CF Private Equity Inc

5 – Fees and Compensation) for further details regarding CF Private Equity’s performance fee arrangements.

Similarly, most Managers utilized by CF Private Equity also charge incentive/performance-based
compensation. The incentive/performance-based compensation of some Managers in these sectors can be as
high as 30% of cumulative profits or higher. Manager performance fees are paid to such Managers directly
by the Funds or separate accounts and thus are indirectly borne by investors in such Funds or separate
accounts. Manager performance fees are separate from, and in addition to, the performance fees charged by
CF Private Equity, as also described in the preceding section.

While CF Private Equity believes that performance fees can align the interests of an investment manager
with those of its clients, particularly in instances where the Governing Documents include terms requiring
clawback or giveback of performance-based compensation amounts at the end of the relevant Fund’s life or
at certain interim intervals, investors should also be aware that such fees could incentivize CF Private Equity,
or Managers utilized by CF Private Equity, to increase risk in client portfolios by making more speculative
investments on behalf of a client’s account than it would otherwise make in the absence of such an
arrangement.

Potential Conflicts of Interest

CF Private Equity provides investment advice to a variety of clients, including Funds investing in different
investment strategies and with different objectives, as well as institutions with differing objectives and risk
tolerances. CF Private Equity’s affiliates also manage investment assets for a variety of clients. In managing
Funds and separate accounts, sometimes side-by-side with other Funds, CF Private Equity and its affiliates
can face potential conflicts of interest. Some of these conflicts of interest are discussed below. Please see
the Governing Documents of the applicable Fund or client account for additional information on how CF
Private Equity addresses potential or actual conflicts of interest relating to such Fund or client account.

Compensation

As noted in the preceding section, CF Private Equity charges incentive/performance-based compensation in
the form of “carried interest”. In addition to the possibility that these compensation arrangements might
create an incentive for CF Private Equity to approve, and cause a Fund or other client account to make,
riskier and more speculative investments, there is also the potential that with respect to attractive investment
opportunities of a limited quantity, CF Private Equity could favor accounts that earn incentive/performance-
based compensation over those that do not and accounts that earn incentive/performance-based
compensation that are higher than the incentive/performance-based compensation earned by other accounts.
CF Private Equity believes that its compensation and other financial arrangements place sufficient weight
on the performance of all accounts such that favoritism is not likely to occur. Given the tax treatment of
carried interest (e.g., gains held for more than one year but less than three years would be treated as long-
term capital gains if allocated to investors but short-term capital gains (subject to ordinary income tax rates)

if allocated as carried interest), a Fund has an incentive to ensure that it holds an investment for at least three
years.

Furthermore, certain of the Funds charge management fees based on invested capital, contributed capital or
similar concepts rather than committed capital. When allocating investments between Funds, there is an
incentive to allocate investment opportunities to such Funds that maximize management fees paid to CF
Private Equity (i.e., there is an incentive to allocate investment opportunities to the Funds that charge
management fees based on invested capital, contributed capital, net asset value or similar
concepts). Additionally, if a Fund charging management fees based on invested capital, contributed capital,
net asset value or similar concepts charges a higher percentage than other Funds that similarly charge
management fees based on invested capital, contributed capital, net asset value or similar concepts, there
will be an incentive to allocate investment opportunities to the Fund paying the higher percentage.

Notably, however, CF Private Equity’s and Commonfund’s allocation policies (discussed in the following
section) are designed to mitigate potential conflicts of interest that arise from the side-by-side management
of Funds and client accounts that charge fees and incentive/performance-based compensation and those that
do not or those that charge higher percentages of fees and incentive/performance-based compensation
compared to other Funds and client accounts.

Allocation of Investment Opportunities

CF Private Equity’s Allocation Policy

CF Private Equity serves as investment adviser to a number of Funds through primaries, secondaries and
direct investments. To address this potential conflict, CF Private Equity maintains an allocation policy and
procedures for allocating investment opportunities, as supplemented from time to time (the “Allocation
Policy”).

It is CF Private Equity’s policy that all investment opportunities shall be allocated among the Funds on a
basis that is fair and equitable, taking into account all relevant facts and circumstances. Relevant facts and
circumstances include, among others, consistency with a Fund’s strategy, risk and return objectives,
investment period, a Fund’s aggregate commitments and the portion of such Fund that is targeted to be
invested in a given strategy, the size of the investment opportunity relative to the Fund, diversification
characteristics (vintage year, geography, strategy, industry, and Manager), ability to meet investment
minimums, Manager approval, and whether a Fund (or its predecessor investment vehicle) has a pre-existing
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