Fees and Expenses
An explanation of the fees and expenses associated with investing in Zell Capital.
Zell Capital is an internally managed fund. This means the fund directly employs the management team and incurs all expenses related to the operations of the fund. There is no external advisor relationship and no defined management fee or carried interest that you would normally find in a venture capital fund. Instead, management will create an annual budget that will be presented to the board of trustees.
The fee and expense table in the “Fees and Expenses” section of the prospectus includes two details that need context to understand the actual expected fees of the fund. First, the Marketing Expenses (2.83%) reflects expenses related to completing the offering of $50 million. The marketing budget will significantly reduce once we have completed the offering. Additionally, the expenses were calculated based on a ‘reasonable’ assumption we made of how much capital we will raise in the first year. We chose $18.6 million as the target which became the basis for calculating fee percentage. Assuming we are able to complete our offering of $50 million, the annual fee percentage would reduce by more than half.
Per our prospectus, the following table is intended to assist you in understanding the costs and expenses that an investor in our Shares will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by “us” or “the Company,” or that “we” will pay fees or expenses, you will indirectly bear such fees or expenses as an investor in the Company, however, your responsibility for such fees or expenses is limited to your investment in the Company. The fee table and example below include all fees and expenses of our consolidated subsidiaries.
(2) There are no expenses associated with our distribution reinvestment plan.
(3) Assumes we have not borrowed funds. We do not currently anticipate incurring indebtedness within the first twelve months of the offering, or paying any interest, during the twelve months following completion of this offering. We also do not currently anticipate issuing any preferred shares. The future issuance of debt securities will be made at the discretion of management and our Board after evaluating the investment opportunities and economic situation of the Company and the market as a whole.
(4) “Other expenses” are estimated for the current fiscal year and includes our estimated overhead expenses (e.g., marketing, payroll, payroll taxes, benefits, consulting expenses, meals and entertainment, office supplies, software subscriptions, travel), all general and administrative expenses and operating expenses.
(5) Total annual expenses are presented as a percentage of net assets attributable to shareholders, because the holders of our Shares (and not the holders of our debt securities or preferred shares, if any) bear all of our fees and expenses. For the purposes of this table, we have assumed that we have not incurred any indebtedness to acquire assets and that we maintain no cash or cash equivalents.
(6) Deferred offering costs are those costs associated with the offering of the Company’s shares, such as legal fees and filing fees related to the initial registration statement.
The example below and in the prospectus of the 1, 3, 5 and 10 year expenses uses the 8.23% total annual expense from the table above.
This example assumes a $18.6 million offering raise and marketing expenses carried through each year the offering is open. This, again, includes the assumption that sales and digital marketing expenses will remain consistent through year 10; however, the Company expects that such expenses will decrease following the offering period, which we expect to end following year two. However, there is no guarantee that such expenses will decrease after the offering period or at all. The Company will use a digital marketing strategy to advertise to investors and will have expenses related to those strategies that will be in effect during the offering period. Once the offering period is complete, expenses related to the digital marketing strategy should decrease and, thus, actual expenses for years three, five and ten may reflect reduced expenses. Therefore, the Company expects that actual expenses as a percentage of assets may be substantially lower than those reflected in years three, five and ten in the example. If the digital marketing strategy is not successful following a 12-month time period beginning with the commencement of the offering, the Company will pursue a more traditional marketing strategy using a broker-dealer and incur expenses associated with such traditional marketing strategy.