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.
As compensation for investment advisory services rendered to the Funds, Saybrook receives both a
management fee and a carried interest allocation. The General Partners or other Saybrook entities
or affiliates may receive additional compensation in connection with management and other services
performed for portfolio companies of the Funds (e.g., monitoring, transaction, advisory board and
other fees). Such additional compensation generally will reduce in whole or in part the
management fees otherwise payable to Saybrook.
The precise amount of, and the manner and calculation of, the management fees for each Fund are
established by Saybrook, as modified by negotiations with limited partners in the applicable Fund, and
are set forth in each Fund’s Governing Documents prior to investment in a Fund. Any commitment
of a limited partner in excess of a specified threshold may be subject to reduced management fee
schedule as described in the applicable partnership agreement.
Generally, management fees are charged at an annual rate of 2% of aggregate capital commitments
during the investment period; after the investment period of a Fund is over, management fees are
charged at an annual rate of 1.75% of contributed capital, less returns of capital and write-downs to zero.
In addition, the management fee will be reduced by 80% of: (i) any directors’ fees, financial consulting
fees or advisory fees earned by the General Partner with respect to any Fund investment; (ii) any
transaction fees paid to the General Partner with respect to any Fund investment; and (iii) any break-up
fees with respect to Fund transactions not completed that are paid to the General Partner. Management
fees are deducted quarterly in advance and the first payment if less than a full quarter is pro-rated for the
days remaining in the quarter. In certain circumstances, management fees are negotiable and fees and
arrangements with respect to a particular limited partner may differ from those described above. The
relevant Fund general partner may, in its sole discretion, waive or reduce a limited partner’s management
fee.
As further described below in Item 6, each General Partner generally is entitled to receive a carried
interest allocation with respect to the Funds equal to 20% of all realized profits, subject to an 8% annual
compounded preferred return and a related General Partner catch-up provision. The carried interest
allocated to a General Partner is subject to a potential giveback at the end of life of a Fund. The
calculation methodology is fully described in each Fund’s 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.
Management fees are generally deducted from client’s accounts in advance on a quarterly basis.
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.
In addition to the m anagement fee and carried interest allocation payable to the relevant general
partner, each Fund bears certain expenses. The General Partners will pay ordinary administrative and
overhead expenses incurred in connection with maintaining and operating its office(s), including
employees’ salaries, rent, utilities, etc. In addition to the management fee, the Funds will pay all other
costs and expenses of the Funds that are not reimbursed by portfolio companies (which reimbursements
may be for travel and any other out-of-pocket expenses incurred in connection with the making,
monitoring and/or disposing of such portfolio companies, including follow-on investments and
refinancings), including brokerage, legal, auditing, consulting, financing, accounting, due diligence and
custodian fees and expenses; expenses associated with the Funds’ third-party administrator; expenses
associated with the Funds’ financial statements, tax returns and Schedule K-1s; expenses incurred in
connection with transactions not consummated (broken deal expenses); expenses of the Advisory Board
and update visits with and meetings of the limited partners; insurance (including directors and officers
insurance); other expenses associated with the acquisition, holding and disposition of its investments,
including extraordinary expenses (such as litigation, if any); and any taxes, fees or other governmental
charges levied against the Funds. Any board fees received from Saybrook principals and employees for
serving on Saybrook lender or shareholder boards are offset against management fees; however, any
third party appointed board member to an outside lender or shareholder board are not reimbursed
against management fees.
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.
The Funds pay Saybrook non-refundable management fees at the beginning of each fiscal quarter.
Given the long-term nature of an investment in the Funds, there are substantial constraints on a limited
partner’s ability to withdraw and, therefore, it is rare for a limited partner to withdraw from a fund
before the end of a fiscal quarter. However, if this were to occur, Saybrook would refund the unearned
portion of the management fee it received from the limited partner.
E. If you or any of your supervised persons accepts compensation for the sale of securities
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