Item 5 - Fees and Compensation
A. Below is a discussion of how the Adviser is compensated in connection with providing advisory
services to its Clients. In the future the Adviser may enter into different fee arrangements on a
Client by Client basis.
The Adviser will generally receive management fees and/or performance-based fees (also
known as carried or profits interests) (assuming certain regulatory requirements are satisfied)
in connection with the advisory management services that the Adviser provides to its Clients.
Management fees, performance fees and any other compensation payable to the Adviser or its
affiliates for such services by a Client and its investors are generally negotiated with each Client
(or its underlying investors) and will depend on a number of factors as discussed below. The
fees and other compensation payable by each Client (or its underlying investors) are described
in each such Client’s partnership agreement or other governing documents.
Management Fees. The management fees we receive will be based on committed or invested
capital in accordance with the terms of the partnership agreement or other governing documents
of the applicable Client and/or a separate investment management agreement. Our current
management fees will typically be up to 2% of capital committed to the relevant Client during
the investment period of such Client and up to 2% of unreturned invested capital remaining
following the termination of the investment period of such Client. As more fully described
below, management fees payable to the Adviser by certain Clients may be reduced by certain
other compensation received by the Adviser or its affiliates that relate to the relevant Client
and its activities or by certain organizational, offering and other expenses borne by the Client.
Additionally, and detailed in a Fund’s governing documents, the sum of (i) 80% of the sum of
(A) portfolio company board fees (net of related expenses), plus (B) the aggregate amount of
any other fees (net of any related expenses) received by the general partner of a Fund or the
Adviser or their respective affiliates, from or through portfolio or prospective acquisition
targets for sourcing and oversight on behalf of portfolio investments, including advisory fees,
consulting fees, monitoring fees, brokers’ and finders’ fees, transaction fees and investment
banking fees, and to the extent attributable to the Fund investments (as determined by the
general Partner), plus (C) net breakup fees, if any, from broken deals, plus (ii) 100% of
litigation payments, if any, from broken deals, shall be applied to reduce the amount of future
management fees and/or, in the general oartner’s discretion, other Fund expenses (collectively,
“Offset Fees”); provided, however, that bona fide compensation to employees of the Adviser
or their respective affiliates for services to portfolio companies will be excluded from Offset
Fees to the extent (y) for services not otherwise provided by or required to be provided by or
on behalf of the general partner of the Fund or the Adviser or their respective affiliates and (z)
paid or reimbursed by such portfolio companies.
Carried Interest. The general partners or special limited partners that are affiliates of the
general partners, of each Client typically receive carried interest allocations from such Client
of up to 20% of distributable cash, determined with respect to each Client on a whole fund
basis. Carried interest allocations may be subject to preferred return hurdles and/or claw-back
obligations, depending on, among other things, the strategy of the relevant Client and market
terms at the time of the Client’s formation.
As indicated above, the fees and other compensation payable to the Adviser by its Clients are
established at the time of the formation of the relevant Client and negotiated with participating
investors prior to their investment. Specific details of such compensation and expenses, and
their method of calculation are set out in the offering materials, disclosure documents and
governing documents of the relevant Client and, as indicated, may vary from Client to Client.
Once the relevant Client has been established and commenced operations, such compensation
and expenses are generally not negotiable, although we may, from time to time, enter into side
letter agreements or other arrangements with specific investors in certain Clients whereby such
investors receive reductions of management fees or other compensation otherwise payable with
respect to their investment in such Clients.
B. Management fees typically will be calculated and paid semi-annually in advance in January
and July, subject to the terms of the relevant governing documents applicable to each Client.
The general partners of each Client may make capital calls on investors in such Client for the
amount of our management fees and remit the amounts received to the Adviser.
C. Each Client (and its underlying investors) will typically pay or otherwise bear all legal and
other third party out-of-pocket organizational and offering expenses incurred in the formation
of such Client and its related entities. Investors in the Funds will typically, and investors in
other Clients may, receive a reduction in management fees in respect of offering and
organizational expenses in excess of specific amounts as described in the offering materials,
disclosure documents and governing documents of the relevant Client. In addition, investors in
each Client are responsible for expenses related to the operation of such Client, which may
include but are not limited to legal, accounting, transaction related travel, tax, audit, bank line
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