ITEM 5 – FEES AND COMPENSATION
The Private Investment Funds offer interests only to certain qualified investors and admission
to these Private Investment Funds is not open to the general public. Investors in each Private
Investment Fund generally must be “accredited investors” under Rule 501 of Regulation D of
the Securities Act of 1933, as amended, and either “qualified clients” as such term is defined
in Rule 205-3 promulgated under the Investment Advisers Act of 1940, as amended (the “Advisers
Act”) or “qualified purchasers” as such term is defined in Section 2(a)(51) of the Investment
Company Act of 1940, as amended (the “Investment Company Act”). Investors and prospective
Investors should refer to the confidential private offering memorandum for the appropriate
Private Investment Funds for a detailed description of t h e applicable investor qualifications
and fees.
L3 Capital receives a management fee for the Private Investment Funds it acts as a manager equal
to two percent (2%) of the gross proceeds received from Investors, including additions to capital
over the life of a Private Investment Fund (the “Management Fee”). The Management Fee is
payable in advance upon closing of the sale of Interests in a Private Investment Fund to the
Investors. L3 Capital does not receive any Management Fee for any services provided to Private
Investment Fund XII and Private Investment Fund XIII, however, the Managing Member (as
defined herein) receives such fees as part of his ownership interest in each of the respective
managers of such entities. In addition, L3 Capital does not charge any management fee to Private
Investment Fund X. Rather, L3 Capital provides management and advisory services to each investment
made by such fund and shall receive an annual management fee and one time acquisition fee from each
such investment, which is not shared with Private Investment Fund X or its members. An, officer,
director, manager or member of a potential investment made by Private Investment Fund X may receive
fees for services and/or it may be a paid advisor of or receive compensation through its relationships
with such Investment which will not be shared with Private Investment Fund X or its Members.
Affiliates of L3 Capital may, directly or indirectly, be an investor in and/or an officer, director, manager
or member of any investment made by Private Investment Fund X and may be entitled to share in any
fees and/or compensation which such officer, director, manager or member of such investment may be
entitled to receive, which will not be shared with Private Investment Fund X and its Members.
L3 Capital is also eligible to receive a performance-based fee (the “Performance Fee”) from the
Investors in Private Investment Fund I, Private Investment Fund II and Private Investment Fund
III, Private Investment Fund IV, Private Investment Fund V, Private Investment Fund VI, Private
Investment Fund VII and Private Investment Fund VIII, and Private Investment Fund IX, equal to
10% of profits (or equal to 20% of profits in the case of Private Investment Fund XI), subject to
the general requirement that an amount in excess of 100% of the Investor’s capital contributions
be received prior to any Performance Fee being paid. The Performance Fee, if any, will be
determined as of the time any distributions are made to the Investors. The calculation of the
Performance Fee is complex, and Investors and prospective Investors should carefully review the
more detailed terms of the Performance Fee set forth in the relevant Private Investment Fund’s
offering and governing documents. L3 Capital does not receive any Performance Fee for any
services provided to Private Investment Fund X, Private Investment Fund XII and Private
Investment Fund XIII, however, the Managing Member (as defined herein) receives such fees as
part of his ownership interest in each of the respective managers of such entities, in the case of
Private Investment Fund XII and XIII or as an officer, director, manager or member of any
investment made, in the case of Private Investment Fund X.
The portions of the Management Fees and Performance Fees borne by Investors are deducted
from Investor assets in the respective Private Investment Fund. Investors do not have the ability
to choose to be billed directly for fees incurred.
Management Fees and Performance Fees are not negotiable but may be waived or modified in the
sole discretion of L3 Capital, in the case of Private Investment Fund I, Private Investment Fund II
Private Investment Fund III, Private Investment Fund IV, Private Investment Fund V, Private
Investment Fund VI, Private Investment Fund VII and Private Investment Fund VIII and the
applicable investment manager of Private Investment Fund IX, Private Investment Fund X and
Private Investment Fund XI.
L3 Capital is also entitled to the reimbursement of various expenses paid on behalf of each Private
Investment Fund (other than Private Investment Fund X), which include, but are not limited to,
investment expenses (e.g. brokerage commissions, clearing and settlement expenses, custodial fees),
legal expenses, internal and external accounting, audit and tax preparation expenses, costs of
printing and mailing reports and notices to Investors, costs of third party administrators, consultants,
and extraordinary expenses, if any (“Administrative Fees"). Expenses of between $50,000-$75,000
per year are anticipated per Series (including all sub-Series) in each Private Investment Fund, and
L3 Capital typically creates a reserve per Series (including any sub-Series) sufficient to cover
expenses for a period of two (2) years – three (3) years to cover Administrative Fees. If there is
more than one purchase of Portfolio Securities (as defined herein) per Issuer (as defined herein) in
a particular Private Investment Fund which results in the creation of a sub-Series, all such sub-Series
...