Item 5. Fees and Compensation
Hedge Fund
The management fees and performance-based compensation are set forth in detail in the Hedge
Fund’s Governing Documents. Investors in, or prospective investors of, the Hedge Fund are
encouraged to read and understand all management fees and other expenses that may be borne by
their investment in the Hedge Fund, as detailed within the Hedge Fund’s Governing Documents.
Generally, the Hedge Fund pays Amberwave a fee for investment management services (a
“Management Fee”) and pays its General Partner a performance-based fee (“Incentive
Allocation”). As further described in the Governing Documents, the Hedge Fund pays
Amberwave a Management Fee equal to 1.75% annually for Class B interests in the Hedge Fund
(“Interests”), and 1.25% annually for Founders Class Interests. The Hedge Fund also pays
Amberwave an Incentive Allocation equal to 20% annually for Class B Interests, and 15% for
Founders Class Interests. Further details on the Incentive Percentage are included in Item 6
Performance-Based Fees and Side-by-Side Management.
As described in the Hedge Fund’s Governing Documents, the Hedge Fund generally bears, or
reimburses the Adviser and/or the General Partner for advancing, the Partnership’s expenses
including, without limitation, the following: (i) expenses related to the research, execution and
monitoring of actual and prospective investments (whether or not consummated) and the
consummation of investments, (ii) organizational fees and expenses and fees and expenses
incurred in connection with the offering and sale of the Interests, (iii) operational expenses, and
(iv) extraordinary expenses.
Amberwave’s fees from the Hedge Fund are billed quarterly and are calculated by and remitted to
Amberwave by the Hedge Fund’s administrator.
Separately Managed Accounts
Generally, Amberwave provides advisory services to SMAs based on individualized basis, based
on the particular needs of each client. Accordingly, fees are negotiated with each individual client
depending on the nature of services to be provided and other relevant factors. Amberwave bases
its investment management fees on a percentage of assets under management, which for certain
accounts may be equal to the notional trading level of such account (as distinct from the actual
amount of cash clients may deposit in such account) based on agreement between the Client and
Amberwave as to the notional trading level of such account. SMAs generally have fee
arrangements that are similar to the Hedge Fund, including incentive fees as detailed in Item 6
Performance-Based Fees and Side-by-Side Management. Some SMA clients may pay lower
management fees than Hedge Fund investors; however, these SMA clients generally pay higher
incentive fees than Hedge Fund investors.
Managed Accounts generally bear all costs associated with trading and maintaining their
investment accounts, as described above, including without limitation: commissions, custody fees,
administration expenses, debit balances, taxes, and other transaction-related costs.
For SMAs, Amberwave’s fees are typically paid quarterly in arrears. Fees for less than a full
quarter are pro-rated for the period of the quarter for which Amberwave served as Adviser. In the
event that any fees are pre-paid, Amberwave will promptly refund any unearned fees to a
terminating client.