Item 5. Fees and Compensation
DS2 receives management fees in connection with the investment management services it provides to
each of the Funds and may also receive performance fees. Such management fees, performance fees or
other compensation generally are negotiable and established at the beginning of the advisory relationship
with each Fund. Specific details of payment terms and compensation, including its method of calculation,
are set out in the offering materials, indentures, disclosure documents, Management Agreements and the
Governing Documents of each Fund. Such compensation may be negotiated with strategic partnerships,
managed accounts and certain other investors in certain limited circumstances.
Management fees may be subject to waiver or rebate. Such management fees are generally structured
with a portion of such fee payable as a senior management fee and a portion payable as a subordinated
management fee. Management fees are typically payable quarterly in arrears, deducted from each Funds’
account and dependent in part on certain cash distribution constraints set forth in the Governing
Documents for each Fund.
Collateral management fees for Fund Clients are payable only to the extent that funds are available in
accordance with the priority of payments described in the Funds’ indentures.
DS2 may also receive an incentive fee as set forth in the Funds’ indentures. Incentive fees are also only
payable to the extent that funds are available for such purpose and certain performance hurdles are met
on each payment date in accordance with the priority of payments described in the CLOs’ indentures.
All performance-based compensation payable to DS2 will be consistent with the requirements of Section
205 of the Advisers Act, and as applicable, Rule 205-3 thereunder. Performance-based compensation
payable to DS2 is typically payable quarterly, or more frequently, in arrears, deducted from each CLO’s
account and dependent in part on certain cash distribution constraints set forth in the constituent
documents for each CLO.
DS2 may also receive management fees payable under CLO Warehouse documents as negotiated by DS2
on a deal-by-deal basis.
In accordance with the terms of DS2’s Management Agreement with each of the Funds and applicable
indentures, the Funds generally reimburse DS2 for certain out-of-pocket expenses related to the services
provided by DS2 and third parties to the CLOs.
Each Fund typically pays or otherwise bears all fees, costs, expenses and other liabilities incurred in
connection with the formation and organization of such Fund (collectively, the “Organizational
Expenses”). Fees, costs and expenses will differ in each Fund.
Each Fund, subject to its Governing Documents, typically pays or otherwise bears all of the direct and
indirect fees, costs, expenses and other liabilities or obligations resulting from or arising in connection
with its operations (collectively, the “Operating Expenses”). These Operating Expenses include taxes,
brokerage commissions, clearing and settlement fees and other typical transaction expenses related to
closing and execution. The Operating Expenses of a particular Fund are set forth in its Governing
Documents and related offering documents. Investors and prospective investors in a Fund should review
the applicable Governing Documents in conjunction with this Brochure for complete information on the
charges and expenses payable with respect to such Fund.
All fees, costs and expenses incurred by DS2 employees for travel, accommodations, meals, events,
entertainment and other similar fees, costs and expenses are subject to applicable travel and expense
reimbursement policies and procedures.
DS2 and its affiliates from time to time incur fees, costs and expenses on behalf of more than one Fund or
multiple Funds. To the extent such fees, costs and expenses are incurred for the account or benefit of more
than one Fund, each Fund typically bears an allocable portion of any such fees, costs and expenses in
proportion to the size of its investment in the activity or entity to which the expense relates (subject to
the terms of each Fund’s applicable Governing Documents) or in such other manner as DS2 considers
fair and equitable under the circumstances. DS2 endeavors to allocate such fees, costs and expenses on
a fair and equitable basis over time.
Funds and CLO Warehouses are required to pay fees, costs or expenses incurred prior to their closing
dates. In addition, no employee of DS2 or its affiliates receives compensation in connection with the sale
of interests in CLOs or CLO Warehouses.
The investment strategies employed with respect to Clients generally do not involve the purchase or sale
of publicly offered securities, and as such, do not typically entail expenses related to brokerage
commissions. To the extent applicable, each Client generally is responsible for and pays any of its
custodial fees and expenses. Additional information relating to DS2’s brokerage practices is outlined in