Item 5: Fees and Compensation
The fees and expenses associated with the Adviser’s investment advisory services are set forth and agreed to in each
Fund’s Governing Documents. Investors and prospective investors must carefully review the Governing Documents
for specific fees and expenses applicable to their investment.
Management Fee:
In consideration for its services to the open-end Fund, Strategic Value Bank Partners is generally entitled to a
management fee at an annual rate of 1.5% of each Limited Partner’s capital account balance, calculated and paid the
first business day of each calendar quarter. Upon any Limited Partner’s capital contribution, the pro rata portion of
the Management Fee attributable to the newly contributed capital is paid to the General Partner. Upon any withdrawal
of all or any portion of such Limited Partner’s capital account, the unearned pro rata portion of the Management Fee
attributable to the amount withdrawn is repaid to such Limited Partner. Certain investors may have access to a Founder
Class, which may offer preferential terms in the form of lower fees.
In consideration for its services to the closed-end Funds, Strategic Value Bank Partners is generally entitled to a
management fee at an annual rate of 1.5% of the Fund’s net invested capital based on the cost basis of the Fund’s non-
cash investments (the “Management Fee”). The Management Fee will be an Operating Expense and will be paid
quarterly in advance.
The General Partner, at its sole discretion, may waive or alter the management fee with respect to certain Limited
Partners including, but not limited to, those that are affiliated with the General Partner.
Performance Fee:
In the context of the open-end Fund, subject to certain terms and limitations disclosed in the Governing Documents,
Strategic Value Bank Partners or its affiliate is generally entitled to receive performance-based compensation (the
“Performance Fee”) in an amount equal to 20% of the net capital appreciation attributable to each Limited Partner’s
capital account in the Funds (after considering expenses of the Funds, including any Management Fees). The
Performance Fee related to general capital (liquid securities) is reallocated from the Limited Partner to the General
Partner annually, on December 31, or at the time the Limited Partner withdraws its capital before yearend. The
Performance Fee related to designated investments (illiquid securities) will be reallocated from the Limited Partner to
the General Partner upon a realization event. The realization event, with respect to each designated investment, is
either the sale/liquidation of the investment or the determination by the General Partner that the investment no longer
qualifies as a designated investment.
The Performance Fee is subject to what is commonly known as “high-water mark.” That is, if the general capital
investments underperform during a calendar year, the net underperformance will be recorded and carried forward to
future calendar years (such amount is referred to as the “Loss Carryforward”), and Strategic Value Bank Partners will
not receive the Performance Fee for future calendar years until the Loss Carryforward amount has been recovered
(i.e., when the Loss Carryforward amount has been exceeded by the cumulative net outperformance in the calendar
years following the Loss Carryforward). Once the Loss Carryforward has been recovered, the Performance Fee shall
be based on the excess net capital appreciation over the Loss Carryforward amount, rather than on all net capital
appreciation. The “high-water mark” applies to each designated investment, and the performance fee can only be
recognized upon a realization event. The “high-water mark” procedure prevents Strategic Value Bank Partners from
receiving the Performance Fee for net capital appreciation that simply restores previous underperformance and is
intended to ensure that the Performance Fee is based on the long-term net investment returns of the Fund.
In the context of the closed-end Funds, Strategic Value Bank Partners is entitled to a 15% carried interest, payable
after Limited Partners receive their original investment contributions. The carried interest payment structure prevents
Strategic Value Bank Partners from receiving a performance fee until the investor’s contributed capital is returned.
Strategic Value Bank Partners may enter into side letter agreements with certain Limited Partners allowing for
different terms on their investment in the Funds, including lower compensation arrangements and different liquidity
terms. Certain investors may have access to a Founder Class, which may offer preferential terms in a form of lower
fees. Current and prospective investors should carefully review all fees charged by Strategic Value Bank Partners and
its affiliates.
Strategic Value Bank Partners deducts fees directly from the Funds. Strategic Value Bank Partners renders its services
to the Funds at its own expense and is responsible for its overhead expenses including: office rent, utilities, furniture
and fixtures, stationery, secretarial/internal administrative services, employee salaries and bonuses, entertainment
expenses, employee insurance and payroll taxes.
Other Expenses Charged to the Clients:
Limited Partners are subject to the following expenses associated with their investments in the Funds, in addition to
the Management Fee and Performance Fee described above: expenses of the organization of the Funds (including
legal and accounting fees, travel, “blue sky” filing fees and expenses and out-of-pocket expenses); all costs and
expenses related to its investment program, including, without limitation, expenses related to consultants, brokerage,
investment banker’s fees, commitment fees, broken deal expenses, proxies, underwriting and private placements,
service contracts for quotation equipment and related hardware and software, research, industry and investor
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