Item 5 - Fees and Compensation
A. Set forth below is a description of the fees and expenses paid by the Fund:
In consideration of KLR Group’s investment advisory and other services, KLR Group will
receive a management fee from the Fund, which is generally equal to a percentage of the total
invested capital to the Fund (the “Management Fee”). The percentage of the Management
Fee will be 1% of the invested capital per annum. After the conclusion of the investment
period, the Management Fee generally accrues at an annual rate based on a percentage of the
aggregate capital contributions of all investors used to make investments in portfolio
investments that have not been sold or written off.
In addition, the general partner of the Fund, will receive certain allocations and distributions
calculated and charged based on a share of capital gains on or capital appreciation of the assets
of the Fund, as negotiated and determined at the time such Fund is established and as set forth
in its Offering Documents. These allocations and distributions are commonly known as
“Carried Interest”.
Management Fees and Carried Interest distributions generally are not negotiable. However,
KLR Group has complete discretion to reduce or waive Management Fees and/or Carried
Interest distributions. As a general practice, KLR Group will waive the Management Fee and
Carried Interest distributions for KLR Group’s affiliates, including its employees.
Management Fees are funded from the total amount of invested capital but may also be funded
with or withheld from proceeds from investments. Carried Interest distributions generally will
be distributed to KLR Group’s affiliate from time to time upon the disposition of investments
by the Fund and are distributed to such affiliate in accordance with the terms of the Fund’s
Offering Documents.
B. As stated above, the Fund pays a Management Fee based on a percentage of the invested
capital to the Fund. Such fees are generally paid quarterly in advance as compensation for the
management services to be performed by the Adviser. The Management Fee is typically
funded with capital contributions drawn for such purpose but may also be funded with or
withheld from proceeds from investments. Carried Interest distributions generally will (if
earned in accordance with the Fund’s Offering Documents) be distributed to KLR Group or
its affiliate upon the disposition of one or more investments of the Fund.
From time to time, where permitted under the Offering Documents, an affiliate of KLR Group
may provide financial advisory and transaction execution services to certain Fund’s portfolio
companies or otherwise be involved in providing financial advisory and other services. These
activities may not need to be approved by the Investors, and compensation received in
connection with these activities may not be shared with the Fund or reduce management or
other fees payable by the Investors.
It is critical that Investors and prospective investors refer to the Fund’s Offering
Documents for a complete understanding of how KLR Group and its affiliates, including
the general partner of the Fund, are compensated for advisory services. The information
contained herein is a summary only and is qualified in its entirety by the Fund’s Offering
Documents.
C. In general, KLR Group pays its ordinary administrative and overhead expenses, incurred in
connection with managing, originating and monitoring investments, such as employee
salaries, rent and utilities.
In addition to the Management Fee and the Carried Interest described above, the Fund is
subject to customary expenses associated with conducting a Fund’s investment program,
including, without limitation: (i) fees, costs and expenses relating to the sourcing, purchasing,
holding and sale of investments, including the costs of unconsummated transactions and travel
related thereto; (ii) legal, auditing, bookkeeping, reporting, regulatory compliance and
accounting (including tax advisory, tax compliance and costs for preparation of reports to the
Client and financial statements) fees and expenses; (iii) all insurance and indemnification
expenses; (iv) interest expenses and debt service obligations, investment banking, brokerage
fees, finders’ fees, custody, transfer, registration, commissions, discounts and other similar
expenses; (v) costs associated with meeting with limited partners, including related travel
costs; (vi) extraordinary expenses such as litigation expenses; (vii) expenses of liquidating
any vehicles set up for the Client; (viii) costs and expenses associated with the formation,
launch and closing of such Fund and (ix) taxes, fees or other government charges levied
against the Client investments and all expenses incurred in connection with tax audit,
investigation, settlement, regulatory compliance or review of the Client investments.
The foregoing list of expenses is not intended to be exhaustive and is qualified in its entirety
by the terms set out in the Offering Documents of the Fund.
D. Other than as described above and in Item 10.C, neither KLR Group nor any of its supervised
persons accepts compensation for the sale of securities or other investment products, including
asset-based sales charges or service fees from the sale of mutual funds.