ITEM 5 – FEES AND COMPENSATION
Item 5.A Describe how you are compensated for your advisory services. Provide your
fee schedule. Disclose whether the fees are negotiable.
Crimson Velocity is compensated through the payment of management fees and
performance based compensation by the Funds. The specific terms relating to the
fees paid by each Fund, summarized below, are negotiated by the Investors in
such Fund at the time of its formation and, as such, may vary from Fund to Fund.
• Management Fee: as detailed in the offering documents, Crimson
Velocity receives annual management fees from the Funds based upon (i)
during the commitment period, the capital commitments of the respective
Fund; and (ii) thereafter the funded capital commitments of the respective
fund minus the amount of certain capital contributions (as detailed in the
respective offering documents). The annual Management Fee for each
Fund is between 2.0% and 2.5% of the amount from (i) or (ii) above, as
the case may be, payable quarterly in advance. Prior to the beginning of
each year Crimson Velocity may waive a portion of the Management Fees
payable for such year.
• Carried Interest: In addition, the Affiliated General Partners may
receive a performance allocation (“Carried Interest”). All distributions are
split between Investors and the respective Affiliated General Partner as
set forth in the applicable Fund’s governing documents. The Carried
Interest is generally equal to 20% of realized gains, which may apply once
an Investor in the relevant Fund has received a specific preferred return (the
“Return”), if applicable. Investors are generally allocated all gains until
they have surpassed the Return. Thereafter, gains are generally shared
on an 80%/20% basis between Investors and the Affiliated General
Partners.
• Management Fee Offset: Crimson Velocity and/or its affiliates may
receive customary fees for certain corporate finance, investment banking
and advisory and monitoring services performed for Portfolio Companies
or in conjunction with unconsummated transactions. Although fees from
these activities will not be paid to the Fund, the Management Fee to be paid
to Crimson Velocity will be reduced by an amount equal to 80% of the
following fees (“Other Fees”): (i) break-up fees received by the respective
Affiliated General Partner, Crimson Velocity and their affiliates in
connection with the Fund’s uncompleted transactions and (ii) transaction
fees and ongoing monitoring, advisory, consulting or similar fees received
by the Affiliated General Partner, Crimson Velocity and their affiliates
attributable to the Fund’s investments in Portfolio Companies.
It should be noted that the fees paid by Investors are negotiable prior to an
investment in the Fund, at the discretion of the Affiliated General Partner.
Item 5.B Describe whether you deduct fees from clients’ assets or bill clients for fees
incurred. If clients may select either method, disclose this fact. Explain how
often you bill clients or deduct your fees.
Crimson Velocity or its affiliates deduct fees applicable to the appropriate Funds
(and Investors) directly from the Funds’ assets or issues capital call letters to
Investors to request funds to pay specific expenses.
The management fees are payable quarterly in advance and the Carried Interest
distribution may be made when earned or at a later date.
It is critical that Investors refer to the relevant confidential private
placement memorandum or other governing documents for a complete
understanding of how fees are paid to Crimson Velocity. The information
contained herein is a summary only and is qualified in its entirety by such
documents.
Item 5.C Describe any other types of fees or expenses clients may pay in connection
with your advisory services, such as custodian fees or mutual fund expenses.
Disclose that clients will incur brokerage and other transaction costs, and
direct clients to the section(s) of your brochure that discuss brokerage.
The Affiliated General Partner bears all the following expenses of the general
partner related to each Fund: costs and expenses for office space, facilities, supplies
and compensation of its staff and the costs and expenses associated with the
preliminary investigation of potential investment opportunities.
Each Fund pays all of the following expenses to the extent they do not constitute
expenses paid by the Affiliated General Partner: (i) reasonable fees and expenses
for tax advisors, attorneys and accountants, including the fees and expenses of
preparing the annual audit and any reports for limited partners of the Fund; (ii) all
reasonable out-of-pocket costs and expenses, if any, incurred in due diligence,
negotiating, structuring, acquiring, holding, valuing, developing, advising,
monitoring and disposing of actual or proposed portfolio investments, including
without limitation any financing, legal, accounting, advisory, recruiting and
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