Item 5. Fees and Compensation
A. The General Partners are entitled to receive from the Clients management fees and performance fees.
During the commitment period of the Clients, management fees are generally 1.5-2.0% p.a. of
committed amounts to the Clients and are, in general, paid at the beginning of a quarter. Thereafter,
management fees are generally 1.5-2.0% p.a. of remaining invested capital of the Clients (excluding
investments that have been permanently written-off) and are, in general, payable at the beginning of a
quarter. The aggregate amount of management fees payable to the General Partners shall be offset by
a percentage of certain fees and expenses paid to affiliates of the General Partners according to the
governing documents of each Client. Such other fees and expenses include some combination of
monitoring fees, transaction fees and Broken Deal Expenses, as further described in the governing
documents of each Client. “Broken Deal Expenses” means all third-party expenses directly related to
a potential investment that is not ultimately made or a potential disposition of an investment that is
not actually consummated. For the purposes of this definition, a “potential investment” or a
“potential disposition”, will be deemed to occur upon the approval of the investment or disposition, as
applicable, by the Investment Committee of the General Partner and the commencement of activity
related to such investment or disposition, and will generally be evidenced by the execution of a term
sheet, letter of intent, memorandum of understanding or similar document or by the initiation of a due
diligence process, as the case may be. Certain personnel of GP Ltda. also receive director’s fees from
portfolio companies, which are not offset against management fees.
Performance fees are generally 20% of any profits from the disposition of investments of the Clients
so long as a target percentage return has been achieved for the Client’s investors, subject to clawback
if the General Partner receives excess distributions on a net basis from the Client, and in each case as
set forth in the governing documents of the Client.
Performance fees and management fees may vary depending upon the governing documents of each
Client.
B. GP Ltda. is entitled to receive from each General Partner an advisory fee (the “Advisory Fee”) in
amounts and at times as may be agreed from time to time between GP Ltda. and each General
Partner. The Advisory Fees are determined based upon the costs incurred by GP Ltda. in connection
with the provision of such services plus a specified percentage of such cost, subject to an annual
review. Because this brochure will only be delivered to qualified purchasers as defined in section
2(a)(51)(A) of the Investment Company Act of 1940, as amended, this brochure does not include a
fee schedule. In no event shall Clients be directly liable for any portion of the Advisory Fee, nor shall
the General Partners be entitled to reimbursement from the Clients for such Advisory Fee.
C. GP Ltda. also receives compensation from (i) certain non-U.S. client for providing investment
advisory services; and (ii) certain Brazilian equity investment funds (Fundos de Investimento em
Participações) (the “FIPs”) for acting as securities portfolio manager to such entities, and charges GP
Investments, Ltd. for back office activities performed on behalf of GP Investments, Ltd.
D. GP Ltda. does not require payment of Advisory Fees in advance from the General Partners.
Management fees received by the General Partners from the Clients are paid in advance, in line with
the provisions of the governing documents of each Client.
Except as otherwise provided in items I-V below, the General Partners shall in all cases assume or
charge to prospective portfolio companies or other third parties, or, in the case of dispositions, deduct
from the related disposition proceeds, any costs and expenses related to the acquisition or disposition
of investments, whether or not consummated. In no event shall the Clients or any limited partner be
directly liable for any such other costs or expenses.
The following expenses of establishing and administering the Clients shall be charged to and paid by
the limited partners of the Clients:
I. Organizational Expenses: reasonable costs, according to the limits provided in the governing
documents of each Client, of establishing such Client, including attorneys’ fees, accountants’
fees and other related out-of-pocket expenses incurred in connection with the organization of
such Client, including subscription and other offering costs, but excluding the fees of
financial advisors or placement agents in connection with the formation of such Client.
Organizational Expenses in excess of the limits provided in the governing documents of each
Client shall be paid by the respective General Partner.
II. Administrative Expenses: includes but is not limited to: (i) all reasonable ordinary and
necessary administrative expenses of each Client, including all fees and expense
reimbursements payable by such Client to third parties (such as attorneys, auditors,
accountants, bankers, consultants, experts or custodians), retained by such Client or by the
General Partner for such Client; (ii) the maintenance of each Client’s books and records and
any filing fees or other fees and expenses that may arise under such Client’s place of
incorporation; (iii) out-of-pocket costs of the annual investors’ meeting, provided that this
shall not include the costs and expenses of any limited partner in connection with such
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