ITEM 5. FEES AND COMPENSATION
For providing investment advisory services, Granite Bay typically charges Clients a
management fee and/or performance fee or carried interest, and other fees as necessary and
agreed to (including, but not limited to, expenses related to servicing accounts, such as
administration and legal services).
Under appropriate circumstances and where permitted by applicable law, the terms of an
investment advisory contract, including fees, terms of payment and performance fees and
termination provisions, are negotiable. In negotiating fees, Granite Bay considers various
factors, including assets under management, investment objectives, strategies and
restrictions, and the resources required to meet investment objectives.
Clients incur brokerage and other transaction costs associated with Granite Bay’s
management of Client Accounts. Please see the section titled Brokerage Practices of this
ADV Part 2 for a discussion of Granite Bay’s brokerage practices.
As discussed in Item 4. Advisory Business, Granite Bay may contract with Highland for the
provision of certain services. To provide these services, Highland will charge Granite Bay a
fee. This fee is based off arms-length negotiations and payable by Granite Bay, not its Client
Account.
FEE SCHEDULE
The following summary of fees is typically updated in this brochure annually (on or about
March 31) and does not reflect subsequent changes unless expressly indicated otherwise.
Fees in the below Fee Schedule are annualized.
Management Performance Fee or Carried
Product Other Fees
Fee Interest
Separate Accounts Not Available Not Available Not Available
Unregistered Investment
Up to 1.5% Up to 20% None
Funds
Certain investment vehicles managed by Granite Bay invest in other investment vehicles
managed by Granite Bay or our affiliates. Both investment vehicles may impose
management fees, performance fees or other expenses (including administrative fees). This
results in greater expense to a Client than if such Client had invested directly in the
underlying investment vehicle. Certain companies in which Clients are invested also use the
products or services, or invest in investment vehicles, offered by Granite Bay or its affiliates
and pay fees or other compensation accordingly.
UNREGISTERED INVESTMENT FUNDS
As compensation for our advisory services, each Unregistered Investment Fund pays Granite
Bay management fees of up to 1.5% annually. Management fees are based upon outstanding
capital accounts or amounts of committed capital and are deducted quarterly in advance or
in arrears depending on the specific fund. For accounts that also provide for incentive
compensation, Granite Bay also deducts performance fees or investment profit allocations in
the form of carried interest of up to 20% of returns, which may be after the achievement of a
hurdle rate, and which is typically contingent on the manager of the applicable Unregistered
Investment Fund eclipsing the high-water mark. In some cases, certain investors in an
Unregistered Investment Fund enter into side letter agreements with Highland, under which
they may pay a different fee than others based on the terms of their agreement with Granite
Bay or may otherwise receive certain additional rights. Upon termination of the applicable
Unregistered Investment Fund’s advisory agreement, any management fees that have been
prepaid are generally returned on a pro-rated basis.
In addition to management fees, performance fees, and brokerage and transaction costs,
investors in the Unregistered Investment Funds will indirectly bear the fees and expenses
paid by the Unregistered Investment Funds, including custody fees, administration, legal,
audit and tax preparation fees, overhead allocation, and certain other fees and expenses.
Each Unregistered Investment Fund’s offering documents include more detailed information
about the fees and expenses paid by such Unregistered Investment Fund.
SEPARATE ACCOUNTS
For our Separate Accounts, the agreement entered into with Granite Bay will determine the
fee structure. Typically, a Separate Account will pay Granite Bay management fees that
range annually. Management fees are based upon the average daily net assets, which may
or may not be net of investment leverage. Granite Bay may also collect a performance fee
after reaching an internal rate of return (“IRR”). Fees are deducted from the Separate
Account’s assets on a quarterly basis and payable in arrears.
OTHER COMPENSATION
Client Accounts may hold significant positions, individually or collectively, in the securities
issued by a company. Accordingly, Granite Bay may have the right to appoint a board
member or officer for such company. Granite Bay may appoint an employee or a third party
to such position as it sees fit in the best interest of the company and its Clients. Employees
are permitted to retain all compensation received for such positions except to the extent
contrary to the governing documents for one or more Client Accounts, in which case the
proportion of such compensation related to such Client Account(s) will be paid to those
Account(s) (generally in proportion to relative assets of the Client Account as of the date
paid).
In addition, to the extent permitted by the offering and/or governing documents of the
applicable advised accounts, Granite Bay and/or its affiliates receive other fees for services
provided to portfolio companies, provided such fees are on arms-length terms and approved
by the Board of Directors or other governing body of the applicable portfolio company. See
also Item 10. Other Financial Industry Activities and Affiliations.
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