Item 5 – FEES AND COMPENSATION
The Advisor and its Affiliates receive fees and other compensation in exchange for the advisory
services provided to Clients. These fees typically include a management fee, performance-based
compensation (often referred to as a promote, carried interest or an incentive fee) and other fees
related to the Advisor’s management of Client Investments, in each case in accordance with a Client’s
Governing Documents and as described below. Differences in fees exist from Client-to-Client based
on a number of factors, including Investment strategy, Investment amount, type of Client, and the
type of other services provided. As more fully described below, the Advisor or a Client, on occasion,
has negotiated to share with or receive a percentage of certain fees with its Affiliates or joint venture
partners. The share of compensation earned by the Advisor or its Affiliates varies among Investors
pursuant to the terms of the Governing Documents.
The following is a general description of Client fees and expenses. Investors should refer to the
Governing Documents of the applicable Client for a more detailed description of the fees and
expenses charged by Affinius Capital, the Advisor and/or its Affiliates for their advisory and other
services. Fees are generally agreed upon at the time of the establishment of the relevant Client and
negotiated with participating Investors before their Investment. Specific details of such
compensation and its calculation methodology are set out in the Governing Documents for the
relevant Client. There are instances where the Advisor has granted certain preferential terms to
Clients and/or Investors resulting in fees lower than those applicable to other Investors. Fees and
expenses are paid by the Client to the Advisor by either reducing distributions otherwise due to
Investors, through use of a Client line of credit, or by calling capital from Investors.
Management Fees
The Advisor charges management fees as base compensation for providing advisory services to
Clients, which is paid indirectly by Investors in such Client. Management fees are determined on a
Client-by-Client and Investor-by-Investor basis and are described in each Client’s Governing
Documents and modified in certain Investors’ Side Letters. The management fee is often based on a
stated percentage of capital invested in a Client by an Investor, which may be calculated with respect
to net asset value, invested capital, or gross asset value, and may be charged on committed capital
and/or invested capital, depending on the Client and the life-cycle of the Client. The Advisor can, and
often does, charge a reduced management fee or no management fee to the General Partners (and
their direct or indirect members or affiliates) and/or to certain Investors, including Affiliates, Related
Entities, Ownership Entities, Investors in co-investment vehicles and Investors that commit larger
amounts of capital, in each case at the Advisor’s discretion.
Investors participating in a subsequent closing after the initial closing of a Fund may be responsible
for paying the management fee as of the date of the initial closing of such Fund, generally in addition
to an interest component payable to the Advisor or an affiliate, as applicable. In addition,
management fees are payable during term extensions unless Investors have otherwise negotiated or
are otherwise notified. Management fees are paid by the Client using available cash of the Client or
by calling capital from Investors. The management fees are due and payable by a Client either
quarterly in advance or quarterly in arrears, depending on the Client and as detailed in each Client’s
Governing Documents.
For most Clients, the amount of management fees will not correspond with fluctuations in the net
asset value of (i) individual Investments, (ii) aggregate Investments or (iii) of a Client, and will not be
reduced in connection with any write-downs, except potentially in the case of Investments that have
been permanently written down if stipulated in the Governing Documents. Except where the
Governing Documents expressly provide to the contrary, management fees will not be reduced (in
whole or in part) in the case of partial distributions, partial sales, reorganizations, recapitalizations
(including recapitalizations involving dividends), restructurings or similar transactions, in each case
unless the result is the complete disposition of the relevant Client’s interest therein, and even in cases
where the value of such Client’s investment or ownership percentage in an investment has been
reduced (including substantially reduced) as a result of such transaction. In addition, in certain cases,
management fees will not be reimbursed or refunded under the Governing Documents in the event
of realizations, dispositions or partial write-downs that occur partway through the relevant
calculation period. Further, where there has been a partial disposition or permanent write-down of
a Client’s Investment and the fair market value of the Investment following such event exceeds the
total amount of the Client’s Investment contributions relating to the Investment, the Governing
Documents do not require management fees to be reduced. In some circumstances, the management
fee base will include capitalized transaction-specific fees and expenses (as described below in “Other
Fees”) and expenses of unrealized investments, including transaction fees charged by the Advisor in
connection with the Investment, as well as certain fees and expenses paid to third parties, the Advisor
or its Affiliates, which poses a conflict of interest in that the inclusion of such fees and expenses
results in a higher management fee than if such transaction fees and expenses were not capitalized
into the asset base.