ITEM 5 - FEES AND COMPENSATION
A. The Funds are offered only to “qualified purchasers”, as defined in the Investment Company Act.
American Industrial Partners generally charges a management fee (the “Management Fee”) of (i)
2% on commi ed capital un l the earlier of the end of the investment period and the date that a
successor to the applicable Fund begins paying (or, in certain cases, accruing) a management fee;
(ii) therea er, if no successor to the applicable Fund has begun paying (or, in certain cases, accruing)
a management fee, 2% on remaining investor capital contribu on for investments un l the earlier
of the date that a successor to the applicable Fund begins paying (or, in certain cases, accruing) a
management fee and the end of the term of the applicable Fund (or, in certain cases, the twel h
anniversary of the final closing date even if the term of the applicable Fund exceeds such date); and
(iii) therea er, un l the remaining term of the applicable Fund (or, in certain cases, un l the twel h
anniversary of the final closing date even if the term of the applicable Fund exceeds such date),
1.5% on remaining investor capital contribu on for investments. For purposes of clauses (ii) and (iii)
of the preceding sentence, if the fair market value of an investment is less than 25% of the cost of
such investment as of the beginning of a management fee payment period unless the advisory
commi ee of the applicable Fund otherwise consents, the remaining investor capital contribu ons
for such investment will equal the fair market value of such investment for such management fee
payment period. As further specified in the Funds’ governing documents, from the effec ve date
of the relevant Fund un l a date specified in the governing documents (the “Stepdown Date”),
management fees generally will be charged based on a formula ed to the amount of the relevant
Fund’s aggregate capital commitments. Therea er, the management fee base for any management
fee period a er the Stepdown Date will include capitalized expenses of unrealized investments
(which expenses could include, without limita on, any acquisi on-related legal fees and expenses,
transac on fees, Consultant fees, es mated third-party diligence expenses, borrowing and other
financing fees and expenses, as well as amounts that are eligible to be treated as a Fund expense
rather than as capital contribu ons for the making of por olio investments). Capitalized expenses
will be expected to have the effect of increasing the base on which the Management Fee is
calculated; capitalizing expenses to AIP and to third par es involves conflicts of interest in AIP
determining such amounts and earning Management Fees thereon. Further, to the extent that any
such fees and/or expenses to the Firm or its affiliates are subject to any offset against the
Management Fee otherwise to be borne by Investors, Investors should note that the benefit of any
such offset is effec vely reduced by virtue of such fees and/or expenses increasing the base on
which the Management Fee is calculated. Addi onally, if an investment is deemed “worthless” it is
considered a disposi on. Unless a Fund’s limited partnership agreement sets out specific criteria
for determining when an investment is worthless, an investment will be deemed worthless when
the general partner of the applicable Fund makes a determina on that such investment is wri en
off for tax purposes [(for the avoidance of doubt, wri en down to $0 does not necessarily mean
wri en off)]. The general partner of the applicable Fund will determine whether to deem an
investment to be worthless at the aggregate por olio company level, unless such general partner
reasonably expects to realize on the investment at the individual security level rather than
collec vely for the interests in the por olio company. Please see “Management Fee and Impaired
Investments” in Item 11 below for further details.
American Industrial Partners affiliates also generally charge a 20% performance-based fee (the
“Carried Interest Distribution”) on realized gains net of expenses and write downs.
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Please refer to each Fund’s offering documents for specific information related to the fees
associated with an investment in such Fund.
B. American Industrial Partners deducts Management Fees directly from the Clients’ assets on a
quarterly basis. As American Industrial Partners is structured primarily as a private equity firm, the
Carried Interest Distributions are deducted as investments come to fruition and not on any set
schedule. Carried Interest distributions relating to Credit Opportunity Investments are deferred
until the end of the investment period and thereafter as investments come to fruition for the
applicable Fund.
C. In addition to the Management Fees and Carried Interest Distributions described above (and in
Item 6 below), each Fund bears all fees, costs, expenses, liabilities and obligations relating to such
Fund and/or its activities, business, Portfolio Companies or actual or prospective investments
(including (i) to the extent that such expenses also benefit other Funds and (ii) cost and expenses
related to any co-investment vehicles to the extent not borne by such co-investment vehicles),
including, but not limited to: all fees, costs, expenses, liabilities and obligations relating to the
acquiring, monitoring, holding and sale of securities; tax, legal, accounting, auditing, consulting,
administration, investment banking, broker, deal finder, underwriting, valuation, costs of related
information management systems and other advisory or other services; custodial fees, interest
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