ITEM 5: FEES AND COMPENSATION
FFC is compensated for its services through the receipt of a management fee and performance
based fees. FFC’s compensation, as well as other costs associated with management by FFC, is
discussed generally below and in more detail in relevant offering materials.
a) Compensation
FFC receives a management fee from each Fund (other than Peloton Equity I, Peloton AeroCare I
and Peloton II) based on committed capital of 2% annually (the "Management Fee") for the first 5
years of a Fund. After year 5 of a Fund, the 2% Management Fee is calculated based upon Invested
Capital at cost minus write-downs, minus capital returned. Fund II has not paid Management Fees
since October 2010. FFC III-B has not paid Management Fees since October 2015.
Peloton receives a management fee from Peloton Equity I based on committed capital of 2.5%
annually (the "Management Fee") for the first 42 months of its term. After such time, the 2.5%
Management Fee is calculated based upon Invested Capital at cost minus write-downs, minus
capital returned. Any installment of the Management Fee which is paid subsequent to a “Key Man
Event” and prior to the cure of such “Key Man Event” shall be reduced to 2/3 of the Management
Fee otherwise applicable as of the date of such installment and upon the cure of the Key Man
Event, any such installment of the Management Fee shall be recalculated as of the date of such
installment. At any time, upon the closing of a successor fund to Peloton Equity I with aggregate
third-party capital commitments of at least $50,000,000, the annual Management Fee rate will be
reduced to 2.0%. The Management Fee is paid quarterly, adjusted for the current quarter’s write-
downs, and capital returned.
Peloton also receives a management fee from Peloton AeroCare I based on committed capital for
investments of 0.75% annually (the “Management Fee”) for the first year, 0.5% annually for the
second year and 0.25% annually thereafter until the fifth anniversary of the Partnership.
Peloton also receives a management fee from Peloton II based on 2% committed capital for the
first 5 years of the Partnership. After year 5 of a Fund, the 2% Management Fee is calculated
based upon Invested Capital at cost minus write-downs, minus capital returned.
In addition, the Adviser may receive performance compensation as set out in each individual
prospectus (the "Performance Fee"). The Adviser, in its sole discretion, may temporarily waive
or reduce the Management Fee and/or the Performance Fee. The side-by-side Funds typically have
a reduced Management Fee and Performance Fee as described in each Fund’s Private Placement
Memorandum and Limited Partnership Agreement.
FFC also performs mergers and acquisitions advisory services for some of the portfolio companies
in which the Funds invest. The advisory work includes advising portfolio companies on the sale
of assets or acquisition by another company. The advisory fee is paid to FFC or Peloton and FFC
or Peloton either retains the fee as revenue, or in the case of Peloton Equity I, Peloton AeroCare I
and Peloton II, passes the fee along to the investors as a dollar for dollar reduction in the
management fee for that quarter.
The Adviser also earns fees as members of the boards of some of its portfolio companies.
Compensation for board membership is earned in the form of cash and/ or equities. The board
compensation is paid to FFC or Peloton and FFC or Peloton either retains the fee as revenue, or in
the case of Peloton Equity I, Peloton AeroCare I and Peloton II, passes the fee along to the investors
as a dollar for dollar reduction in the management fee for that quarter.
b) Billing
Management fees are called from Institutional Investors, with the exception of the side-by-side
funds, whose management fees are automatically deducted from the Fund Investors’ accounts.
c) Other Expenses
Each Fund generally pays all of its ordinary organizational, offering, administrative, and operating
expenses, including, but not limited to, ordinary and recurring legal, accounting, escrow, auditing,
administration, and certain clerical expenses including those incurred in preparing, printing and
mailing reports and tax information to investors and regulatory authorities, expenses for
specialized administrative services, filing fees, and taxes. Additional fees (e.g., wire transfer
charges) may be imposed by service providers. At its discretion FFC and/or Peloton may elect to
pay broken deal expenses on behalf of the Funds.
On behalf of the SPV Fund, Arcadia Solutions, Inc. pays, within reason, the ordinary
organizational, offering, administrative, and operating expenses, including, but not limited to,
ordinary and recurring legal, accounting, escrow, auditing, administration, and certain clerical
expenses including those incurred in preparing, printing and mailing reports and tax information
to investors and regulatory authorities, expenses for specialized administrative services, filing fees,
and taxes. Additional fees (e.g., wire transfer charges) may be imposed by service providers.
d) Advance Billing
As discussed above, other than with respect to the SPV Fund, the management fee is payable
quarterly in advance. Fees are not refundable for either funds or managed accounts.
e) Sales-based Compensation
Not applicable. Neither the Firm nor any of its employees or affiliates accepts additional
compensation for the sale of securities or other services. The Firm or its affiliates and employees
do not receive compensation for other services besides the investment advisory services we
provide.