Item 5: Fees and Compensation
Management Fee
As described above in Item 4 and pursuant to the Investment Management Agreement between the Fund and
the Investment Manager, the Fund pays the Investment Manager a fee for management services (the
“Management Fee”) for each fiscal quarter equal to the applicable Management Fee Rate multiplied by the
NAV of each series of Shares as of the beginning of such fiscal quarter.
“Management Fee Rate” means 0.25% (1.0% annualized) for Tranche A1 and A2 Shares, and 0.125%
(0.5% annualized) for Tranche F-A1 Shares and Tranche F-A2 Shares.
The Management Fee will be prorated for any subscription by a shareholder that is effective other than as of
the first day of a fiscal quarter. In the event of a redemption by a shareholder other than as of the last day of
a fiscal quarter, the Investment Manager will pay to the Fund an amount equal to the pro rata portion of the
Management Fee, based on the actual number of days remaining in such fiscal quarter, and the Fund will
distribute such amount to the redeeming shareholder.
The Investment Manager, in its sole discretion, may elect to reduce, waive or calculate differently the
Management Fee with respect to any employee, affiliate or friend 1 of the Investment Manager, or any family
member or estate planning vehicle of such person or any strategic advisor to the Investment Manager and its
affiliates (collectively, the “Dilation Affiliates”).
In consideration for the Management Fee, the Investment Manager provides office space and utilities and
professional and other personnel to the Fund. The Investment Manager bears the costs of providing such
goods and services, and all of its own overhead costs and expenses.
Incentive Allocations
Hurdle Incentive Allocation – Tranche A1 Shares and Tranche F-A1 Shares
Generally, at the end of each fiscal year of the Master Fund, the Master Fund will reallocate from the NAV
of each series of shares of the Master Fund corresponding to each series of Tranche A1 Shares or Tranche
F-A1 Shares to the NAV of the Class M Shares of the Master Fund (the “Hurdle Incentive Allocation”) an
amount equal to the applicable Hurdle Incentive Allocation Rate (as defined below) multiplied by the net
realized and unrealized appreciation in the NAV of such series of shares of the Master Fund, adjusted for (i)
any redemption of shares of such series of the Master Fund since the last calculation of the Prior High NAV
(as defined below) of such series of shares of the Master Fund, and (ii) the Management Fee and any other
expenses of the Fund (other than Investor-Related Taxes) corresponding to such series of shares of the Master
Fund that are not reflected in the NAV of the Master Fund (the “Adjusted NAV”); provided, however, that
such Hurdle Incentive Allocation will only be made with respect to a series of shares of the Master Fund
corresponding to a series of Tranche A1 Shares or Tranche F-A1 Shares to the extent that it does not cause
the value of such series of shares of the Master Fund as of the end of a fiscal year to fall below the Threshold
Management Fee waivers with respect to "friends" will be capped at $10,000,000 of invested capital in the Dilation Funds.
Return (as defined below); provided, further, that a Hurdle Incentive Allocation will be made only with
respect to the excess of the Adjusted NAV of a series of shares of the Master Fund corresponding to a series
of Tranche A1 Shares or Tranche F-A1 Shares over its Prior High NAV.
The "Hurdle Incentive Allocation Rate" means 20% for Tranche A1 shares and 25% for Tranche F-A1
Shares.
The "Threshold Return" is the value that a series of shares of the Master Fund corresponding to a series of
Tranche A1 Shares or Tranche F-A1 Shares would reach at fiscal year-end if such series of shares of the
Master Fund achieved an annualized rate of return equal to 7.0% per annum from the beginning of such fiscal
year (the “Threshold Rate”), as adjusted for redemptions. The Threshold Rate is not cumulative from year
to year. Thus, if the Threshold Return is not achieved in a year with respect to a series of shares of the Master
Fund corresponding to a series of Tranche A1 Shares or Tranche F-A1 Shares, the shortfall is not carried
forward into subsequent periods.
In the event of a redemption of Tranche A1 Shares or Tranche F-A1 Shares prior to the end of a fiscal year,
for purposes of determining the Hurdle Incentive Allocation, the Threshold Rate with respect to the shares
of a series of the Master Fund corresponding to such Tranche A1 Shares or Tranche F-A1 Shares within a
series will be pro-rated through such Redemption Date at a cumulative monthly rate of 0.583% (7.0% per
annum).
Benchmark Incentive Allocation – Tranche A2 Shares and Tranche F-A2 Shares
Generally, at the end of each fiscal year of the Master Fund, the Master Fund will reallocate from the NAV
of each series of shares of the Master Fund corresponding to a series of Tranche A2 Shares or Tranche F-A2
Shares to the NAV of the Class M Shares of the Master Fund an incentive allocation (a “Benchmark Incentive
Allocation” and together with the Hurdle Incentive Allocation, each, an “Incentive Allocation”) equal to the
applicable Benchmark Incentive Allocation Rate (as defined below) multiplied by the amount by which the
Net Return for such series of shares of the Master Fund exceeds the Benchmark Amount for such series of
shares of the Master Fund; provided, however, that the Net Return upon which the calculation of the
Benchmark Incentive Allocation is based will be reduced to the extent of any unrecovered balance remaining
in the Underperformance Carryforward corresponding to such series of shares of the Master Fund.
“Benchmark Incentive Allocation Rate” means 20% for Tranche A2 Shares and 25% for Tranche F-A2
Shares.
Incentive Allocation Generally
The first Incentive Allocation, if any, is expected to be calculated for the period beginning on the Initial
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