Item 5. Fees and Compensation
Asset-Based and Performance-Based Compensation. The fee schedules for the Clients will be described
in detail in each Client’s offering memorandum.
Asset-Based Compensation
Each of the Clients typically pays the Adviser an asset-based investment management fee each quarter in
advance ranging from 1.25% to 1.75% per annum based on the value of the net assets of the respective
Client on the first day of each quarter (the "Management Fee"). The Adviser may waive or modify the
Management Fee for investors that are members, principals, employees or affiliates of the Adviser or the
General Partner, relatives of such persons, and for certain large or strategic investors.
Performance-Based Compensation
As a general matter, CastleKnight Fund GP LLC (the “General Partner”), an affiliate of the Adviser, is
entitled to receive annual performance-based compensation (the “Incentive Allocation”) from the Clients at
a rate ranging from 15% to 20%, which is compensation that is based on a share of net capital appreciation
of the assets of a Client. The Incentive Allocation is subject to a loss carryforward provision. The General
Partner may waive or modify the Incentive Allocation for investors that are members, principals, employees
or affiliates of the Adviser or the General Partner, relatives of such persons, and for certain large or strategic
investors.
Expenses. In addition to bearing the Management Fee and Incentive Allocation, if any, the Clients will also
be subject to other expenses related to its investments and operations, such as all investment-related costs
and expenses (i.e., expenses that, in the Adviser’s sole discretion, are related to the investment of a Client’s
assets, whether or not such investments are consummated), including the Client’s legal, investment banking,
compliance (including consultants’ fees), risk management expenses (including software licensing and
consultants’ fees), administrator (including, but not limited to, middle and back office services, software
necessary for trade capture and portfolio management, any costs, fees and expenses related to investor
communications, relations, reporting or other investor materials), audit and tax preparation (including third-
party tax preparation) and accounting expenses (including third party accounting services and accounting
software); Client organizational expenses; execution and order management system fees and expenses
(including fees and expenses related to systems that facilitate trade compliance, commission management,
stock locates and transaction cost analysis, and third party service providers used for implementation, custom
reporting, updates, consultations, support, maintenance, monitoring and data extracts); investment expenses
(i.e., expenses that, in the Adviser’s sole discretion, are related to the investment of a Client’s assets, whether
or not such investments are consummated) such as commissions, research fees and expenses (including
Bloomberg and similar subscriptions and data services and research-related travel (including meals and
lodging)); interest on margin accounts and other indebtedness; borrowing charges on securities sold short;
custodial fees; bank service fees; Client-related insurance costs (including D&O and E&O insurance for the
Adviser and the General Partner and members of the Governance Committee); independent Master Fund
Governance Committee members’ fees and expenses; expenses of regulatory compliance (including
compliance with AIFMD and AEOI), filings and reporting (including but not limited to Section 13 filings, such
as 13G, 13D, 13F and 13H filings, Section 16, Form D, Form PF, anti-money laundering compliance, state
securities, general regulatory compliance and non-U.S. position reporting filings, if applicable, and non-U.S.
filings, if any); directors’ fees; pricing service fees; portfolio valuation expenses (including data feeds and
third-party valuation agents); fees and expenses related to bankruptcies, restructurings, reorganizations,
creditors’ committees or any activist-related activities; fees and expenses related to sourcing, evaluating,
consummating, monitoring, managing and enforcing actual or potential investments (including, but not limited
to, expenses relating to shareholder and management communication, soliciting proxies, hiring proxy advisory
consultants, hosting shareholder forums, hiring public relations consultants and legal and other professional
fees and expenses related thereto); fees paid to proxy and securities class action advisory firms; all costs and
expenses incurred in attempting to protect and enhance the value of a Client’s investment (including any fees
and expenses associated with any pending or threatened litigation, audit, investigation, administrative or other
proceeding, as well as any settlement costs); any fees and expenses related to a Client’s liquidation, if
applicable; expenses relating to the offer and sale of interests in a Client and withdrawals and transfers thereof
and any other expenses related to the purchase, sale or transmittal of Client assets.
The allocation of expenses by the Adviser between it and a Client and, to the extent the Adviser manages
multiple Client accounts, among Clients represents a conflict of interest for the Adviser. The Adviser has
adopted an expense allocation policy that is designed to address this conflict. The Adviser allocates
expenses to each Client in accordance with the Client’s governing documents. The Adviser seeks to
allocate any shared expenses for products and services benefitting multiple Clients or both the Adviser and
a Client, and not covered in the Client’s governing documents, in a fair and reasonable manner.