ITEM 5: FEES AND COMPENSATION
A. Advisory Fees and Compensation
The fees and compensation applicable to each Fund are set forth in detail in each Fund’s offering
documents. A brief summary of such fees and compensation is provided below. The fees and
compensation payable to VCM are negotiable and vary among the Funds and investors. However, the
range of compensation is generally as follows:
1. Management Fee
VCM typically receives a quarterly asset-based management fee calculated as a percentage of each
investor’s capital account, payable quarterly in advance (the “Management Fee”). The Management
Fee is generally 2.0% per annum. The Management Fee is calculated and paid in advance but is
amortized monthly by a Fund over the quarter for which such Management Fee is paid.
The Management Fee will be prorated for any capital contribution or withdrawal by an investor that is
effective other than as of the first day of a fiscal quarter. In the event of a withdrawal by an investor
other than as of the last day of a fiscal quarter, VCM will pay to the Fund an amount equal to the pro
rata portion of the Management Fee, based on the actual number of days remaining in such fiscal
quarter, and the investor’s capital account(s) will be credited by such amount to the extent its capital
account(s) have been debited for the Management Fee for the remaining days in such fiscal quarter. In
the sole discretion of the general partners of the Funds, the Management Fee may be waived, reduced
or calculated differently with respect to certain investors.
2. Incentive Allocation
VCM generally receives an incentive allocation equal to a percentage of the net realized and unrealized
profits allocated to each investor for the year, but only to the extent net income allocated to that investor
exceeds any cumulative losses that were allocated to that investor for earlier periods and that have not
been recovered (a “high water mark”). This incentive allocation is generally 20.0% and is typically
made at the end of each calendar year. Certain Funds will have a high-water mark and hurdle rate, as
described in the applicable Fund’s offering documents.
VCM’s performance-based fees will be based on unrealized as well as realized gains. There can be no
assurance that such unrealized gains will, in fact, ever be recognized. Furthermore, the valuation of
unrealized gains and losses may be subject to material subsequent revision.
The incentive allocation will only be charged to accounts of those investors who are “qualified clients”
as defined in Rule 205-3 of the Investment Advisers Act of 1940, as amended (“Advisers Act”), in
accordance with the provisions of the California Corporations Code Section 260.234.
VCM does not receive an incentive allocation from the General Partners or certain employee accounts
invested in the Funds.
B. Payment of Fees
Management fees, incentive allocations, and third-party fees (discussed below) are deducted from Fund
assets. Management fees, which are paid in advance, are withdrawn at the beginning of the quarter.
Incentive allocations are allocated as of the last business day of the calendar year and as of any date on
which an investor makes a withdrawal or receives a distribution from such investor’s capital account(s).
C. Additional Fees and Expenses
Each Fund bears its own expenses, including all costs and expenses relating to the Fund’s activities,
investments and business (to the extent not borne or reimbursed by an entity in which the Fund invests),
which generally include, without limitation: (i) legal, accounting, bookkeeping, recordkeeping,
administration, tax, audit, administration, custodial, consulting and other professional fees (including
expenses associated with maintaining the Fund’s financial books and records, calculating net assets and
preparing the Fund’s financial statements and other reports, tax returns and forms K-1); (ii) banking,
brokerage, registration, qualification, depositary and similar fees or commissions (including finder’s
fees) (see Item 12); (iii) transfer, capital and other taxes, duties and costs incurred in acquiring, holding,
selling or otherwise disposing of assets; (iv) costs, expenses and liabilities of the Fund (including
premiums for insurance (if any) protecting the Fund, the Fund General Partner, any of their respective
affiliates, and any of their respective employees and agents); (v) costs and expenses that are classified
as extraordinary expenses under generally accepted accounting principles; (vi) taxes or other
governmental charges payable by the Fund; (vii) litigation costs and any judgments or settlements paid
in connection with litigation involving the Fund or an Indemnified Party; (viii) costs of soliciting,
reporting to or meeting with the Fund’s investors; (ix) costs of meetings of the Fund’s board of directors
(as applicable) and of the Fund’s investors; (x) costs incurred in valuing securities; (xi) costs of winding
up and liquidating the Fund; (xii) expenses incurred in connection with an investor that defaults in
respect of a capital contribution; (xiii) other expenses associated with the acquisition, holding and
disposition of Fund investments; and (xiv) expenses relating to software tools, programs or other
technology utilized in managing the Fund (including third-party software licensing, implementation,
data management and recovery services and custom development costs); (xv) expenses related to the
conduct of an activist campaign, including proxy contests, solicitations and tender offers, and
compensation, indemnification and other expenses of any nominees proposed by VCM as directors or
executives of portfolio companies; and (xvi) all fees and expenses (whether paid in cash or otherwise)
incurred by the Fund, VCM or the Fund General Partner relating to investment and disposition
opportunities for the Fund and whether or not consummated (including, without limitation, legal,
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