previously drawn down by the Fund (plus an additional amount thereon), there can be no assurance that such payment will reflect the fair value of the Fund’s existing investments at the time such additional Limited Partners subscribe for such interests.
Difficulty in Valuing Portfolio Investments and Distribution in Kind
Generally, there will be no readily available market for a substantial number of the Fund’s investments and hence, most of the Fund’s investments will be difficult to value. The securities in which the Fund will invest may be among the most junior in a portfolio company’s capital structure, and thus subject to the greatest risk of loss. It is highly speculative as to the whether and when a portfolio company will be able to register its securities so that the securities become eligible for trading in public markets. Certain investments may be distributed in kind to the Partners of the Fund. An investor that receives assets other than cash from the Fund may incur costs and delays in converting those assets to cash.
Non-Controlling Investments
The Fund generally expects to make non-controlling investments in portfolio companies where the Fund may not be able to control or effectively influence the business or affairs of such entities. Portfolio companies in which the Fund’s investments are made may have economic or business interests or goals which are inconsistent with those of the Fund, and the Fund may not be in a position to influence those interests or goals or otherwise protect the value of the Fund’s investments in such entities. In addition, although the Fund may seek board representation in connection with its investments, there is no assurance that such representation, if sought, will be obtained.
Service on Board of Directors
The Fund typically will seek to have observation or visitation rights or the right to designate directors to serve on the boards of directors of the Fund’s portfolio companies. In addition, affiliates of the General Partner may serve, from time to time, as officers or directors of the portfolio companies. The foregoing rights and activities could expose the General Partner, its affiliates and the assets of the Fund to regulatory action and/or lawsuits and claims by a portfolio company, its security holders and its creditors. While the General Partner intends to manage the Fund in a way that will minimize exposure to these risks, the possibility of successful claims or lawsuits or adverse regulatory action cannot be eliminated, and such events could have significant adverse effects on the Fund.
Material Non-Public Information
By reason of their responsibilities in connection with their other activities, certain affiliates of the General Partner may acquire confidential or material non-public information or be otherwise restricted from initiating transactions in certain securities. The Fund will not be free to act upon any such information. Due to these restrictions, the Fund may be not be able to initiate a transaction that it otherwise might have initiated and may not be able to sell an investment that it might otherwise might have sold.
In their capacity as officers or directors, affiliates of the General Partner will be subject to fiduciary or other duties to the portfolio company, which may adversely affect the Fund. For example, the Fund may be prohibited from selling publicly traded securities of a portfolio company if the General Partner or any of its affiliates is in possession of material non-public information relating to such company.
67 CONTROL NUMBER 257 - CONFIDENTIAL
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