ITEM 5. FEES AND COMPENSATION
Fees – Investment Funds
Taylor is generally entitled to one or two types of fees from each Investment Fund that we
manage: (a) an asset-based management fee; and/or (b) incentive compensation based upon
the performance of the Investment Fund. Where applicable, our incentive compensation from
the investment funds that are organized as limited partnerships takes the form of a partnership
allocation from the limited partners to the general partner.
The management fee is calculated based upon a specified percentage (generally ranging from
1% to 1.50% per year) of an Investment Fund’s net assets. The management fee may be paid
monthly or quarterly in advance.
The incentive compensation (which is not applicable to every Investment Fund that we manage)
is a specified percentage (generally 10%) of the net profits of an Investment Fund for the
relevant period (attributable to each investor’s interest therein). The incentive compensation is
generally determined and allocated/paid on an annual basis, but will be determined and
allocated/paid for shorter periods under certain circumstances (such as with respect to amounts
withdrawn from an Investment Fund other than at year-end). The incentive allocation is subject
to a loss carryforward, or “high water mark,” provision that generally requires that any losses
suffered by an investor in the Investment Fund (adjusted to reflect withdrawals) be offset by
subsequent net profits allocated to the investor, before we are entitled to subsequent incentive
compensation from the Investment Fund with respect to the investor.
Following is a schedule of management fee and incentive compensation rates for the
Investment Funds that we manage:
Insurance-Dedicated Investment Funds Management Fee Rate Incentive allocation
(per annum) Rate (per annum)
Taylor Insurance Series LP – Series C 1.25% Not applicable
(payable quarterly in advance)
Taylor Insurance Series LP – Series G 1.25% Not applicable
(payable monthly in advance)
Taylor Insurance Series LP – Series K 1.25% Not applicable
(payable monthly in advance)
Taylor Insurance Series LP – Relative Value 1.00% Not applicable
Strategies Series (payable quarterly in advance)
Taylor Insurance Series LP – Talson Acier 1.00% 5%
Fund (payable quarterly in advance)
Taylor Insurance Series LP –Sound Point 1.50% Not applicable
Floating Rate Fund (payable quarterly in advance)
Taylor Insurance Series LP –Sound Point .5% 15%
CLO Equity Fund (payable quarterly in advance)
Additional detail as to how the fees and incentive compensation are calculated may be found in
the Offering Document of each Investment Fund.
The fees and incentive compensation described above are typical, however, each private
Investment Fund has the right to enter into agreements with one or more of its investors
providing for the waiver or modification of certain terms of the offering of Investment Fund
interests, or certain rights and obligations of Investment Fund investors, including fees, otherwise
applicable to such interest(s), in each case without notice to the other Investment Fund
investors.
Fees are deducted from the assets of the Investment Funds and paid to us or, in the case of
incentive compensation, are reallocated from the capital accounts of Investment Fund investors
and into our capital account.
As the Investment Funds invest their assets in Investment Vehicles, investors in the Investment
Funds will, in addition to the management fee and incentive compensation described above, be
indirectly subject to the management fees and/or incentive compensation charged by or with
respect to Investment Vehicles. Such fees and compensation may be expected to vary
substantially from one Investment Vehicle to another. In addition, investors will be indirectly
subject to a pro rata portion of the organizational and/or operating expenses incurred by such
Investment Vehicles. As a result, the aggregate investment advisory compensation and
expenses to which investors will be subject is likely to substantially exceed the management fee
and incentive compensation described above, as well as the expenses described below. As the
investment manager of an Investment Vehicle is likely to be compensated, in part, based upon
the performance of its own Investment Vehicle, such investment manager may effectively
receive incentive compensation from an Investment Fund that we manage for a particular period
even if the overall portfolio of the Investment Fund depreciates during such period.
Fees – Separate Accounts
We will generally charge a Separate Account Client both a management fee and an incentive
fee, as follows:
• The management fee will be payable monthly in advance. The management fee for a
calendar month will generally be equal to 0.0833% (equivalent to a per annum rate of
1%) of the net asset value of the Client’s account at the open of business on the first
business day of each calendar month (after giving effect to any capital contributions on
such date), and will be payable within 10 days after such date.
• The incentive fee will be computed at the end of each calendar year and will generally
be equal to ten percent (10%) of the Net Account Profits (as defined below) of the
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