Item 5: Fees and Compensation
Circle Road receives compensation from a combination of management fees and performance
allocations. The Client Agreements set forth in detail each Client’s and each Investor’s fee structure.
For the purpose of fee calculation, all Feeder Funds currently offer two investment classes to their
Investors, Series A and Series B. Series A interests are only intended to be made available to early
investors in the Feeder Funds.
Management Fees
The Funds pay Circle Road a quarterly management fee in advance (the "Management Fee") that is
calculated as a percentage of the Fund’s gross asset value. Management Fees are typically deducted
from the relevant Fund accounts. The Feeder Funds do not pay any Management Fees, as such fees
are payable at the relevant Fund level. However, each Feeder Fund’s interest in a Fund will be
reduced on a pro rata basis to reflect the deduction of such fees at the Fund level.
For each of the Funds, the percentage will equal 0.3125% (1.25% per annum) in respect of all assets
attributable to Series A interests, and 0.375 (1.5% per annum) in respect of all assets attributable to
Series B Interests. In the event that the combined net asset value of the Funds equals at least $400
million on the first day of a calendar month, the Management Fee attributable to the Series A
Investors of that Fund will be permanently reduced to 0.25% (1% per annum) starting on the first
day of the following calendar quarter.
All Management Fee calculations are subject to pro rata adjustments to reflect contributions to or
withdrawals from the relevant Client account. However, any withdrawals that are made from an
account within 12 months of the underlying capital being contributed will be subject to an early
withdrawal fee of 5% of the amount withdrawn.
Circle Road reserves the right to waive or reduce Management Fees or enter into alternate fee
arrangements for certain Clients and/or Investors, including but not limited to Prospective Clients
and employees, as may be determined in Circle Road’s sole discretion. Factors that may affect
Circle Road’s decision to do so, may (and in the case of two Investors that were previously invested
through a Fund of One did) include, the size of the investment made by the Client or Investor and/or
their agreement not to withdraw capital for extended periods of time.
Performance Allocations
If at the end of a fiscal year, there is “new” capital appreciation in a Fund Investor’s account, a
percentage of that “new” capital appreciation (the “Performance Allocation Rate”) will be payable
by the Investor as a “Performance Allocation”.
For each of the Funds, the Performance Allocation Rate will be 17.5% for Series A interests and
20% for Series B interests.
For the purpose of calculating Performance Allocations, a “new” capital appreciation is any increase
in a Fund Investor’s account’s net asset value (calculated after deduction of all Management Fees
and the allocation of all accrued expenses) that exceeds the account’s “High Water Mark”. An
account’s “High Water Mark” is the highest net asset value of such account as of any preceding
December 31 - after deducting any Performance Allocations that were payable on such date. High
Water Marks and Performance Allocation calculations will be proportionately adjusted to reflect
contributions to or withdrawals from a Fund Investor’s account.
Performance Allocations will typically be allocated to a Feeder Fund’s managing member, general
partner or special shareholder (depending on the legal structure used) as a carried interest.
Circle Road reserves the right to waive or reduce Performance Allocations or enter into alternate
fee arrangements for certain Clients and/or Investors, including but not limited to Prospective
Clients and employees, as may be determined in Circle Road’s sole discretion. Factors that may
affect Circle Road’s decision to do so, may (and in the case of two Investors that were previously
invested through a Fund of One did) include, the size of the investment made by the Client or
Investor and/or their agreement not to withdraw capital for extended periods of time.
Strategic Investor
Circle Road has entered into an arrangement with a strategic Investor (the “Strategic Investor”)
whereby in consideration for its investment in the Opportunity Fund, the Strategic Investor is
allocated a portion of the Performance Allocations attributable to such Fund. Additional details
relating to this arrangement are contained in the relevant Governing Fund Documents and in Item
10 below.
Other Expenses Allocated to Clients
In addition to Management Fees and Performance Allocations, each Client will be responsible for
paying various operating expenses, transaction costs, and organizational and offering costs.
Operating Expenses and Transaction Costs
The operating expenses and transaction costs payable by Clients are more fully disclosed in the
relevant Client Agreements. Such expenses include, but are not limited to, the following: (i)
brokerage commissions and other costs of executing transactions; (ii) investment expenses and all
other expenses (including, without limitation, all commissions, clearing fees, valuation and
portfolio pricing, interest charges, financing charges and applicable withholding and other taxes)
related to the purchase, sale, transmittal or custody of trading assets and related items; (iii) the costs
of trading, order management systems, research and/or data screens, as well as risk management
and data services and systems (including, without limitation, the costs of utilizing and/or supporting
risk-reporting technology required by consultants retained by or on behalf of institutional investors);
(iv) any taxes and duties payable in any jurisdiction in connection with the Client’s trading and
operations; (v) custody fees and expenses; (vi) insurance premiums (including, without limitation,
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