Item 5 - Fees and Compensation
A. Fee Structure
SB Advisors provides investment advice to, and supervises, affiliated relying advisers who are
registered with the SEC through us. We are compensated as a result of the activities of our
affiliated relying advisers, which earn revenues by providing investment advice to our Investment
Programs through a combination of management fees and performance fees. Performance fees, in
the form of carried interest, are paid to the respective Managers of the Funds and the stand-alone
investments, as provided in the respective offering documents of our Investment Programs.
Certain fees charged by SB Advisors or its affiliated relying advisers may be subject to negotiation.
In addition, such fees, in a particular Manager’s sole discretion, may be reduced or waived for
certain large clients, Affiliated Vehicles (as defined and discussed, below) and employees.
The specific manner in which fees are charged by SB Advisors is established in our written relying
adviser investment management agreements with our affiliated relying advisers.
Management Fees
A respective Manager will generally charge the related Fund a management fee (the “Management
Fee”) determined as of the end of each calendar quarter equal to the greater of (i) one and sixty-
five one-hundredths (1.65%) percent per annum on capital contributions that have not yet been
realized (which does not include cash and other cash equivalents, other short term securities or
money market funds that are not Investments), accruing daily and (ii) one half (0.50%) percent per
annum of the aggregate capital commitments of the Fund, in each case, payable quarterly in arrears.
Management Fees shall be prorated for each capital contribution and withdrawal made during the
applicable calendar quarter (with the exception of small contributions and withdrawals). Accounts
opened or terminated during a calendar quarter will be charged a prorated fee. Upon termination
of any account, any prepaid, unearned fees will be promptly refunded, and any earned, unpaid fees
will be due and payable. If a particular Investment Program has insufficient cash available to pay
expenses or the Management Fee in full, as determined by the Manager in its sole discretion, the
Manager may (i) make a capital call or borrow from the Manager or its affiliates, or (ii) the
expenses and/or Management Fee may be accrued as a debt of the Investment Program due to the
Manager, together with interest at three (3%) percent per annum, which interest will be added to
the Management Fee.
Carried Interest
The Manager receives compensation in the form of payments of carried interest. Distributions
proceeds from a particular Investment Program are allocated as follows:
Investment Capital (returns of Investment principal and appreciation)
a. first, 100% to the members, pro rata in accordance with their relative capital accounts,
until they receive a return of their capital contributions, as calculated after payment of
the Management Fee and Fund expenses;
b. second, 100% to the members, pro rata in accordance with their relative capital
accounts, until they receive any shortfall of the 8% preferred return on their net capital
contributions as set forth below; and
c. thereafter, between the members and the Manager (as “Carried Interest”), in the
following ratio: (a) 75% to the members and (b) 25% to the Manager.
Investment Portfolio Distributions (Investment Portfolio distributions, interest and other gains)
a. first, 100% to the members, pro rata in accordance with their relative capital accounts,
until they receive any shortfall of return of their capital contributions, set forth above
for return of invested capital;
b. second, 100% to the members, pro rata in accordance with their relative capital
accounts, until they receive an 8% preferred return on their net capital contributions, as
calculated after payment of the Management Fee and Fund expenses; and
c. thereafter, between the members and the Manager (as “Carried Interest”), in the
following ratio: (a) 75% to the members and (b) 25% to the Manager.
Carried Interest will be calculated on an annual basis and will be paid from “realized profits” that
exceed the amount of any “realized losses, amounts held in reserve for “unrealized losses” and any
“loss carry-forwards”. For purposes of calculating Carried Interest: (i) “Realized profits” means
distributions, interest and other gains received from the Investment Portfolio in excess of
acquisition cost of an Investment; (ii) “Realized loss” is the aggregate amount by which an
Investment fails to return its acquisition cost plus an 8% per annum preference; (iii) “Unrealized
loss” means the estimated loss on an Investment determined as of a specific date; and (iv) “Loss
carry-forwards” means the (i) sum of (x) the cumulative amount by which distributions to a
member has underperformed the stated 8% per annum preference plus (y) any realized losses,
minus (ii) realized profits.
Each Manager will engage an independent valuation firm to determine, as of the last day of each
calendar year, the value of each Investment Portfolio and to determine Carried Interest, if any,
earned thereon. In each year following a Carried Interest distribution to the Manager, the valuation
firm shall recalculate the Carried Interest for the period from inception to the measuring date,
without regard for any prior Carried Interest distributions. In subsequent years, the Manager shall
receive additional Carried Interest or refund prior Carried Interest distributions, as applicable, if
subsequent Carried Interest calculations exceed or are less than prior Carried Interest distributions;
in no event shall the Manager be required to refund more than the aggregate amount of Carried
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