Item 5 – Fees and Compensation
A. Advisory Fees and Compensation.
Certain clients are charged a management fee (“Management Fees”) based upon a percentage of
assets under management, as provided in each relevant client’s investment management
agreements.
With respect to private equity investments, SIH obtained and retained additional fees customary
for such private equity and related transactions, including, but not limited to, transaction fees,
monitoring fees, directors’ fees, and exit fees (“Supplemental Fees”). SIH also received equity
incentives in forms including, but not limited to, warrants and options in certain underlying portfolio
companies in which clients invest. However, SIH is not currently making any new investors and
will not receive Supplemental Fees.
The Fund is charged a performance-based fee (carried interest), as described in Item 6 –
Performance-Based Fees and Side-By-Side Management. Management Fees and carried interest
paid by the Fund are borne indirectly by investors.
B. Payment of Fees.
Management Fees are billed directly to clients, or indirectly through the Fund, and generally
payable quarterly in arrears.
C. Other Fees and Expenses.
SIH is not currently making new investments on behalf of any clients. Accordingly, certain
expenses described below are no longer incurred, but were applicable in the past. In addition,
certain expenses are still being incurred on behalf of the Fund, still being managed by SIH.
Consistent with the Fund Governing Documents, SIH incurs or previously incurred expenses
(including, without limitation, travel expenses, which may include expenses for first class, business
class or chartered travel, lodging, and other out-of-pocket costs and expenses for the performance
of certain services, which may include amounts paid to consultants), and a portfolio company
reimburses SIH for such expenses incurred by SIH in connection with its performance of services
for such portfolio company; those reimbursed expenses generally are not included in the definition
of Portfolio Company Fees (defined below), as discussed above. For a discussion of material
conflicts of interest created by the receipt of such fees and reimbursements, see Item 8 – Methods
of Analysis, Investment Strategies and Risk of Loss – Conflicts of Interest, and Item 11 – Code of
Ethics, Participation in Client Transactions and Personal Trading for additional information.
From time-to-time, SIH expects to retain or assist a portfolio company in retaining, other companies
or individuals, including third parties such as consultants or external executives, to provide
strategic advice, operational support or other services. Such services would likely include support
to the portfolio company in respect of, among other things, the company’s management, the
company’s operations, revenue and margin enhancement (including determining sales and
marketing strategy), finance (including metrics and reporting), human resources (including
executive recruitment), information technology, customer service, real estate matters, intellectual
property matters and other operational matters. SIH also reserves the right to engage and/or retain
senior advisors, industry advisors, consultants, and other professionals who are not employees or
affiliates of SIH and who, from time-to-time, receive payments for such services from, or
allocations with respect to, portfolio companies and/or other entities. In such circumstances, such
amounts will not be deemed paid to or received by SIH or its affiliates.
Additionally, as further described herein and in the Governing Documents, it was SIH’s practice
to employ, use or retain certain Operating Partners (as defined below) to provide services to (or
with respect to) one or more Funds or certain current or prospective portfolio companies in which
one or more Funds invest. Such Operating Partners generally provide services in relation to the
identification, acquisition, holding, improvement, and disposition of portfolio companies,
including operational aspects of such companies. In certain circumstances, these services also
include serving in management or policy-making positions for portfolio companies. Operating
Partners receive compensation, including, but not limited to cash fees, retainers, discretionary
bonuses (whether or not based on pre-determined milestones), transaction fees, profits,
participation or equity interest in a portfolio company or holding company, incentive equity, stock
awards, carried interest, and profits or equity interests in one or more Funds or General Partners,
remuneration from SIH and/or its Funds or affiliates, guaranteed minimums or other compensation,
the amount of which typically is determined according to one or more methods, including the value
of the time (including an allocation for overhead and other fixed costs) of such Operating Partners,
a percentage of the value of the portfolio company, the invested capital exposed to such portfolio
company, amounts believed to be charged by other providers for comparable services and/or a
percentage of cash flows from such company. Operating Partners will generally be reimbursed for
certain travel and other costs in connection with their services. As described above, no such
amounts will offset or reduce the Management Fee. The use of Operating Partners subjects SIH to
potential conflicts of interest, as discussed under “Conflicts of Interest,” below.
The Fund will reimburse SIH for certain transaction-related expenses, including but not limited to
expenses associated with legal, investment banking, consulting, accounting, due diligence,
brokerage services, travel expenses, including first and business class service and chartered travel,
and expenses relating to board service. At such time SIH was currently seeking new investments
on behalf of its clients, certain clients were also expected to reimburse SIH for out-of-pocket
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