14 Reasonable Organization and Partnership Expenses Expenses allocable to the partnership as a whole should be reasonable, clearly disclosed prior to the initiation of the fund and at regular intervals to all LPs, e.g., clarified in capital call notices. The allocation of such agreed expenses to the partnership should be consistent and subject to periodic LP and indepen- dent auditor review and certification. Organization Costs­—Costs related to the formation of the fund should be reasonable and capped at an amount appropriate to the size of the fund.Increases in organization cost caps for successor funds should not necessarily be linear with growth in fund sizes but rather clearly aligned with specific cost factors not otherwise rationally covered under the management fee, e.g., placement agent expenses or compliance with a new regulatory regime. Should the agreed cap on organizational costs be exceeded, any excess should be offset against the management fee. Any agreed cap on organizational costs should take into account the costs associated with negotiating side letters. Organizational costs that are specific to an alternative vehicle, parallel vehicle, co-invest vehicle, etc. should be borne solely by that vehicle. This includes organization expenses of the GP specific to the GP’s commitment to the fund. Side Letters—The cost of negotiating and complying with side letters can be sizeable. In order to minimize the cost and complexity of side letter compliance, GPs should seek whenever possible to include those pro- visions common across the majority of a fund’s side letters into the LPA itself. The costs of negotiating the side letters should be considered an organizational expense and subject to any agreed cap in place. Any costs associated with negotiating side letters not sub- ject to the agreed cap should be fully disclosed to LPs. To minimize the cost and complexity of negotiations, LPs should endeavor to limit the substance of side let- ters to essential statutory or other institution-specific requirements. Expenses Shared Between the GP and the Partnership The specific circumstances surrounding the following, and the LPA’s treatment thereof, should determine how the following expenses are shared between the GP and the fund: Broken Deal Expenses­ —Broken deal expenses should be charged to the fund. To the extent that other ve- hicles participated in the broken deal, including but not limited to special purpose vehicles, co-investment vehicles, and parallel investment vehicles, in most cases it is appropriate to share broken deal expenses across these entities with the fund on a pro rata basis. Expenses incurred through preliminary due diligence and sourcing, i.e., including related travel, should not be considered broken deal expenses. LPs should be made aware of any parallel co-invest- ment vehicles that are not allocated a pro rata share of broken deal expenses and the treatment of any fee income related to such parallel or co-investment vehicles. Any reverse termination fees collected by the fund should be used to reimburse LPs to offset previously incurred broken deal expenses. The allocation of broken deal and co-investment ex- penses should be clearly and consistently disclosed across all fund documents, including the PPM, the LPA, marketing materials, and regulatory filings, e.g., Form ADV Part 2 filed with the SEC. Technology, Cyber Security and Software Upgrades— To the extent that a technology implementation or an upgrade to the GP’s existing system solely or chiefly benefits the GP, and can be utilized across multiple funds over time, the GP should pay the associated costs. Expenses Specific to Individual LPs—An individual LP or subset of LPs may require the engagement of a third party with respect to organization costs or expenses pertaining to a specific transaction, e.g., jurisdiction-specific or institution-specific matters. Such expenses should be allocated to the parties with the specialized requirements rather than to all LPs in the fund. GP AND FUND ECONOMICS