Item 5 - Fees and Compensation
The fees and expenses associated with an investment in the Funds are described in detail in each of the
Fund’s offering documents. In the future, we may, in our discretion, manage other funds or accounts with
higher or lower fees, different fee structures, and different expense payment arrangements, than the
Funds. The fees the Adviser change for managing separately managed accounts are negotiable, and will
be described in each client’s investment advisory agreement.
Management Fee
The adviser and/or its related persons who provide services to the Funds received management fees
based on a certain percentage of the Fund’s net assets. The standard management fee for each Fund is
calculated and paid as described in the Fund’s offering documents. Management fees are negotiable,
and individual management fee arrangements may vary depending on a variety of factors (including the
assets under management of the applicable investor).
Incentive Allocation
Investors in each Fund generally are subject to an incentive allocation. See Item 6 below for information
with respect to incentive allocations.
Fees charged to Employees
Due to the special relationship with its employees, the Adviser may charge reduced or no fees or
incentive allocations for providing investment management services to them (including as investors in the
Funds).
Redemptions and Termination
Investors in the Funds may withdraw or redeem their interest in the Funds in accordance with the
applicable terms set forth in the respective Fund’s offering documents and other Fund documentation.
Under certain circumstances, investors may pay a withdrawal or redemption fee to the Fund if the
investor withdraws or redeems within a certain period of time.
Generally, the Adviser’s investment services are terminable by either the Adviser or the applicable Fund.
The Terms of such termination, including provisions with respect to notice and fees earned or refunded,
are described in the respective Fund’s offering documents or the applicable advisory agreement.
However, the SREC Funds’ generally do not allow for early redemption or withdrawal.
Other Fees and Expenses
The Adviser’s and related persons’ fees are exclusive of brokerage commissions, transaction fees,
and other related costs and expenses which shall be incurred by the respective Fund. Each Fund is
responsible for all direct expenses related to its respective operations and activities, including all
expenses associated with its investment portfolio. Funds may incur certain charges imposed by
custodians, counsel, independent accountants, administrators, brokers and other professionals and
consultants, the fees of directors of the Funds (or, if applicable, the general partner of a Fund) who
may be affiliated with the Adviser, and any taxes, fees or other governmental charges levied against
the Fund, interest on indebtedness, custodial fees, bank service fees, insurance premiums and any
extraordinary expenses of the Fund, including but not limited to litigation and indemnification
expenses.
The Funds also will pay the out-of-pocket costs associated with making and realizing investments,
including but not limited to research, information services, order management, travel, communications,
brokerage commissions, filing and registration fees, and other reporting and filing expenses and
the costs incurred by the Adviser, the Funds and its affiliates in connection with specific shareholder
initiatives (such as the costs of calling shareholder meetings, proxy solicitation fees and costs, and
professional consulting fees).
The Funds may also reimburse the general partners of the Funds or the Adviser for audit, tax and
other filing and registration expense. If the Fund invests through a Master Fund, the Fund will bear
a pro rata share of the expenses of such master Fund. Each Fund pays its expenses directly or
reimburses the Adviser or its affiliates, as instructed, for expenses paid on its behalf. The direct
expenses incurred by each Fund vary depending on the nature of the operations and activities of
such entity and are described in detail in each Fund’s offering documents.
The Adviser will pay compensation costs of its employees, rent and other overhead expenses of the
Adviser. The Funds incur brokerage and other transaction related costs. Item 12 describes the factors
that the Adviser may consider in selecting broker-dealers to execute Funds’ transactions and
determining the reasonableness of their compensation (e.g., commissions).
Valuation
Each Fund’s net asset value, as of any date of determination, is the value of its assets minus its
liabilities as determined by the Adviser in accordance with the Fund’s governing documents and
generally accepted accounting principles, but is not reduced by any incentive allocation fee accrued but
not yet earned. The Adviser is responsible for determining the fair market value of each Fund’s
investments. In doing so, the Adviser has considerable discretion in valuing certain privately-placed and
less liquid investment instruments. The Adviser has adopted pricing methodologies for the valuation of
the Funds’ investment instruments as described in each Fund’s governing documents. Securities
owned that are traded on national securities exchanges are valued at the last reported sales price on
the date of determination or, if no sales occurred on such day, at the mean between the bid and
asked prices on such day. Investments in securities which are not listed on a national securities
exchange are valued at the last sales price on the date of determination, or, if no sales occurred on
such day, at the “bid” price at the close of business on such day if held long and if sold short at the
“asked” price at the close of business on such day. All other securities and all property other than
securities will be valued at fair value as reasonably determined by the general partner of the relevant
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