ITEM 5 – FEES AND COMPENSATION
Item 5.A Describe how you are compensated for your advisory services. Provide your
fee schedule. Disclose whether the fees are negotiable.
The Feeder Funds offer interests/shares only to certain qualified investors and
admission to the Feeder Funds is not open to the general public. Limited
partnership interests of the Domestic Fund and shares of the Offshore Fund are
sold only to certain qualified Investors. U.S. Investors must be “accredited
investors” under Rule 501 of Regulation D of the Securities Act of 1933, as
amended, and “qualified purchasers” as such term is defined in Section 2(a)(51)
of the Investment Company Act of 1940, as amended. Investors and prospective
Investors should refer to the PPM for the appropriate Feeder Fund for a detailed
description of fees.
Investors generally compensate Ellis Lake, directly or indirectly, by a
management fee of 1.5-2.0% (the “Management Fee”) and a performance-based
fee of 15-20% of profits, subject to a loss carry-forward provision (the “Incentive
Allocation”). Class A shares of the Offshore Fund and Class A interests of the
Domestic Fund pay a 2% Management Fee and 20% Incentive Allocation. Class
B shares of the Offshore Fund and Class B interests of the Domestic Fund pay a
1.5% Management Fee and 18% Incentive Allocation. Class C shares of the
Offshore Fund and Class C interests of the Domestic Fund pay a 1.5%
Management Fee and 15% Incentive Allocation. As a general matter, the liquidity
associated with a class of shares or interests is directly related to fees (i.e.,
Investors that pay higher fees generally have greater liquidity).
It is critical that Investors refer to the relevant PPM and other governing
documents for a complete understanding of how Ellis Lake is compensated
for its advisory services. The information contained herein is a summary
only and is qualified in its entirety by such documents.
Item 5.B Describe whether you deduct fees from clients’ assets or bill clients for fees
incurred. If clients may select either method, disclose this fact. Explain how
often you bill clients or deduct your fees.
Ellis Lake deducts fees from Investors’ assets invested in the Feeder Funds.
Investors do not have the ability to choose to be billed directly for fees incurred.
The Management Fee generally is paid from the Master Fund to Ellis Lake on
behalf of each of the Feeder Funds quarterly in advance. Ellis Lake deducts the
amount of the Management Fee applicable to each Investor at the beginning of
each quarter.
Generally, the Incentive Allocation applicable to each Investor will be made (at
the Master Fund level) to the General Partner as of the end of each year, on a high
watermark basis.
The Incentive Allocation applicable to an Investor may be made at the time an
Investor withdraws or redeems (as the case may be) from the Feeder Fund. Ellis
Lake deducts the amount of the Incentive Allocation applicable to an Investor at
such time.
It is critical that Investors refer to the relevant PPM and other governing
documents for a complete understanding of how fees are deducted from their
assets. The information contained herein is a summary only and is qualified
in its entirety by such documents.
Item 5.C Describe any other types of fees or expenses clients may pay in connection
with your advisory services, such as custodian fees or mutual fund expenses.
Disclose that clients will incur brokerage and other transaction costs, and
direct clients to the section(s) of your brochure that discuss brokerage.
In addition to fees payable to Ellis Lake (or the General Partner), the Master Fund
is responsible for the expenses it incurs in connection with its operations. Such
expenses are allocated on a pro rata basis to the Feeder Funds, which then allocate
such expenses to their respective Investors. Accordingly, such expenses are
deducted from Investors interests in the Feeder Funds. The expenses typically
incurred by the Master Fund, include, but are not limited to:
Fund legal, compliance, administrator, audit (including custody audit, if
any) and accounting expenses (including third party accounting services);
shareholder proxy voting services (Offshore Fund Investors only);
organizational expenses;
investment expenses such as commissions, research fees and expenses
(including Bloomberg (trading, research and support) and similar services
and research related travel);
interest on margin accounts and other indebtedness;
borrowing charges on securities sold short;
custodial fees;
bank service fees;
Fund-related insurance costs;
Directors' fees and expenses (Offshore Fund Investors only);
The Feeder Fund’s pro rata share of the expenses of the Master Fund; and
any other expenses reasonably related to the purchase, sale or transmittal
of Advisory Client assets.
Organizational expenses of the Feeder Funds are being amortized, for net asset
value purposes, over a period of up to 60 months from the date operations were
commenced.
...