Item 5 Fees and Compensation
A. Advisory Fees and Compensation
Separately Managed Accounts
Asset-Based Compensation
The Adviser charges each SMA Client an investment management fee (the “SMA Management
Fee”) based on the value of the SMA Client’s assets under management. The SMA Management
Fee will generally range from 1% to 3% of assets under management, based on account size and
the scope and complexity of the services to be performed. SMA Management Fees are
negotiable in the sole and absolute discretion of the Adviser.
Performance-Based Compensation
The Adviser may also be paid a performance-based fee (each, a “Performance Fee”), which is
compensation that is based on a share of capital gains on or capital appreciation of the assets of
an SMA Client. For an SMA Client to be charged a Performance Fee, the SMA Client must
either (i) demonstrate a net worth of $2.1 million (exclusive of the value of such SMA Client’s
primary residence) or at least $1 million under management with the Adviser or (ii) meet the
requirements imposed by the relevant governmental authority. The Performance Fee is generally
20% but is negotiable in the sole and absolute discretion of the Adviser.
Pooled Investment Vehicles
Asset-Based Compensation
With respect to a Fund, the Adviser will receive a management fee (each, a “Management Fee”)
that is either calculated at an annual percentage rate of (i) the capital account of each investor in
such Fund or (ii) the net asset value of each series of such Fund, as the case may be.
Management Fees are generally paid to the Adviser on a monthly or quarterly basis, depending
on the Fund. The terms of the Management Fee with respect to a Fund are described in detail in
the Offering Documents of such Fund. The Adviser, in its discretion, may waive all or a portion
of the Management Fee as to an investor, or may agree with an investor to other changes in the
Management Fee with respect to such investor.
Performance-Based Compensation
With respect to a Fund, the Adviser or an affiliate of the Adviser may receive, at the end of each
measuring or accounting period, an annual performance allocation or an annual incentive
allocation, as the case may be, equal to a percentage of such Fund’s net realized and unrealized
appreciation in assets (each, an “Incentive Allocation”). Each Incentive Allocation will be
subject to a “high water mark,” meaning that the Adviser or an affiliate of the Adviser will not
receive an Incentive Allocation with respect to an investor in a Fund until such investor has
recovered prior losses (as adjusted for withdrawals of capital). The terms of the Incentive
Allocation with respect to a Fund are described in detail in the Offering Documents of such
Fund. The Adviser or an affiliate of the Adviser, in its discretion, may waive all or a portion of
the Incentive Allocation as to an investor, or may agree with an investor to other changes in the
Incentive Allocation with respect to such investor.
Performance-based compensation will only be charged in accordance with Rule 205-3 under the
Investment Advisers Act of 1940, as amended (the “Advisers Act”).
The Adviser believes that its fees are competitive with fees charged by other investment advisers
for comparable services. Comparable services may be available, however, from other sources
for lower fees.
B. Payment of Management Fees and Incentive Allocations
The Adviser deducts Management Fees and Incentive Allocations (if any) from each Fund’s
account by instructing such Fund’s custodian. Management Fees are generally paid to the
Adviser monthly or quarterly, depending on the Fund. The Adviser or an affiliate of the Adviser
generally receives an Incentive Allocation, if any, from each investor in a Fund at the end of
such Fund’s fiscal year or earlier upon such investors’ withdrawal from such Fund.
With respect to each SMA Client, the Adviser will deduct the Management Fee quarterly in
advance directly from the SMA Client’s account. The Adviser will provide the SMA Client with
a report itemizing the fee, including the calculation period covered by the fee, the account value
and the methodology used to calculate the fee. It is the responsibility of the SMA Client to
verify the accuracy of these fees as listed on the custodian’s brokerage statement as the custodian
does not assume this responsibility. Each SMA Client provides written authorization permitting
the Adviser to be paid directly from their accounts held by the custodian as part of the
investment management agreement or other agreement, and separate account forms provided by
the custodian.
C. Other Fees and Expenses
In addition to paying Management Fees and, if applicable, Incentive Allocations, or other
compensation, Client accounts will also be subject to other investment expenses such as
custodial charges; brokerage charges, commissions and related costs; interest expenses; taxes,
duties and other governmental charges; transfer and registration fees or similar expenses; and
other portfolio investment expenses (including, investment advisory and other fees charged by
investment advisers with, or funds in, which the Client’s account invests) associated with
products or services that may be necessary or incidental to such investments or accounts. Client
assets may be invested in pooled investment vehicles. In these cases, Clients will bear their pro
rata share of the underlying fund’s operating and other expenses including, in addition to those
listed above: sales expenses, legal expenses, internal and external accounting, audit and tax
preparation expenses, and organizational expenses. Please refer to Item 12 below for a
discussion of the Adviser’s brokerage practices.
D. Prepayment of Fees
In all cases, expenses, the pro rata portion of the Management Fee and the Incentive Allocations
through the date of termination are charged to the Fund Client’s account. All prepaid but
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