ITEM 5 – FEES AND COMPENSATION
Fees Generally. We generally charge asset-based investment advisory fees (which in other
contexts we commonly refer to as “management fees”) to the Arrow Ridge Funds. Advisory fees
paid by an Arrow Ridge Fund are indirectly borne by its investors. Such investment advisory
fees are deducted from Arrow Ridge Fund assets and generally payable quarterly in advance,
depending upon the Arrow Ridge Fund. The amount of any investment advisory fee is prorated
for periods of less than a full billing cycle at the beginning or end of our provision of investment
advisory services, and any prepaid amount in excess of the prorated fee will be returned upon
termination of our investment advisory services. Our Advisory Agreements generally impose
some restrictions on an Arrow Ridge Fund’s ability to terminate the agreement.
We establish and negotiate with investors in the applicable Arrow Ridge Fund the precise
amount of, and the manner and calculation of, the advisory fees. Such Arrow Ridge Fund’s
Advisory Agreement, organizational documents, offering documents and/or other documentation
received by each investor prior to its investment in such Arrow Ridge Fund, which we refer to
collectively as, together with any applicable side letters, the “Governing Documents,” sets forth
the precise amount of, and the manner and calculation of, the advisory fees.
Certain investors in the Arrow Ridge Funds, including, for example, our affiliates and certain
“friends of the firm,” pay reduced or no advisory fees at our discretion (though these investors
generally pay their pro rata share of certain Arrow Ridge Fund expenses).
Please see Item 11 for a description of the side letter agreements we and our related advisors
enter into with certain investors in Arrow Ridge Funds that provide such investors with
customized terms, including with respect to advisory fees.
Please see Item 6 for more information on incentive compensation.
Expenses. In addition to the investment advisory fees described above, each Arrow Ridge Fund
bears all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the
conduct of the Fund’s affairs, or in connection with its management, including, to the extent
provided in the particular Arrow Ridge Fund’s Governing Documents,
• legal, accounting, bookkeeping, tax compliance, auditing, consulting and other
professional expenses, including those of valuation firms;
• administration fees and other expenses charged by or relating to the services of third-
party providers of administration services;
• fees payable to sub-advisors including through investments in pooled investment
vehicles;
• third-party and out-of-pocket research and market data expenses (including news,
quotation, statistics and pricing services);
• software, databases and other technical and telecommunications services and equipment
used in the investment management and order management processes;
• consulting fees and travel expenses in connection with investigating and monitoring
potential and existing investments (including meals, lodging and travel);
• interest and fees (including commitment, structuring and underwriting fees) on margin
loans, committed loan facilities, total return swaps and other indebtedness;
• bank service, custodial and similar fees;
• fees and expenses (including travel expenses) related to the analysis, purchase or sale of
securities, whether or not the investments are consummated;
• expenses related to the purchase, monitoring, sale, settlement, custody or transfer of
Arrow Ridge Fund assets (directly or through trading affiliates);
• expenses associated with activist investment activities (including public relations, tender
offer and proxy solicitation expenses);
• third-party and out-of-pocket fees and expenses relating to systems and software used in
connection with the operation of the Arrow Ridge Fund and investment related activities
(including any accounting, risk management, trading and administrator-like functions that
we perform in-house);
• fees and expenses in connection with any advisory board or committee;
• taxes;
• fees and expenses relating to the offer and sale of interests in the Arrow Ridge Funds
(including organizational fees and expenses), and filing and legal fees;
• costs and expenses incurred in connection with the liquidation, winding up or termination
of the Arrow Ridge Fund;
• costs and expenses incurred in connection with any meeting of investors in the Arrow
Ridge Fund relating to the Arrow Ridge Fund;
• cost of insurance, including general partner liability/director and officer insurance and
crime/fidelity insurance;
• expenses related to the Arrow Ridge Fund’s indemnification obligations; and
• such other ordinary or extraordinary expenses associated with the operations of the
Arrow Ridge Fund and its investment activities we or the general partners may deem
necessary or proper to incur.
Details regarding these and additional expenses are generally disclosed to investors in each
Arrow Ridge Fund’s Governing Documents. For more information on brokerage practices,
please see Item 12 below.
Some expenses are incurred on an aggregate basis for the benefit of multiple Arrow Ridge
Funds, Other TPG Funds (as defined below) and/or TPG. We allocate the aggregate costs of
these items across the applicable Arrow Ridge Funds, Other TPG Funds and TPG in a manner
we determine to be reasonable and fair to all parties. Generally, the allocation method across
multiple Arrow Ridge Funds or Other TPG Funds is pro rata in accordance with assets under
management, but we may vary this approach in particular instances if we believe another
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