Item 5 – Fees and Compensation
Generally, EHI’s compensation for the discretionary investment advisory services it provides to the
Funds will be comprised of an asset-based management fee and an incentive allocation that is based
on the performance achieved for the account of each investor. The fees and expenses applicable to
each Fund are set forth in detail in each Fund’s respective Offering Documents. A brief summary
of fees and expenses is provided below.
Management Fee
On an annual basis, the Master Fund will pay EHI a management fee (the “Management Fee”) of
up to 1.5% of the net asset value of each investor’s capital account. The Management Fee will be
paid monthly in advance, based on the value of each capital account as of the first business day of
each calendar month. The General Partner or the Firm, as applicable, may waive or modify the
Management Fee for certain investors, including members, Employees, or affiliates of EHI, relatives
of such persons, and for certain early stage, large or strategic investors.
Incentive Allocation
At the conclusion of each fiscal year, the General Partner will receive an annual incentive allocation
of up to 17.5% of the net profits attributable to each investor’s capital account (including realized and
unrealized gains and losses), if any, subject to a high watermark (the “Incentive Allocation”). When
calculating the Incentive Allocation, net profits are reduced by the Management Fee and all other
expenses of the Funds as described below. The Incentive Allocation will be allocated at the Master
Fund level but will be calculated with respect to each investor such that any Feeder Fund-level
income and expenses will be considered for purposes of calculating such Incentive Allocation. The
Incentive Allocation will be determined with respect to any fiscal year as of the close of business
on the last day of such fiscal year.
The General Partner may waive or modify the Incentive Allocation for investors that are members,
Employees, or affiliates of EHI, relatives of such persons, and for certain early stage, large or
strategic investors. Incentive Allocations received by EHI will comply with Rule 205-3 under the
Advisers Act.
Fund Expenses
As further described in the Offering Documents of the Funds, certain organizational and operating
expenses will be incurred by the Funds (collectively, “Fund Expenses”). In general, each investor
will bear its proportionate share of Fund Expenses on a pro rata basis with respect to the size of its
capital account. The General Partner may, however, allocate expenses on another basis, including
by allocating certain expenses to certain (but not all) investors, if the General Partner determines
that such an allocation is more equitable.
As noted above, the Funds invest their assets through a “master-feeder” fund structure in the Master
Fund. The Feeder Funds, which invest exclusively in the Master Fund, indirectly bear the expenses
of the Master Fund pro rata based on their interest in the Master Fund. As a result, virtually all
expenses are incurred at the Master Fund level and therefore expenses incurred directly
by the Feeder Funds are relatively small and typically include legal, audit, and administrative
expenses.
Organizational Expenses
The Funds will bear all organizational and offering expenses and will reimburse the General Partner,
the Firm and/or the Principal, as applicable, to the extent that any of them bears organizational or
offering expenses on behalf of the Funds. Such organizational and offering expenses will include,
without limitation, all costs and expenses incurred in connection with the Funds’ formation and the
offering and sale of interests, including, but not limited to, legal and accounting fees and expenses,
registration fees, filing fees and all costs and expenses incurred in connection with the preparation
of offering and organizational documents, marketing materials and similar materials.
Operating Expenses
In general, the Funds will also incur all operating expenses, which expenses will include, without
limitation: (a) organizational and offering expenses; (b) expenses associated with all investments
and transactions considered, evaluated and/or consummated by the Funds, as well as overall
consideration and evaluation of the Funds’ portfolio, including, without limitation, those expenses
incurred before the initial closing of the Funds, including, without limitation, expenses associated
with sourcing, negotiating, investigating, researching, financing and structuring of investments and
potential investments, whether or not consummated, including, without limitation, third-party
research, data, analytics, modeling, risk, structuring, pricing, execution and other third-party
information systems, including, without limitation, installation and maintenance, software and
service fees (including, without limitation, the expenses with respect to data, data feeds,
subscriptions, expert networks, political intelligence providers and reports); (c) the costs of
research-related computer hardware and software expenses, including, without limitation,
Bloomberg terminals and subscriptions; (d) the Funds’ share of expenses with respect to the
portfolio management system and any other software used for accounting and/or monitoring of the
portfolio, including, without limitation, subscriptions relating to, among other things, trading and
order management systems and services; (e) expenses associated with holding, financing,
monitoring, hedging, maintaining and disposing of all investments of the Funds and all transaction
and other costs associated therewith; (f) the Funds’ share of expenses with respect to travel expenses
related to healthcare conferences or meetings associated with investments and potential
investments; (g) professional fees associated with investments and potential investments, including,
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