Item 5. Fees and Compensation
Each Feeder Fund’s offering memorandum sets forth the compensation to be paid to Element. The Feeder
Funds pay an asset-based management fee and are subject to a performance-based allocation. While
management fees and performance allocations for each class of shares or interests in the Feeder Funds
are non-negotiable, different classes of shares or interests in the Element Funds are subject to different
performance allocations. The Feeder Funds invest all of their investable assets in the Global Fund which,
in turn, invests its assets into the Trading Entities. Any management fee or performance allocation
attributable to a class of shares or interests in the Feeder Funds may be taken at the relevant Feeder Fund
level, the Global Fund level or any Trading Entity level (in any case, without duplication).
MANAGEMENT FEE
Each Feeder Fund pays Element a management fee equal to 2% per annum of the net asset value of the
Feeder Fund’s shares or interests. Management fees are payable monthly in arrears and are deducted
from the Feeder Fund’s assets at the Global Fund level. The management fees will be prorated in the event
of any intra-month subscription or redemption.
One or more separate investment accounts or vehicles, established by Element or its affiliates, that are
comprised of proprietary capital (“Proprietary Accounts”) invest directly in the Trading Entities. The Trading
Entities do not pay a management fee to Element in respect of their assets attributable to the Proprietary
Accounts.
PERFORMANCE ALLOCATION
Element Capital Holdings LLC, an affiliate of Element, also receives an annual performance allocation
ranging from 20% to 40% of the net capital appreciation (both realized and unrealized) of the assets of the
Global Fund, subject to a “high water mark” provision. The performance allocation will be made annually in
arrears and upon any redemption or withdrawal of shares or interests in the Feeder Funds and is deducted
from the Global Fund’s assets.
The Proprietary Accounts are not subject to any performance allocation in respect of the assets of the
Trading Entities attributable to their investments.
EXPENSES
In addition to the management fees and performance allocations, if applicable, each Element Fund also
bears: all investment-related costs and expenses (i.e., expenses that, in Element’s sole discretion, are
related to the investment of such Element Fund’s assets, whether or not such investments are
consummated), including commissions and charges, interest on margin accounts and other indebtedness,
expenses relating to short sales, clearing and settlement charges, option premiums and custodial and
service fees, research-related expenses (including research-related travel expenses) and expenses
relating to consultants, attorneys, brokers or other professionals or advisors who provide research, advice
or due diligence services with regard to investments; fees and expenses related to acquiring, updating and
maintaining technology used in connection with investment operations (e.g., servers, monitors, software
licenses, communications hardware (e.g., telephone and teleconference equipment)); fees and expenses
related to portfolio exposure and performance management systems, risk management services and
software related to trade reconciliation, treasury, margin, financial and counterparty management, risk
monitoring, performance reporting, valuation quotation services (e.g., Bloomberg terminals, historical and
live financial data and other similar services and data feeds) and trade order management systems
(including systems that facilitate trade compliance, commission management, stock locates and transaction
cost analysis, and third party service providers used for implementation, custom reporting, updates,
consultations, support, maintenance, monitoring and data extracts); such Element Fund’s legal, accounting,
tax preparation and other tax-related expenses (including preparation and mailing costs of financial
statements, tax returns and other reports to shareholders), auditing, consulting and other professional
expenses; third-party administration costs, fees and expenses (including any costs, fees and expenses
related to investor communications, relations, reporting or other investor materials, performance
information, data extraction and other types of reporting and any audit or accounting services provided by
a third-party administrator); fees of any third-party shareholder proxy voting firms; compliance and reporting
expenses and expenses attributable to regulatory filings that are made with respect to such Element Fund
or its assets (including Section 13, Section 16, Form D, Form SHO, Form PF, Form CPO-PQR, MiFID/MiFIR
reporting, the Foreign Account Tax Compliance Act, anti-money laundering compliance (including, without
limitation, fees and expenses of an Element Fund’s anti-money laundering officers, if applicable), state
security filings, general regulatory compliance and non-U.S. position reporting filings, if applicable, and any
other non-U.S. filings); such Element Fund’s insurance costs (including such Element Fund’s pro rata
portion of director’s and officer’s insurance, errors and omissions insurance, fidelity insurance and other
similar policies covering Element and/or its affiliates); any taxes (including, without limitation, any
withholding taxes, transfer taxes, stamp duties and other governmental or self-regulatory agency-related
charges or duties); all costs and expenses incurred in attempting to protect and enhance the value of such
Element Fund’s investments (including any fees and expenses associated with any pending or threatened
litigation, audit, investigation, administrative or other proceeding, as well as any settlement costs); fees and
expenses related to any activist-related activities; any fees and expenses related to such Element Fund’s
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