ITEM 5 – FEES AND COMPENSATION
Fees
As investment adviser to each Fund, HPA will generally receive an annual management fee equal
to 2% of the capital commitment of each Fund investor from the initial closing of the Fund through
the end of the Fund’s investment period and, thereafter, a percentage generally ranging between
1.75% and 1% of the invested capital (i.e., cost basis of all unrealized portfolio investments) of
each Fund investor.
The management fee generally will be paid by each Fund semi-annually in advance. Management
fees are deducted from the assets of each Fund and are generally payable out of current cash flow,
disposition proceeds or from drawdowns of investors’ capital commitments to the Fund. The
investment management agreement of a Fund may be terminated upon the winding up of the Fund.
Upon termination, annual management fees that have been paid by a Fund in advance are refunded
on a pro rata basis.
HPA and/or its affiliates may be entitled to receive fees from actual or prospective portfolio
investments of the Funds, including director’s, transaction, breakup, commitment and closing fees.
Although these fees are in addition to management fees paid by the Funds, HPA and/or its affiliates
will in certain circumstances reduce management fees payable by the Funds in connection with
the receipt of such fees.
Under each Fund’s governing agreement, an affiliate of HPA generally will be entitled to receive
carried interest distributions. The carried interest distributions will generally be an amount equal
to a percentage, generally 20%, of the profits from each portfolio investment made by such Fund
after the return of invested capital and a preferred return to investors.
The carried interest distributions for each Fund generally are paid out as distributions of the net
cash proceeds attributable to dispositions of portfolio investments of the Fund.
The amount of, and the manner and calculation of, the management fees and carried interest
distributions for each Fund are set forth in the governing documents and Memorandum of the
Fund.
HPA will not receive sales commissions in connection with sales of interests in a Fund.
Costs and Expenses
Generally, a Fund bears all legal, accounting and other fees, costs and expenses of and incidental
to organizing and funding the Fund and the general partner and manager of the Fund up to a certain
amount as set forth in the governing documents and Memorandum of the Fund. A Fund will also
bear the operational costs and expenses of the Fund. Such costs and expenses include, but are not
limited to: (i) legal, accounting, consulting, audit, tax return preparation and other fees and
expenses; (ii) costs incurred in purchasing, holding and selling portfolio securities; (iii) out-of-
pocket expenses of transactions not consummated; (iv) any taxes applicable to the Fund on account
of its activities; (v) appraisal and other consulting expenses; (vi) expenses of meetings; (vii)
indemnification and litigation expenses; (viii) insurance premiums; and (ix) costs of dissolving
and winding up the Fund. Fund investors may also bear a portion of any fees or expenses charged
by any special purpose vehicles that have been formed to facilitate portfolio investments by the
Funds or their investors for tax, regulatory or economic purposes. The Funds will also bear
brokerage and transaction costs to the extent incurred. For additional information regarding
brokerage and transaction costs, see Item 12 below. HPA may, at its discretion, choose to pay or
reimburse the Fund for all or any portion of such expenses.