ITEM 5: FEES AND COMPENSATION
Each Partnership’s offering documents set forth such Partnership’s respective applicable fees and
expenses.
Typically, Hudson offers investment management services for a management fee (“Management
Fee”), as described below. In addition, an affiliate of Hudson receives performance‐based
compensation, as discussed in Item 6. Fees for certain Clients may be waived, reduced or
calculated differently with respect to certain Limited Partners, including, but not limited to,
Hudson’s employees or affiliates, at the discretion of Hudson and in accordance with the
respective Partnership’s offering or governing documents.
The Management Fee
Effective as of March 1, 2019 (the “Effective Date”), certain Limited Partners agreed to amend
the Partnership Agreements as to those Limited Partners (“Consenting Limited Partners”),
whereby Consenting Limited Partners would no longer pay a Management Fee or be subject to a
share of carried interest, but instead will bear their pro rata share of:
• an administrative fee, payable quarterly in advance, to Hudson;
• success fees, payable to Hudson, from proceeds from sales of Portfolio Companies
allocated to such Limited Partners, which amounts will depend upon the timing and
amount of net proceeds from the sale of each remaining Portfolio Company of the
Partnerships; and
• certain additional fees to Imperial, as further set forth in the governing documents of the
Partnerships.
In addition, Consenting Limited Partners have agreed to relinquish rights to a share of any future
clawback of carried interest. Limited Partners that were not Consenting Limited Partners will
continue to pay the Management Fee and carried interest to Hudson upon the terms and
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conditions of the Partnership Agreements as in effect prior to the Effective Date, but are subject
to the new governance arrangements of the Partnerships following the Effective Date.
For a particular Partnership, the Management Fee is calculated as a percentage, typically 2.0%
per annum, of: (i) the aggregate capital commitments of Limited Partners in that Partnership
during the commitment period specified in the offering documents; and (ii) after the expiration
of the commitment period, the (x) sum of the aggregate capital contributions of all Limited
Partners of that Partnership invested in portfolio investments minus (y) proceeds from sales of
investments representing a return of capital and the cumulative amount of any write‐ offs, if any,
attributable to those Limited Partners’ capital commitments invested in Portfolio Companies.
Management Fees were reduced by 20% effective beginning with the quarterly period July 1,
2014 and continuing through December 31, 2015. Thereafter Hudson has reduced the
Management Fee by 25%. The Management Fee is generally payable quarterly in advance.
Generally, should Hudson’s investment management services to a particular Client be terminated
prior to the end of the period in which the fees have been paid in advance, an appropriate refund
will be made of such Fees for any stub period in which services are not provided based on the
number of days therein. Limited Partners pay the Management Fee through capital contributions
to their respective Partnerships in accordance with the Management Fee calculations below,
subject to the offset provisions described in the offering materials and below.
The method for calculating the Management Fee after the expiration of the commitment period
may create a potential conflict of interest, in that it may create an incentive for Hudson to assign
higher values to assets held by the Partnerships. Hudson has adopted practices and procedures
that are designed to address such potential conflict of interest.
Organizational Expenses
Each Client generally pays for all of its out‐of‐pocket organizational expenses, including legal,
professional, consulting, printing and travel expenses. Such expenses are limited to a maximum
amount (a “cap”); Hudson or its affiliates typically bear the expenses in excess of such caps. In
addition, Hudson or its affiliates typically bear all placement agent fees incurred by the
Partnership in connection with a Partnership offering.
Operating Expenses
The Partnerships generally pay all expenses related to their operations, including expenses
incurred in connection with the investigation, purchase, holding, management, sale or proposed
sale of Client investments, expenses of administrators, service providers and custodians, and
insurance, indemnity and litigation costs. In addition, each Partnership pays its direct operating
expenses, such as legal, accounting, audit, compliance and tax preparation expenses (including
preparation costs of financial statements, tax returns and reports to the Limited Partners),
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printing and mailing costs, market information systems and computer software expenses, fees of
financial modeling services, filing and registration fees, Limited Partner advisory committee
expenses, expenses of meetings of the Limited Partners, expenses of the General Partner
advisory board, and any taxes, fees or other governmental charges levied against the
Partnerships.
Other Fees
Hudson or an affiliate may receive certain advisory, underwriting, consulting, monitoring,
organization, transaction fees, directors’ fees and other fees (“Ancillary Fees”) from any Portfolio
Company; however, an amount equal to 80% of all Ancillary Fees received by Hudson or an
affiliate (with certain exceptions) will be applied to reduce and offset the Management Fee
otherwise payable. Ancillary Fees do not include any amount received from any Portfolio
Company as reimbursement for expenses directly related to such Portfolio Company, as
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