Item 5. Fees and Compensation
The Adviser charges certain Clients an asset-based investment management fee (the “Management Fee”)
based on the value of the Client’s assets under management. The Management Fee is generally payable
to the Adviser monthly or quarterly in arrears and is at an annual rate of 1-2%, as specified in the relevant
Client’s Offering Documents. The Management Fee will be prorated for any period that is less than a full
month or quarter, and will be adjusted for subscriptions and redemptions. The Adviser instructs the
Client’s administrator to deduct the Management Fee from the Client’s account.
For certain of the Adviser’s Clients, any Management Fees payable to the Adviser will be reduced by the
amount of finder’s, director’s, break-up, financing, servicing, leasing, licensing, royalty, administrative,
program and other similar fees received by the Adviser or any of its affiliated entities (such as a Fund’s
general partner) from companies in which the Fund invests or proposes to invest (the “Management Fee
Credits”). If the amount of Management Fee Credits exceeds the Management Fee otherwise payable as
of any month or quarter, then such excess amount will be applied against future Management Fees (in the
order payable until fully used), but will not be carried back to prior periods.
In addition, Clients are subject to an incentive fee or incentive allocation (collectively, the “Performance
Fee”) of up to 30% of all income, gains and losses derived from portfolio investments that exceed either
a high-water mark or hurdle, depending on the individual investor’s share class ownership. The Adviser
or an affiliate of the Adviser is paid or allocated the Performance Fee. For further information related to
payment of the Performance Fee, please refer to each Client’s respective offering documents, including,
but not limited to, a private placement memorandum, limited partnership agreement and/or investment
management agreement (collectively, the “Offering Documents”) for further information related to the
calculation and payment of the Performance Fee.
As disclosed in Item 4, the Adviser receives an asset-based management fee from the Third Party
Manager. In furtherance of this relationship, for certain Clients, the Adviser pays a portion of its
Performance Fee and Management Fee to the Third Party Manager, if, as a result of the Research Services
provided by the Adviser, a Client purchases equity securities from the private fund managed by the Third
Party Manager, which generates investment proceeds for the Client. This arrangement is made solely for
the benefit of the investors. Accordingly, investors will not be subject to any additional fees with respect
to this arrangement.
The Adviser, in its sole discretion, has, and may in the future, modify or waive the Management Fee and
the Performance Fee for investors that are members, employees or affiliates of the Adviser, relatives of
such persons, and for certain large or strategic investors.
In addition, the Clients will be subject to other expenses, including but not limited to following:
administration; operational expenses; trading operations, including brokerage commissions and other
costs of executing transactions; interest expenses; legal, accounting, auditing and other professional fees
and expenses; tax preparation and “tax matters partner” fees and expenses; custodial fees, bank service
fees and other operating expenses; administrative costs (including the fees and out-of-pocket expenses of
third-party administrators); any other operating or administrative expenses related to accounting,
research, due diligence (excluding travel expenses) and reporting; other costs related to the feeder fund
investments in a “master fund”; regulatory and compliance expenses directly related to the Client, as well
as costs and expenses relating to the Client’s or Extract’s regulatory compliance, including, without
limitation, the costs of compliance programs, examinations, regulatory inquiries and regulatory filings;
costs of regulatory, tax and other filings, reporting and compliance, as well as all other tax reporting
requirements; annual fees, out-of-pocket expenses and insurance for Client directors; insurance expenses;
taxes (other than taxes allocable to one or more, but not all, limited partners of the Client); any
indemnification payments; and costs related to maintaining a registered office and operating expenses.
Clients will also pay any extraordinary expenses or costs that they may incur (e.g., litigation expenses or
damages) and any indemnification obligations they may owe a general partner, Extract, Client directors,
or their respective affiliates or other appropriate parties. Funds that are part of a master feeder structure
will also be allocated a pro rata share of the expenses of the related fund and will indirectly bear the
administrative and other expenses of the master fund pro rata based on its interest in the fund. It is
important that each investor who is considering an investment in a Fund reviews the Offering Documents
applicable to that Fund for a further detailed description of the fees and expenses applicable to such
investment.
Each Client will bear its own expenses, as set forth in its respective Offering Documents. Expenses borne
by each Client may differ from the expenses borne by other Clients. In certain instances, a Client may
bear expenses that the Adviser has agreed to bear for one or more other Clients.
Common expenses are incurred on behalf of more than one Client. The Adviser seeks to allocate those
common expenses among the Clients in a manner that is fair and reasonable over time. However, expense
allocation decisions may involve potential conflicts of interest (e.g., an incentive to favor Clients that pay
higher incentive fees, or conflicts relating to different expense arrangements with certain clients). The
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