Item 5. Fees and Compensation
As compensation for its advisory services, Drona Partners is entitled to receive a management fee from each of the Clients,
which is required to be paid on a quarterly basis, either in advance or in arrears. The management fee is assessed based on
the Client’s invested capital (which is comprised of capital contributions and leverage used to acquire investments) and will
not exceed the product of 1.5% multiplied by the Client’s aggregate capital commitments.
Drona Partners Archery is also entitled to receive, directly or indirectly, from each Client a performance-based profits
interest through each Client’s General Partner, entitling it to a certain percentage of the realized profits, subject to a
preferred return to the Client’s investors. This profits interest is based on realized gains and received income only and is
subject to a “clawback” if applicable to account for later realized losses. Performance-based compensation payable to the
Drona Partners Archery, the General Partners and/or their designee will be consistent with the requirements of Section 205
of the Advisers Act and Rule 205-3 thereunder.
Drona Partners may modify and/or waive the management fee and profits interest with respect to certain investors and
expects to waive them for employees and their related parties.
The aforementioned compensation of Drona Partners Archery and the General Partners is based upon the value of the Clients’
assets, which Drona Partners is responsible for determining. As these entities are under common control, this presents a
potential conflict of interest. To mitigate this conflict, Drona Partners does not impose a profits-sharing obligation on
unrealized gains (net of unrealized losses) on any Illiquid Asset (as that term is defined in the LP Agreements). Additionally,
Drona Partners engages independent third parties to assist with valuing certain Illiquid Assets. Drona Partners also engages
an independent auditor to perform an annual audit of the Clients in conformity with accounting principles generally accepted
in the United States (“GAAP”) at each calendar year-end.
Expenses
Drona Partners will, in consideration for management fees, bear its own overhead expenses incurred in connection with
managing the affairs and business of the Clients, including expenses related to its office space, utilities, and employees.
The Clients will bear, or reimburse Drona Partners for, all organizational, restructuring and offering expenses and all ordinary
and extraordinary expenses incurred or advanced in the operation or management of the Clients and their investment activities
as Drona Partners deems to be reasonable and necessary. The costs and expenses borne directly or indirectly through affiliated
entities (e.g., special purpose vehicles) by the Clients (of which the investors bear their allocable share) include, without
limitation:
(i) Investment-related expenses, such as expenses related to sourcing investments, performing due diligence related
to prospective investments or areas of investment, structuring, negotiating and executing acquisitions and
dispositions of investments and performing ongoing supervision and maintenance of investments, including but
not limited to the following:
a) brokerage fees and commissions;
b) clearing and settlement charges and custodial and sub-custodial fees;
c) fees and expenses (including travel expenses) charged by professional service providers (some of whom
may be current or former consultants to Drona Partners), such as legal, accounting, auditing, consulting
(which may include the cost of consultants onsite at Drona Partners’ offices), investment banking, research
(including expert network services), class action monitoring and recovery (which may be in the form of a
fixed fee or based on a percentage of the amount recovered by a Client in respect of such litigation, or a
combination of both), advisory, lobbyist and other professional service providers;
d) costs of retainers and transaction-based compensation or success fees, some of which may be discretionary,
charged by third party consultants, operating partners, brokers, market participants and advisers (some of
whom may be current or former consultants to Drona Partners) in connection with sourcing or evaluating
investments, any of which may be fixed or based on a percentage of the proceeds of sourced investments,
a percentage of the amount invested, or a combination of the foregoing;
e) management, development, profit-sharing or other fees or expenses (including, in certain instances, an
operating partner’s operational and overhead expenses) charged by operating partners or third parties
(some of whom may be current or former consultants to Drona Partners) who manage certain investments
(including joint ventures and partnerships), any of which such fees or expenses may be fixed or based on
a percentage of the proceeds of managed investments or a percentage of the amount invested, or a
combination of the foregoing;
f) fees and expenses associated with the organization, operation and maintenance of special-purpose and
other investment vehicles used in connection with the Clients’ investments, including (1) operational and
overhead expenses such as office rent, furniture, build-out costs, personnel costs and information
technology costs, (2) fees and expenses associated with developing, structuring, and winding up such
entities, (3) costs of management of assets, including real property investments, owned by the Clients, and
(4) legal, accounting, and operational support;
...