Item 5. - Fees and Compensation
Each Private Fund pays Pallas an annual management fee equal to a percentage of its net
assets payable in advance each fiscal quarter. Pallas II pays a fee at an annual rate of 1.25%.
Pallas Tech and CP21 pay a fee at an annual rate of 1.5%. Each Purchaser in the Private
Funds is assessed an annual special allocation, payable to the general partner, equal to 20% of
the amount by which the portion of the Private Funds’ profits exceed the prior high point.
Pallas’ fees ordinarily are calculated by Pallas or its agent, based on Pallas’ valuation of the
assets in the Client’s portfolio.
In the event of termination, any management fees paid in advance will be prorated as of the
date of termination and the unearned portion will be returned to the Client.
Pallas’ fees will be reduced by 25 basis points for any portion of a Purchaser’s investment in the
Private Funds that exceeds $10 million at the time the management fee is calculated. In
addition, a Purchaser that agrees in writing with the Private Funds to not withdraw any part of its
capital account for more than one year will be subject to a reduced incentive fee. Moreover,
Pallas may waive or reduce management fees for its employees and employees of its affiliates
and any other Purchasers.
In addition, and to the extent permitted by law, Pallas may enter into performance-related fee
arrangements, provided that all applicable regulatory requirements are met. The incentive fee
arrangement described above for the Private Funds is one type of performance based fee.
However, performance-related fee arrangements vary depending on the particular Client’s
needs and individual circumstances. Performance-related fees may create an incentive for
Pallas to make investments that are riskier or more speculative than would be the case in the
absence of a performance-related fee arrangement. In addition, under certain circumstances,
Pallas may receive compensation under a performance-related fee arrangement that is larger
than it otherwise might receive under asset-based fee arrangements.
You may choose to be billed directly for fees, or may authorize us to directly deduct fees from
your account. If we can deduct fees directly from your account, your custodian should send a
quarterly statement directly to you, showing transactions in the account, including our fees. We
will receive paper or electronic copies of the custodian’s statements. We urge you to carefully
review these statements, where applicable, and compare the official custodial records to any
account statements we may send to you.
Holdings in a client’s account may include securities of investment companies or other collective
investment vehicles that we advise. Those investment companies or collective investment
vehicles charge a separate management fee, as disclosed in their relevant governing or offering
documents. See Item 10 below for more information on these accounts.
Besides our fees, you will pay fees and expenses of other service providers, including
custodians, brokers, and other third parties. For example, to the extent that your assets are
invested in a cash investment fund of your trustee or custodian, the trustee or custodian may
also charge separate management or transactional fees. Fees and expenses also include
custodial fees, sales charges, transfer taxes, wire transfer and electronic fund fees, and other
fees and taxes on brokerage accounts and securities transactions, including commissions. If
you invest in a pooled investment vehicle, that vehicle or fund will charge internal management
fees and other expenses, as disclosed in the fund’s prospectus or offering memorandum.
Although these charges, fees and commissions are in addition to our fee, they are paid to other
parties, and we do not receive any portion of these amounts, except when invested in an
investment company or collective investment vehicle we advise.