Item 5 - Fees and Compensation
A. Below is a discussion of how the Adviser is generally compensated in connection with
providing advisory services to its Funds. However, the Adviser may enter into different fee
arrangements on a Fund by Fund basis. A potential investor should read and review any and
all Offering Documents in their entirety before making any investment decisions.
Management Fees. The Funds pay a management fee (the “Management Fee”) calculated
monthly and paid quarterly in arrears to the Adviser’s affiliate generally equal to 0.1667% of
the gross asset value of each investor’s capital account as of the end of each calendar month (a
2.0% annual rate). The Management Fee for each Fund may vary.
Distributions made as of the end of a calendar quarter do not reduce the gross asset value of an
investor’s capital account for purposes of calculating the Management Fee due with respect to
the last month of such quarter.
The gross asset value of an investor’s capital account reflects only the drawdowns made from
such investor’s capital commitments and subsequent performance, not the amount of such
capital commitments.
Incentive Allocation. As of the end of each calendar year, the Adviser or its designated affiliate
will receive an incentive allocation (if due) (the “Incentive Allocation”) equal to 20% of any
New Appreciation then attributable to each investor’s capital account.
“New Appreciation” is equal to the amount by which the gross asset value of each capital
account (calculated after reduction for Management Fees, the Administrator’s fees and for all
accrued expenses, but not for the Incentive Allocation itself) exceeds the High Water Mark
attributable to such capital account.
The “High Water Mark” applicable to each capital account is the highest aggregate net asset
value (which is then also the gross asset value) of such capital account as of any preceding
calendar year, after reduction for the Incentive Allocation then made (or an investor’s aggregate
capital contributions, if no year-end Incentive Allocation has been made from such capital
account). The High Water Mark is reduced dollar-for-dollar by the amount of any distributions
and proportionately reduced whenever withdrawals or transfers are made from a capital
account. The High Water Mark is increased dollar-for-dollar by capital contributions made to
such capital account.
The Incentive Allocation is calculated on the basis of the performance of an investor’s overall
capital account, not separately with respect to each capital commitment or capital contribution
made to such capital account.
Organizational Expenses. A Fund also bears the expenses of the organization of the Fund. The
organizational and initial offering costs of the Fund include legal, accounting, printing,
marketing and comparable expenses (not including any placement fees). The Fund’s
organizational costs are being amortized over a 36-month period — beginning with the date
that the first capital commitments are accepted — for purposes of calculating Net Asset Values
(although these costs will be expensed in their entirety for financial reporting purposes as of
the initial issuance of interests). The organizational expenses borne by the Fund are described
in more detail in the Fund’s Offering Documents.
Operating Expenses. Fund investors will pay its operating expenses including:
(i) costs of identifying, acquiring, modifying and reselling loans and property; (ii) executing
and originating transactions; (iii) interest charges, financing charges and applicable
withholding and other taxes; (iv) the fees for the servicing of loans held by the Fund; (v) legal,
accounting, auditing and other professional fees and expenses, including consulting and
appraisal fees and expenses; (vi) tax preparation and “Tax Matters Partner” fees and expenses;
(vii) any taxes and duties payable in any jurisdiction in connection with the Fund’s operations;
(viii) fees in connection with the custody of the Fund’s assets; (ix) insurance costs; (x) computer
services; (xi) administrative costs (including the fees and out-of-pocket expenses of third-party
administrators), paying agency, transfer agency, accounting verification (if any) and/or investor
registrar services; (xii) computer software licensing, development, purchasing, programming
and operating costs; (xiii) any other operating or administrative expenses related to accounting,
research, due diligence and reporting; (xiv) travel expenses incurred by the Adviser for due
diligence, servicing and improving of the assets; (xv) costs and expenses relating to the Fund’s
and Adviser’s or its affiliates’ regulatory compliance, including, without limitation, the costs
of compliance programs, examinations, regulatory inquiries and regulatory filings (including
Form PF and other regulatory and reporting forms relating to the Fund’s and/or the Adviser’s
or its affiliates’ trading and investing); (xvi) the costs of tax-related compliance; (xvii) any
indemnification payments; and (xviii) the costs for in-house accountants, originators, mortgage
servicers (including the Servicer), operational support and other personnel providing such
services to the extent such expenses are generally consistent with the costs customarily charged
by third-party professionals (such costs, the “In-House Costs”); provided that with respect to
such In-House Costs, over time the aggregate fees paid to the in-house party for such costs will
not be greater than the market rate generally charged by third-party professionals for providing
such services to other similar investment funds.
Miscellaneous. The Adviser may grant waivers of the Management Fees and Incentive
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