ITEM 5: FEES AND COMPENSATION
CLO IV pays management fees on assets under management of .15% per annum as a senior management
fee and .35% per annum as a subordinated management fee.
CLO V pays management fees on assets under management of .15% per annum as a senior management
fee and .35% per annum as a subordinated management fee.
CLO VI pays management fees on assets under management of .15% per annum as a senior management
fee and .35% per annum as a subordinated management fee.
CLO VII pays management fees on assets under management of .15% per annum as a senior management
fee and .10% per annum as a subordinated management fee.
We share a portion of our CLO subordinated management fees with the equity holders in CLO IV, CLO V
and CLO VI pursuant to fee sharing agreements.
The subordinated management fees are payable on each quarterly payment date to the extent that sufficient
interest or principal proceeds are available in accordance with the priority of payments, and if the
subordinated management fee for the CLO’s is not paid for any reason, other than a waiver by us, such fees
will be deferred and will accrue interest at LIBOR plus .35% from such payment date. The trustee of our
CLOs (the “Trustee”) calculates and remits payment of the management fees on each quarterly payment
date from the waterfall proceeds pursuant to the terms of the respective Indenture.
The CLO’s provide for incentive management fees payable up to 20% of the remaining interest proceeds
(and 20% of the remaining principal proceeds after the Reinvestment Period), if and after the Subordinated
Notes have realized an Internal Rate of Return of 12%. The remaining 80% of interest proceeds (and
principal proceeds after the Reinvestment Period) is payable to the Subordinated Noteholders.
For CLO IV, the Incentive Management Fee Threshold will be satisfied on any Payment Date if the Holders
of the Junior Subordinated Notes have received an annualized internal rate of return (computed using the
"XIRR" function in Microsoft® Excel or an equivalent function in another software package and based on
the respective dates of issuance and an aggregate purchase price of $28,937,250 for the Junior Subordinated
Notes) of at least 12% on the outstanding investment in the Junior Subordinated Notes as of such Payment
Date after giving effect to all payments made or to be made on such Payment Date.
For CLO V, the Incentive Management Fee Threshold will be satisfied on any Payment Date if the Holders
of the Junior Subordinated Notes have received an annualized internal rate of return (computed using the
"XIRR" function in Microsoft® Excel or an equivalent function in another software package and based on
the respective dates of issuance and an aggregate purchase price of $26,216,294 for the Junior Subordinated
Notes) of at least 12% on the outstanding investment in the Junior Subordinated Notes as of such Payment
Date after giving effect to all payments made or to be made on such Payment Date.
For CLO VI, the Incentive Management Fee Threshold will be satisfied on any Payment Date if the Holders
of the Junior Subordinated Notes have received an annualized internal rate of return (computed using the
"XIRR" function in Microsoft® Excel or an equivalent function in another software package and based on
the respective dates of issuance and an aggregate purchase price of $25,877,500 for the Junior Subordinated
Notes) of at least 12% on the outstanding investment in the Junior Subordinated Notes as of such Payment
Date after giving effect to all payments made or to be made on such Payment Date.
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For CLO VII, the Incentive Management Fee Threshold will be satisfied on any Payment Date if the
Holders of the Subordinated Notes have received an annualized internal rate of return (computed usingthe
"XIRR" function in Microsoft® Excel or an equivalent function in another software package and based on
the respective dates of issuance and an aggregate purchase price of $28,969,383.64 for the Subordinated
Notes) of at least 12.00% on the outstanding investment in the Subordinated Notes as of such Payment
Date after giving effect to all payments previously made or to be made on such PaymentDate.
Such incentive management fees could create an incentive for us to manage our Clients’ investments in a
manner that could increase the risk of loss (insofar as we would be incentivized to seek investments that
maximize yield at the expense of higher creditworthiness). We have not earned any incentive-based
compensation to date from our CLOs.
We generally pay all ordinary expenses and costs incurred by us in the course of performing our obligations
under the investment management agreement with our CLOs (the “Management Agreements”) and/or the
Indentures, except that we are not liable for, and our CLOs are responsible for the payment of, all
extraordinary expenses and costs incurred by us in performing our obligations, as well as all expenses and
costs of legal advisers, independent accountants and consultants. These expenses generally include, among
other things:
• Investment transaction costs, including assignment fees (please see Item 12 for discussion of our