EFTA01396934.pdf

GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A ICAPITAL ADVISORS, LLC FORM ADV PART 2A Business Address 60 East 42nd Street, 26th Floor New York, NY 10165 USA Phone: www.icapitalnetwork.com March 30, 2018 This brochure provides information about the qualifications and business practices of iCapital Advisors, LLC ("iCapital"). If you have any questions about the contents of this brochure ("Brochure"), please contact us at The information in this Brochure has not been approved or verified by the United States Securities and Exchange Commission ("SEC") or by any state securities authority. Additional information about iCapital is also available on the SEC's website at www.adviserinfo.sec.gov. iCapital is registered as an investment adviser with the SEC pursuant to the Investment Advisors Act of 1940, as amended (the "Advisers Act"). Recipients of this Brochure should be aware that registration with the SEC does not in any way constitute an endorsement by the SEC of an investment adviser's skill or expertise. Further, registration does not imply or guarantee that a registered adviser has achieved a certain level of skill, competency, sophistication, expertise or training in providing advisory services to its clients. 1 EFTA01396934 GLDUS127 Annandale Capital iCapital Advisors, LLC Item I: Material Changes This brochure amendment is made in connection with iCapital's annual updating requirement for 2018 and serves as an update to iCapital's brochure dated March 31, 2017. This brochure contains routine annual updates and clarifying changes to the prior brochure, an update to Item 5 relating to the collection of an investor servicing fee, an update to Item 8 relating to the scope of diligence conducted on certain Funds, and an update to Item 14 relating to iCapital's business relationship with Fidelity Brokerage Services LLC. In addition, in December 2017, Institutional Capital Network, Inc., the parent company of iCapital, acquired the U.S. private equity access fund platform from the Asset Management division of Deutsche Bank. iCapital took over as the investment manager of these private equity access funds. Item 3: Table of Contents Item I: Material Changes Item 3: Table of Contents Item 4: Advisory Business Item 5: Fees and Compensation 4 Item 6: Performance-Based Fees and Side by Side Management .. 7 Item 7: Types of Clients 7 Item 8: Methods of Analysis, Investment Strategies and Risk of Loss 8 Item 9: Disciplinary Information 22 Item 10: Other Financial Industry Activities and Affiliations 22 Item 11: Code of Ethics, Participation or Interest in Client Transactions and Personal Trading 23 Item 12: Brokerage Practices EFTA01396935  26 Item 13: Review of Accounts 26 Item 14: Client Referrals and Other Compensation 26 Item 15: Custody 27 Item 16: Investment Discretion 27 Item 17: Voting Client Securities 28 Item 18: Financial Information 28 Form ADV Part 2A Item 4: Advisory Business iCapital Advisors, LLC ("iCapital", "we", "us" or "the Firm"), is a Delaware limited liability company that has been in business since May, 2014. We are wholly-owned by Institutional Capital Network, Inc. (the "Company") and have our principal place of business in New York, NY. iCapital Securities, LLC ("iCapital Securities"), is a broker-dealer primarily engaged in the private placement of securities and is registered with the SEC and a member of the Financial Industry Regulatory Authority. iCapital Securities serves as the Firm's private placement agent in respect of many Funds (as defined below) advised by iCapital and is also a wholly-owned subsidiary of the Company. For additional information on iCapital Securities, see Item 14 below. iCapital provides investment advisory services to each of iCapital Carlyle Property Investors Access Fund, L.P., iCapital-SV7, L.P., iCapital-SLP V Access Fund, L.P., iCapital-MSD Private Credit Opportunity II Access Fund, L.P., iCapital-BTAS IV Access Fund, L.P., BIAS IV Private Investors (U.S.), L.P., Invesco Venture Alpha Feeder Fund, L.P., Private Equity Select Master EFTA01396936 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A Trust I, Private Equity Global Select Master Fund, Private Equity Global Select Master Fund II, Private Equity Global Select Master Fund III, Private Equity Global Select Master Fund IV, Private Equity Global Select Master Fund V, Private Equity Global Select Fund VI (U.S.), L.P., Private Equity Global Select Fund VII (U.S.), L.P., Private Equity Asia Select Master Fund, Private Equity Asia Select Master Fund II, Private Equity Asia Select Fund III (U.S.), L.P., Private Equity Asia Select Fund III (International), L.P., Private Equity Asia Select Fund IV (U.S.), L.P., Private Equity Asia Select Fund IV (International), L.P., Opportunistic Real Estate and Infrastructure Select Fund (International) L.P., Opportunistic Real Estate and Infrastructure Select Fund (U.S.), L.P., Private Equity & Credit Opportunities Select Fund (U.S.), L.P., Private Equity & Credit Opportunities Select Fund (International), L.P., Energy Select Fund (U.S.), L.P., Energy Select Fund (International), L.P., Credit Opportunities Access Fund (International), L.P., Secondary Opportunities Fund II Private Client Feeder Fund., KKR Credit Select Access Fund (U.S.), L.P., 6200 Hollywood Blvd. North, Dislocation Opportunities Access Fund (U.S.), Dislocation Opportunities Access Fund (International), Secondary Opportunities Fund III Private Client Feeder Fund (U.S.), L.P., Apollo Credit Select Access Fund (International), L.P., BEP Private Investors II GP, Ltd., BEP Private Investors II (International), L.P., BIAS 2015 Private Investors (U.S.), L.P., BIAS 2015 Private Investors (International), L.P., KKR Credit Select Access Fund II (U.S.), L.P., Vista Software Select Access Fund (U.S.), L.P., Private Equity Global Select II SICAR, S.C.A., Private Equity Global Select IV SICAR, S.C.A., Private Equity Global Select V S.C.A, SICAR, Private Equity Asia Select III S.C.A., SICAR, Private Equity & Credit Opportunities Select, iCapital-OrbiMed Royalty Opportunities II Access Fund, L.P., iCapital-KVV Access Fund, L.P., iCapital-TEP Access Fund, L.P., iCapital-TEP Non-U.S. Access Fund, Structured Credit Recovery Access Fund, L.P., iCapital-2015 Vintage Access Fund, iCapital-Apollo EFTA01396937 L.P., iCapital-Warburg Pincus Private Equity XII Access Fund, L.P., iCapital-KV Seed C Access Fund, L.P., iCapital-SH Access Fund, L.P., iCapital- HG Vora Access Fund, L.P., Royalty Investment Fund Limited Partnership, iCapital Private Credit Access Fund, L.P., iCapital Arbitrage Fund, a series of iCapital Global Access Partnership II, L.P., and Horizon Opportunities Fund, a series of (each of the foregoing, a "Private Access L.P., and International Growth Equity Fund and L.P. iCapital provides investment iCapital Global Access Partnership II, Fund"), along with iCapital MLP Fund, International Value Equity Fund, each a series of iCapital Global Access Partnership II, L.P. (each a "Direct Investment Fund," each Private Access Fund or Direct Investment Fund, a "Fund" and collectively referred to herein as the "Funds"). advisory services to the Funds and may provide investment advisory services to other investment vehicles in the future. Investment advice is provided directly to the Funds, subject to the discretion and control of the applicable general partner, and not individually to the investors in a Fund. Each of the Funds is exempt from registration under the Investment Company Act of 1940, as amended. The Funds' securities are not registered under the Securities Act of 1933, as amended. iCapital's advisory services primarily include identifying underlying private equity or hedge fund managers with whom to invest the assets of its Private Access Funds or identifying sub-advisors to assist iCapital in managing the Direct Investment Funds. Each Fund is managed in accordance with the applicable Fund's confidential private placement memorandum (the "PPM"). The Private Access Funds managed by iCapital were formed to pool investments of investors for the purpose of investing each such Fund's assets with private equity or hedge funds ("Underlying Funds") managed by third-party managers ("Underlying Managers") that are selected by iCapital. Each Underlying Fund has its own PPM ("Underlying Fund PPM"), which includes important disclosures with respect to investment related risks, macroeconomic considerations, fees and other potential conflict issues, and such other EFTA01396938 disclosures as are determined appropriate by the Underlying Managers. The Direct Investment Funds primarily 3 EFTA01396939 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A make investments directly in certain equity securities recommended by a sub - adviser (a "SubAdviser") selected by iCapital in accordance with each such Fund's respective investment objective and any investment guidelines, as set forth in that Fund's PPM. These Funds permit investors to access leading private equity and hedge funds at investment minimums which may be as low as $100,000, as set forth in the applicable PPM. Each Fund is managed only in accordance with its own investment objectives and restrictions and is not tailored to any particular private fund investor (each an "Investor"). Since iCapital does not provide individualized advice to Investors, Investors should consider whether a particular Fund meets their investment objectives and risk tolerance prior to investing. We do not permit Investors in the Funds to impose limitations on the investment activity described in the Funds' offering documents. Information about each Fund can be found in its offering documents, including its PPM and limited partnership agreement (the "LPA"). As of December 31, 2017 total discretionary assets under management were $4,014,735,581.86. Please note that for certain Funds, December 31, 2017 values were not available from the Underlying Funds and as a result, assets under management for these Funds are as of September 30, 2017.1 iCapital has included in its regulatory assets under management the assets of any clients for which it (or one of its affiliates) serves as general partner. Institutional Capital Network, Inc., the parent of iCapital, is owned by various persons, including certain management persons and employees of iCapital, none of which own 25% or more of the corporation. Michael Stanton is iCapital's Chief Compliance Officer ("CCO") Item 5: Fees and Compensation Management Fee for the Funds: iCapital will charge each Fund a management fee, generally charged quarterly in advance, equal to the aggregate management fee assessed with respect to each Investor. The management fee charged will typically range between 0.25% to 1.25% per annum, a portion of which, in respect of the Direct Investment Funds only, is paid by iCapital or its affiliates to the applicable SubAdviser for services provided by the Sub-Adviser. To the extent an Investor EFTA01396940 withdraws or is withdrawn other than at the end of a calendar quarter, and the Investor prepaid the 1 Funds with 9/30/2017 values are as follows: Private Equity Select Master Trust I, Private Equity Global Select Master Fund, Private Equity Global Select Master Fund II, Private Equity Global Select Master Fund III, Private Equity Global Select Master Fund IV, Private Equity Global Select Master Fund V, Private Equity Global Select Fund VI (U.S.), L.P., Private Equity Global Select Fund VII (U.S.), L.P., Private Equity Asia Select Master Fund, Private Equity Asia Select Master Fund II, Private Equity Asia Select Fund III (U.S.), L.P., Private Equity Asia Select Fund III (International), L.P., Private Equity Asia Select Fund IV (U.S.), L.P., Private Equity Asia Select Fund IV (International), L.P., Opportunistic Real Estate and Infrastructure Select Fund (International) L.P., Opportunistic Real Estate and Infrastructure Select Fund (U.S.), L.P., Private Equity & Credit Opportunities Select Fund (U.S.), L.P., Private Equity & Credit Opportunities Select Fund (International), L.P., Energy Select Fund (U.S.), L.P., Energy Select Fund (International), L.P., Credit Opportunities Access Fund (International), L.P., Secondary Opportunities Fund II Private Client Feeder Fund., KKR Credit Select Access Fund (U.S.), L.P., 6200 Hollywood Blvd. North, Dislocation Opportunities Access Fund (U.S.), Dislocation Opportunities Access Fund (International), Secondary Opportunities Fund III Private Client Feeder Fund (U.S.), L.P., Apollo Credit Select Access Fund (International), L.P., BEP Private Investors II GP, Ltd., BEP Private Investors II (International), L.P., BIAS 2015 Private Investors (U.S.), L.P., BIAS 2015 Private Investors (International), L.P., KKR Credit Select Access Fund II (U.S.), L.P., Vista Software Select Access Fund (U.S.), L.P., Private Equity Global Select II SICAR, S.C.A., Private Equity Global Select IV SICAR, S.C.A., Private Equity Global Select V S.C.A, SICAR, Private Equity Asia Select III S.C.A., SICAR, Private Equity & Credit Opportunities Select, iCapital Vintage II Access Fund, L.P., iCapital-SV7, L.P., Invesco Venture Alpha Feeder Fund L.P., iCapital- KV Seed C Access Fund, L.P., iCapital- TEP Non-US Access Fund, L.P., iCapital- TEP Access Fund, L.P., iCapitalKVV Access Fund, L.P., iCapital Private Credit Access Fund, L.P., iCapital- 2015 Vintage Access Fund, L.P.. 4 EFTA01396941 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A management fee up through the end of that calendar quarter, such Investor will generally receive a pro rata share of any management fee it prepaid for any quarter, based on the Investor's date of withdrawal, unless the applicable Fund documents provide otherwise. Notwithstanding the foregoing, iCapital in its sole and absolute discretion may elect to waive or otherwise reduce the management fee attributable to any Investor. Investor Servicing Fee: In addition to the management fee described above, iCapital may be entitled to receive an investor servicing fee from the Underlying Manager typically charged as a percentage of the Fund's aggregate capital contributions. Typically, the General Partner of the Underlying Fund is responsible for payment of the Investor Servicing Fee to iCapital. Investors should refer to the Fund's PPM for full disclosure relating to all the fees an investor might be subject to or received by iCapital. Payments to Underlying Managers: In addition to the management fee described above, the Private Access Funds are generally subject to their pro rata portion of any fees charged by the Underlying Funds. These fees typically include a management fee, which generally ranges from 1% on an annual basis, and in most cases an incentive compensation arrangement, which generally ranges from 10% - 20% of the capital appreciation in the Underlying Fund. In respect of the Underlying Funds that are private equity funds, such Private Access Funds are often subject to a preferred return and general partner catch-up. In addition, each Fund will fees, indirectly bear its pro-rata share of organizational expenses and other operational expenses and costs and expenses payable by the Fund to the Underlying Fund. Furthermore, certain Underlying Funds will offset the amount of any management fees payable by a Private Access Fund (and its other limited partners or shareholders) by the amount of any transaction fees, break-up fees, commitment underwriting fees, amendment fees, waiver fees, modification fees, monitoring fees, consulting fees, directors' fees, advisory fees, closing fees and other similar fees EFTA01396942 received and retained by the Underlying Fund Manager (or any of its affiliates) in respect of such Underlying Fund. Investors should refer to the Underlying Fund PPMs for full disclosure relating to all the fees a Private Access Fund would be subject to in connection with its investment in an Underlying Fund. Service Providers: In connection with its management activities, iCapital may engage various service providers. Service providers to each Fund may be compensated as a fund expense (as described below) or may be compensated out of iCapital's fee. iCapital has engaged Dynasty Securities, LLC ("Dynasty") as a service provider for certain Funds. Dynasty may provide certain administrative, marketing and technical support services to iCapital and may receive fees typically ranging from .075% - .25% in relation to investors who are clients of Dynasty's network of financial advisory firms. Dynasty is an independent company, not affiliated with iCapital. There is no form of legal partnership, agency, affiliated or similar relationship between iCapital and Dynasty. Organizational Expenses: Each Fund will bear its own organizational and offering expenses. Such organizational and offering expenses generally include, but are not limited to, legal expenses, travel, accounting, 5 EFTA01396943 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A filing, capital-raising and other expenses incurred in connection with the formation of the Fund and the offering of the Interests (including costs associated with preparing and distributing offering memoranda). These expenses may be subject to a cap based on the terms set forth in each Fund's PPM. Please refer to the applicable Fund PPM for further details. Fund Expenses: The Private Access Fund will generally pay the costs and expenses of the Private Access Fund, including without limitation: the management fee; organizational expenses; liquidation expenses of the Private Access Fund; any sales or other taxes, fees or government charges which may be assessed against the Private Access Fund; expenses and fees related to audits of the Private Access Fund's books and records and preparation of the Private Access Fund's tax returns; costs of preparing and distributing financial statements and other reports to and other communications with the Partners, as well as costs of all governmental returns, reports and filings; any subsequent closing interest charged to the Private Access Fund in connection with its admission to an Underlying Fund; extraordinary one-time expenses of the Private Access Fund; all expenses relating to litigation and threatened litigation involving the Private Access Fund, including indemnification expenses; commissions or brokerage fees or similar charges incurred in connection with the purchase or sale of securities; legal, administrative (including any fees and expenses of the administrator for the the costs and expenses (including travel related expenses) of hosting meetings of the Partners, or otherwise holding meetings or conferences with limited partners, whether individually or in a group; expenses attributable to normal and extraordinary investment banking, commercial banking, accounting, appraisal, Private Access Fund related to the Private Access Fund or the General Partner), custodial and registration services provided to the Private Access Fund and any expenses attributable to consulting services, including in each case services with respect to the proposed purchase or EFTA01396944 sale of securities by the Private Access Fund that are not reimbursed by the issuer of such securities or others (whether or not any such purchase or sale is consummated); and premiums for liability or other insurance to protect the Private Access Fund, the General Partner and any of their respective partners, members, employees, agents or affiliates in connection with the activities of the Private Access Fund. In addition to the foregoing costs and expenses, limited partners will indirectly bear the cost of the Private Access Fund's pro rata share of management fees, carried interest, organizational expenses, taxes, indemnification and other costs and expenses payable by the Private Access Fund as an investor in the Underlying Funds. Please refer to the applicable Fund PPM and/or Underlying Fund PPM for further details. The Direct Investment Funds will bear all the ordinary and extraordinary expenses in connection with the offering of its interests and operations, including without limitation: the cost of producing and distributing offering memoranda and other marketing and subscription materials; printing and mailing costs; filing and regulatory fees and expenses (including any costs and expenses in connection with regulatory filings and reports required to be made by a Direct Investment Fund, the applicable general partner or the Firm relating to such Direct Investment Fund), pricing and valuation fees and expenses (including the costs and expenses of valuation agents); accounting, custodial, administrative, legal, audit, bookkeeping and tax preparation fees and expenses (including fees and expenses of any administrator or custodian); computer software, licensing, programming and operating expenses; investment research and research- related products and services; data processing costs; consultant fees; tax, litigation and extraordinary expenses, if any, including, without limitation, 6 indemnification, dispute stockholders, officers, directors, EFTA01396945 GLDUS127 Annandale Capital iCapital Advisors, LLC resolution, litigations and related legal Form ADV Part 2A fees and expenses; investment expenses whether relating to investments that are consummated or unconsummated (e.g., expenses which, in the determination of the applicable general partner, iCapital or any sub- adviser, if appropriate, are related to the investment of such Direct Investment Fund's assets, such as brokerage commissions, spreads, mark-ups on securities, interest expenses, custodial and sub-custodial transaction charges and any costs associated with collateral management); insurance expenses, bank charges, currency hedging costs; and other investment and operating expenses. Expenses borne by any such Direct Investment Fund for audit expenses, preparation of the Funds' tax returns and liquidation expenses of such Direct Investment Fund may be subject to a cap as set forth in the applicable Direct Investment Fund's PPM. Please refer to the applicable Fund PPM for further details. iCapital will pay all overhead expenses, including its employees' salaries, rent, utilities, etc. Item 6: Performance-Based Fees and Side by Side Management iCapital may charge the Funds a performance-based fee or carried interest to its Investors. Performance-based compensation may create an incentive for iCapital to make more speculative investments than would otherwise be made or make decisions regarding the timing and manner of realization of investments differently than if such compensation were not received. In addition, a Private Access Fund will bear its pro rata share of management fees, performance fees, carried interest or other expenses charged by an Underlying Fund. Please refer to the iCapital and applicable Underlying Funds' PPM for further details and methods of calculating the fees charged to the applicable Private Access Fund. Item 7: Types of Clients The Clients of iCapital are the Funds. The Funds rely on an exemption from the definition of "investment company" under Section 3(c)(7) or Section 3(c)(1) of the Investment Company Act, which requires that its securities are to be held exclusively by "Qualified Purchasers" as EFTA01396946 defined in the Investment Company Act. iCapital offers interests in the Funds pursuant to Regulation D and Regulation S under the 1933 Act. Investors in the Funds may include high net worth individuals and estate planning vehicles as well as a variety of institutional investors (e.g., employee benefit plans, endowments, foundations, corporations and other types of entities and other corporations or businesses) meeting the terms of the exceptions and exemptions under which the Funds operate and wishing to invest in accordance with a particular Fund's investment objective. iCapital does not have a minimum size for a Fund, but the minimum investment commitment in a Fund is generally $100,000 or $250,000 depending on the Fund, although iCapital has the authority to accept subscriptions for a lesser amount iCapital may from time to time enter into letter agreements or other similar agreements (collectively, "Side Letters") with one or more investors or shareholders of a pooled investment vehicle which provide such investor or shareholder(s) with additional and/or different rights (including, without limitation, with respect to management fees, the performance allocations, withdrawals, access to information and additional capacity offered by the third-party managers, minimum investment amounts and liquidity terms) than such shareholder(s) or investors have pursuant to general terms of such pooled investment vehicle. iCapital will not be required to notify any or all of the other investors or shareholders of any such written agreements or any of the 7 EFTA01396947 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A rights and/or terms or provisions thereof, nor will iCapital be required to offer such additional and/or different rights and/or terms to any or all of the other investors or shareholders. Item 8: Methods of Analysis, Investment Strategies and Risk of Loss Underlying Fund Manager/Sub-Adviser Selection: The Private Access Funds' primary investment objective will be to allow investors to gain exposure to select fund managers at significantly lower investment minimums than would be required for a direct leveraging our sourcing advantages and employing an ongoing "bottom-up" diligence approach. The Direct Investment Funds' portfolio management by a variety of Sub-Advisers selected by iCapital. Bottom-up Diligence (Private Equity Funds): iCapital's due diligence team is focused on conducting investment, operations, and legal due diligence on the Private Access Fund offerings made available on iCapital's platform. iCapital's due diligence process comprises three stages. In the initial quantitative phase of evaluation, iCapital reviews the forward calendar of funds coming to market to develop market maps across the various private equity strategies (buyouts, growth capital, mezzanine, etc.) to identify funds likely to be appealing to iCapital's network. At this stage, iCapital also identifies fundraising schedules and targets and compares performance against benchmarks and against specific managers in the pipeline. Once iCapital has isolated funds coming to market in the ensuing 18 months, iCapital proceeds to the second phase of the due diligence process. During this phase, iCapital conducts a comprehensive evaluation of the manager's track record, a detailed benchmarking analysis, and a thorough review of the competitive landscape. iCapital has an initial meeting with the investment team and seeks to analyze the fund's investment strategy, review the quality and competency of the investment team, and understand the market outlook. Before meeting with a manager, iCapital's diligence team spends a significant amount of time evaluating data room materials provided by the manager. They prepare an agenda with a thorough EFTA01396948 list of questions. Also, during this phase of diligence, iCapital does a complete review of the fund's PPM, LPA, and ancillary marketing materials. Finally, iCapital makes reference calls to understand market positioning, team stability and depth, and market demand. iCapital's due diligence comprises both qualitative and quantitative components. The qualitative manager assessment generally includes a full-day onsite during which iCapital meets with the manager's investment, operational, and legal professionals. iCapital aims to cover many different topics during these meetings, including team depth and stability, investment strategy and marketing positioning, competitive landscape, discussion of poor investments and lessons learned. iCapital leverages these meetings, the review of the list the managers' due diligence questionnaire, and responses to any additional questions, to evaluate the fund relative to its peers with a focus on assessing the team in the context of its depth, diversity, and longevity. iCapital assesses the manager's compensation structure to ensure alignment of iCapital conducts both on the list and off interest. reference calls to contacts including executives at portfolio companies, peer firms, institutional LPs, former employees, and service providers such as bankers and lawyers. iCapital's quantitative analysis is focused on performing a comprehensive track record 8 investment in any Underlying Fund. iCapital will accomplish this by investment objective is to provide its investors access to EFTA01396949 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A assessment. In this evaluation, iCapital looks at internal rate of return ("IRR"), multiple on invested capital ("MOIC"), distributions to paid -in ("DPI"), and residual value to paid-in capital (RVPI). iCapital looks at the dispersion of returns, benchmark performance, the loss ratio, partner attribution on individual deals, investment pacing, cumulative contributions, and other inputs. Finally, iCapital does a comprehensive review of the fund terms and ensures that the terms are in line with similar strategies and follow market standards. Upon completion of the review, iCapital prepares a detailed due diligence report outlining the findings with a summary of strengths and weaknesses. The due diligence report is presented to iCapital's Investment Committee for approval and a unanimous vote of the Investment Committee is required for any investment opportunity to be marketed to our network. Bottom-up Diligence (Hedge Funds): The Hedge Fund Private Access Fund selection process encompasses five stages. In the first stage, iCapital investigates market opportunity and platform needs. iCapital seeks to identify strategies which are best suited for the current market environment. In particular, iCapital endeavors to add managers that are able to take advantage of a unique opportunity that a market dislocation might present. From a platform needs perspective, iCapital seeks to maintain an offering of I to 3 managers within each of the key hedge fund strategy buckets, across a diverse mix of fund manager profiles. As part of this process, iCapital is continually examining the peers of existing funds to better understand the markets and strategies. At the second stage of the diligence process iCapital aims to identify managers to evaluate more closely. iCapital builds a peer group universe, leveraging iCapital's entire sourcing capability, to identify managers with strong performance track records, including looking at return, volatility and drawdowns. The third stage of the diligence process is designed for iCapital to conduct initial diligence on select managers. As part of the initial due diligence iCapital will hold a meeting or conference call, followed by in-person meetings at the manager's or iCapital's offices. EFTA01396950 In these meetings, iCapital seeks to understand the quality and stability of the investment team, the strength of the organization, the past drivers of the track record and the stability of the performance going forward. In the fourth stage, iCapital proceeds with a diligence deep dive. iCapital makes all investment and fund selection decisions but has engaged Castle Hall Alternatives Inc. ("Castle Hall") to assist in hedge fund due diligence. Castle Hall performs an independent evaluation of the manager from an investment and operational due diligence perspective. Castle Hall's diligence process usually takes four to six weeks to complete. In the last stage, if iCapital is comfortable with Castle Hall's due diligence findings, the manager will be presented to the iCapital Investment Committee. The due diligence report is presented to iCapital's Investment Committee for approval and a unanimous vote of the Investment Committee is required for any investment opportunity to be marketed to our network. With respect to all of its diligence activities, while iCapital intends to conduct both investment and limited operational due diligence with respect to the Underlying Funds as part of the 9 EFTA01396951 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A investment selection process and it believes its due diligence and investment selection process is thorough, there can be no assurance that the Underlying Funds selected will ultimately be successful. Further, operational due diligence will be limited and will not consist of a full forensic accounting or a detailed review of internal conflicts. Accordingly, there is the risk that iCapital may not detect conflicts of interest, fraudulent behavior or administrative or operational weaknesses within the Underlying Funds that may give rise to substantial losses. Private Access Funds: Custom Engagements In certain cases, iCapital may be engaged by an Underlying Fund Manager or distribution agent to facilitate access to an underlying investment vehicle. In such capacity, iCapital will create and manage a Private Access Fund solely in an operational capacity to facilitate such investments and does not intend to conduct investment or operational due diligence with respect to the underlying fund vehicle. Accordingly, there is the risk that iCapital may not detect conflicts of interest, fraudulent behavior or administrative or operational weaknesses within the Fund that may give rise to substantial losses. References to "Fund" in the discussion of risks below shall mean any of the Private Access Funds, Direct Investment Funds and/or Underlying Funds, as applicable. Risk of Loss: Investing in securities involves risk of loss that Investors should be prepared to bear. Investors should consider the risks before investing in any Fund. The list of risk factors below is not a complete enumeration or explanation of the risks involved in an investment through iCapital or any of professional investors are urged to consult their memorandum and other legal documents of the particular Fund before deciding to invest. Certain Risk Factors: Potential Investors should carefully consider the risks of an investment in any Fund, which include, but are not limited to, the risks outlined below. For the Private Access Funds such EFTA01396952 risks include the detailed discussion with regard to risks and conflicts of interest generally applicable to the applicable Underlying Fund set forth in the Underlying Fund PPM. There can be no assurance that any Fund will be successful in achieving such Fund's investment objective or the strategies set forth in its PPM. Past results of any Funds, or any of the Underlying Managers or Sub-Advisers, are not necessarily indicative of the future performance of the Funds. There can be no assurance that a Fund's objectives will be achieved or that Investors will not lose their entire investment. Private investment funds generally involve various risk factors and liquidity constraints, a discussion of which is set forth in each Funds' offering documents, which will be provided to each prospective investor for review and consideration prior to investing. We strongly advise prospective investors to engage legal and tax counsel to review Fund offering documents prior to investing in any private investment fund. Investing in private investment funds is intended only for experienced and sophisticated investors who are willing to bear the high economic risks of the investment. Carefully review and consider potential risks before investing. Some of these risks include loss of all or a substantial portion of the investment due to leveraging or other speculative practices. Additionally, Investors may experience volatility of returns, a 10 the Funds it manages. Prospective advisers and review the offering EFTA01396953 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A potential lack of diversification, higher fees than those offered through more traditional investment products (such as mutual funds), and lack of information regarding valuations and pricing. Each prospective investor will be required to complete a subscription agreement for any Fund in which it seeks to invest, pursuant to which the prospective investor shall establish that he/she is qualified for investment in the Fund, and acknowledges and accepts the various risk factors that are associated with such an investment. The risks and conflicts of interest described in the Underlying Fund PPM with respect to the Underlying Fund and an investment therein apply generally to a Private Access Fund. Moreover, without limiting the application or generality of the foregoing, each Private Access Fund will be either (A) a newly formed entity or (B) an entity with a limited operating history (i) that will not be registered under the Investment Company Act, (ii) that will issue illiquid securities that are not registered under the Securities Act or any other laws, (iii) that will not register under the Exchange Act, (iv) the Interests of which will be subject to restrictions on transfer, (v) which will not be permitted to make full or partial withdrawals from an Underlying Fund pursuant to the terms of the Underlying Funds' governing agreement (except in very limited circumstances) and (vi) with respect to which, investors may lose the entire amount of their investment. The returns of the Private Access Fund will depend almost entirely on the performance of its investment in the Underlying Fund and there can be no assurance that the Underlying Fund will be able to implement its investment objective and strategy. Certain ongoing operating expenses of the Private Access Fund, which will be in addition to those expenses borne by the Private Access Fund as an investor in the Underlying Fund (e.g., carried interest, management fees, underlying fund expenses, organizational expenses and other expenses and liabilities borne by investors in the Underlying Fund), generally will be borne by the Private Access Fund and the Investors with a corresponding impact on the returns to the EFTA01396954 Investors. Such additional expenses of the Private Access Fund will reduce the Private Access Funds' performance relative to the Underlying Fund. Pending investment in the applicable Underlying Fund, the Private Access Fund may invest a portion of its assets in short term interest bearing accounts which would not meet the Underlying Funds' overall return objectives. An investor in the Private Access Fund will have only those rights provided for in the PPM. iCapital is not the General Partner or manager of the Underlying Fund. None of any Private Access Fund, iCapital or any of their affiliates will take part in the management of the Underlying Fund or have control over its management strategies and policies. Each Private Access Fund is subject to the risk of bad judgment, negligence, or misconduct of the general partner or manager of the Underlying Fund and its affiliates. There have been a number of instances in recent years in which pooled investment vehicles investing in third-party funds have incurred substantial losses due to sponsor misconduct. The PPM will provide for indemnification of iCapital and its affiliates and certain other indemnified parties and any such indemnification (and the expense thereof) will be in addition to any indemnification granted under the Underlying Fund constituent documents. Investors in a Private Access Fund may receive in-kind distributions to the extent the Underlying Fund distributes securities in-kind to its investors and the securities or other assets so received in an in-kind distribution may not be marketable or otherwise freely tradable. With respect to any such securities or other assets distributed in -kind, the risk of loss and delay in liquidating these securities or assets will be borne by the Investors of the Private Access Fund, with the result that such Investors may receive less cash than reflected in the fair value of such securities as determined by iCapital pursuant to the offering documents. 11 EFTA01396955 GLDUS127 Annandale Capital iCapital Advisors, LLC iCapital cannot predict the timing and amounts of Form ADV Part 2A the capital contributions that will be required to be made by Investors to any Private Access Fund. Such capital contributions may be called on an irregular basis, although as previously noted, iCapital will require each Investor to make a capital contribution to a Private Access Fund on or before the date it is admitted to a Private Access Fund (which amount will be held in escrow pending acceptance of the Investor's Subscription by iCapital). iCapital will provide written notice of the exact size and timing of the initial capital contribution in advance of the initial closing of a Private Access Fund. If an Investor fails to make a required capital contribution to a Private Access Fund on its due date (including, without limitation, recalls of distributed capital), regardless of the reason (including legal or other prohibitions), iCapital may impose substantial penalties on such in the to its investment Investor and use any available remedies to enforce the contribution obligation. If a Private Access Fund fails to make a capital contribution with respect Underlying Fund when due, whether as a result of a default of an Investor or otherwise, the Underlying Fund may exercise various remedies against the Private Access Fund, including forfeiture of all, or a part of, its investment in the Underlying Fund, which will have a material negative impact on the return of the Private Access Fund as a whole. By making the Private Access Funds available, neither iCapital nor any of its affiliates is providing investment advice or making any recommendation as to the advisability of an investment in a Private Access Fund or the Underlying Fund. iCapital and its affiliates and personnel are not required to devote all or any specified portion of their time to managing the Private Access Funds' affairs, or from engaging in any other business activities, whether or not competitive with a Private Access Fund. Each prospective investor in a Private Access Fund should consult with its own counsel and advisors as to all legal, tax, financial and related matters concerning an investment in the Private Access Fund. EFTA01396956 No Recourse Against the Underlying Fund. Investors in a Private Access Fund will not be limited partners of the Underlying Fund, will have no direct interest in the Underlying Fund and will have no standing or recourse against the Underlying Fund, the Underlying Fund Manager, their respective affiliates or any of their respective advisors, officers, directors, employees, partners or members. No Rights to Vote or Participate. In the event that there is an issue to be voted upon by the investors of any Underlying Fund, iCapital, and not the Investors in any Private Access Fund, will determine how a Private Access Fund's interest in the applicable Underlying Fund will be voted. In addition, Investors in any Private Access Fund will have no opportunity to participate directly in the day-to-day operations of such Underlying Fund. Terms of the Underlying Fund. The terms of each Underlying Fund are subject to change. There can be no assurances that the partners of any Underlying Fund will not amend such Underlying Funds' governing agreement. Neither any Private Access Fund nor iCapital will have the ability to unilaterally block any amendment of any Underlying Funds' governing agreement. None of any Underlying Fund Manager, any Underlying Fund or iCapital will have any liability or responsibility to any Investor for any changes to the terms of the Underlying Fund. iCapital is under no obligation to revise or supplement the applicable PPM. notwithstanding any amendments to any Underlying Funds' governing agreement. Repayment of Distributions. In the event any Underlying Fund is unable otherwise to meet its indemnification obligations, a Private Access Fund may be required to repay to such Underlying Fund or to pay creditors of such Underlying Fund, as applicable, distributions previously 12 EFTA01396957 GLDUS127 Annandale Capital iCapital Advisors, LLC Form ADV Part 2A received by it. In addition, a Private Access Fund may be required to pay to an Underlying Fund amounts that are required to be withheld by the Underlying Fund for tax purposes. A Private Access Fund may require Investors to return to the Private Access Fund all or part of any distribution by the Private Access Fund to the Investors in order to satisfy all or any portion of such Private Access Fund's indemnification and other obligations in respect of itself or the applicable Underlying Fund. Similarly, Investors may be required to repay or pay such amounts to a Private Access Fund if the Private Access Fund is unable otherwise to meet its obligations. Annual Income Tax Information. Investors will be required to obtain extensions for filing U.S. federal, state and local income tax returns. Each Investor will be furnished information on a Schedule K-1 for preparation of such Investor's individual U.S. federal income tax return. The furnishing of such information is subject to, among other things, the timely receipt by a Fund of information from the applicable Underlying Fund or Sub-Adviser. Tax Liabilities in Excess of Cash Distributions. Due to potential timing differences between income recognition for tax purposes and actual cash distributions by a Fund, an Investor may incur income tax liabilities in excess of actual cash distributions made prior to the date such liabilities arise or such taxes are due. Tax-Exempt Investors and UBTI. Tax-exempt investors may recognize UBTI from a Fund for U.S. federal income tax purposes and any such amounts of UBTI could be significant. Illiquidity of Private Access Fund Investments. Certain of the Private Access Funds' is limited, and the transferability of such investments is investment portfolios will primarily consist of investments in private equity funds. Prospective investors should be aware of the long-term nature of these types of investments. An investment by a Private Access Fund in a private equity fund is highly illiquid because the market for the sale of such investments also generally EFTA01396958 restricted. There are no assurances that a Private Access Fund will be able to liquidate a particular private equity fund interest at the time and upon the terms it desires. Economic and Market Risk. Companies and securities in which a Fund will for example, including, exchange rate fluctuations, industry invest may be inflation rates, competition, sensitive to general downward swings in the overall economy or in their specific industries or geographies. Factors affecting economic conditions, currency devaluation, conditions, technological developments, domestic and worldwide political, military and diplomatic events and trends and innumerable other factors, none of which will be in the control of a Fund, can substantially and adversely affect the business and prospects of the Funds. A major recession or adverse developments in the securities market might have an impact on some or all of a Fund's investments. In addition, where a Fund is a private equity fund, factors specific to a portfolio company may have an adverse effect on the u