Item 5. Fees and Compensation
The Adviser and the General Partner generally receive Management Fees and Performance
Allocation (each defined below), respectively, from the U.S. Fund and the Master Fund. The
Offshore Fund is charged management fees and a performance allocation through its investment
in the Master Fund. Additionally, consistent with the Memorandum, Advisory Agreements, and
other governing documents of each Fund (the “Organizational Documents”), the Funds bear
expenses, including certain out-of-pocket expenses incurred by the Adviser in connection with the
services it provides to the Funds. A summary of those fees and expenses is provided below and is
qualified in its entirety by each Fund’s Organizational Documents.
Management Fees and Performance Allocation
As compensation for services rendered to the Clients, the Adviser receives from the U.S. Fund and
the Master Fund an investment management fee (each, a “Management Fee”) due in advance of
each calendar month. Management Fees are generally 2.0% per annum based on the capital account
net asset values at the beginning of the month (computed prior to the accrual of the Performance
Allocation, if applicable for the current year).
The General Partner is entitled to receive from the U.S. Fund and the Master Fund performance-
based compensation generally equal to 20% of the excess net profit over net losses for each year
for each investor, subject to a high watermark (the “Performance Allocation”). The Performance
Allocation is generally made to the General Partner at the end of each year or sooner upon
withdrawals by investors.
There are legacy Management Fee and Performance Allocation fee structures with certain
investors, such as founder’s class investors that differ from those detailed in this Item, these fee
structures are generally no longer available to new investors.
Burrage or the General Partner deducts Management Fees and Performance Allocations directly
from Client assets and does not bill investors in the Clients. At the discretion of Burrage and the
General Partner, Management Fees and the Performance Allocation to one or more investors in a
Fund may be reduced, waived or, with the consent of the applicable investor, calculated differently.
Upon termination of an Advisory Agreement or withdrawal from a Fund, Management Fees that
have been prepaid are not refunded.
Expenses
Each Fund bears all costs and expenses related to its investments and operations, including:
brokerage commissions and other transaction costs; clearing and settlement charges; margin and
interest expense and commitment fees on debit balances or borrowings; borrowing charges on
securities sold short; outsourced trading service expenses, any issue or transfer taxes chargeable
in connection with any securities transactions; legal and consulting fees and other expenses in
connection with conducting due diligence and negotiating terms of certain investments; research
(including, but not limited to, Bloomberg and other market data feeds) and travel expenses related
to potential and actual investments; consulting, legal and other professional fees relating to
particular investments; expenses of professionals providing services to the Fund, including legal,
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audit, accounting, tax and administration; organizational expenses; custodial fees; expenses and
costs of expert networks, expenses and costs of obtaining surveys, analysis or other data sets from
third parties related to prospective investments or sectors in which the Funds may invest; costs of
any liability insurance obtained on behalf of the Fund; regulatory costs; regulatory and government
filing fees and license fees; directors’ fees; registered office fees; costs of reporting and providing
information to Fund investors; any extraordinary expenses, including, without limitation, costs of
any litigation or investigation involving the Fund’s activities; and indemnification expenses. Funds
will also bear the Management Fees and the Performance Allocation, as applicable. A portion of
the Fund’s operating expenses may be shared with other investment entities or accounts managed
by the Adviser or any of its affiliates on an equitable basis as determined by the General Partner
and/or the Adviser. The Adviser or the General Partner may elect from time to time to pay certain
expenses of the Funds, including, but not limited to, the Funds’ organizational expenses, and
reserves the right to seek reimbursement of such expenses from the Funds. For purposes of clarity,
the Offshore Fund bears its own costs and expenses and its pro rata share of the Master Fund’s
costs and expenses.
If an investor in a Fund elects to withdraw capital prior to the end of a one-year period from the
date of its investment, the proceeds in respect of any such withdrawal will be subject to a
withdrawal fee equal to three percent (3%) of the amount of such withdrawal proceeds, which will
remain an asset of the applicable Fund (other than for the benefit of the withdrawing investor).
Each Fund will also pay brokerage fees and other transaction costs of any brokers and/or
custodians they use from time to time, as further discussed in Item 12.
Neither the Adviser nor any of its supervised persons accepts any compensation for the sale of
securities or other investment products, including interests in the Funds.
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