Item 5. Fees and Compensation
Asset-Based Compensation
The Adviser will be paid an asset-based investment management fee ranging from 0.25% to 2.00% per
annum of the net assets of each respective client account.
Investment management fees will be charged each quarter, typically in advance, based on the net asset
value of the client account (including net unrealized appreciation or depreciation of investments, and
including cash, cash equivalents and accrued interest) on the first day of the quarter. If a new client
account is established during a quarter or a client makes an additional capital contribution to its account
during a quarter the investment management fee will be charged as of the effective date of the
investment management agreement or the date of the additional contribution based on the value of the
assets as of the applicable date and will be prorated for the number of days remaining in the quarter.
The Adviser’s clients will typically be required to pay the Adviser’s asset-based investment management
fees in advance. A client may obtain a refund of such a pre-paid fee if the advisory contract is terminated
or a withdrawal is made from the account before the end of a billing period.
Performance-Based Compensation
The Adviser or an affiliate of the Adviser, with regard to some clients and some strategies, will be paid
performance-based compensation, which is based on a share of capital gains on or capital appreciation
of the net assets of a client account. This compensation may be paid to the Adviser or to an affiliate of
the Adviser and is expected to range from zero to 20% of such capital gains or capital appreciation.
Under certain circumstances, receipt of performance-based compensation may be subject to a hurdle
rate based upon U.S. Treasuries, LIBOR or some other benchmark.
The asset-based fees and performance-based compensation may be negotiated with certain clients.
Expenses
Subject to the language of each client’s investment management agreement with the Adviser, clients will
be pay the expenses described below.
The Adviser will render its services at its own expense with regard to the following overhead expenses:
salaries and other compensation to its employees (including payroll taxes, health insurance and other
benefits and other employment expenses), office rent and related expenses (including property and
casualty insurance, utilities and furniture and fixtures), secretarial and other internal administrative
expenses, and office expenses (including stationery and employee entertainment expenses). The
Adviser will not be responsible for any of the client’s expenses, and the client shall be responsible for all
other costs and expenses related to the operation of the client’s account, including without limitation: (1)
organizational expenses; (2) accounting, auditing, legal, and compliance expenses; (3) investment and
trading expenses (including without limitation trade clearance and settlement, corporate action
processing, and trade confirmation and reconciliation); (4) information and news services; (5) professional
fees and expenses (including expenses of researchers, consultants and experts); (6) insurance expense
(including without limitation premiums for directors’ and officers’ liability insurance; (7) taxes and
governmental charges (including without limitation any related preparation, compliance and other
expenses); (8) custodial and transfer agency fees and expenses; (9) record keeping and other
administrative fees and expenses; (10) printing and mailing expenses; (11) interest, commitment fees and
related expenses payable to lenders on borrowings, margin accounts or other indebtedness; (12) foreign
exchange transaction costs; (13) brokerage commissions and spreads; (14) borrowing charges on
Investments sold short; (15) bank service fees, withholding and transfer fees; (16) custodial fees, clearing
and settlement charges and other trading-related expenses; (17) loan fees, sales commissions, appraisal
fees, loan-pricing services fees, interest and commitment fees; (18) underwriting commissions and
discounts; (19) consulting and information services expenses; (20) research expenses; (21) unusual or
extraordinary expenses (including without limitation legal costs and expenses) of any litigation,
investigation or indemnification involving the account activities; (22) any other expenses reasonably
related to the purchase, sale or transmittal of the investments of the client’s account; (23) all other
investment expenses incurred by the account; and (24) all other similar expenses necessary or advisable
for or incidental or related to the client’s account; in each case as the Adviser reasonably determines.
The client will also reimburse the Adviser for the reasonable travel and incidental expenses of its
personnel related directly to the business of the client, including travel to attend meetings of the board of
directors of the client or other events or meetings at the request of the client. To the extent the Adviser
advances any costs or expenses described above on behalf of the account, the client will reimburse the
Adviser promptly upon the Adviser’s request.
The allocation of expenses by the Adviser between it and a client and among clients represents a conflict
of interest for the Adviser. The Adviser has adopted an expense allocation policy that is designed to
address this conflict. The Adviser allocates expenses to each client in accordance with the client’s
investment management agreement. The Adviser seeks to allocate any shared expenses for products
and services benefitting multiple clients or both the Adviser and a client, and not covered in the client’s
investment management agreement, in a fair and reasonable manner.