Item 5 – Fees and Compensation
Management Fees
Hinoki charges the Funds a monthly management fee calculated at an annual rate of 1.5% of the net
asset value of the capital account of each Fund investor (the “Management Fee”). The Management
Fee is paid monthly in advance, based on the value of each Fund investor’s capital account as of the
first Business Day (defined below) of each month. (A “Business Day” means any day on which
banks are open in New York.)
The Management Fee may be waived, reduced, rebated or calculated differently at the sole discretion
of Hinoki. In addition, certain seed investors receive a portion of the Management Fee monthly.
The Firm deducts the Management Fees directly from the Funds’ accounts monthly.
Hinoki intends to deliver this Brochure only to “accredited investors” within the meaning of
Regulation D of the Securities Act of 1933, as amended; and therefore, is not required to disclose its
Clients’ fee schedules.
Incentive Fees
At the end of each fiscal year, the General Partner, as the holder of certain allocation class shares in
Hinoki Investments, Ltd. (the “Master Fund”), receives at the Master Fund level an annual incentive
allocation equal to 20% of Master Fund net profits (including realized and unrealized gains and
losses), if any, attributable to each investor’s capital account established with respect to Interests,
subject to a loss carryforward provision (the “Incentive Allocation”).
Hinoki may waive or modify the Incentive Allocation for Fund investors that are members,
employees or Hinoki affiliates or the General Partner, relatives of such persons, and for certain large
or strategic investors. In addition, certain seed investors receive an allocation of the Incentive
Allocation.
When calculating the Incentive Allocation at the Master Fund level, net profits will be reduced by
the Management Fee, and all items of income, loss and expense incurred at the Fund level are taken
into account. Since the General Partner receives the Incentive Allocation at the Master Fund level,
no incentive fee or allocation is paid at the Fund level.
In the event that a Fund investor makes a complete or partial withdrawal or is required to make a
complete or partial withdrawal at any time other than the end of a fiscal year, the General Partner
will receive the Incentive Allocation with respect to the withdrawn amount, with respect to such
Fund investor, on the applicable withdrawal date; provided, however, that in the case of a partial
withdrawal, the General Partner may, at its sole discretion, elect to delay the deduction of the
Incentive Allocation until the end of the fiscal year, at which time it will assess the Incentive
Allocation on the entire performance of the Fund investor’s capital account since the last deduction
of the Incentive Allocation from such Fund investor’s capital account. The Fund’s fiscal years will
end on December 31.
Under a loss carryforward provision contained in the Fund’s Governing Documents, no Incentive
Allocation will be made from the capital account of a particular Fund investor until any net loss
previously allocated to the capital account of such Fund investor has been offset by subsequent net
profits. Any such loss carryforward will be subject to reduction for withdrawals on a pro-rata basis.
Hinoki’s fees are exclusive of investment expenses such as commissions, transaction fees, margin
interest and other related costs and expenses which are incurred by the Client. Clients may incur
certain charges imposed by custodians, brokers and other third parties, custodial fees, transfer taxes,
wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts and securities
transactions. Such charges, fees and commissions are exclusive of and in addition to Hinoki’s fee.
Item 12 further describes the factors considered in selecting or recommending broker-dealers for
Client transactions and determining the reasonableness of their compensation (e.g., commissions).
Valuation of Fund investments (which will indirectly determine the Management Fee and the
Incentive Allocation) may involve uncertainties and judgmental determinations, and if such
valuations should prove to be incorrect, Fund investors could be adversely affected. Independent
pricing information may not at times be available with respect to certain securities and other
investments, particularly illiquid investments. Accordingly, while we will use our best efforts to value
all investments fairly, certain investments may be difficult to value and may be subject to varying
interpretations of value.
Other Fees and Expenses
As permitted by the respective Governing Documents the Management Fee and Incentive
Allocation are exclusive of other fees and expenses. The Funds bear their respective operating costs
and expenses, including the following: such as legal, compliance, administrator, audit and
accounting expenses, shareholder proxy voting services, organizational expenses; investment
expenses such as commissions, research fees and expenses and custodial fees (provided, however,
that the Clients will only pay for research which constitutes research within the meaning of Section
28(e) of the Securities Exchange Act of 1934); interest on margin accounts and other indebtedness,
borrowing charges on securities sold short, bank service fees, Fund-related insurance costs and other
expenses reasonably related to the Clients. Item 12 further describes the factors considered in
selecting or recommending broker-dealers for Client transactions and determining the reasonableness
of their compensation (e.g., commissions).