Item 5: Fees and Compensation
We are generally compensated for our advisory services to the Funds based on a percentage
of assets under management, a performance-based amount, and fees for advisory, management
and transaction services that we provide to each Fund’s portfolio companies. The fee
arrangements are generally not negotiable, although they are subject to waiver or reduction
in some cases, at Teakwood’s sole discretion or as may be further described below or in a
Fund’s CPPM. This section of the brochure is a summary, and the details may vary between
individual Funds, so an Investor in any Fund should review in detail the CPPM applicable to
that Fund.
Management Fee
Until the commitment period for a Fund has terminated, according to the terms of the
management agreement and the applicable limited partnership agreement, a Fund generally
pays us an annual advisory fee (“Management Fee”) equal to 2.0% or 2.5% of the total capital
commitments (regardless of whether such capital has been invested) of the Investors in the
applicable Fund. Following the end of the commitment period of a Fund and where indicated
by a Fund’s CPPM, the Management Fee of such Fund may then be calculated as a percentage
of the net invested capital of the Investors in the applicable Fund. The Management Fee is paid
quarterly in advance.
Teakwood Capital Form ADV Part 2A
We may waive or reduce the Management Fee as to all or any of the Investors in the Funds
or agree with an Investor to waive or alter the Management Fee as to that Investor. The
Management Fee charged to a Fund may be reduced by all or a portion of any origination,
transaction, break-up, monitoring or similar fees that we may receive, as described in the
CPPM of the applicable Fund.
There can be no assurance as to when capital will be invested or that the entire capital
commitment of an Investor will be invested by any Fund.
Carried Interest
Each Fund’s general partner (in relation to that Fund, the “General Partner”) is also
apportioned performance-based compensation, in the form of carried interest distributions
from that Fund (“Carried Interest”), based on the net cash proceeds attributable to the
Fund’s investments. In its discretion, the General Partner may waive or reduce the Carried
Interest as to all or any of the Investors in a Fund or agree with an Investor to waive or alter
the Carried Interest as to that Investor.
The Carried Interest can vary for each Fund, and is typically 20.0% of the profits earned by a
Fund. Investors and prospective Investors should refer to each Fund’s CPPM for additional
or supplementary information regarding the Funds as well as the fees paid by each Fund.
Lower fees for comparable services may be available from other sources. The expenses of a
Fund, including the Management Fee and Carried Interest, may constitute a higher percentage
of average net assets than would be found in other investment vehicles not managed by
Teakwood.
The Funds have long-term growth investment strategies. A Carried Interest arrangement such
as the above may provide an incentive for Teakwood, typically included with the General
Partner of each Fund and others as a “Conflict Person” under the conflict of interest terms of
that Fund’s organizational and offering documents, to make investments that are riskier or
more speculative than would be the case in the absence of such an arrangement.
Payment Method
Generally, the Management Fee is payable quarterly in advance from drawdowns of the
Investors’ unfunded capital commitments, provided that, to the extent of subsequent
distributions, such amounts will be added back to unfunded Capital Commitments and may be
recalled by the particular Fund. While the Management Fee is not generally refundable,
quarterly installments of the Management Fee payable for a period other than a full quarterly
period are adjusted on a pro rata basis according to the actual number of days in such period.
The Carried Interest for each Fund generally is paid out as a distribution of the net cash
proceeds attributable to dispositions of portfolio investments of a Fund. Upon termination of
a Fund, the General Partner will be required to return to the Fund distributions of Carried
Interest previously received to the extent, when calculated on an aggregate basis covering all
transactions of the Fund, that they exceed the amounts required by the limited partnership
agreement to be distributed to the General Partner as Carried Interest.
Teakwood Capital Form ADV Part 2A
Expenses
Organizational Expenses
Subject to any expense limitations that may be described in the CPPM of a particular Fund,
each Fund will bear all legal and other expenses incurred in the formation of the Fund and the
offering of Interests in the Fund (other than any placement fees). Organizational expenses in
excess of this amount, and any placement fees, will be paid by the Fund but borne by
Teakwood through a 100% offset against the Management Fee.
Operating Expenses
Teakwood will bear the ordinary day-to-day expenses incidental to the operation of the Fund.
The Funds will bear all out-of-pocket expenses, such as travel, fees and expenses of lenders,
consultants, attorneys, accountants, advisors and other related expenses associated with the
sourcing and investigating of all transactions whether or not consummated, monitoring
portfolio investments, ongoing administration of portfolio investments and fees and expenses
of the Fund’s Management Board (as defined below).
The Funds will bear such day-to-day expenses as taxes, fees of auditors, accountants, counsel,
expenses of the Investor Advisory Committee, expenses of annual meetings, insurance, and
litigation, and, subject to the approval of the Investor Advisory Committee, any extraordinary
expense.
...