Ann: Launch of Bentham IMF US Investment Vehicle, page-22

The truth is i don't know for sure if i'm right on the performance fee structure, as i've applied what i know is a common structure in private equity land to IMF's case without being sure. That said, i think i am, and it's just slightly clumsily worded in IMF's announcement.

To demystify, below i've done a very simplified example of how i think the cash flow waterfall works in IMF's case. I've made some very crude assumptions of:

- All capital deployed on day 1, and returned after 5 years
- No interim cash flows
- Pref hurdle of 15%
- Actual return of 25%

Using those assumptions, this is how it looks:

	Column 1	Column 2	Column 3	Column 4	Column 5	Column 6	Column 7	Column 8
0	{colgroup}
1	{col=325x@}{/col}{col=100x@}{/col}{col=100x@}{/col}{col=100x@}{/col}{col=100x@}{/col}{col=100x@}{/col}{col=100x@}{/col}{col=100x@}{/col}
2	{/colgroup}
3			6/30/2016	6/30/2017	6/30/2018	6/30/2019	6/30/2020	6/30/2021
4			Year	Year	Year	Year	Year	Year
5				1	2	3	4	5
6	IMF investment		-$50.0	$0.0	$0.0	$0.0	$0.0	$0.0
7	Fortress investment		-$150.0	$0.0	$0.0	$0.0	$0.0	$0.0
8
9	Pref on IMF investment @ 15%		$50.0	$57.5	$66.1	$76.0	$87.5	$100.6
10	Pref on Fortress @ 15%		$150.0	$172.5	$198.4	$228.1	$262.4	$301.7
11
12	Cash flow available to distribute (assume 25% IRR)		$0.0	$0.0	$0.0	$0.0	$0.0	$610.4
13
14	Pay off IMF pref							-$100.6
15	Pay off Fortress pref							-$301.7
16
17	Profit split available (surplus above pref)							$208.1
18	Pro-rata 85% share to Fortress							$132.7
19	Pro-rata 85% share to IMF							$44.2
20	15% performance fee (profit share) to IMF							$31.2
21
22	Total cash flow to Fortress (pref + profit share)		-$150.0	$0.0	$0.0	$0.0	$0.0	$434.4
23	Total cash flow to IMF (pref + profit share + performance fee)		-$50.0	$0.0	$0.0	$0.0	$0.0	$176.0
24	Total vehicle cash flow		-$200.0	$0.0	$0.0	$0.0	$0.0	$610.4
25
26	Fortress IRR		23.68%
27	IMF IRR		28.60%

You can see that the vehicle gets a 25% IRR in total, but the way the profit sharing works is that 85% above the preferred return hurdle gets split pro rata (i.e. 75% Fortress 25% IMF) between equity in the fund, and the remaining 15% goes straight to IMF as a performance fee. That's why the respective investors' IRRs are significantly different, even though they invested pro rata into the same JV - IMF skims the 15% performance fee above the pref straight into its pocket, as well as sharing in the pro rata 85% returns to unitholders.