13 ILPA Principles 3.0 Fee Income Beyond the Management Fee Fund documentation should adequately detail the policies regarding the calculation, assessment, and reporting of any fees and expenses allocable to port- folio companies that have a significant impact on the LP’s commitment to the fund and/or net investment return. No fees should be charged to portfolio companies. Any portfolio company fees that are charged should be 100% offset against the management fee and subject to standard disclosure. Fees exempt from the offset provisions should be rare, but clearly defined in the LPA. Where such fees are not fully offset, the GP should disclose the amount of fees received by the GP, including those that fall outside of any offset provision. Any disclosure of transaction fees that are likely to be collected, but not subject to offset, should be based on a standard that exceeds the prevailing definition of a Related Party. Portfolio company fees that cannot be offset should be distributed to LPs eligible to receive residual re- bates at the end of the fund’s life. Any fees generated by an affiliate of the GP, such as an advisory firm or in-house consultancy, whether charged to the Fund or an underlying portfolio company, should be reviewed and approved by a majority of the LPAC. The application of offsets to any fee income paid in- kind should account for the fair market value of such payment. Where a fair market value is unavailable, the payment should be offset against the management fee as soon as the security becomes marketable or at the end of the life of the fund, whichever is first. Fee Offsets Related to Co-Investments Unless prohibited by the LPA, a GP may charge man- agement and other fees, such as transaction fees, on co-investments. Where such fees are collected, the firm should clearly disclose the implication for allocation of transaction or other fees collected from the portfolio company between the fund and co-investors, as well as the application of offsets for any such fees applied. The approach to allocating broken-deal expenses for co-investments should align with the approach to allocating and offsetting any co-investment related fees collected between the GP and co-investors. GP AND FUND ECONOMICS