Item 5. Fees and Compensation
Fees
Cross Sound will charge a management fee, and the Master Fund’s general partner, Cross Sound Capital
Partners LLC (the “General Partner”) will be entitled to receive a special profit allocation in accordance
FORM ADV PART 2A CROSS SOUND MANAGEMENT LLC MARCH 25, 2020
with the Master Fund’s Limited Partnership Agreement (“LPA”), offering circular (including supplements)
and other governing documents (collectively, the “Master Fund Offering Documents”). The information
provided in this brochure regarding the fees and expenses that can be charged to Investors is not intended
to be complete or final and is qualified in its entirety by the Master Fund’s Offering Documents, as well as
the Feeder Fund’s Articles of Association, offering circular (including supplements) and other governing
documents (collectively, the “Feeder Fund Offering Documents,” and together with the Master Fund
Offering Documents, the “Offering Documents”).
The General Partner may, in its discretion, establish any number of series (each, a “Series”) and classes
within such Series (each, a “Class”), associated with different assets of the Master Fund and each with
varying investment guidelines, lock-up periods, management fees and special profit allocations. The
terms associated with such Series and Classes will be described in supplements to the offering circular that
relate specifically to each such Series or Class. Similarly, the Feeder Fund will establish a segregated
portfolio (a “Segregated Portfolio”) comprised of one or more classes of shares, and the assets attributable
to that Segregated Portfolio will be invested in the relevant Master Fund Series or Class. The terms
associated with each Segregated Portfolio will be described in supplements to the Feeder Fund’s offering
circular that relate specifically to each such Segregated Portfolio. Investors should read and review these
supplements for the Master Fund and the Feeder Fund, respectively, which form part of the Offering
Documents, to fully understand the types of fees and expenses that are paid for by each such Series or
Segregated Portfolio and each class or series within such Series and Segregated Portfolios. Currently, the
Master Fund has two (2) Series, which invest within the distressed sector: one which invests principally in
distressed debt securities (“Distressed Series 1”) and a second which invests principally in DIP loans (“DIP
Series 3”). The Feeder Fund has two (2) corresponding Segregated Portfolios numbered 1 and 3, which
invest in Distressed Series 1 and DIP Series 3, respectively. The Master Fund had a “DIP Series 2,” and
the Feeder Fund had a corresponding Segregated Portfolio 2, both of which were liquidated as of March
31, 2017.
Except as noted below, the Master Fund, as to each Limited Partner (including the Feeder Fund), will pay
Cross Sound a quarterly management fee calculated at an annual rate ranging between 0.50% and 1.75%,
depending on the Class or Classes in which the Limited Partner is invested, with the lock-up period also
varying by Class. The Management Fee is calculated either (i) based on the net assets attributable as to
each Limited Partner within each Class or (ii) the committed capital and unreturned capital contributions
as of the first day of such quarter. The management fee will be adjusted for contributions and withdrawals
made during the quarter.
Except as noted below, the Master Fund, as to each Limited Partner (including the Feeder Fund), will also
pay to the General Partner a performance-based fee (“Special Profit Allocation”) calculated at an annual
rate ranging between 15% and 20% of the net profits allocated to each Limited Partner’s capital account
subject to a high water mark or a hurdle rate in certain circumstances. The performance-based fee generally
includes unrealized gains and losses, if any. When calculating the performance-based fee, net profits will
be reduced by the management fee and all items of loss and expense incurred by the Master Fund, as more
particularly described in the LPA. The Special Profit Allocation is made with respect to each Limited
Partner at the end of each fiscal quarter (and on withdrawal of funds by or distribution of funds to a Limited
Partner during a fiscal quarter) but is only paid to the General Partner annually.
FORM ADV PART 2A CROSS SOUND MANAGEMENT LLC MARCH 25, 2020
Cross Sound reserves the right to vary the fees as to particular Limited Partners by separate agreement and
to reduce or waive any fees at any time. Cross Sound has waived or reduced the fee for its own capital and
that of its constituent partners, affiliates, and employees, and family members of the foregoing.
Expenses
In addition to the fees noted above, the Limited Partners (including the Feeder Fund) will also indirectly
bear the fees and expenses charged to the Master Fund, including, without limitation, operating costs such
as all trading costs and expenses (such as, for example, brokerage commissions and charges, expenses
related to short sales, clearing and settlement charges , option premiums and custodial and service fees); all
interest and commitment fees on loans and debit balances (on margin or otherwise); all costs and expenses
of negotiating and entering into contracts and arrangements and making investments (such as brokerage,
legal, accounting, investment banking, appraisal and other professional and consulting fees and expenses
arising from particular investments and potential investments) and similar expenses in terminating those
contracts and arrangements and disposing of investments; all costs and expenses associated with registering
restricted securities; costs and expenses incurred in attempting to protect or enhance the value of
investments; (including participation in creditors’ committees, both formal and informal and costs and
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