Item 5. Fees and Compensation
Strategy Consulting Services
Upwelling acts a traditional investment consultant advising clients on their portfolio allocation,
market positioning, strategic relationships, portfolio construction, manager due diligence, and on-
going performance and manager monitoring. Upwelling’s fixed fees range from $5,000 to
$500,000, and are negotiable based on the size of the project and the complexity of the clients’
needs. All of these services are generally bundled into a retainer relationship but may also be
structured on an hourly fee, as outlined below, based on the complexity of the clients’ needs.
In addition, Upwelling may enter into an agreement with a client to perform one or more services
on a project or one-time basis.
For clients on a retainer service, fees are due and payable on a monthly or quarterly basis and
are payable in advance or arrears, as appropriate.
Advisory Services/Asset Management Services
For the discretionary and non-discretionary investment advisory and asset management services
Upwelling offers, the manner in which management fees will be charged will be established in
the client’s investment management agreement with Upwelling. Client consulting fees may fall
within the range of $75.00 to $750.00 per hour, as negotiated between Upwelling and the client.
Depending on the circumstances, Upwelling may charge different fee structures, such as flat
fees, asset-based fees, liquidation fees and/or performance fees. Upwelling may deduct fees
from client accounts, call capital to fund required fees and expenses, or bill clients for such fees,
all as stated in a client’s investment management agreement.
Performance-based fees for managed accounts will generally be set forth in the applicable
investment management agreement and performance-based fees for funds will generally be set
forth in the applicable fund’s operating agreement. Upwelling’s compensation will be negotiable
and may vary. Upwelling will generally charge an annual fee of between 1.0% and 2.0% of assets
under management for advisory services, and will generally charge a performance fee of between
10% and 20% of net profits of the account (including both realized and unrealized gains and
losses). Performance allocations and fees will be assessed in arrears on an annual basis and on
withdrawal of funds during the year with respect to the amount withdrawn, and will only be
applied to the portion of profits that exceed the cumulative losses previously allocated to or
incurred by clients. Upwelling complies with California Code of Regulations section 260.234,
as required. Performance allocations and fees may create an incentive for Upwelling to make
more risky and speculative investments than it would otherwise make.
Management fees will generally be charged monthly or quarterly in advance. Upon redemption
or termination of an advisory relationship, Upwelling will refund unearned fees. If management
fees are charged in arrears for a particular client, Upwelling will prorate fees so that the client is
charged only for the actual period of time that Upwelling provided advisory services.
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The foregoing fees and allocations are negotiable and may be reduced or waived in certain
circumstances, including with respect to investors that are employees of Upwelling and other
persons affiliated with Upwelling and its affiliates.
Other Expenses
Unless investment consulting fees are designed to be all-inclusive, clients pay for travel expenses
incurred in connection with investment due diligence, expenses for research-related services and
products and expenses related to attendance by Upwelling personnel at general partner annual
meetings, portfolio company meetings, investment conferences and other programs.
In addition, for the discretionary and non-discretionary advisory and asset management services
that Upwelling offers, the manner in which expenses are charged will be established in the client’s
investment management agreement with Upwelling. Clients will generally be responsible for all
of the transaction expenses, administrative, custody, legal (including blue sky compliance), tax
preparation, accounting, extraordinary insurance and any other expenses associated with their
funds and managed accounts.
Prepayment of Fees
Clients may pay Upwelling’s fees in advance. The client’s obligation to pay fees ceases upon
the termination of the client’s agreement or, in the case of a fund that includes a performance fee,
the final distributions from the fund.
Additional Compensation and Conflicts of Interest
Neither Upwelling nor any of its supervised persons accepts compensation for the sale of
securities or other investment products. Lower fees for comparable services may be available
from other sources.