Item 5 – Fees and Compensation
Asset management fees are paid by the Fund to the REIT Manager/General Partner and the REIT
Manager/General Partner pays a portion of these fees to the Adviser as compensation for its services.
These asset management fees are determined by the size of the Fund’s assets. During the Fund’s
Investment Period (as defined below), the asset management fee is one percent (1%) per annum of the
aggregate capital commitments of the Class A Members of the REIT. After the Investment Period, the
asset management fee is one percent (1%) per annum of the total invested equity capital of Class A
Members of the REIT. Asset management fees are reduced proportionately based on reductions after
the Investment Period of acreage of forestlands owned directly or indirectly or with respect to which the
Fund holds rights to harvest and remove timber and reductions of the percentage ownership interests in a
forestland interest held by the Fund. Asset management fees will not be reduced upon the full or partial
disposition of any other investment or Permitted Short Term Investment, and there will be no adjustments
in the asset management fee for appraised value changes. The “Investment Period” is the period of time
that begins on the initial closing date of the sale of Class A Membership interests in the REIT and
continues until the earlier of (i) four years from the initial closing date, or (ii) one year following all capital
contributions of Class A Members having been invested (but in no event less than three years from the
initial closing date).
In addition to a portion of the management fee, the REIT Manager/General Partner may also receive
performance based compensation (commonly referred to as a “carried interest”). Specifically,
distributions by the Fund will initially be apportioned among the General Partner and the limited partners
of the Fund (including the REIT) in accordance with their percentage interests. The amount apportioned
to the General Partner will be distributed to the General Partner, and the amount apportioned to the
limited partners will be distributed to the limited partners until the Class A Members have recovered all
capital contributions plus a real (inflation-adjusted) preferred internal rate of return equal to 5% per annum
(adjusted for the CPI-U) of such capital. Thereafter, the General Partner is entitled to performance based
compensation whereby distributions are made 80% to the limited partners (including the REIT) and 20%
to the General Partner.
The Adviser will comply with Rule 205-3 of the Investment Advisers Act of 1940 with respect to
performance-based compensation. Each member of the REIT and each limited partner of the Fund must
qualify as a “qualified client” (as defined in Rule 205-3) and agree to furnish certain information to the
REIT and the Fund in order to ascertain such status.
In addition to the asset management and performance-based fees described above, the Fund and the
REIT bear certain costs and expenses which include: (i) fees and charges, including incentive fees to
non-affiliated persons and direct expenses (legal, accounting, environmental, engineering and otherwise),
in connection with the acquisition, ownership, management and disposition of investments; (ii) consulting
fees and expenses; (iii) travel expenses in connection with the acquisition, ownership, operation,
management, and disposition of investments; (iv) fees for overseeing the security of the forestlands;
(v) all ad valorem property taxes and assessments imposed in connection with the investments, including
any federal, state or local tax; (vi) fees and expenses of certified public accountants in connection with
reviewing and preparing financial statements for the Fund and the REIT; (viii) charitable contributions,
dues and other supporting payments to volunteer fire departments, forest product trade groups and
forestry education and research groups; (ix) all legal and accounting fees; (x) costs associated with
investor meetings, (xi) costs of appraisals by third-party valuation firms; (xii) costs incurred in connection
with pursuing, obtaining, and maintaining Forest Stewardship Council (FSC) or similar certifications for
Investments; (xiii) costs incurred in connection with the implementation of and compliance with the
Adviser’s responsible investment policy; (xiv) the fees and expenses of carbon developers and
consultants in conjunction with the development, issuance, and verification of forest-carbon offset projects
for the Fund; (xv) costs incurred in connection with forest management summit meetings and forest
planning sessions; and (xvi) all other expenses incurred by the Fund and the REIT in the ordinary and
necessary course of operating the business of the Fund and the REIT. These costs and expenses are in
addition to the asset management and performance-based fees assessed to the Fund.
Investors should refer to the Confidential Offering Memorandum of the REIT for a further description and
list of costs and expenses that the Fund and the REIT may bear.