FEES AND COMPENSATION
Claren Road and/or the General Partner receive management fees and performance fees or
incentive allocations from its Clients.
Claren Road, its affiliates and equity owners, and certain of their respective professionals,
may invest in or alongside the Funds. Fees assessed or profit allocations on such investments
may be substantially reduced or, as is more typical, waived altogether for these investors.
Performance fees or carried interest profit allocations are subject to regulation under Rule
205-3 under the Advisers Act. Therefore, Claren Road seeks to ensure that investors in the
Funds that are directly or indirectly assessed performance fees or are subject to carried
interest profit allocations satisfy the qualifications of Rule 205-3 under the Advisers Act and
have been advised of such fees or allocations and their risks. Accordingly, the fees
applicable to each Fund are set forth in detail in each Fund's offering documents. Similarly,
the fees applicable to any separately managed accounts are set forth in detail in a managed
account agreement entered into between Claren Road, on the one hand, and the separately
managed account, on the other hand. A brief summary of such fees is provided below.
1. Management Fee
Generally, each of the Feeder Credit Funds pays Claren Road a fee for investment
advisory services (the "Management Fee") for each fiscal quarter ranging from 0% (0%
per annum) to 0.5% (2% per annum) of the beginning net asset value of each investor's
capital account for such fiscal quarter. The Management Fee is calculated and paid at the
beginning of each quarter.
The Management Fee will be prorated for any period that is less than a full quarter and
will be adjusted for contributions made during the quarter. The General Partner of the
Domestic Credit Fund may waive or modify the Management Fee with respect to certain
investors.
2. Performance Compensation
Incentive Allocation
Generally, at the end of each fiscal year, or such other period as may be specified in the
operative documents for a particular class of investors, of the Domestic Credit Fund, the
Fund's General Partner is entitled to an incentive allocation (the "Incentive Allocation") in
an amount equal to either 15% or 20% of the net capital appreciation (which includes
both realized gains and losses and unrealized appreciation and depreciation of securities
held in the Domestic Credit Fund's portfolio) allocated to an investor's capital account for
such fiscal year, or such other period as may be specified in the operative documents for a
particular class of investors, after deducting the Management Fee debited to such
investor's capital account for such fiscal year, subject to a loss carry-forward mechanism.
In the event that the Domestic Credit Fund is terminated, or an investor withdraws other
than at the end of a fiscal year or such other period as may be specified in the operative
documents for a particular class of investors, then for purposes of determining the
Incentive Allocation allocable at such time to the Fund's General Partner, net capital
appreciation will be determined as if such dates were the end of the fiscal year or such
other period as may be specified in the operative documents for a particular class of
investors, subject to certain adjustments. The General Partner of the Domestic Credit
Fund may waive or modify the Incentive Allocation with respect to certain investors.
Incentive Fee
Generally, at the end of each fiscal year, or such other period as may be specified in the
operative documents for a particular class of investors, of the Offshore Credit Fund,
Claren Road is entitled to an incentive fee (the "Incentive Fee", and together with the
Incentive Allocation, the "Performance Compensation") in an amount equal to either 15%
or 20% of the net realized and unrealized appreciation in the net asset value of each series
of shares, adjusted for any redemption of shares in the series made during the year and
any accruals of the Incentive Fee and subject to a loss carry-forward mechanism.
In the event that shares are redeemed other than at the end of a fiscal year, or such other
period as may be specified in the operative documents for a particular class of investors,
the Incentive Fee will be computed and paid as though the redemption date were the last
day of the fiscal year or such other period as may be specified in the operative documents
for a particular class of investors. The Board of Directors of the Offshore Credit Fund,
with the consent of Claren Road, may waive or modify the Incentive Fee with respect to
certain investors.
The Funds may issue additional subclasses and tranches of shares with differing fee
terms.
3. Separately Managed Accounts
As of the date of this Brochure, Claren Road is providing investment management
services to one separately managed account, and may in the future directly advise
additional separately managed accounts.
Fees for separately managed accounts are negotiable and not based on a fixed fee
schedule. Such fees are generally based on factors specific to the applicable managed
account and the applicable client's preferences, including without limitation, the
investment strategy to be utilized, the investment restrictions imposed, the perceived
risk/return of the instruments expected to be traded, the level of assets in the managed
account, and the required and/or anticipated term of the managed account arrangements.
Fees for separately managed accounts include either management fees based on an
agreed-upon percentage of the assets in the managed account or performance fees based
on an agreed-upon percentage of the net returns of the managed account, or both
management and performance fees.
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