ITEM 5. FEES AND COMPENSATION
A. The specific terms of Hill Country’s fees and compensation arrangements are set forth
in each of the Fund’s Offering Documents. The Firm generally charges an annual
management fee (“Management Fee”) which ranges from 1% - 1.75% of Investor
commitments during a Fund’s investment period. Hill Country may, in its sole
discretion, reduce, waive or calculate differently the Management Fee with respect to
any Investors including, without limitation, Investors that are affiliates of Hill Country,
which include the Principals for whom the Management Fee has been waived.
Along with the Management Fee, Investors are generally subject to a performance-
based profit allocation (“Carried Interest”) with respect to realized investments as
further described under Item 6 of this Brochure. The Carried Interest (if due) is payable
to Hill Country Special Opportunities Fund GP, LLC (“General Partner”), an affiliate of
Hill Country, which serves as the General Partner of the Funds. If a Fund’s Carried
Interest results in an over distribution of the agreed upon percentage of Carried Interest
as of certain measurement dates specified in the Offering Documents, the General
Partner is generally subject to an after-tax “claw back” obligation. Carried Interest is
generally calculated as a percentage of profits after Investors have received a preferred
return. The maximum Carried Interest allocable to the General Partner is 20% of the
realized profits derived from the disposition of investments (after taking into account
costs and expenses of the Hill Country Fund, including Management Fees, and
following a preferred return to Investors of up to 8% annually). The General Partner
may, in its sole discretion, reduce, waive or calculate differently Carried Interest with
respect to any Investors including, without limitation, Investors that are affiliates of Hill
Country, which include the Principals for whom the Carried Interest has been waived.
B. Hill Country generally deducts the Management Fee from the Funds’ accounts quarterly
in advance, as further disclosed in each Fund’s Offering Documents.
C. In addition to the Management Fee described above, each Fund bears all costs and
expenses associated with the organization and offering of such Fund and its pro rata
share of the costs and expenses associated with the organization of the General Partner
and any Hill Country Fund in which such Fund directly or indirectly invests, including
any legal and accounting fees, printing costs, travel and out-of-pocket expenses and
expenses related to the compliance with any applicable federal and state laws, except as
otherwise determined by the General Partner. In addition to the Management Fee and
the organizational and offering expenses, each Fund will pay all costs and expenses
arising in connection with such Fund’s operations and its pro rata share of the costs and
expenses arising in connection with the operations of any Hill Country Fund in which
such Fund invests. Such expenses include, without limitation: all costs and expenses
related to investments or prospective investments (whether or not consummated) such
as external research fees (including travel, legal, diligence and other advisory fees and
expenses); mark-ups, brokerage fees and commissions and similar expenses, including
any expenses related to hedging activities or short sales, clearing and settlement
charges, custodial and depositary fees and any expenses related to the negotiation of
agreements with brokers and trading counterparties; interest and commitment fees and
expenses on debit balances or borrowings, borrowing charges on investments sold short
and any other expenses related to financing investments; custody fees and bank service
fees; amounts for taxes incurred by any Hill Country Fund (as determined by the
General Partner) and fees and expenses of the “partnership representative” of any Hill
Country Fund; any governmental, regulatory, licensing, filing or registration fees
incurred by such Fund, the General Partner or the Firm in compliance with any U.S.
federal, state or local or non-U.S. laws or the rules of any self-regulatory organization;
to the extent permitted by applicable law, and subject to the
indemnification/exculpation provisions in the applicable Offering Documents, any
legal fees and costs (including settlement costs) arising in connection with any litigation
or regulatory investigation instituted against any Hill Country Fund, the General
Partner or the Firm, each in its capacity as such (whether incurred by a Hill Country
Fund or the General Partner or Hill Country or on any Hill Country Fund’s behalf); all
expenses incurred in connection with any supplements or amendments to or
restatements of the constituent documents of the Hill Country Fund and any related
entities, including the General Partner; expenses of negotiating and entering into
agreements (including side letters) with any Investor or proposed by a potential
investor, and modifications and amendments to such agreements; all (or such pro rata
portion, as determined by Hill Country, of) fees and expenses related to any acquisition
vehicle utilized to facilitate Fund investments (including legal, administrative,
valuation, custodial, audit, registered office and other fees); fees and expenses of any
advisory committee and any independent investor representative; the cost of the audit
of the Hill Country Funds’ financial statements and the preparation of their tax returns
and the fees and expenses for financial and tax accounting and reporting services, and
administrative services on behalf of the Hill Country Funds to the extent performed by
persons other than the General Partner or Hill Country; any administrator’s or valuation
agent’s fees and expenses and external pricing service fees, as well as fees and expenses
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