ITEM 5. FEES AND COMPENSATION
Management Fees
GCP Capital provides investment advisory services to the funds. For its services, GCP Capital is
entitled to management fees. Fees are established through written agreements between GCP
Capital and its clients. The fees are paid by the funds on a quarterly basis (i.e., indirectly by the
limited partners of the funds). Subject to any reductions or waivers mentioned below, the
management fees are called from the limited partners quarterly in advance. At times, when a capital
call and a distribution are made at the same time the management fees may be netted from
distributions from portfolio companies that would otherwise have been distributed to the limited
partners. The annual management fee charged to a limited partner prior to the end of the
commitment period for each fund is generally 1.5% of the limited partner’s capital commitment,
and after the end of the commitment period for a fund, the annual management fee is generally
equal to a limited partner’s aggregate invested capital multiplied by 1%. Management fees are
generally non-refundable as interests in the funds generally are not transferrable.
Carried Interest
As discussed further in Item 6, subject to any reductions or waivers mentioned below, limited
partners of the funds generally bear a carried interest up to 20% of the profits, if any, earned from
each investment made by the funds, subject to a preferred return. Carried interest distributions are
calculated and made to the general partner of each fund out of the proceeds of the relevant
investment at the time of realization. In the case of GCP II, the general partners are affiliates of
Greenhill & Co. In each of the funds managed by the Adviser, however, while the Adviser receives
no portion of any such carried interest, certain of its supervised persons may be entitled to a portion
of any such carried interest paid.
Transaction Based Compensation
The Adviser may also earn fees in connection with advising clients with regard to certain portfolio
investments, which may include: net break-up, topping or similar fees received in connection with
a proposed fund investment that is ultimately not made; net commitment fees received in
connection with a fund investment (or proposed investment); organization or success fees received
in connection with the making of any fund investment; periodic monitoring fees charged by the
general partner of the fund to any portfolio company; and directors fees. For GCP II, III and IV,
eighty percent of any such transaction or monitoring fees are an offset to the management fees.
Variation of Terms
The fee schedule for each of the funds is generally not negotiable; however, in most cases, the
Adviser or the general partner has the discretion to waive or modify fees with respect to a fund or
any of the investors in a fund. Certain funds in which employees of the Adviser and its affiliates
invest, or in which Greenhill & Co. or its employees invest, may not charge fees or may charge
reduced fees to limited partners.
Other Fees and Expenses
In addition to the management fee and the carried interest, pursuant to the partnership agreements,
the funds generally bear their own expenses, including (i) all expenses incurred in connection with
the making, holding, sale or proposed sale of any fund investment, including any third party
expenses associated with proposed investments that are ultimately not made by the funds; (ii)
routine expenses of the funds that are not reimbursed by portfolio companies, including legal,
accounting, auditing, consulting and financing fees, and expenses associated with the funds’
financial statements and tax returns and other administrative expenses of the funds; (iii) all
litigation-related and indemnification expenses; and (iv) subject to a cap, the funds’ proportionate
share of organizational expenses. GCP will allocate expenses on a fair and equitable basis. The
controller and CCO routinely discuss and review the allocation process.
Please see Item 12 below for further discussion of the factors that GCP Capital considers in
selecting or recommending broker-dealers for client transactions and determining the
reasonableness of their compensation (e.g., commissions).
Use of Leverage
Certain funds may use leverage in connection with making investments and payment of expenses,
including the Management Fee. The funds IRRs are calculated using the actual cash flows of the
limited partners (or all partners) in the fund unless disclosed otherwise.
Capital Calls and Use of Subscription Lines and Asset-Backed Credit Facilities. Calculations of
net and gross IRRs in respect of investment and performance data with respect to the GCP Funds,
as reported to limited partners from time to time, are based on the payment date of capital
contributions received from limited partners. This treatment also applies in instances where the
GCP Funds may utilize borrowings under a subscription-based credit facility in lieu of capital
contributions or in advance of receiving capital contributions from limited partners to repay any
such borrowings and related interest expense. As a result, use of a subscription-based credit facility
(or other long-term leverage) with respect to investments might impact calculations of returns and
might result in a higher or lower reported IRR than if the facility had not been utilized and instead
the limited partners’ capital had been contributed at the inception of an investment. Subject to the
limitations in any Governing Document, the use of a subscription-based credit facility by any GCP
Fund is within the General Partner’s discretion. To the extent that any Fund is unable to obtain a
subscription line or an asset-backed credit facility, determines that the terms of such facility would
not be appropriate for such Fund or otherwise determines not to use such facility or access to such
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