Item 5. Fees and Compensation
Palisades charges annual fees for investment advisory services. The fees are asset-based, generally
either calculated on a percentage of capital invested, committed capital, or unreturned capital,
depending on the stage of the Fund and the class of Investor, and range from 1.00% to 2.00% of
that capital. The fees are non-negotiable once the limited partnership agreements have been
executed. Such fees are payable semiannually, partially in arrears and partially in advance, and are
debited from the Palisades Fund accounts. The fee payment process and rates are approved at the
formation of each Palisades Fund and described in each Fund’s partnership agreement. The
Palisades Fund partnership agreements generally restrict a Palisades Fund’s ability to terminate its
Investment Advisory Agreement with Palisades. The specific restrictions or terms vary depending
on the nature of the Fund.
Additional fees and expenses for which the Palisades Funds are responsible are described in the
limited partnership agreement of each Fund. Generally, each Fund pays all costs and expenses
relating to its operations, including, but not limited to, all expenses, costs and liabilities incurred in
connection with the identifying, structuring, negotiating, making, monitoring, sale, proposed sale,
other disposition or valuation of portfolio investments, temporary investments and investments
considered for a Palisades Fund but not consummated (including due diligence in connection with
each of the foregoing) as further discussed in Item 12 (“Brokerage Practices”), consultants, outside
counsel and accountants; the cost of insurance; any taxes, fees or other governmental charges levied
on such Palisades Fund; all costs of compliance with the Investment Advisers Act of 1940 (the
“Advisers Act”), the Investment Company Act, the Securities Act, the Securities Exchange Act of
1934, as amended (the “Exchange Act”) and other applicable regulatory regimes and laws (these costs
of compliance are absorbed by some Palisades Funds but not all); and the costs of expenses of any
litigation relating to the activities or operation of such Palisades Fund, including the amount of any
judgments or settlements paid in connection therewith, relating to the business, activities and interests
of such Palisades Fund.
In some cases, expenses might be attributable to more than one Fund, or to Palisades or an affiliate.
In such cases, Palisades and its affiliates will apply an expense allocation methodology that is
believed to be fair to the affected Funds and consistent with their confidential offering materials
and limited partnership agreements. Palisades and its affiliates have not experienced this in the
past but may in the future experience a conflict of interest when determining and applying an
allocation methodology.
While they have not in the past, Palisades or the affiliated general partners of the Palisades Funds,
may in the future receive break-up fees, monitoring and directors’ fees and organization, financing
and other similar fees in connection with the activities of the Palisades Funds as compensation for
financial advisory and similar services provided to the Palisades Funds’ portfolio companies (each,
a “Portfolio Company”) (“Other Fees”). In addition, although we have not in the past, we may in
the future be reimbursed by the Portfolio Companies for expenses Palisades incurs in connection
with its performance of the services that give rise to Other Fees. In general, if Other Fee are
received, the management fee payable by each of the Palisades Fund will be offset by a portion of
\\DC - 042014/000001 - 12100232 v5
such Other Fees received by Palisades in connection with the activities of such Palisades Fund.
Other Fees, when received, are applied on a pro rata basis to the management payable by each
Palisades Funds that has participated in the transaction that generated such Other Fees, in each
case in accordance with the governing documents of the relevant Funds.
The right of Palisades, the affiliated general partner entities or other affiliates to receive Other Fees
may create a conflict of interest between Palisades, on one hand, and the Palisades Funds and their
investors, on the other hand, because the Palisades Funds and their investors do not have a direct
interest in Other Fees. Palisades believes, however, that management fee offsets (to the extent
applicable) and the equity commitments made by Palisades’ principals may serve to mitigate this
potential conflict. In addition, Palisades believes this potential conflict may be further mitigated
by the fact that the ability of Palisades or its affiliates to collect these kinds of fees may be subject
to negotiation with third parties, such as sellers, buyers, and management teams or boards of
directors of, or lenders to, Portfolio Companies.
Similar advisory services may or may not be available from other registered or unregistered
investment advisers for similar or lower fees. The management fee and carried interest has been
in the past and may in the future be waived or reduced at the discretion of Palisades or its affiliates.
Certain members and / or employees of Centre invest in the Palisades Funds and may receive
carried interest.