Item 5 – Fees and Compensation
Management Fee and Incentive Allocation
The Adviser receives from each of the Onshore Fund and the Offshore Fund (the “Funds”) a monthly
investment management fee (the “Management Fee”) at an annualized rate up to 1.5%, depending on the
share class. The Management Fee is assessed on a monthly basis, in arrears. The Funds currently offer
two classes of shares which have differing terms, including fee structures.
In addition, as of the end of each calendar year and as of any date on which an investor
withdraws/redeems or receives a distribution from either Fund (an “Incentive Allocation Calculation
Date”), the relevant Fund will ordinarily determine and credit to an affiliate of the Adviser (either directly
in the Onshore Fund or indirectly at the master fund level for the Offshore Fund) a special allocation of
profits (the “Incentive Allocation”) in an amount equal to twenty percent (20%) of the Net New Profit in
respect of the relevant investor’s account at such time. “Net New Profit” is any amount by which the
NAV of an investment account exceeds the “High Water Mark” for such account, which is the NAV of
the account immediately after the assessment of the most recent Incentive Allocation (adjusting for the
amount of any contributions to and withdrawals/redemptions or distributions from such account since
such assessment) or, if the account has never been assessed an Incentive Allocation, the aggregate amount
of the capital contributions to such account (adjusting for the amount of any contributions to and any
withdrawals/redemption or distributions from the Account since it was established). Notwithstanding the
foregoing, for Class B investors, the Incentive Allocation will be reduced to the extent that the annualized
investment return for the relevant account would be less than five percent (5%) on a non-cumulative basis
after the assessment of the Incentive Allocation. In addition, for the Class B investors, the High Water
Mark will be the greater of (i) the High Water Mark as described above and (ii) the end-of-year NAV of the
relevant account two (2) years prior to the relevant Incentive Allocation Calculation Date (adjusted for the
amount of any contributions to and withdrawals/redemptions or distributions from such account since
such year-end).
In valuing the assets of a client’s investment account for the determination of the Incentive Allocations,
the Adviser includes: for securities for which market quotations are readily available, the realized capital
losses and unrealized capital losses of securities over the period and, if the unrealized capital appreciation
of the securities over this period is included, the unrealized capital depreciation of securities over the
period. As such, we may receive increased compensation with regard to unrealized appreciation.
The Management Fee and Incentive Allocation may be waived or reduced for any investor, including for
investments made by principals, officers, or knowledgeable employees.
Expenses
Each Fund’s direct operational costs and expenses are expected to consist primarily of: (i) Management
Fees; (ii) custodial, administrative, legal, accounting, auditing, record-keeping, appraisal, tax form
preparation, compliance and consulting costs and expenses (including costs and expenses associated with
obtaining systems and other information designed to facilitate the Fund accounting or record-keeping,
including related hardware and software); (iii) professional fees, costs and expenses of third-party service
providers that provide such services (including fees, costs and expenses of attorneys retained by the
Adviser to represent the Adviser in connection with the business and affairs of the Fund, to the extent
such fees, costs and expenses relate to advice provided to the General Partner or the Investment Manager
by such attorneys with respect to such business and affairs); (iv) bank service fees; (v) costs and expenses
associated with preparing investor communications; (vi) printing and mailing costs and expenses; (vii)
insurance costs and expenses (including premiums for liability insurance covering the Fund and other
persons); (viii) expenses of preparing, printing and filing reports and other documents with any
government agencies; (ix) fees and taxes imposed by any federal, state, local or foreign government,
governmental agency or regulatory body or self-regulatory organization, including licensing, filing,
registration and exemption fees and withholding, transfer and franchise taxes; (x) the Fund’s
indemnification obligations under the Limited Partnership Agreement and other agreements to which the
Fund may be a party; and (XI) extraordinary costs and expenses, if any.
Master Fund Expenses
In addition, as a shareholder of the Master Fund, each Fund also bears its allocable share of the costs and
expenses of the Master Fund which are expected to consist, in addition to those expenses described above
for the Fund, primarily of: (i) costs and expenses incurred by the Adviser in connection with investigating
investment opportunities for the Master Fund and reviewing the continuing suitability of the Master
Fund’s investments in light of the Master Fund’s investment objectives (including related travel, lodging
and entertainment expenses); (ii) costs and expenses incurred in connection with the investment and
reinvestment of the Master Fund’s assets, including brokerage commissions, dealer mark-ups, mark-downs
and spreads, and related clearing and settlement charges; (iii) borrowing charges and other costs and
expenses associated with short sales; (iv) interest expense and loan commitment fees relating to the Master
Fund’s borrowings (including margin debt and obligations under repurchase agreements); (v) fees and
expenses related to software tools, programs or other technology utilized in managing the Master Fund
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