Item 5 – Fees and Compensation
A. Compensation for Advisory Services
JEN receives asset- and performance-based fees and allocations from the JEN Funds, with the
exception of JEN IV Co-Invest (as well as other compensation and reimbursements of expenses, as
described further below).
The specific payment terms and other conditions of these fees and allocations are set forth in the
relevant JEN Funds Documentation.
Management Fee
The following is a summary of the method used to calculate the management fee paid by the JEN
Funds. Generally, the management fee (1.5% per annum) is due and payable in advance on a
quarterly basis. The management fee is based on the amount of capital commitments to the
relevant fund during the fund’s commitment period, and, subsequent to the commitment period, is
based on the total capitalized cost of any remaining investments of the relevant fund.
Because management fees are based on capital commitments (during the commitment period) and
total capitalized cost (post-commitment period), JEN may be incentivized to oversize the JEN Funds
and to overvalue the JEN Funds’ investments to increase the amount of its management fees. JEN
believes that, notwithstanding this potential conflict: (i) it has sought and continues to seek capital
commitments in amounts that allow it to, on behalf of the JEN Funds, effectively deploy capital
towards investment opportunities which generate attractive rates of return for those funds’
investors; and (ii) it values JEN Fund assets pursuant to specific valuation policies and procedures
(see “Valuation” below).
Because JEN IV Co-Invest does not pay any performance-based fees, JEN may be incentivized to
allocate more profitable investments to the other JEN Funds. JEN believes that the fact that it
allocates investments pro rata (based on investable capital) as between JEN IV, JEN IV Co-Invest
and JEN IV Co-Invest 2, mitigates any such conflict of interest.
Carried Interest
The JEN Funds (excluding JEN IV Co-Invest) allocate to their general partners (and/or their
affiliates) a carried interest distribution based on proceeds generated from the sale of fund
investments, in an amount equal to 20% of the profits from the disposition of each portfolio
investment made by the relevant JEN Fund, after the return of limited partners’ capital
contributions and a preferred return to limited partners. All performance-based compensation
payable to JEN will be effected consistent with the requirements of Section 205 of the Advisers Act
and Rule 205-3 thereunder.
The terms of the carried interest distributions could incentivize JEN to make decisions regarding
potential investments and the timing and structure of realization transactions that may not be in
the best interests of the JEN Funds (and their investors). For example, JEN may be incentivized to
make more risky or speculative investments than it would otherwise make in the absence of
performance-based compensation.
(See also disclosure of the potential conflict of interest (and mitigating factor) related to JEN IV Co-
Invest and carried interest, above in “Management Fee.”)
Fee Waivers/Reductions
Limited partners of the JEN Funds may in the future negotiate different fee terms than those set
forth in the JEN Funds Documentation (through side letters).
Indemnification
The JEN Funds are obligated to indemnify JEN and its personnel under circumstances set forth in
the relevant JEN Funds Documentation.
Investors participating in subsequent closings
Investors admitted at any closing after the relevant JEN Fund’s initial closing are required to
contribute to that JEN Fund an amount equal to the capital commitments that would have been
drawn down had those persons been limited partners from the time of that JEN Fund’s initial
closing (plus interest). This amount will include each limited partner’s proportionate share of
management fees, fund expenses and original costs of fund investments.
Valuation
The value of the JEN Funds’ investments is relevant to numerous aspects of those entities, including
any management fees and performance allocations borne by those entities. JEN maintains
valuation policies, which provide guidelines for valuing the JEN Funds’ investments. Under its
valuation policies, the relevant JEN General Partner values a JEN Fund’s investments at fair value
using various valuation techniques, including discounted cash flows and the market approach. In
calculating fair value, the relevant JEN General Partner may take into account factors such as: the
cost basis of the investment; recent transactions in properties proximate and/or similar to that
investment; industry experience; market perception; financial performance projections; and tests
of impairment. JEN’s Chief Financial Officer/Chief Compliance Officer is responsible for ensuring
that investments are valued according to JEN’s policies and procedures, and valuations are
reviewed by the JEN Funds’ auditor during the annual audit process.
B. Method of Fee Payments
Pursuant to the terms of the JEN Funds Documentation, the JEN Funds pay management fees on a
quarterly basis in advance.
Any carried interest is generally allocated to the relevant JEN General Partner’s capital account
based on cash generated from JEN Fund investments after repayment of capital and ”preferred
return”.
C. Other Fees/Expenses
Fund Expenses
JEN is responsible for all overhead expenses of managing the JEN Funds, including the costs of all
salaried personnel and senior advisors, rent, general office overhead and its out-of-pocket travel
and entertainment expenses for deals not consummated1.
Each JEN Fund will bear its own organizational expenses (including the out-of-pocket expenses of
JEN and its agents, but excluding any placement agents) up to an amount specified in the relevant
JEN Funds Documentation. Organizational expenses in excess of that amount (as well as the fees of
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