Item 5. Fees and Compensation
GLM receives a base collateral management fee and, in some instances, a subordinated collateral
management fee. At the time of the launch of each CLO, GLM negotiates the fees it will be paid
for its portfolio management services with the non-affiliated commercial or investment bank that
acts as placement agent, underwriter and/or initial purchaser of the CLO’s securities. GLM’s
management fees are calculated as a percentage of the aggregate principal amount of the assets
under management (or market value with respect to certain discounted or defaulted assets),
determined as of each payment date. Accordingly, management fees payable to GLM may differ
from CLO to CLO.
Generally, GLM’s CLO management fees have three components: a senior management fee, a
subordinated management fee, and an incentive fee. The senior and subordinated fees are paid
quarterly in arrears in accordance with the priority of payment waterfall (i.e., priority of payment
sequence) set forth in the CLO Indenture pursuant to which each CLO’s securities are issued.
The senior management fee is paid earlier in the waterfall than the subordinated management
fee. The subordinated fee is subject to deferral if sufficient funds are not available to pay CLO
obligations at a higher level in the waterfall. The subordinated management fee also may be
deferred if the Fund is not in compliance with certain financial coverage tests set forth in the
CLO Indenture on the date each quarter when the tests are determined. The incentive fee is not
payable unless and until the CLO’s performance exceeds the CLO’s designated hurdle rate and
the CLO equity investors have achieved a certain internal rate of return (“IRR”) (generally about
12%) on their investment. Thereafter, the incentive fee is payable quarterly as a percentage
(generally 20%) of the amount (principal and interest) available for distribution to the CLO’s
equity investors. The trustee of each CLO generally remits the collateral management fees and
incentive fees (after the designated IRR has been achieved) quarterly in arrears, from interest
collections (and after the rated debt and expenses are paid in full, principal collections)
associated with the applicable CLO. In some instances, we also receive an incentive
management fee with respect to collateral interest and collateral principal collections available as
of each payment date, in certain instances subject to a hurdle.
Detailed information concerning compensation and fee arrangements is contained in the offering
circular or other governing documents of each CLO.
The CLOs may incur a variety of portfolio related expenses which may include the following:
rating agency expenses, underwriting and placement agency expenses, legal expenses, trustee
expenses, tax related expenses, appraisal related expenses, administrator expenses, accounting
related expenses, asset acquisition/ holding/ monitoring/ amendment/ default/ restructuring/
bankruptcy related expenses, brokerage expenses, pricing services, and other expenses that may
arise. GLM allocates any such fees and expenses among the CLOs and any other of its clients,
as appropriate and in a manner GLM determines to be equitable and consistent with the CLOs
governing documents. Pursuant to those documents, generally, GLM may be reimbursed for
certain fees and expenses for which the CLOs are responsible to the extent funds are available
therefor in accordance with and subject to the priority of payments and the other limitations
contained in each CLO’s Indenture.
Neither GLM nor any of its members, employees, or employees of its affiliated managers
(“Employees”) receives any transaction-based compensation from Clients for the sale of
securities or other investment products.