ITEM 5 – FEES AND COMPENSATION
Management Fees
Each Client pays Dorset a management fee that is calculated as a percentage of assets under
management by Dorset. Management fees for Fund Clients are set out in detail in the PPM
for each such Fund. The management fee payable to Dorset with respect to Knott Partners,
Shoshone and Mulsanne (should it in the future accept new investors) is equal to 1.0% of
net assets per year, calculated quarterly based on the net asset value of each such entity on
the first day of such calendar quarter and payable in arrears on the last day of the quarter.
In the case of Matterhorn, Dorset charges a fixed fee equal to 1.0% of net assets per year,
payable monthly in arrears based on the net asset value of such interests on the last business
day of such month. The Matterhorn management fee is paid at the Master Fund level. The
Master Fund does not charge an additional management fee beyond the fee charged by
Matterhorn. When offered to non-affiliated investors, Dorset will charge investors in
Dorset Opportunity a fixed fee equal to 1.25% of net assets per year, payable monthly in
Prior to mid-March 2016, for no fee, Dorset had provided residual discretionary investment advisory
services to a Client who has redeemed its assets (the “Liquidating Account”). Effective mid-March, 2016,
Dorset ceased providing such residual services. The net assets data reflected here includes $79,099 which
was held in the Liquidating Account as of January 2016.
arrears based on the net asset value of such interests in Dorset Opportunity on the last
business day of such month. Each underlying investor in a Fund who is not an employee
or an affiliate of Dorset (or was not at the time the initial investment was made) pays the
Fund the portion of the fee attributable to that investor’s holdings in the Fund. In the case
of Dorset Energy, the management fee is equal to 1.25% of Dorset Energy’s net asset value
per year, payable monthly in arrears. Pursuant to the Portfolio Advisory Agreement,
Dorset shares a percentage of the management fees generated by the Dorset Energy Fund
with Optima, an unaffiliated entity which serves as the manager to Dorset Energy.
Dorset’s Managed Account Clients generally compensate Dorset on the basis of a quarterly
or monthly fee that is computed as a percentage of the value of the assets under
management. All such fee arrangements are individually negotiated.
Where a management agreement is in place for less than a full calendar quarter (for Knott
Partners, Shoshone, Mulsanne and most other Clients) or less than a full month (for
Matterhorn, Dorset Opportunity and certain other Clients), management fees are prorated.
Performance-Based Compensation
At the end of each fiscal year, each Client also makes, to Dorset or an affiliate of Dorset, a
performance-based allocation in compliance with Rule 205-3 under the Advisers Act.
Although Mr. Knott is currently the only investor in the Fund, and it does not charge a
performance-based allocation, should the Fund accept new investors in the future, the
affiliate that is entitled to receive the allocation attributable to Mulsanne is Mabon, which
serves as the general partner of the Fund. The affiliate that receives the allocation for the
other Funds is KPM, which, as previously mentioned, serves as the managing general
partner of Knott Partners and the general partner of Shoshone, Dorset Opportunity and the
Master Fund. Performance or incentive allocations for each Fund Client are set out in
detail in the PPM for each such Fund.
Knott Partners, Shoshone, and, when offered, Mulsanne and Dorset Opportunity, pay or
allocate to KPM, Mabon, or Dorset, as applicable, an annual incentive allocation/fee equal
to 20% of any net capital appreciation in each such Fund. In the case of Matterhorn, Dorset
charges an annual incentive fee, payable at the Master Fund level, equal to 20% of any net
capital appreciation earned by the shareholders. Each Fund makes the allocation or fee pro
rata from the capital accounts of each underlying Fund investor, other than those who are
employees of, or affiliated with, Dorset, in the amount attributable to that investor’s
holdings in the Fund.
The Dorset Energy Fund is subject to an incentive fee equal to 20% of net capital
appreciation earned by the shareholders, payable annually in arrears. Pursuant to the
Portfolio Advisory Agreement, under certain circumstances Dorset shares a percentage of
the incentive fee generated by Dorset Energy with Optima, an unaffiliated entity, which
serves as the manager to the Dorset Energy Fund.
Dorset’s Managed Account Clients generally compensate Dorset on the basis of a
percentage of the net capital appreciation in the Managed Account Client’s portfolio during
a specified period, subject to a loss carryforward provision. All such fee arrangements are
individually negotiated.
All performance-based compensation for all Clients is subject to a loss carryforward
provision. This means that no performance allocation is made unless the value of Client
assets has increased since the prior allocation. If the Client terminates the Investment
Management Agreement, or an underlying investor withdraws its assets from the Client
Fund, fees will be allocated and subject to the high water mark on a pro rata basis.
Fee Differential
In connection with the Dorset Funds, Dorset, in its sole discretion, may (through the use of
side letters or other agreements), waive or reduce the management fee or incentive
allocation otherwise payable to it or its affiliates by investors that are principals, employees
or affiliates of Dorset, or relatives of or, vehicles formed for the benefit of, such persons,
and in limited circumstances for certain large or strategic investors. In addition, investors
such as those providing large or initial investments in a Dorset Fund may have specially
tailored arrangements with respect to their investment in a Fund.
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