This brochure applies to J.F. Lehman & Company, LLC (the "Firm") and each of the General Partners of the
Funds (JFL GP Investors III, LLC; JFL GP Investors IV, LLC and JFL GP Investors V, LLC), (collectively with
the Firm, "JFLCO"). Since its establishment, JFLCO has pursued a consistent focus on investing in companies in
the defense, aerospace, maritime and environmental industries and the technologies that originate from them. To
this end, JFLCO currently provides portfolio management and administrative services to private equity funds
(individually a "Fund" or collectively the "Funds"). The Firm's primary services include investigating, analyzing,
structuring and negotiating potential investments, monitoring portfolio companies and advising the Funds as to
disposition opportunities.
The Funds' objectives are to make private equity or equity-related investments in companies involved or
connected with defense, aerospace, maritime and environmental industries and companies using the technical
capabilities that originate from these sectors. The primary focus of the Funds is control investments in lower
middle market companies with unique engineering competencies and technology-driven products and services.
After extensive research and investigation by the Firm, investment recommendations are communicated to the
general partner of the applicable Fund (the "General Partner"), who are affiliates of the Firm. The advice
provided by the Firm and its affiliates to each Fund is tailored to meet the individual investment objectives and
restrictions of each Fund. Notwithstanding the foregoing, the General Partner of each Fund is ultimately
responsible for all final investment decisions
The Funds are currently comprised of primary funds (the "Primary Funds"), executive funds, comprised of
investors which are affiliated with the Firm or employees of the Firm (the "Executive Funds") and co-invest
funds which make additional investments in the same portfolio companies ("Co-Investor Funds"). The Co-
Investor funds are generally comprised of a similar group of limited partners as the Primary Funds.
The principal owners of the Firm are Louis N. Mintz, Stephen L. Brooks, and C. Alexander Harman.
JFLCO managed approximately $2,829,899,000 in client assets on a discretionary basis as of December 31,
2019.
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Management Fee: In accordance with the Limited Partnership Agreement for the applicable Primary Fund, for
the period beginning as of the initial drawdown of a Fund through the earlier of the end of the investment period
for such Fund or the date the General Partner holds a closing admitting third party members to a successor fund,
JFLCO receives an annual management fee from the Primary Fund equal to 2% of total capital commitments of
the applicable Fund. Capital commitments are the amount contractually committed to a Fund by the limited
partners of the Fund (the "Limited Partners"). Thereafter, the management fee is either (i) for Fund IV and Fund
V, 2% of funded capital contributions that were used to fund the costs in portfolio companies of such Fund (other
than the portion of a portfolio investment that represents an unrealized loss), or (ii) for Fund III, 2% of funded
capital contributions that were used to invest in the portfolio companies of such Fund and remain invested in the
portfolio companies. The management fee is payable quarterly in advance from drawdowns of the Limited
Partners unfunded capital commitments and are subject to certain reductions. Such reductions include, among
other things, certain fees paid to JFLCO by portfolio companies of the Fund as further described in "Other Fees"
below. Typically, the Executive Funds and Co-Investor Funds do not pay management fees.
Dispositions: For the Primary Funds, upon the disposition of a portfolio investment, all distributions, in-kind
securities, dividends, interest or other income are proportionately distributed to the Limited Partners up to 100%
of their aggregate capital contributions to the Fund plus a preferred return of 8% per annum, compounded
annually on such aggregate capital contributions. The General Partner then receives any remaining funds up to
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20% of the amounts paid to the Limited Partners. All remaining proceeds are then allocated 80% to the Limited
Partners and 20% to the General Partners. All distributions by the Executive Funds or Co-Investor Funds are pro-
rata based on the capital commitment of the partner. Upon termination of a Primary Fund, generally the General
Partner would be required to return to the applicable Fund distributions of carried interest previously received by
the General Partner to the extent that they exceed the amounts that should have been distributed to the General
Partner as carried interest applied on an aggregate basis covering all transactions of such Fund. In no event, will
the General Partner be required to return more than cumulative carried interest distributions received by the
General Partner, net of income taxes.
Other Expenses: JFLCO pays all of its own normal operating expenses incurred for day-to-day administrative
services to the Funds including overhead and expenses related to the analysis of potential investments.
A Fund typically pays (or reimburses JFLCO) its organizational expenses up to a specified amount as described
in the Fund's Limited Partnership Agreement. Typically, a Fund generally pays (or reimburses JFLCO) for
expenses associated with a Fund's operation, including, without limitation: (i) fees, costs and expenses
attributable to or arising in respect to identifying, researching, evaluating, sourcing, structuring, organizing,
negotiating, bidding on, consummating, acquiring, investing, holding, financing, refinancing, monitoring,
operating, hedging, protecting, restructuring, trading, taking public or private, selling, valuing and realizing
portfolio investments and prospective investments, including follow-on investments (including the costs, fees and
expenses of any alternative investment fund, due diligence and travel expenses), or seeking to do any of the
foregoing (including associated legal, financing, commitment, transaction, introduction or other fees, and fees
and expenses payable to attorneys, accountants, investment bankers, lenders, third-party diligence software,
subscriptions and service providers, consultants, industry specialists, custodians and similar professionals in
connection therewith and any fees and expenses related to any transactions that may have been offered to co-
investors) whether or not any contemplated transaction is consummated and whether or not such activities are
successful; (ii) interest or fees and expenses related to or arising from any indebtedness or guarantees made by a
Fund or a General Partner on behalf of a Fund (including any subscription-backed credit facility, letter of credit
or similar credit support), including interest with respect thereto, or seeking to put in place any such indebtedness
or guarantee, including debt service obligations or other fees, expenses and other amounts payable in connection
therewith; (iii) legal, regulatory and compliance expenses related to the investment activities of a Fund; (iv)
financing, commitment, origination and similar fees and expenses; broker, dealer, finder, underwriting (including
both commissions and discounts), loan administration, private placement fees, sales commissions, investment
banker, finder and similar services; brokerage, sale, custodial, depository, trustee, record-keeping, account and
similar services; (v) directors and officers liability, errors and omissions liability, crime coverage and general
partnership liability premiums and other insurance and related expenses; (vi) taxes; (vii) accounting, legal,
consulting (including legal consultants and including consulting and retainer fees and any other compensation
paid to any consultants performing investment initiatives or similar consultants), research, auditing,
administration (including fees and expenses associated with the Fund's third-party administrator and
administration or reporting software, if any), information appraisal, advisory, valuation (including third-party
valuations, appraisals or pricing services), tax and other professional services; (viii) the preparation, distribution
or filing of fund-related or investment-related financial statements or other reports, tax returns, tax estimates,
Schedules K-1, or any other administrative, compliance or regulatory filings or reports relating to a Fund or a
portfolio company (including Form PF and any reports required by the Alternative Investment Fund Managers
Directive 2011/61/EU relating to a Fund), or other information, including fees and costs of any third-party
service providers and professionals related to the foregoing; (ix) costs and expenses of the activities or
proceedings of the advisory committee and the operating executive committee of a Fund, including retainer and
certain other fees associated with the Operating Executive Committee, and the annual meeting and other
meetings with Limited Partners, (x) costs of other reporting to governmental and regulatory authorities and to
Limited Partners, in each case as related specifically to a Fund and its portfolio investments, and other costs and
expenses of complying with laws and regulations, including any required authorization, registration or reporting
in relation to a Fund or any of its assets; (xi) investor-related services and other similar costs and costs and
expenses of administering any side letters (including the process of compiling, distributing and implementing
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applicable elections pursuant to the "most favored nations" process contained in a Fund's Limited Partnership
Agreement; (xii) costs, fees and expenses for developing, structuring, operating and winding up administrative
investment structures and offices of a Fund in various jurisdictions formed or utilized to conduct certain aspects
of its investment activities, act as service providers to a Fund or otherwise facilitate the activities of investment
platforms affiliated with a Fund; (xiii) all costs, fees and expenses associated with the liquidation of a Fund; (xiv)
actual, threatened or otherwise anticipated litigation, mediation, arbitration or other dispute resolution process
relating to a Fund or its portfolio investments, including any judgment, other award or settlement entered into or
indemnification in connection therewith; and (xv) other extraordinary expenses. Co-Invest Funds generally are
formed in connection with the consummation of a transaction. Accordingly, where a proposed transaction is not
consummated, no Co-Invest Fund generally will have been formed, and the full amount of any broken deal
expenses relating to any such proposed transaction would therefore be borne by the Fund or Funds selected by
the applicable General Partner as proposed investors for such proposed transaction.
Other Fees: JFLCO receives fees from the portfolio companies. These fees include; transaction fees, monitoring
fees, certain cost reimbursements and other similar advisory related fees. All such fees are allocated between the
Fund and any related Co-Investor Funds on the basis of capital committed by each to the relevant portfolio
company. For Fund IV and Fund V, 100% of these fees paid by the portfolio companies to JFLCO or its related
persons, net of expenses, are applied to reduce the management fee otherwise payable; for Fund III, subject to a
budget-based formula, 50% (and in some cases 100%) of the allocable portion of these fees paid by the portfolio
companies to JFLCO or its related persons, net of expenses, are applied to reduce the management fee otherwise
payable. Management fee reductions will be carried forward if necessary.
All base and performance fees assessed to the Funds are fully disclosed to investors in the respective Fund's
Private Placement Memorandum, Limited Partnership Agreement and in Investor Subscription documents.
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As detailed in Item 5 above, the Primary Funds' General Partner assesses a performance based compensation of
20% of realized gains upon the disposition of a portfolio company. The performance compensation is earned only
after the Limited Partners receive 100% of their aggregate capital contribution to the Fund plus a return of 8%
per annum, compounded annually. All Limited Partners are required to be "Qualified Clients" as defined under
the Investment Advisers Act of 1940, as amended (the "Investment Company Act").
The fact that affiliates of JFLCO are in part compensated based on the performance of the Funds may create an
incentive for the Firm to make investments on behalf of the Funds that are riskier or more speculative than would
be the case in the absence of the performance-based compensation arrangements. Notwithstanding such
arrangements, the Firm manages the Funds in accordance with the investment strategy disclosed in the Funds'
Private Placement Memoranda, Limited Partnership Agreements and in the Investor Subscription documents. The
Firm regularly reviews the Funds' investments to ensure that they are being made in accordance with the Funds'
respective investment guidelines.
The Firm does not manage any account or any Primary Fund for which it does not receive a performance-based
compensation. However, because the expected value of the performance-based fee may vary from Fund to Fund,
the Firm has an incentive to favor one Fund over another. Specifically, the Firm could have an incentive to favor
the Fund which is more likely to pay the General Partner its carried interest because of the performance
threshold. The Limited Partnership Agreements address many potential areas of conflicts of interest. On any
issue involving conflicts of interest not provided for in the applicable Limited Partnership Agreement, (
i) each of
the General Partner and Manager will be guided by its good faith judgment as to the best interests of the Fund
and shall take such actions as are determined by the General Partner or the Firm, as the case may be, to be
necessary or appropriate to ameliorate such conflicts of interest and (
ii) the General Partner or the Firm will
consult with the advisory committee of the Fund with respect to any matter as to which the General Partner
determines in good faith that such a conflict of interest exists.
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All performance compensation assessed to the Funds are fully disclosed to investors in the respective Fund's
Private Placement Memorandum, Limited Partnership Agreement and in the Investor Subscription documents.
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JFLCO provides investment management services exclusively to Funds. Each Fund is a limited partnership,
limited liability company or other entity formed under U.S. or foreign laws and operated pursuant to one or more
exemptions from registration under the Investment Company Act. A Fund may include feeder entities, special
purpose vehicles and/or parallel structures established for tax, regulatory or other considerations.
Certain of the Funds have minimum commitments required to invest in the Fund but the General Partner of the
Fund may waive such requirement. Generally, each Fund would have assets greater than $1,000,000.
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JFLCO pursues an exclusive and consistent focus on investing in companies in the defense, aerospace,
maritime and environmental services industries and companies using the technical capabilities that originate from
these sectors, primarily in the U.S. and U.K.
Within its target industries, JFLCO focuses primarily on making control investments in lower middle market
companies with unique engineering competencies and technology-driven products and services whose
performance is critical. Companies that JFLCO targets may not be realizing their full potential. These businesses
often have well-established product offerings and are leaders in certain or all their markets but lack the human or
capital resources required for further growth. JFLCO fully supports each portfolio company with internal and
external resources and independently evaluates each company from origination through exit to identify
opportunities for creating value in concert with the portfolio companies' management partners.
Investment in the Funds involves risk of loss, and investors in the Funds should have the ability to sustain the
loss of their entire investment. There is no assurance that the performance of JFLCO or the Funds will equal or
exceed any past performance. While prospective investors should review the risk disclosures set forth in full in
the applicable Fund's offering materials or separate account documentation, the following are certain material
risks with respect to investments in the Funds. These risks are qualified in their entirety for a particular Fund by
the risks set forth in such Fund's Private Placement Memorandum, other offering materials or governing
documents.
•Long-Term Investment. Investments in the Funds are not intended to be short-term investments. Even if
the investment strategy of a Fund proves successful, it is unlikely to produce a realized return to its
investors for a number of years.
•Reliance on Portfolio Company Management. While it is the intent of the General Partners of the Funds
to invest in companies with proven operating management in place, there can be no assurance that such
management will continue to operate successfully. While it is often the intent of the General Partners to
augment the existing management team in certain circumstances, there can be no assurance that such
management will operate successfully. Although the Firm monitors the performance of each investment,
the Funds rely upon management to operate the portfolio companies on a day-to-day basis.
•Illiquidity. Restrictions on the transfer of interests in the Funds result in highly illiquid investments that
should only be acquired by investors able to commit capital for an indefinite period of time. Investors
may not transfer their interests in the Funds without the written consent of the respective General Partner
(which may be withheld in its sole discretion) and the satisfaction of certain other conditions, including
compliance with applicable securities laws.
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•Risk of Inadequate Return. The returns on a particular Fund's investments, if any, may not be
commensurate with the degree of risk of an investment in such Fund. Investors should have the ability to
sustain the loss of their entire investment.
•Capital Calls. Each partner of a Fund will be required to meet capital calls of the Fund over an extended
period of time. Failure by an investor to meet any capital call by such Fund could have adverse
consequences for such Fund and its other investors.
•Funds Not Registered. The Funds are not registered under the Investment Company Act or any other U.S.
federal or state securities laws or the laws of any other jurisdiction. The Investment Company Act
provides certain protections to investors and imposes certain restrictions on registered investment
companies, which will not be applicable to the Funds.
•Partner Giveback. An investor in a particular Fund may be required to return distributions it has received
from the Fund if such Fund is obligated to return distributions it has received from underlying
investments because of an indemnification obligation of the Fund. In this event, the investor would be
required to give back to the Fund its pro rata share of the amount the Fund is required to return, subject to
certain limitations as set forth in such Fund's Limited Partnership Agreement or other governing
documents, even though such investor already paid taxes attributed to such amounts, and at a time when
such investor may not have sufficient cash to satisfy such giveback obligation.
•Potential Conflicts of Interest. Due to the other activities in which members and affiliates of the General
Partner, the Firm, the Operating Executive Board and their respective officers, directors, employees and
agents (the "JFL Parties") may engage, certain conflicts of interest could arise. While the applicable
Fund's Limited Partnership Agreement contains certain protections for Limited Partners against conflicts
of interest, it does not purport to address all potential conflicts. Investors should consider the following
discussion of potential conflicts of interest when deciding whether to invest in the Funds.
Certain JFL Parties are engaged in a variety of business advisory activities in connection with its sponsoring and
offering private investment funds. In the ordinary course of their businesses, certain JFL Parties may engage in
activities in which their interests or the interests of their clients may conflict with or be adverse to the interests of
the Funds. In addition, such clients may utilize the services of certain JFL Parties, for which they will pay
customary fees and expenses which will not be shared with the Funds or the Limited Partners.
Certain JFL Parties have long term relationships with a significant number of portfolio companies and their
respective senior management. Certain JFL Parties also have relationships with numerous investors, including
institutional investors and their senior management. The existence and development of these relationships may
influence whether or not the General Partner undertakes a particular investment on behalf of the Funds and, if so,
the form and level of such investment. Similarly, the General Partner may take the existence and development of
such relationships into consideration in its management of the Funds and its investments. Without limiting the
generality of the foregoing, there may, for example, be certain strategies involving the management or realization
of particular investments that the General Partner will not employ on behalf of the Funds in light of these
relationships.
Subject to the limitations set forth in the Limited Partnership Agreements, JFLCO may establish one or more
additional investment funds with investment objectives substantially similar to, or different from, those of the
Funds. Allocation of available investment opportunities between the Funds and any Co-Investment Fund could
give rise to conflicts of interest.
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The Limited Partners are expected to include U.S. taxable and tax-exempt entities, and institutions from
jurisdictions outside of the United States. Such Limited Partners may have conflicting investment, tax and other
interests with respect to their investments in the Funds. The conflicting interests among the Limited Partners may
relate to or arise from, among other things, the nature of investments made by the Funds, the structuring of the
acquisition of investments and the timing of the disposition of investments. As a consequence, conflicts of
interest may arise in connection with decisions made by the General Partner, including with respect to the nature
or structuring of investments, that may be more beneficial for one Limited Partner than for another Limited
Partner, especially with respect to Limited Partners' individual tax situations. In selecting and structuring
investments appropriate for the Funds, the General Partners will consider the investment and tax objectives of the
Funds and the Limited Partners as a whole, rather than the investment, tax or other objectives of any Limited
Partner individually.
Uncertain Economic, Social and Political Environment. Consumer, corporate and financial confidence may be
adversely affected by current or future tensions around the world, fear of terrorist activity and/or military
conflicts, catastrophic events (including the COVID-19 global pandemic), localized or global financial crises or
other sources of political, social or economic unrest (including Brexit). Such erosion of confidence may lead to
or extend a localized or global economic downturn. A climate of uncertainty may reduce the availability of
potential investment opportunities, and increases the difficulty of modeling market conditions, potentially
reducing the accuracy of financial projections. In addition, limited availability of credit for consumers,
homeowners and businesses, including credit used to acquire businesses, in an uncertain environment or
economic downturn may have an adverse effect on the economy generally and on the ability of a Fund and its
portfolio companies to execute their respective strategies and to receive an attractive multiple of earnings on the
disposition of businesses. This may slow the rate of future investments by such Fund and result in longer holding
periods for investments. Furthermore, such uncertainty or general economic downturn may have an adverse
effect upon such Fund's portfolio companies.
Questions regarding these risks may be directed to JFLCO and its management.
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Employees of JFLCO serve as the managing members for the General Partners of the Funds (JFL GP Investors
III, LLC; JFL GP Investors IV, LLC and JFL GP Investors V, LLC). See Item 8 for discussion of potential
conflicts of interest.
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Personal Trading
As required by Rule 204A-1 of the Investment Company Act, JFLCO has adopted a Code of Ethics that sets forth
the basic policies of ethical conduct for all managers, officers and employees of the Firm. The Code of Ethics
describes the Firm's fiduciary duties and obligations to the Funds, and sets forth the Firm's practice of supervising
the personal securities transactions of employees who maintain access to non-public information in connection
with the business of the Funds.
The Firm collects and maintains records of securities holdings and transactions made by employees. The Firm
reviews the personal trading practices of its employees to identify and resolve any potential or realized conflicts
of interest and to protect against the misuse of material, non-public information.
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As discussed in Item 6 above, each Fund contains numerous Co-Investor Funds which make additional
investments in the same portfolio companies or fund new acquisitions. As discussed in Item 6 above, the General
Partner or JFLCO will consult with the advisory committee of a Fund with respect to any matter as to which the
General Partner determines in good faith that such a conflict of interest exists.
A copy of JFLCO's Code of Ethics is available upon request from any client of JFLCO.
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Given the nature of private equity investing, the Firm does not utilize any brokerage platform or trade on any
security exchanges. Portfolio companies are purchased and sold through a formal legal closing process.
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When a Fund takes a controlling interest in a portfolio company, the Firm takes a hands-on approach to
management and partners with the management of the company to ensure its full potential is realized. The Firm
supports each investment with human or capital resources required for further growth and monitors each
company from acquisition through exit to identify opportunities for creating value.
JFLCO provides quarterly and annual reports to the limited partners. These reports include a summary of the
Fund's capital commitments, investments and distributions, as well as periodic valuations of the portfolio
companies. The reports also include a financial summary and a market outlook for each portfolio company.
In addition, the Firm provides the Funds' audited financial statements to the limited partners of each relevant
Fund on an annual basis.
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The Firm and/or its affiliates are deemed to have custody of the Funds' securities and cash due to our role as
general partner of the Funds. Assets of our Funds are held in the name of the Fund by an independent qualified
custodian, or are private, un-certificated securities recorded on the books of the issuers in the name of the Fund.
Quarterly reports are distributed to limited partners and each Fund is subject to an annual audit in accordance
with U.S. generally accepted accounting principles by PriceWaterhouseCoopers, LLC. The audited financial
statements are provided to the Fund's investors.
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JFLCO maintains discretionary authority over the selection and amount of portfolio companies to be bought or
sold in the Funds without obtaining prior consent or approval of its clients. The Funds may impose reasonable
restrictions on the investment discretion, such as geographical limitations or other parameters. These purchases or
sales are subject to specified investment guidelines and limitations set forth in each respective Fund's Limited
Partnership Agreement.
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JFLCO, through the applicable Fund, typically maintains a controlling interest in each portfolio company; thus,
proxies are not typically required. All business decisions are made in a collaborative effort between the firm and
management.
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As of the date of this filing, JFLCO does not have any financial hardships or other conditions that might impair
its ability to meet its contractual obligations to the Funds.
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