Item 5: Fees and Compensation
The fees applicable to each of the Funds are set forth in detail in the corresponding Offering
Documents. A brief summary of such fees is provided below.
Management Fee
The Master Fund will pay Avala a fee for its services (the “Management Fee”) for each month equal
to a twelfth of the result of the applicable management fee rate multiplied by the balance of each
Investor’s capital account in the Onshore Fund or Offshore Fund as of the beginning of the month
(before taking into account the estimated accrued Incentive Allocation, if any). For purposes of
calculating the Management Fee, “special investments” are valued at the lower of (i) initial cost, as
adjusted for partial realizations (or deemed realizations) and (ii) fair value (which may be cost), as
determined by Avala. The Management Fee is calculated and paid in advance within 10 days of the
first day of each fiscal month.
The specific rates, calculation methodology and other terms of the Management Fee applicable to
each tranche of interests is detailed in the Funds’ Offering Documents.
The Investment Manager, in its sole discretion, may waive or modify the Management Fee for any
Investor, including the Principal and any other member, partner, affiliate or employee of the General
Partner or the Investment Manager, any member of the immediate family of any such person, and
any trust or other entity established for the benefit of any such person. The General Partner is not
charged the Management Fee.
Incentive Allocation
Generally, at the end of each fiscal year, the General Partner is entitled to an incentive allocation
(the “Incentive Allocation”) from the Onshore Fund and the Intermediate Fund, which is
determined separately with respect to each capital account established for an Investor.
The Funds offer several tranches of interests into which Investors may invest, and the rate and
manner of calculation of the Incentive Allocation applicable to each Investor is determined by the
terms of the tranche of interests in which each such Investor invests. The specific Incentive
Allocation amounts charged to Investors will also vary due to a number of factors including, without
limitation, restrictions from participating in new issues, timing of capital contributions and
withdrawals, and participation in special investments.
Generally, the Incentive Allocation allocated in respect of an Investor’s capital account will be an
amount equal to the result of (i) the applicable Incentive Allocation rate multiplied by (ii) the
amount of the net capital appreciation allocated to such capital account for such fiscal year,
reduced by the Management Fee debited to such capital account for such fiscal year, taking into
account any gains or losses from special investments that have been realized or deemed realized, but
reduced to the extent of any balance in such capital account’s “loss recovery account.”
The specific rates and calculation methodology for the Incentive Allocation applicable to each
tranche of interest is detailed in the Funds’ Offering Documents.
The General Partner, in its sole discretion, may waive or modify the Incentive Allocation for any
Investor, including the Principal and any other member, partner, affiliate or employee of the General
Partner or the Investment Manager, any member of the immediate family of any such person, and
any trust or other entity established for the benefit of any such person.
Payment of Fees
Fees and compensation paid or allocated to the Adviser or its affiliates by a Fund will generally be
deducted from the assets of such Fund. As discussed above, Management Fees are generally
deducted on a monthly basis and the Incentive Allocation is generally deducted on an annual basis.
Prepayment of Fees
Generally, the Master Fund pays the Management Fee to Avala within the first 10 days of each
month for such month. The Funds only permit voluntary withdrawals on applicable quarter-ends;
however, if the Funds were to wind up or permit an Investor to withdraw on a date that is not a
month-end, a pro rata portion of the Management Fee that was paid in advance by the Funds and
borne by such Investor would be refunded.
Additional Compensation and Conflicts of Interest
Neither the Adviser nor any of its supervised persons accepts compensation (e.g., brokerage
commissions) for the sale of securities or other investment products.
Additional Fees and Expenses
In addition to the management fees and incentive compensation items noted above, Investors will
bear indirectly the operating expenses charged to the applicable Funds, which include, without
limitation: (i) expenses related to the research, due diligence and monitoring of actual and
prospective investments of the Master Fund (whether or not consummated) and the consummation
and disposition of investments of the Master Fund, including the following: third-party investment
sourcing fees; fees and expenses related to obtaining research and market data (including expenses
related to obtaining, processing and analyzing “big data” or “alternative data,” any information
technology hardware, software or other technology incorporated into the cost of obtaining such
research and market data) and expenses related to performing due diligence on current or
prospective vendors of such research or market data services; due diligence expenses including
consulting and appraisal fees; travel expenses (including transportation, lodging and meals);
conference registration fees; brokerage, prime brokerage and futures commission merchant fees,
commissions and expenses; expenses relating to short sales; clearing and settlement charges;
custodial fees and expenses; bank service fees; interest expenses and fees related to financings or
refinancings; costs and expenses related to a Subscription Facility; fees and expenses of proxy
research and voting services; and fees and expenses of third-party professionals, including
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