Item 5 Fees and Compensation
The Investment Manager’s fees and compensation are described in the advisory contracts it enters into
with its clients.
The Caption Funds’ Management Fee
The Caption Funds pay to the Investment Manager a quarterly management fee (the “Management Fee”)
calculated at an annual rate of 2.55% of each investor’s capital account. The Management Fee is paid
quarterly in advance based on the value of each investor’s capital account as of the first business day of
each calendar quarter, adjusted for contributions and withdrawals made during the quarter. If
applicable, any Management Fees are refundable on a pro-rated basis if the relevant advisory contract
is cancelled prior to the end of a payment period. The Management Fee is deducted directly from the
investor’s assets.
The General Partner has reduced the Management Fee for certain investors in the Caption Funds and
may, in its sole discretion, waive or modify the Management Fee for future investors in the Caption
Funds.
Separately Managed Accounts’ Management Fees
The Investment Manager’s compensation schedule with respect to each SMA is contained in the
investment advisory agreement relating to such account. Management fees are generally paid to the
Investment Manager monthly or quarterly in advance, and a pro-rated portion will be refunded if the
investment advisory agreement is cancelled prior to the end of the relevant payment period. Such fees
are billed by the Investment Manager and are not deducted from the SMAs.
Expenses
The Investment Manager is responsible for its overhead expenses including: office rent; furniture and
fixtures; stationery; secretarial/internal administrative services; salaries and bonuses; entertainment
expenses; employee insurance and payroll taxes.
The Caption Funds will bear their own expenses, including, in addition to the Management Fee: the
Caption Funds’ legal, compliance, administrator, audit and accounting expenses (including third party
accounting services); organizational expenses (amortized over five years); investment expenses such as
commissions (see Item 12 “Brokerage Practices” below), research-related fees and expenses (including
research-related travel; news and quotation equipment and services; conferences, market information
systems; data feeds and services, including the costs of subscription services for Bloomberg terminals
and other data feeds, to the extent associated with providing market research related to trading markets
and industries (including, without limitation, any information technology hardware, software or other
technology or technology-related research services (including the costs of software licensing,
implementation, custom development, data management and recovery services incorporated into the
cost of obtaining any research or market data)); cost related to artificial intelligence and machine
learning-related technology to facilitate obtaining and analyzing research and the Caption Funds’ trading
functions; fees and expenses of third-party software developers that build, maintain or support research,
trading or risk management; fees and expenses of third party providers of investment research and data
services; fees and expenses of other consultants and third party service providers that advise, among
other things, on various aspects of sourcing, investigating and pursuing possible investments (including
broker-dealers, outside consultants engaged to provide custom research or otherwise assist in the
research, modeling, analysis or data-gathering processes, and industry and subject-matter experts); fees
and expenses for data ingestion and aggregation, portfolio analytics and portfolio risk management
services); interest on margin accounts and other indebtedness; borrowing charges on securities sold
short; custodial fees, bank service fees and any other expenses related to the purchase, sale or
transmittal of the Caption Funds’ assets, including expenses related to the negotiation, execution,
settlement, and administration of trades and investment transactions, including brokerage commissions,
clearing and settlement charges and custodial fee; ordinary and extraordinary legal expenses, including
expenses associated with regulatory filings, including fees and associated expenses relating to filings
concerning investment and other activities of the Caption Funds made with government, licensing,
regulatory, or self-regulatory organizations (including Form PF), anti-money laundering compliance
expenses and other legal and regulatory expenses of the Caption Funds; indemnification expenses;
offering expenses; Caption Fund-related insurance costs (including D&O and E&O insurance for the
Investment Manager and the General Partner and outside directorship liability, if applicable); and fees
and expenses related to the organization and conduct of the Independent Advisory Committee, if
constituted.
Each SMA is responsible for its pro rata share of the same expenses, to the extent applicable. Any
expenses that are attributable to all Accounts that are unable to be allocated to an SMA (due to
restrictions in the investment advisory agreement) will be paid for by the Investment Manager.
The Investment Manager may also allocate a portion of certain Accounts’ capital to money market funds
or exchange-traded funds (“ETFs”). In addition to the fees and expenses discussed above, the Accounts
will indirectly incur similar fees and expenses if the Investment Manager invests their capital in such
funds, as these funds in turn pay similar fees and expenses to their investment managers and other
service providers.