Item 5 - Fees and Compensation
Investment Management Fees
In general, one of the Subsidiary Advisers receives a management fee in connection with advisory
services. Other than as noted below, each Fund, as well as the Separate Account, initially pays (or
paid) a quarterly management fee of up to 2% per annum based on aggregate Investor capital
commitments (“Commitments”). Each Fund’s management fee steps down following certain events
specified in the relevant limited partnership agreement of such Fund. The Sub-advised Fund pays a
quarterly management fee of up to 2% per annum based on the fund’s net asset value; however, to
the extent it invests in any Fund, the management fee will be reduced by the amount of fees charged
to the Sub-advised Fund as an Investor in such Fund. Peppertree, as investment adviser to each Fund,
may also retain certain transaction fees or investment banking fees, some or all which are applied to
offset management compensation as specified in the relevant limited partnership agreement of each
Fund. Certain Relying Advisers may elect to irrevocably waive a portion of the management fee payable
by a particular Fund (the "Waived Management Compensation"). The aggregate amount of Waived
Management Compensation may not exceed the amount of the investment commitment of the principals
of PCMI with respect to the relevant Fund (including any investment commitment to a related co-
investment vehicle) in effect from time to time, and any such Waived Management Compensation shall
reduce on a dollar-for-dollar basis the aggregate remaining un-invested commitment (if any) of the
principals at the time of such waiver.
No management fee is payable to any Subsidiary Adviser by SDF or Peppertree Capital International
Co-Investor Fund (“FV Co”).
Carried Interest
Each Fund pays a carried interest to one of the Relying Advisers, generally equal to 15-20% of all
realized profits subject to any preferred return, all as specified in the limited partnership agreement
of the relevant Fund. The Sub-Advised Fund pays a similar carried interest on its investments that
may be paid through underlying vehicles. One portfolio company pays a carried interest with respect
to non-Fund investors to its own general partner, which is under common control with PCMI. These
carried interests are subject to a potential clawback at the end of life of the relevant Fund if such
Relying Adviser has received excess cumulative distributions.
No carried interest is payable to PCMI or any Relying Adviser by SDF, FV Co or the Separate Account.
Deduction of Fees from Client Accounts
PCMI and its affiliates are authorized to deduct investment management fees from the accounts of
the Funds. Management fees are typically, but not always, due in advance on the first day of each fiscal
quarter. If the management fee payable for a fiscal quarter or other period is greater than the amount
paid at the beginning of that fiscal quarter or period, the additional management fees owed shall be due
at the beginning of the next fiscal quarter. If the management fees payable for a fiscal quarter or other
period is less than the amount paid at the beginning of that fiscal quarter or period, then management
fees payable for the following fiscal quarter or period shall be reduced by the amount of the overpayment
or, if the Fund is wound up and liquidated prior to the end of such fiscal quarter or other period, the
overpayment shall be repaid to the Fund.
Client Expenses
As more specifically set forth in each partnership agreement, each private equity Fund generally
bears the costs associated with its investments in addition to the fees described above. Such
expenses may include, without limitation, the annual audit of the Fund, the preparation of the annual
and any interim financial statements of the Fund and the Federal and state tax returns of the
Partnership and related K-1’s; fees, costs, and expenses related to any Federal or state audit of the
Fund; taxes, government charges and related costs payable by the Fund; costs and expenses
associated with meetings of the limited partners of the Fund, communications with limited partners
and preparation of Fund status reports; costs and expenses associated with meetings of limited
partners with the general partner and of committees and advisory boards of the Fund; the costs and
expenses of the advisory board; the legal fees costs and expenses for counsel of the Fund in any legal
action, proceeding or investigation, including threatened action, proceeding or investigation, and the
amount of any judgments or settlements paid in connection with such action, proceeding or
investigation; costs and expenses (not otherwise reimbursed) of potential investments that are not
consummated; all other legal fees, costs and expenses incident to the Fund, its formation, its
management and activities; organizational expenses not to exceed the amount noted in the relevant
partnership agreement; interest and other expenses relating to any Fund indebtedness; bonding
expenses; premiums for insurance protecting the Fund and the partners and employees of PCMI and
affiliates; securities filing fees; and all extraordinary fees, costs and expenses.
SDF bears Fund expenses as set forth in its partnership agreement.