ITEM 5: FEES & COMPENSATION
A. MANAGEMENT FEE AND INCENTIVE ALLOCATION
Management Fee
ALJCM charges an annual management fee ranging from 1.25% to 1.50% of the value of each
Investor’s capital account (the “Management Fee”). The Management Fee is billed quarterly, in
advance, and is prorated for investments made at times other than the beginning of a calendar
quarter.
Incentive Allocation
In addition to the Management Fee, Investors are subject to an annual performance-based
compensation arrangement with the General Partner (the “Incentive Allocation”). The Incentive
Allocation generally ranges from 17% to 20% of the net capital appreciation (i.e., capital appreciation
less capital depreciation), if any, of each Investor’s capital account, subject to certain hurdles;
provided, the Incentive Allocation is payable only if, and to the extent that, the net capital appreciation
of the Investor’s capital account exceeds any net capital depreciation accumulated in prior years (as
adjusted for withdrawals of capital).
Please refer to Item 6 for further information about the Incentive Allocation and our conflicts of
interest.
Negotiability of Compensation & Other Investor Terms; Side Letters
ALJCM and the General Partner, respectively, retain the authority and discretion, on an Investor-by-
Investor basis:
• to negotiate, modify, or waive, in whole or in part, the amount, terms, or method of
calculating the Management Fee or Incentive Allocation; and
• to negotiate alternative fee or compensation arrangements.
ALJCM and the General Partner have negotiated, and may negotiate again in the future, separate
agreements with Investors (each referred to as a “Side Letter”) containing material assurances or
undertakings that provide the recipient more favorable rights or terms, as compared to other
Investors. A Side Letter may grant an Investor any or all of the following:
• preferential redemption rights (such as greater liquidity rights, more frequent liquidity
dates, shortened or eliminated lock-up periods, shortened notice periods for
redemptions, or redemption “gate” waivers);
• greater ‘key man’ redemption provisions;
• capacity assurances or terms regarding in-kind distribution;
• additional reports or greater access to information regarding the Funds’ investments
or changes in the Funds’ custodian, administrator, or broker-dealers;
• earlier notice of management redemptions; or
• confidentiality provisions which prevent us or the General Partner from disclosing the
existence or terms of the Side Letter.
Investors not receiving a Side Letter with comparable terms can reasonably be expected to be at a
material disadvantage as compared to the Investors who receive Side Letters, particularly where a Side
Letter grants the recipient enhanced redemption rights or better or timelier information from which to
decide whether or when to redeem their Interests. For example, an Investor receiving a Side Letter
may be able to exercise redemption rights at a time when market conditions are more favorable, and
when other Investors may be prevented from redeeming their Interests.
When considering and negotiating the Management Fee, the Incentive Allocation, or terms of a Side
Letter, we usually consider, among other factors, the size of the Investor’s investment, anticipated
additional investments from the Investor or related accounts, and existing or anticipated business or
personal relationships, among other factors. We or the General Partner may elect, in our discretion, to
grant more favorable terms not generally available to other Investors to the family members or friends
of ALJCM, the General Partner, or our employees.
B. PAYMENT OF THE MANAGEMENT FEES & REALLOCATION OF THE INCENTIVE ALLOCATION
We bill the Management Fees, in advance, as of the beginning of each calendar quarter, to the
qualified custodian(s) maintaining the Funds’ assets, who will deduct the Management Fees from the
Funds’ assets and pay us according to our instruction. The General Partner calculates the Incentive
Allocation for each Investor, in arrears, as of the end of each calendar year, and which will be paid by
reallocation from the Investor’s capital account balance to the General Partner’s capital account
balance as of December 31 of each year. An Investor is not permitted to choose to have Management
Fees or the Incentive Allocation billed directly to the Investor for payment.
The Management Fee and Incentive Allocation are prorated for periods less than a full billing cycle and
for investments in the Funds at times other than the start of a calendar quarter or calendar year.
Investors who elect to withdraw all or part of their capital account balance will be charged the
Incentive Allocation based on the net capital appreciation of their capital account from the end of the
period for which the Incentive Allocation was last assessed until the date of withdrawal.
Value of Securities and Other Investments
The Management Fees and Incentive Allocation are based, in part, on the value of the Funds’ securities
and other investments, as determined by ALJCM. In valuing the Funds’ securities and other
investments, we will be guided by the following:
• Securities traded on a national securities exchange will be valued at the last sale price
prior to the date of determination, or if no sales occurred on such day, at a value based
on a weighted average (which weighted average will differ depending on whether such
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