ITEM 5: FEES AND COMPENSATION
A. Advisory Fees and Compensation – HHR’s fee schedule for Funds and Separate Accounts
utilizing a long-short equity investment strategy provide for the payment of (i) a management
fee at a rate of 0.5% per annum of the value of the assets of the Fund or Separate Account, and (ii)
an incentive fee or allocation calculated at the end of each calendar year equal to 20% of the net
profits (including net unrealized gains) during the year, subject to a loss carryforward provision.
HHR has three different fee schedules for Funds and Separate Accounts utilizing a long-only
equity investment strategy. These fee schedules provide for the payment of (i) (A) a management
fee at a rate of 0.5% per annum of the value of the assets of the Fund or Separate Account and (B)
an incentive fee or allocation calculated at the end of each calendar year equal to 20% of the net
profits (including net unrealized gains) during the year, subject to a loss carryforward provision,
(ii) (A) a management fee at a rate of 1.0% per annum of the value of the assets of the Fund or
Separate Account and (B) no incentive fee or allocation, or (iii) (A) a management fee at a rate of
0.5% per annum of the value of the assets of the Fund or Separate Account and (B) an annual
incentive fee or allocation at a rate of 20% based on the outperformance above the S&P 500 Total
Return Index for the relevant year.
Management fees payable by a Separate Account or Fund are pro-rated for partial quarters or
partial years, as the case may be. Generally, for intra-year withdrawals, the incentive fee or
allocation is payable as if the withdrawal date were the last day of the year.
HHR has waived fees for Fund investors that are principals and employees of HHR, relatives of
such persons and their respective trusts and may in the future waive, modify or reduce fees for
Fund investors that are principals, employees or affiliates of HHR, relatives of such persons and
for certain other investors. Otherwise, HHR does not currently negotiate fees.
B. Payment of Fees – For the Funds, fees charged are deducted from the Funds’ assets.
Management fees are paid quarterly in advance with respect to certain Funds and in arrears with
respect to certain other Funds. Incentive allocations are calculated and payable annually (and in
certain cases more frequently upon the withdrawal of capital).
For the Separate Accounts, the management fee is calculated and billed quarterly or calculated
monthly and billed quarterly to the investor in arrears. Incentive fees are calculated and billed
annually to the investor (and in certain cases more frequently upon the withdrawal of capital).
Fees are generally payable within 30 days of receipt of the fee statement.
C. Other Fees and Expenses - Other fees and expenses generally payable by the Funds and/or
Separate Accounts include: legal, accounting and administrative, auditing and other professional
expenses, investment expenses such as commissions, borrowing charges on securities sold short,
interest on margin accounts and other indebtedness, custodial fees, bank service fees and any
other reasonable expenses related to the purchase, sale or transmittal of Fund/Separate Account
assets. Clients may not be subject to one or more of the expense items described above.
D. Prepayment of Fees - As noted in Item 5(B) above, the management fee charged to the Funds
is paid quarterly in advance with respect to certain Funds and in arrears with respect to certain
other Funds. The management fee is prorated for any period that is less than a full quarter.
E. Additional Compensation and Conflicts of Interest - Neither HHR nor any of its supervised
persons accept any form of compensation for the sale of securities or other investment products.