Item 5. Fees and Compensation
Genesis will receive both an annual management fee and a performance-based incentive
management fee for the provision of advisory services to the Funds.
The annual management fee is based on negotiated fee rates with each Client, and is set forth
in the relevant governing documents for each Fund. Generally, management fees are based
on a percentage of aggregate capital contributions used to fund invested capital as of the
immediately preceding calendar month. After aggregate capital contributions exceed a
certain threshold, calculation of the management fee may be changed to reflect an amount
necessary to increase the Client’s profit margin to a certain percentage. The management fee
is paid in monthly installments in arrears. Any payment of fees for a period of less than a full
calendar month is adjusted on a pro rata basis.
In the event of termination of the advisory agreement between Genesis and a Fund, Genesis
generally will be entitled to all outstanding management fees for the period prior to the
termination and the management fees that would have been payable to Genesis during the
two-month period following the termination had it not been terminated.
Similar to the management fee, the annual performance-based incentive fee is based on
negotiated fee rates with each Client, and is set forth in the relevant governing documents for
each Fund. Following the end of each fiscal year, the Firm will be entitled to receive an
amount equal to 10% of the positive excess (if any) of: (i) the aggregate amount of annual
management fees that would have been payable during the fiscal year in accordance with the
Client’s governing documents, over (ii) the total amount of management fees actually paid to
the Firm by the Client during the fiscal year. The annual incentive fee and related conflicts
of interest are described in Item 6, below.
In addition, certain of the Firm’s Clients may also pay Genesis a fee composed of 60% of: (i)
all underwriting and processing fees received in respect of any loan made or acquired by the
Client, less (ii) the actual third-party costs incurred in connection with the provision of the
applicable service in connection with such loan.
All of the above fees are paid either monthly or quarterly in arrears from Client accounts.
Advance payment of fees or expenses is not required. Accordingly, advisory fees are not
paid until after services have been rendered. Because Genesis is authorized by its Clients to
charge and deduct advisory fees directly from Clients’ assets, at the times and in the amounts
set forth in the Funds’ governing documents, Genesis is deemed to have custody of client
assets.
Expenses
Clients are responsible for certain organizational and operational costs and expenses as
specifically identified in a Fund’s governing documents. These may include, without
limitation, costs related to servicing the investments; costs of insurance; costs of formation of
subsidiaries; costs associated with any restructuring, liquidation, winding up, or dissolution
of a Fund; taxes, duties, or other similar and related costs; costs associated with
indemnification or any proceeding to which the Fund is a named party; costs associated with
accounting, legal, and administrative services; costs related to regulatory compliance; and a
percentage of “investment banking fees” related to certain investments. Some of these
additional fees and expenses may be charged by and payable to affiliates of Genesis in
accordance with terms outlined in each Fund’s governing documents.