eTrade 2001 Annual Report Download - page 138

Partner. The General Partner receives an annual management fee of 1.75% of the total committed capital of the fund. The management
fee is paid in its entirety to the Company and is used to offset the costs and expenses of its corporate development/strategic investment
group. In addition, to the extent that Fund I generates profits, 20% are allocated to the General Partner as a carried interest. As a
member of the General Partner, the Company is entitled to receive 50% of such amount provided that up to one-fifth of the Company’ s
interest can be allocated by the managing members to Company personnel.
In October 2001, the Company amended its agreement in Fund I, whereby it increased the Company’ s capital commitment by $7.5
million and modified the order in which Fund I distributions are to occur. The change provides for cash contributing partners to
receive priority in distribution until they reach a 15% annual rate of return on their initial investment; the securities contributing
partners would then receive a 15% annual rate of return, additional distribution amounts, if any, would be allocated proportionately to
all limited partners. The Company contributed primarily securities to Fund I and with respect to this contribution, will be entitled to
distributions behind the cash-contributing partners of Fund I, which include certain of our executive officers and directors, as well as
several independent third parties. As a result of this amendment, the Company recorded an additional equity loss of $11.1 million. The
Company has no obligation to advance additional amounts to Fund I.
The Company made a $50.0 million capital commitment to the ArrowPath Fund II (“Fund II”) as of June16, 2000, of which $1.0
million was paid during the year ended September 30, 2000 and $2.5 million was paid during the year ended December 31, 2001.
Fund II has committed capital of approximately $215.0 million, with all capital in excess of the E*TRADE contributions being raised
from third parties. Fund II invests in early to mid-stage information technology companies. Fund II is managed by its General Partner,
ArrowPath VenturesII, LLC (“General Partner II”). The Chairman of the Board of Directors and Chief Executive Officer of the
Company and the Company’ s Chief Strategic Investment Officer are the managing members of General PartnerII. The Company is a
non-managing member of General Partner II. General Partner II receives an annual management fee of 1.75% of the total committed
capital which is used to pay the ongoing expenses of managing Fund II. In addition, to the extent that Fund II generates capital gain,
25% is allocated to General Partner II as a carried interest. As a member of General Partner II, the Company is entitled to receive 27%
of such amount with the balance allocated to the investment professionals dedicated to activities of Fund II and to the managing
members of General Partner II which include certain of our executive officers. At December 31, 2001, the Company’ s outstanding
capital funding commitment to Fund II was $46.5 million.
121
Table of Contents
The Funds have a December 31 fiscal year end. The following table presents summarized combined financial data for the Fund I and
Fund II (in thousands):
Years Ended December 31,
2001 2000 1999
Statement of operations data:
Investment income $ 361 $ 220 $ 11
Unrealized gain (loss) on investments (28,784 ) (66,049 ) 73,462
Realized loss on investments (20,854 ) — —
Management fees 5,353 3,354 439
Other expense 264 157 114
Net income (loss) $ (54,894 ) $ (69,340 ) $ 72,920
2002. EDGAR Online, Inc.