Item 5. Fees and Compensation
The Adviser generally receives Management Fees, sub-advisory fees equal to a percentage of
assets under management of the respective fund. The Adviser also receives Performance Fees
based on the performance of certain Separately Managed Accounts. The advisory services
provided to each of the Private Funds and its affiliated entities are pursuant to separate
investment management, service, or subscription agreement (the “Agreements”). The
Agreements for each Private Fund, along with any specific organizational documents of such
Private Fund, set forth the specific fees and related mechanisms for each Private Fund.
Separately managed accounts and the registered investment company are subject to the fees
and related mechanisms as defined in its specific Advisory Agreement.
Management Fees
As compensation for investment management and supervisory services rendered to the Private
Funds, the Adviser receives from each such Private Fund a Management Fee typically at an agreed
fixed rate, calculated by the Private Fund’s NAV. Management Fees paid by a Private Fund may
also be reduced by other fees or compensation received by the Adviser or its affiliates that relate
to such Private Fund’s activities and investments, or by certain organizational or other expenses
borne by such Private Fund, as described in more detail below. Management Fees paid by a Private
Fund are indirectly borne by investors in such Private Fund.
The precise amount and calculation of the Management Fees for each Private Fund are set forth
in such Private Fund’s Agreements. Management Fee structures can differ from one Private Fund
to another.
As compensation for investment management services rendered to separately managed accounts,
the Adviser receives a Management Fee and/or Performance Based fees, at an agreed fixed rate,
calculated based on the account’s assets under management and/or performance of the account.
As compensation for sub-advisory services rendered to the registered investment company, the
Adviser receives a Management Fee calculated based on the company’s assets under
management.
Expenses
Adviser Expenses
To the extent provided in the Agreements of the Private Funds, the Adviser will pay out of
Management Fees all expenses and costs incurred by the Adviser in the course of providing services
to the Private Funds, including compensation of its investment professionals, rent, utilities, office
expenses, those travel costs which are not related to Private Funds’ expenses under the Organizational
Documents, audit costs, staff recruitment costs, insurance costs, information technology costs,
marketing costs, legal expenses, software costs, database costs and printing costs. Management Fees
and sub-advisory fees received also contributes to these Adviser expenses.
Private Fund Expenses
Each Private Fund is responsible for paying its own organizational, operating and related
expenses as described below and in the applicable Organizational Documents. In cases where
multiple Private Funds, properties or entities incur or benefit from a specific expenditure,
Adviser will allocate the expense by estimating the relative usage and benefit that each such
Private Fund, property or entity obtains from the expense, as more fully described below.
The Private Funds are responsible for travel expenses related to their respective businesses. Such
expenses include the Private Fund’s Directors’ coach or economy class airfare for most domestic
travel and, for transcontinental, international destinations or other longer duration flights, business
or first class airfare.
Allocation of Expenses
From time to time the Adviser will be required to decide whether certain fees, costs and expenses
should be allocated between or among Private Funds and/or other parties. Certain expenses may
be the obligation of one particular Private Fund and may be borne by such Private Fund or,
expenses may be allocated among multiple Private Funds and entities. The Adviser will allocate
fees and expenses incurred in connection with the operations and management of a Private Fund
between the Adviser and such Private Fund in accordance with the Organizational Documents of
such Private Fund or Private Funds. However, while the Adviser intends to use good faith and its
best judgment in connection with any such allocation, such
allocations may require inherently subjective determinations and give rise to conflicts of interest
due to the inherent biases in the process.
The appropriate allocation among the Private Funds of expenses and fees generated in the course
of evaluating and making investments often may not always be clear, especially where more than
one Private Fund participates. For instance, if multiple Private Funds are considering making an
investment that is not consummated, allocation of the expenses generated for the account of such
Private Funds (such as expenses of common counsel and other professionals) will be made in
good faith. In general, the Adviser intends to resolve all such matters on a pro-rata basis, using
its best judgment, considering all factors it deems relevant.
With respect to allocating other expenses among Private Fund(s), Adviser, Investors and/or
Third Parties, as appropriate, to the extent not addressed in the Organizational Documents of a
Private Fund, the Adviser will make any such allocation determination in a fair and reasonable
manner using its good faith judgment, notwithstanding its interest (if any) in the allocation. The
Adviser will make any corrective allocations and take any mitigating steps if it determines such
corrections are necessary or advisable. Notwithstanding the foregoing, the portion of an expense
allocated to a Private Fund for a particular service may not reflect the relative benefit derived by
such Private Fund from that service in any particular instance.
Compensation and Fee Schedules
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