Item 5. FEES AND COMPENSATION
For our services to the Fund, we charge a management fee as described below. In
addition, the Fund’s General Partner, an affiliate of Searchlight as defined at Item 10 of
this Brochure, will receive carried interest, a form of performance-based compensation,
as described below.
The management fee is paid quarterly, in advance. Carried interest is allocated upon the
sale of any portfolio company or realization of an investment or dividend. Investors
should refer to the limited partnership agreement and/or private placement memorandum
for detailed information regarding fees and expenses related to investment in the Fund.
MANAGEMENT FEE: The Fund’s General Partner has designated Searchlight to
provide management and administrative services to the Fund. For its services to the Fund,
Searchlight will be paid an annual management fee equal to 2.0% of the committed
equity interests for the first six years of the Fund. The management fee will then be
reduced by 10% per year upon the earlier to occur of (i) the sixth anniversary of the Fund
or (ii) the closing of an investment fund controlled by the Fund’s Managing Directors (as
defined at Item 10 below) with similar objectives as the Fund. No management fee is
charged on reinvested funds. The management fee is paid quarterly in advance.
CARRIED INTEREST: All net realized income and capital gains and losses will be
allocated as follows: 80 percent to all partners in proportion to their capital contributions
and 20 percent to the General Partner.
All distributions (other than tax distributions) will be made to Fund partners on a
cumulative basis as follows: 100 percent to all partners in proportion to their capital
contributions until they have received distributions (including tax distributions) equal to
their aggregate contributed capital. Thereafter, distributions will be made 80 percent to
all partners in proportion to their capital contributions and 20 percent to the General
Partner.
Investors must understand the proposed method of compensation and its risks prior to
investing in the Fund.
GENERAL INFORMATION:
Investments in Funds: The General Partner for the Fund is affiliated with Searchlight
through common ownership and control as well as shared executive officers including the
Fund’s Managing Directors. The General Partner of the Fund will generally participate
in the Fund’s investments by investing assets directly in the Fund. In addition,
Searchlight will not exclude from consideration investment in a company in which the
Managing Directors, executive officers or other affiliated persons of Searchlight have
previously, directly invested capital or provided financing at an earlier stage of the
company’s development. (See also Item 11 of this Brochure).
Co-Investments: Searchlight may make co-loan/co-investment opportunities available to
the investors and their affiliates as appropriate and in the best interest of the Fund.
Allocation of such opportunities creates a conflict of interest as they are, by nature,
limited and participation is not possible for all or even most investors in the Fund. As
such, Searchlight must determine which investors will be given the opportunity to co-
loan/co-invest and which will not.
To address this conflict we have adopted written policies and procedures designed to
ensure that Searchlight does not favor certain investors over others, that investors are
provided with appropriate disclosures regarding the conflicts of interest inherent in co-
investing and that all investors are treated fairly with respect to co-loan/co-investment
opportunities. In general, Searchlight may offer co-investment opportunities to those
investors who have expressed a desire, under their respective charters, to make direct
investments in portfolio companies. In addition, investors should note that Searchlight’s
allocation of co-loan/co-investment opportunities may include third parties that are part
of a consortium for the particular deal as a way for Searchlight to complete a transaction.
Finally, although investors are not typically a source of investment opportunities, when
applicable, Searchlight will generally give priority with respect to co-loan/co-investment
opportunities to any investor that brought an opportunity to Searchlight’s attention.
Clawbacks: The Managing Directors of the Fund’s General Partner will be subject to a
several, not joint, after tax lookback contribution obligation in the event of over
distributions to the General Partner.
Lock-Up: Except as may be otherwise set forth in the Fund’s offering documents, an
investor in the Fund generally may not rescind any part of its capital commitment or
otherwise withdraw from the Fund. Private fund investing is for those who can afford to
have capital locked up for long periods of time and who are able to bear the risk of
significant losses.
Investors in the Fund should refer to the Fund's limited partnership agreement and
offering documents for complete information regarding lock-ups and penalties or other
consequences for failure to observe capital calls made by the Fund.
Other Fees and Expenses: In accordance with the terms of the Fund’s offering
documents, the Fund was responsible for the legal, accounting and other organizational
expenses related to the offering.
In addition to the organizational expenses of the Fund, the Fund shall also bear all costs
incurred in connection with operation of its business, including those costs associated
with holding or sale of securities, legal (litigation and otherwise), audit, and tax
preparation fees, bank fees, costs of appraisers, trade association dues and the cost of
Fund meetings.
Side Arrangements: Fund investors subject to ERISA (as well as investors subject to
similar state laws) have a limited right to withdraw from the Fund if continued
participation by such investors would violate such laws. Searchlight or the Fund’s
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