Item 5: Fees and Compensation
A. Describe how you are compensated for your advisory services. Provide your fee schedule.
Disclose whether the fees are negotiable.
Pinnacle is compensated for the investment management and administrative services it provides to
the Funds through the payment of management fees. The Funds' governing documents provide
that the Funds pay the GP Entities annual management fees, which are then generally assigned to
Pinnacle in return for the services Pinnacle provides. The specific manner in which fees are paid
by a Fund is established in the Fund's governing documents. Generally, management fees are paid
quarterly in advance, with daily proration for short periods. The management fees generally range
from between 1.0% to 2.0% per year, and are generally based either on the committed capital of a
Fund or the cost basis of the Fund's assets, net of write-offs. For some Funds, the basis on which
management fees are charged may switch from one metric to another (e.g., the initial management
fee rate is a specified percentage of committed capital, but after a fixed period of time or the
occurrence of a triggering event, the management fee rate becomes a specified percentage of the
aggregate cost basis of portfolio securities held by the Fund during the applicable period).
Additionally, the Funds' governing documents provide for a reduction in management fees if the
applicable GP Entity receives certain amounts (such as transaction, commitment, break-up,
advisory, syndication, guarantee and directors fees that originate from the investments held by a
Fund) ("Management Fee Offsets").
In addition, to the management fee, a Fund's GP Entity may receive an incentive fee equal to a
specified percentage of the Fund's net profits that is payable according to each Fund's governing
documents.
The management fee paid to a GP Entity by a Fund typically parallels the amount paid by the GP
Entity to Pinnacle in terms of amount and timing. However, the incentive allocation is paid directly
to the GP Entity from the Fund, and the GP Entity, in turn, distributes the incentive allocation to
the members of the GP Entity.
In some funds, the GP and GP related persons are not charged management fees nor incentive fees.
The management fees and incentive fees are described in greater detail in each Client's applicable
governing documents.
B. Describe whether you deduct fees from clients' assets or bill clients for fees incurred. If clients
may select either method, disclose this fact. Explain how often you bill clients or deduct your
fees.
We deduct management fees from the Funds' assets. Generally, management fees are payable on
a quarterly basis, in advance, in accordance with the specific terms of the applicable governing
documents, as outlined in A above.
C. Describe any other types of fees or expenses clients may pay in connection with your advisory
services, such as custodian fees or mutual fund expenses. Disclose that clients will incur
brokerage and other transaction costs, and direct clients to the section(s) of your brochure
that discuss brokerage.
An investor in a Fund will also be subject to a pro rata allocation of organization, syndication, due
diligence and other operating expenses of the Fund as set forth in the governing documents of the
applicable Fund. Typically, a Fund's governing documents set specified limits for the amount of
organization and syndication costs that may be charged.
The Funds may also incur brokerage fees and commissions in connection with the sale of
investments. Item 12 further describes the factors that Pinnacle considers in selecting or
recommending broker-dealers for Client transactions and determining the reasonableness of their
compensation (e.g., commissions).
D. If your clients either may or must pay your fees in advance, disclose this fact. Explain how a
Client may obtain a refund of a pre-paid fee if the advisory contract is terminated before the
end of the billing period. Explain how you will determine the amount of the refund.
Generally, the Funds pay management fees in advance on the first day of the quarter. The amount
and duration of the management fee and incentive allocation are negotiated and set prior to the
commencement of a Fund's term and generally are not cancelable except for cause and by a vote
of the investors in such Fund.
E. If you or any of your supervised persons accepts compensation for the sale of securities or
other investment products, including asset-based sales charges or service fees from the sale of
mutual funds, disclose this fact and respond to Items 5.E.1, 5.E.2, 5.E.3 and 5.E.4
Not Applicable.