Drawdown and distribution notices should be issued to investors in accordance with the fund formation documents with cross-references to the specific sections of these documents.
Standard practice is for drawdown notices to be accompanied by a covering note explaining how the funds will be used, for example for an investment, for management fees or for fund running costs. Where such notices relate to an investment, the date and nature of the investment transaction being undertaken and the following should also be covered:
- The company or companies being acquired;
- The investment thesis;
- Total financing;
- Other material deal parameters.
However, General Partners may need to restrict disclosure where commercial sensitivity is required, particularly if a drawdown is being undertaken prior to the closing of an investment, or where a drawdown is being made in advance of multiple investments some of which may not yet have been identified.
Distribution notices should be accompanied by a covering note listing the company or companies divested, and giving relevant details such as the exit route, timing, any escrows or contingencies and the fund’s gross multiple and IRR for this investment.
For partially exited investments and refinancings, the cost basis and value of the remaining investment may be relevant.
Where a drawdown and distribution are performed in the same notice resulting in a net payment or receipt, the gross balances should be disclosed and accounted for as such.
Drawdown notices should include the following information:
- Due date;
- Amount being drawn down, at the investor and fund level (whole fund in cases where there are parallel vehicles);
- The investor’s commitment;
- Cumulative capital drawn down to date and capital remaining to be drawn;
- The total unfunded commitment;
- Payment instructions for the drawdown;
- Reason for the drawdown including an analysis where applicable of the individual components of the drawdown;
- Where applicable, describe any LPAC or investor consents or waivers sought or granted as required by the LPA in order for this for this drawdown/the underlying investment to proceed.
Distribution notices should include the following information:
- Payment date;
- Amount being distributed, at the investor and partnership/ fund level (whole fund in cases where there are parallel vehicles). This should disclose the amount of any recallable distributions;
- Cumulative capital distributed at the investor and fund level, analysed, where possible, between recallable and non-recallable;
- Payment instructions held for the investor showing the bank to which the distribution will be paid;
- An analysis of the distribution between return of cost, capital gain, interest and dividend and disclosure of amounts withheld to cover fees, carried interest and other expenses;
- Withholding tax deducted;
- For distributions in specie, the name of instrument being distributed, Ticker symbol (where relevant), number of shares, historical cost, value and basis of value (if necessary an estimate, to be followed up with the actual value ascribed when finalised), any settlement details and any restrictions affecting the shares distributed.