be repurchased at the option of the Investor.

8. Key Definitions Investor a person who holds or owns an Equity Interest issued by an Investment Fund. Licensor the Securities Commission or a licensed Investment Fund Administrator.

9. Key Definitions Auditor A person who is A professionally qualified accountant; or An accountant licensed to practice as such under the Public Accountants Act.

10. Key Definitions Offering Document A document or series of documents on the basis of which- Equity Interests are offered for sale; or Persons are invited to subscribe for or purchase Equity Interests.

11. Categories of Investment Funds Professional Fund; Standard Fund; SMART Fund; Recognized Foreign Fund.

12. Professional Fund Offered to �Accredited Investors� only. Must be licensed by a Licensor. Prescribed disclosure requirements.

13. Professional Fund Accredited Investor Any bank licensed under BTCRA or licensed in a prescribed jurisdiction. Any firm registered under SIA w/ regulatory capital $120K or registered in a prescribed jurisdiction. Any Investment Fund or investment fund regulated in a prescribed jurisdiction. Any insurance company under IA or licensed in a prescribed jurisdiction.

14. Professional Fund Accredited Investor Any natural person (jointly w/ spouse) net worth $ 1,000,000. Any natural person who had income minimum $200,000 for last 2 years ($300,000 w/ spouse) and has reasonable expectation of same for current year. Any Trust with $5,000,000 in assets.

15. Professional Fund Accredited Investor Any entity owned by Accredited Investors.

16. Standard Fund Bahamian-Based Investment Fund that does not meet the definition of a Professional Fund, SMART Fund or Recognized Foreign Fund. Must be licensed by Securities Commission only. Prescribed disclosure requirements.

17. Common Requirements for Professional & Standard Funds Audit. Administrator (except for self-administered). Independent Custodian if assets of type which require safe-keeping. Offering Document and Constitutive Documents require certification by Administrator or Bahamian Attorney. Ongoing filing obligation with Securities Commission.

18. SMART Fund Specific Mandate Alternative Regulatory Test Fund. An Investment Fund that satisfies the parameters and requirements of a category, class or type of Investment Fund approved by the Securities Commission. Each SMART Fund structure to be published. Approved Templates. Must be licensed by a Licensor.

19. SMART Fund Templates Model A Promoter is a Regulated Financial Institution in Bahamas or FTRA Scheduled country. Investors are discretionary account customers of Promoter. Limited disclosure requirements.

20. SMART Fund Templates Model B Existing Exempt Funds. Limited disclosure requirements.

21. SMART Fund Templates Model C Private Investment Vehicles. Maximum 10 Investors. Limited disclosure requirements. Waiver of audit.

22. SMART Fund Templates Model D Fund established for a defined commercial purpose; Limited number of Investors; Private Placement only; Limited disclosure requirements.

23. Recognized Foreign Fund An Investment Fund, which is not licensed in The Bahamas, whose Equity Interests are listed on a prescribed securities exchange; or an Investment Fund licensed or registered in a prescribed jurisdiction and not suspended from operation. Bahamas-Based by virtue of relationship with a service provider. Must register with the Securities Commission.

24. Noteworthy Provisions Dormant Investment Funds. Corporate Directors. Principal Office Fee. Transfer of administration. Transfer out of the Jurisdiction. Annual certification to Securities Commission.

25. Transitional Provisions Licensed & Authorized Mutual Funds Grand-fathered. Exempt Mutual Funds MFA Section 3(4) Mutual Funds may carry on business for 9 months provided apply to Licensor within 90 days and not refused a license within the 9 months period.

26. Transitional Provisions Exempt Mutual Funds MFA Section 3(6) Mutual Funds may carry on business for 9 months provided apply to Securities Commission within 90 days for registration as a Recognized Foreign Fund and not refused registration within the 9 months period.

27. Administrators Must be incorporated or registered under Companies Act or incorporated under IBC Act. Unrestricted and Restricted Licenses. Exemption possible where administering only 1 Investment Fund. Annual Audit.

28. Administrators Duties Use reasonable efforts to ensure that the Investment Fund does not carry on or attempt to carry on business contrary to the provisions of the Act. Take all reasonable steps to ensure that the operations of the Investment Fund are carried out in accordance with the provisions of the Offering Document and Constitutive Documents and Regulations.

29. Administrators Duties Take all reasonable steps to maintain the books and records and to prepare the Investment Fund�s accounts and reports. Take all reasonable steps to ensure that audited financial statements of the Investment Fund are prepared and sent to Investors within prescribed period (can be extended by Securities Commission).

30. Administrators Duties Make Constitutive Documents available. Take all reasonable steps to ensure that the Investment Fund is not carrying on its business in a manner which is likely to be prejudicial to holders or creditors of the Investment Fund.

31. Administrators Duties Ongoing reporting obligation to Securities Commission. Take all reasonable steps to ensure that the operators are meeting their obligations and are complying with the Act.

32. Administrators Duties Take all reasonable steps to ensure that the Custodian is compliance with its statutory obligations.

33. Administrators Transitional All MFA Section 9 licensed Administrators are grand-fathered Except for capital requirements. 9 months to comply with capital requirements. Proof to be filed with the Securities Commission.

34. Custodians Must be independent of the Operator and Administrator unless exempted by the Licensor or deemed independent by Regulations. Must be BTRA licensee; Financial institution in prescribed jurisdiction; Such other person approved by the Securities Commission.

35. Securities Commission Broad regulatory authority Licensing Rules Inspections Intervention Disciplinary Hearings & Sanctions International cooperation Approval of Auditors, Custodians, Trustees Registration of SROs

36. USA PATRIOT Act General Duty of Confidentiality Disclosure permitted where information is of a type or is disclosed in a manner that does not enable the identity of any beneficial owners of a regulated person or of any customer or client to which the information relates to be ascertained. PATRIOT Act regulations in draft form. No conflict with draft regulations. Note preliminary proposal that if 1 US Investor names of all Investors must be disclosed to US authorities.

37. BAHAMAS FINANCIAL SERVICES BOARD Michael L. Paton Chairman, BFSB Partner, Lennox Paton