Item 5 – Fees and Compensation
The Funds
Asset-Based Compensation. Fund Investors generally are charged an investment management
fee of two percent (2%) of the value of the Funds’ assets under management (the “Management
Fees”). Management Fees are charged quarterly in advance on the first business day of each
calendar quarter. Management Fees will be adjusted for partial periods. Candlestick may waive
or reduce the Management Fees for any Fund Investor, provided that Candlestick intends to
waive or reduce the Management Fees solely for investors that are officers, directors, members,
partners or employees of Candlestick or its affiliates (the “Employees”) and their immediate
family members and trusts or other entities for their benefit. The Management Fees are generally
deducted from each Fund account by the Funds’ administrator, Morgan Stanley Fund Services
(Cayman) Ltd. or Morgan Stanley Fund Services USA LLC, as applicable (the “Administrator”)
upon Candlestick’s proper instructions.
Performance-Based Compensation. The Funds pay Candlestick or an affiliate performance-
based compensation (“Incentive Compensation”) at a rate (the “Incentive Compensation
Percentage”) of between twenty and thirty percent (20% - 30%), based on a sliding scale of the
gross return above the applicable highwater mark applicable to the particular series of shares or
capital account. Incentive Compensation is calculated by multiplying the cumulative year-to-
date realized and unrealized gains and other net income by the applicable Incentive
Compensation Percentage. Gross return is calculated based on the net asset value of such series
or capital account as of the final day of the applicable fiscal year minus the applicable highwater
mark (but not below zero), determined prior to the allocation of any Incentive Compensation but
after the allocation of all income and all chargeable fund expenses, including, without limitation,
the Management Fee. The Incentive Compensation will be adjusted to reflect any withdrawals
or distributions from the relevant series of shares or capital account.
The applicable Incentive Compensation Percentages are as follows:
Incentive
Gross Return to Applicable Investment with
Compensation
Respect to Applicable Fiscal Year
Percentage
Greater than 0% and less than or equal 12% 20%
Greater than 12% and less than or equal to 13% 21%
Greater than 13% and less than or equal to 14% 22%
Greater than 14% and less than or equal to 15% 23%
Greater than 15% and less than or equal to 16% 24%
Form ADV Part 2A
Greater than 16% and less than or equal to 17% 25%
Greater than 17% and less than or equal to 18% 26%
Greater than 18% and less than or equal to 19% 27%
Greater than 19% and less than or equal to 20% 28%
Greater than 20% and less than or equal to 21% 29%
Greater than 21% 30%
Candlestick and its affiliates may waive or reduce the Incentive Compensation for certain
investors, provided that Candlestick intends to waive or reduce the Incentive Compensation
solely for Employees and their immediate family members and trusts or other entities for their
benefit.
The Strategic Investor is entitled to a revenue share consisting of an asset-based component and
a performance-based component, which will generally reduce (on a dollar-for-dollar basis, but
subject to the existence of net profits) the Management Fee and Incentive Compensation
otherwise payable or allocable to Candlestick.
SMA Clients
All fees applicable to the SMA Clients are subject to negotiation and are established pursuant to
each SMA Client’s investment management agreement. These agreements are generally
terminable by either party upon the occurrence of certain events or upon prior written notice after
the expiration of the specified notice period. Fee arrangements with the SMA Clients generally
include an asset-based fee that is payable in arrears and performance-based compensation
allocated at the end of each fiscal year or payable upon the disposition of an investment. Fee
arrangements with SMA Clients may differ from the Funds’ fee structures.
Additional Compensation
Candlestick and its Employees do not accept compensation for the sale of securities or other
investment products.
Expenses
In addition to asset-based and performance-based compensation, each Client generally bears all
of its own operating expenses. In the case of the Funds, the Feeder Funds bear their pro rata share
of the Master Fund’s operating expenses.
If an expense relates to more than one Client, Candlestick generally allocates such expense pro rata
based on the relevant Clients’ net asset values, unless Candlestick deems another methodology
to be more equitable.
Each Fund bears its own operating and other expenses which include but are not limited to: (a)
Organizational and Offering Expenses (as defined below); (b) expenses associated with all
Form ADV Part 2A
investments and transactions considered, evaluated and/or consummated by the Funds, as well
as overall consideration and evaluation of the Funds’ portfolio, expenses incurred before the
initial Fund closings, including expenses associated with sourcing, negotiating, investigating,
researching, financing and structuring of investments and potential investments, whether or not
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