Item 5 FEES AND COMPENSATION
FSOF
Management Fee
Fifth Street receives a quarterly management fee from FSOF, calculated and payable in advance
at an annualized rate ranging from 1.0% to 1.5% of the value of an investor’s investment in
FSOF. Capital contributed or withdrawn from FSOF during a quarter is charged a ratable
portion of the management fee for the period invested.
Fifth Street and/or FSCO GP may waive, reduce or rebate the management fee attributable to any
interest held by or on behalf of any other party. Fifth Street, in its sole and absolute discretion,
may also pay a portion of the management fee to certain investors in FSOF and/or other third
parties.
Performance Allocation
FSCO GP is entitled to receive an annual performance allocation from FSOF, ranging from 15%
to 20% of the increase in value of an investor’s investment, if any, subject to a loss carryover.
Pursuant to the loss carryover, no performance allocation will be charged on an investor’s
investment unless the value of such investment (net of any losses, for all years since admission)
exceeds the higher of the following amounts: (i) the highest value of such investment through
the close of any year since admission; and (ii) the value of such investor’s investment on the
date of admission. The performance allocation is generally calculated and allocated at the end
of each fiscal year or upon a withdrawal occurring prior to the end of any fiscal year.
Withdrawals by an investor will result in a proportional reduction of any loss carryover.
FSCO GP may waive, reduce or rebate the performance allocation attributable to any investor in
FSOF. FSCO GP, in its sole and absolute discretion, may also pay a portion of the performance
allocation to certain investors in FSOF and/or other third parties.
Other Expenses
FSOF bears certain operating expenses, including, without limitation, the management fee,
administrative expenses, custodial expenses, legal expenses, compliance and regulatory
expenses, accounting expenses, audit and tax preparation expenses, interest, taxes, costs,
offering expenses and all other expenses associated with the operation of FSOF. FSOF
also bears certain investment expenses associated with its investment program, including,
without limitation, (i) brokerage and trading expenses, custodial fees, escrow expenses,
insurance costs, third party research, interest and borrowing expenses, bank, broker and
dealer service fees, consulting, advisory, investment banking and other professional fees,
expenses relating to risk reporting services and trading management systems and all other
research expenses (including, without limitation, travel expenses related to research); (ii)
the fees and expenses charged by the BDCs that are managed by unaffiliated managers and
in which FSOF invests (“Underlying BDCs”) and/or by such unaffiliated managers (“BDC
Managers”); and (iii) any fees and expenses incurred in connection with any credit facility
established by FSOF.
FSCO GP initially paid all of FSOF’s organizational expenses and will be reimbursed by FSOF.
FSOF may amortize its organizational expenses for accounting purposes over a period of 60
months from the date it commences operations, or such other period of time as determined by
FSCO GP, in its sole and absolute discretion.
General
None of Fifth Street or its principals, members, managers, directors (or other persons occupying
a similar status or performing similar functions), or employees (if any), or any other person who
provides investment advice on Fifth Street’s behalf and is subject to Fifth Street’s supervision or
control (collectively, “Supervised Persons”) accepts any compensation for the sale of securities
or other investment products, including interests in FSOF.
Please see Items 6 (Performance-Based Fees and Side-By-Side Management), 10 (Other
Financial Industry Activities and Affiliations) and 12 (Brokerage Practices).