Item 5 – Fees and Compensation
The following discussion represents our basic compensation arrangements. However, fees can be
negotiable in certain circumstances, and arrangements with any particular Client or investor can
vary on a case-by-case basis. All investors and Clients should review the relevant Client Docu-
ments for complete information on fees and compensation payable to us, including, without limi-
tation, information concerning calculation and payment methodology.
We are typically compensated for our advisory services by earning performance fees from our
Clients. Please see Item 6. Performance-Based Fees and Side-by-Side Management for more in-
formation on our Fund performance fees. Investors in our Funds should refer to the applicable
Fund s offering materials for a complete description of our fees.
Not all Clients pay the same level of fees. As such, we have a financial incentive to allocate in-
vestments to Clients that pay a higher rate of fees. To partially mitigate this, our allocation policy
prohibits us from favoring any particular account because of the ownership or economic interests
of us, our affiliates, officers or employees, in such advisory accounts.
For certain Client accounts, we can elect to waive fees from time to time, and such waivers can
have a positive, but one-time, effect on returns.
Chapford Capital Group enters into side letter agreements with certain investors in the Funds
providing such investors with different or preferential rights or terms, including but not limited
to different fee structures and co-investment rights.
Fund Fee Information
Each of the Funds we manage are also subject to additional charges such as custody, brokerage
and other transaction costs, administrative and other expenses. Fifth Season, our affiliate, serves
as one of the service providers of the Funds. Fees are not generally negotiable, though they can be
waived or deferred at the discretion of the Fund in accordance with the Fund s offering materials.
Such waivers and deferrals will cause some investors to pay fees that are different from the basic
fee schedules disclosed in Fund offering materials. Please see the applicable Fund s offering ma-
terials for further information regarding fees.
Management Fees
For Chapford Credit Opportunities Fund L.P., the GP will debit a monthly fee of twelve and one-
half basis points (0.125%) of the gross capital account of each limited partner at the beginning of
each month of calculation.
Transaction-Related Fees and other Expenses
We do not charge or receive compensation in connection with the purchase or sale of investment
products. However, certain of our affiliates, including Fifth Season, officers, employees or em-
ployees of our affiliates can accept compensation for the sale of securities, Funds or other invest-
ment products that we manage. For example, we generally purchase loans for their principal bal-
ances, which will generally include an origination fee of 1.5% to 3% charged to borrowers. Thus,
for loans sold to a Fund by Fifth Season, Fifth Season effectively will earn a fee in the range of
1.5% to 3% inasmuch as the price paid by the Fund will exceed the amount originally advanced
by Fifth Season by this amount. Additionally, as a result of extending lines of credit or originating
loans directly to consumers, Fifth Season will also generate revenue from interest accrued on the
loan during the seasoning period. Thus, the Client that is allocated a Fifth Season loan will pay
accrued interest during the seasoning period (often for a period of at least 90 days) directly to Fifth
Season in addition to the principal amount paid to Fifth Season when acquiring such loan. Ac-
cepting fees for the sale or the ongoing servicing of such investment products gives rise to a con-
flict of interest in that it can give us or our affiliates/employees an incentive to recommend or
invest in investment products based on the compensation they will receive, rather than solely on a
Client s needs. In connection with investments made by certain Clients, Fifth Season (an affiliate
of Chapford Capital Group) receives origination, commitment, document, structuring, facility,
monitoring, amendment, agent and/or other transaction fees from portfolio investments in which
one or more Clients invests. The potential for a Chapford Capital Group affiliate to receive such
economic benefits can create conflicts of interest as we and our affiliates can have economic in-
centives to originate investments other than the incentive associated with a performance payment.
In some cases, an excess portion of an asset can be temporarily held by a non-advisory account,
and when such excess portion is sold to third parties, Fifth Season receives a fee. In other cases,
an excess portion of an asset can be held by a Client before a third party purchases such asset.
Chapford Capital Group can be incentivized to find larger deals than its Clients would ordinarily
want in order to generate transaction fees. To partially mitigate these potential conflicts, Chapford
Capital Group s Clients receive their entire desired allocation prior to another party receiving an
allocation of an originated investment.
In some cases, Fifth Season will serve a leading role with respect to a particular originated loan.
While serving in such a role can provide more attractive investments to our Clients over time, it
(and the fees associated therewith) can conflict with the short term interests of our Clients. None-
theless, we believe that in the long term, such leading roles are integral to our efforts to secure the
best investment opportunities for our Clients.
In addition to fees and expenses described above, each Fund will pay or reimburse Chapford
Capital Group or the Fund’s GP for all reasonable out-of-pocket expenses incurred in connection
with the organization and the offering of the Fund, including, but not limited to, legal, accounting,
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