ITEM 5 – FEES AND COMPENSATION
A. Advisory Fees and Compensation
ACME is generally compensated for its advisory services through asset-based management
fees calculated as a percentage of each Investor’s capital commitment or the cost basis of
investments then-owned by the applicable Fund, payable quarterly in advance. The
management fee rate is generally between 0% and 2.5% per annum.
Subject to the terms of the applicable Fund’s limited partnership agreement, the calculation of
management fees steps down from a committed capital basis to aggregate portfolio company cost
basis once the applicable investment period expired. At this point, any investments that are written
off are not included for purposes of calculating management fees. The determination that an
investment should be written off will be made in accordance with applicable U.S. federal tax
regulations, which generally permit an investment to be written off only if a final determination
has been made that there are no future rights to proceeds however improbable that collection would
be. Consequently, management fees will continue to accrue with respect to an investment whose
reported value is less than its original cost basis for a prolonged period of time because the
investment will not be written-off for U.S. federal tax purposes.
In addition, as described in more detail in Item 6 below, subject to a clawback for certain
Funds, Advisory Affiliates receive performance-based profit distributions (commonly
referred to as “Carried Interest”) in each of the Funds, as negotiated and determined at the
time the applicable Fund is established and set forth in its Governing Documents. Generally,
the applicable Advisory Affiliate does not receive Carried Interest until all capital
contributions have been returned to the Investors in the respective Fund (pursuant to the terms
in each Governing Document).
Any new Fund launched by ACME may have materially different terms than those
summarized above. It should be noted that the fees paid by the Funds are negotiable by
Investors only prior to an investment in the Fund, at the discretion of the Advisory Affiliates.
B. Deduction of Fees
ACME or an Advisory Affiliate deducts the management fees, performance-based fees, and
other fees and expenses (described below) applicable to the respective Fund directly from the
Fund’s assets. Performance-based compensation is paid to the relevant Advisory Affiliate
when earned. Investors do not have the ability to choose to be billed directly for fees incurred.
C. Other Fees and Expenses
The Advisory Affiliates or ACME will pay certain ordinary and customary expenses out of
the management fee (including salaries, wages, rent, communication costs, equipment and
other overhead expenses).
As set forth in the applicable Governing Document, each Fund shall bear all costs and
expenses incurred in the sourcing, investigation, holding, purchase, sale or exchange of
securities (whether or not ultimately consummated), including, but not by way of limitation,
private placement fees, finder’s fees, interest on borrowed money, real property or personal
property taxes on investments, including documentary, recording, stamp and transfer taxes,
brokerage fees or commissions, legal fees, expenses incurred in connection with the
investigation, prosecution or defense of any claims by or against the Fund, including claims
by or against a governmental authority, audit and accounting fees, legal, accounting and
consulting fees relating to investments or proposed investments, taxes applicable to the Fund
on account of its operations, fees incurred in connection with the maintenance of bank or
custodian accounts and permitted Fund indebtedness, all expenses incurred in connection with
the registration of the Fund’s securities under applicable securities laws or regulations, and
travel expenses incurred in managing and holding Fund securities.
Each Fund shall also bear expenses incurred by the Advisory Affiliates in investigating and
evaluating investment opportunities whether or not consummated (including but not limited
to legal, accounting and consulting fees, and travel expenses incurred in connection
therewith), managing investments of the Fund, serving as the tax matters partner and the
partnership representative, the reasonable cost of liability and other premiums for insurance
protecting the Fund, the Advisory Affiliate, the ACME partners and ACME and its managers,
members and employees from liability to third parties, consulting fees relating to services to
the Fund that could not reasonably have been rendered by ACME or the Advisory Affiliate,
all out-of-pocket expenses of preparing and distributing reports to partners, out-of-pocket
expenses associated with Fund communications with partners, including preparation of annual
or other reports to the Investors, out-of-pocket costs associated with Fund meetings or LP
advisory committee meetings, out-of-pocket travel expenses incurred by the Advisory
Affiliate in sourcing and/or monitoring investments, all legal, financial and accounting fees
relating to the Fund and its activities (including the cost of internal legal counsel of the Fund
provided that the cost in respect of such services are not less favorable the Fund than those
generally available from experienced and unaffiliated parties), fees and expenses relating to
outsourced finance, valuation, reporting, administration, accounting and back-office services,
all costs and expenses arising out of the Fund’s indemnification obligation pursuant to its
Governing Document, and all expenses that are not normal operating expenses.
To the extent that any costs, fees and expenses borne by a Fund also benefit any other Fund,
such costs, fees and expenses will be shared by each Fund on an equitable basis as determined
by the Advisory Affiliate in its reasonable discretion.
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