APPENDIX B
Key Points in a Private Placement Memorandum
- Firm and Fund Investment Strategies:
Present the firm’s past performance and history; how it has succeeded and what strategies were used. How the firm’s advantages and resources will succeed in the specified market.
- Investment Performance Record:
Varies by firm because of different sizes and especially how long a firm has been in business. Generally, firms use a table format to present the fund’s investment track record.
- Tax Concerns:
Tax treatment varies by whether the investor is U.S.-based or non-U.S.-based, and this section will briefly address different tax treatments and how it affects the Limited Partners.
- Investment Professionals and Committee:
Presents the investment professionals involved in the new fund and explains their role. An especially important detail here is the history and experience of the investment professionals.
- General Partners and Limited Partners Terms and Agreements:
An initial proposal of terms and agreements between the General Partner and the Limited Partners. Most importantly, the management fee, general partners’ commitments to the fund, distribution of the capital calls, schedules, and the fund’s cooperative investment policy. A key-man clause may be included.
- Fund-Related Investment Risks:
Typically covers three areas of investment risk: business, management, and fund risk.
- Accounting and Reporting:
Explanation of the allocation of returns and losses and accounting for stock options. ...
