Item 5. Fees and Compensation
Compensation earned by Pearlmark and its affiliates for the provision of investment
advisory services to Funds are and/or will be comprised of fees based on (1) a
percentage of capital committed and contributed for Funds that are in their investment
periods, and/or (2) a percentage of capital contributed, net of distributions of capital, for
Funds that are no longer in their investment periods (“Management Fees”), plus
performance-based interests (“Performance Fees”), plus, in some cases, acquisition,
origination, exit and/or yield maintenance fees (“Transaction Fees”). Management
Fees, Performance Fees and Transaction Fees will vary by Fund and as such,
Pearlmark does not have a fee schedule. Further, because Management Fees,
Performance Fees and Transaction Fees of Funds will be set and determined at the
Fund level, Management Fees, Performance Fees and Transaction Fees for Funds will
generally be non-negotiable.
Management Fees to Pearlmark will generally accrue and be billed monthly in arrears
and will commonly be paid from Fund income or capital and reflected in the Fund’s
quarterly financial statements.
Performance Fees will generally be equal to a percentage of net realized profits after
restoring any loss carried forward from prior years and achieving a threshold annual
return on invested capital. Performance Fees to a Pearlmark affiliated Fund manager
will be comprised of a distribution of the investment proceeds of the Fund and are
referred to as the “Carried Interest.”
Transaction Fees to Pearlmark will generally be payable upon the closing of a given
Fund investment and will be reflected in the Fund’s quarterly financial statements.
Pearlmark Investment Advisers, L.L.C. Part 2A of Form ADV
Compensation to Pearlmark for investment advisory services to be provided to a Fund
sponsored by Pearlmark will be outlined in the applicable Fund’s PPM and Governing
Documents.
Compensation for separate account advisory services (“Separate Account Fees”) will
be set forth in the advisory agreement between Pearlmark and the client. Separate
Account Fees may take the form of Management Fees, Performance Fees and
Transaction Fees or may be calculated in a different manner. Separate Account Fees
(and any Start-up Expenses or Operating Expenses) will be negotiated with each
Separate Account client and as such, Pearlmark does not have a fee schedule.
Separate Account Fees (and any Start-up Expenses or Operating Expenses) will be
payable as set forth in the applicable advisory agreement.
In addition to the Management Fees, Performance Fees and Transaction Fees outlined
above, Pearlmark and its affiliates will generally be reimbursed for start-up expenses
(“Start-Up Expenses”). Start-Up Expenses are typically limited and the amounts and
eligible expenses are outlined in a Fund’s PPM and Governing Documents or the
applicable advisory agreement.
Each Fund is or/or will be expected to bear all expenses related to its operations
(“Operating Expenses”), including travel costs, fees and other out-of-pocket expenses
directly related to the investigation of investment opportunities (whether or not
consummated) or visits to the investors, the Fund’s share of the acquisition, ownership,
financing (including loan origination fees and cost and debt service payments), hedging
or sale of investments, taxes, fees of auditors, administrators, custodians, appraisers
and counsel, expenses of the Advisory Committee and the investment committee,
insurance, litigation expenses, expenses associated with the preparation and distribution
of reports to investors and any extraordinary expenses. All Fund Operating Expenses
are described in a Fund’s PPM and/or Governing Documents.
Pearlmark’s clients do not pay fees in advance of their being incurred. Neither
Pearlmark nor any of its supervised persons accepts compensation for the sale of
securities or other investment products, including asset-based sales charges or service
fees.