Item 5 - Fees and Compensation
Below is a discussion of how the Adviser is compensated in connection with providing
advisory services to its Clients. The Adviser may enter into different fee arrangements on a
client-by-client basis.
Management Fees. The fees and expenses associated with each Managed Account are
negotiated and are described in detail in each Client’s Governing Documents.
The Funds pay a quarterly management fee (the “Management Fee”) which is calculated and
payable in advance as of the beginning of each calendar quarter, based on the net asset value
of each investor’s capital account in the Funds (each a “Capital Account”) generally at a rate
of 0.375% (1.50% annually). The Funds also maintain a Founders Class of shares which is
charged a rate of 0.1042% (1.25% annually), as calculated above. The Management Fee is
debited against each Fund investor’s Capital Account and paid to the Adviser for its services
pursuant to the terms of an investment management agreement between the Fund and the
Adviser. In the case of an investor admitted to the Fund after the first business day of the
relevant calendar quarter, the Management Fee will be pro-rated based on the admission date
of such investor. For investors who redeem prior to the end of the calendar quarter, the
Management Fee will be pro-rated and credited to the investor’s Capital Account.
The General Partner may, in its sole discretion, reduce or waive the Management Fee with
respect to any Capital Account of any investor including, without limitation, Capital
Accounts of employees or related affiliates of such employees (collectively, the “Related
Persons”).
For Managed Accounts, the Adviser is compensated as per the Governing Documents that
are negotiated with each Managed Account which generally provides for monthly or
quarterly management fees that are invoiced and paid in advance or in arrears. If advisory
services are terminated prior to the end of a billing cycle, the Managed Account will receive
a refund of excess fees paid in advance, or a prorated invoice if fees are paid in arrears.
Performance Allocation. For each fiscal year, the General Partner of the Funds will be
entitled to a performance allocation (the “Performance Allocation”) generally equal to the
aggregate of 20% of any net profit allocable to each investor for such fiscal year in excess
of any loss recovery with respect to such investor’s Capital Account, as described below,
adjusted for contributions, withdrawals and distributions. The Funds also maintain a
Founders Class of shares which entitles the General Partner to 17.5% of net profit, as
described above. Performance Allocations are subject to a “high water mark” limitation,
whereby a memorandum loss recovery account is maintained with respect to each investor
and is increased for each fiscal year by the aggregate net capital depreciation, if any,
allocated to such investor’s Capital Account for such fiscal year and decreased (not below
zero) by the net capital appreciation, if any, allocated to such investor’s Capital Account for
such fiscal year. In the event that an investor’s loss recovery account ends a fiscal year
above zero, the General Partner will not receive a Performance Allocation with respect to
that investor until such investor’s loss recovery account has been reduced to zero. The
Performance Allocation will be allocated from Capital Accounts as of the close of each
fiscal year (and as of each other date on which the General Partner determines it is
appropriate or necessary to make a determination of the Performance Allocation with
respect to an investor, including a date on which an investor withdraws all or a portion of
its Capital Account).
The Adviser or the General Partner may, in their sole discretion, reduce or waive the
Performance Allocation with respect to any Capital Account of any investor including,
without limitation, Capital Accounts of Related Persons.
For Managed Accounts, the Adviser is compensated as per the Governing Documents
negotiated with each Managed Account, which provides for a performance-based fee based
on net profit or net gain that is invoiced to the Managed Account and paid in arrears.
Direct Client Expenses. Each Fund bears all cost and expenses arising in connection with
the operation of such Fund, and (in the case of the Onshore and Offshore Fund), indirectly,
its pro rata share of costs and expenses arising in connection with the operations of the
Master Fund, including, without limitation, (a) organizational and offering expenses; (b)
expenses associated with investments and transactions considered, evaluated and/or
consummated, as well as overall consideration and evaluation of the portfolio, including,
without limitation, those expenses incurred in the ordinary course of business, including,
without limitation, expenses associated with sourcing, negotiating, investigating,
researching, financing and structuring of investments and potential investments, whether or
not consummated, including, without limitation, data and research on boarding, ingestion,
aggregation, and analysis, third-party research, data, analytics, modeling, risk, structuring,
pricing, execution and other third-party information systems, including, without limitation,
installation and maintenance, software and service fees (including, without limitation, the
expenses with respect to data, data feeds, subscriptions, expert networks, political
intelligence providers and reports); (c) the costs of research-related computer hardware and
software expenses, including, without limitation, Bloomberg terminals and subscriptions
and other market information systems, as well as the costs of research management systems
and corporate access tracking systems; (d) the costs of the portfolio management system
and any other software used for accounting and/or monitoring of the portfolio, including,
without limitation, subscriptions relating to, among other things, trading and order
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