Item 5: Fees and Compensation
KCL’s compensation for the investment advisory services it provides to the Master Fund and
Sub-Advisory Accounts is comprised of an asset-based management fee and an incentive
allocation that is based on the performance achieved for the account. The fees, expenses and
incentive allocation with respect to the Sub-Advisory Accounts are set forth in the agreements
between KCL and the investment advisers of the private funds.
The fees applicable to each Fund are set forth in detail in each Fund’s offering documents. A
brief summary of such fees is provided below.
KCL Capital, L.P. Form ADV Part 2A
Management Fee
KCL is paid a management fee, payable in advance of each quarterly period, as compensation
for the services to be performed by the Investment Manager (the “Management Fee”). In the
Master Fund, unless otherwise determined by the General Partner, the Management Fee will
be calculated at the Onshore Fund and Offshore Fund level on an interest-by-interest and
series-by-series basis, paid at the Master Fund level and charged at the Master Fund level to
the corresponding sub-capital accounts attributable to each underlying Investor.
The Management Fee for KCL Capital L.P and KCL Capital Offshore Fund Ltd will range between
1.00 % to 1.75% on an annualized basis, depending on the class of interests or shares. The
Management Fee is equal to a percentage on an annualized basis of the net asset value of the
interests or shares, as applicable, and is determined as of the beginning of each quarterly
period.
Adjustments to the Management Fee
The amount of any accrued Incentive Allocation (defined below) will be excluded from the
calculation of the Management Fee.
If a new Investor makes an initial investment at any time other than the first day of a quarterly
period, or an existing Investor makes an additional subscription at any time other than the
first day of a quarterly period, the portion of the Management Fee payable with respect to
such new Investor, or with respect to such existing Investor with respect to its additional
subscription, for the partial quarterly period will be prorated based on the number of days
then-remaining in such quarterly period. For the avoidance of doubt, there will be no
adjustment to the Management Fee paid with respect to any Investors to reflect such
additional investment until the start of the following quarterly period.
The Investment Manager may reduce, waive, assign, participate or otherwise share or modify
the Management Fee payable with respect to any Investor (including the General Partner and
any affiliates of the General Partner or Investment Manager) without the consent of or notice
to any Investor.
The General Partner and/or Investment Manager, as applicable, shall have the authority to alter
or change the manner and method of calculating and/or paying the Management Fees for the
purpose of ease of administration, including, without limitation, charging such Management
Fees at the Master Fund level.
The Sub-Advisory accounts provide for payment to us of either an advance draw or a
management fee ranging from 0.50%-1.00% calculated on “Notional Capital” 1 as of the
beginning of each month calculating separately with respect to dollar-denominated tranches
and paid within 15 days following the last day of the month.
Generally, “Notional Capital” is the amount of capital that the Portfolio Manager is deemed to be
investing for the benefit of the Accounts in line with the Investment Program.
KCL Capital, L.P. Form ADV Part 2A
Incentive Allocation and Performance Fees
The Master Fund General Partner will be entitled to an incentive allocation (the “Incentive
Allocation”). The “Incentive Allocation Percentage” will be between seventeen point five and
twenty percent (17.5-20%) with respect to all classes of interest and shares in the Funds.
The Incentive Allocation will be allocated at the Master Fund level but will be calculated with
respect to each interest or series of share in the Onshore Fund and Offshore Fund such that
any feeder fund-level income and expenses will be taken into account for purposes of
calculating such Incentive Allocation. The Incentive Allocation will be debited from the
Onshore Fund’s and Offshore Fund’s capital account in the Master Fund (and from the
corresponding sub-capital accounts with respect to the portion of such Incentive Allocation
attributable to each interest in the Onshore Fund and series of shares in the Offshore Fund)
and credited to the capital account of the General Partner at the Master Fund level. The
Incentive Allocation will be allocated on a sub-capital account by sub-capital account basis at
the Master Fund level with respect to each interest in the Onshore Fund and series of shares
in the Offshore Fund.
Upon final allocation thereof, the General Partner may withdraw the Incentive Allocation at
any time, including, without limitation, to satisfy tax liabilities with respect thereto, without
the consent of or notice to any Investor.
The Sub-Advisory accounts generally provide for payment to us of:
(i) An annual “Performance Fee” equal to 17.5%-20% of net profits over any loss
carry forward through the end of such period.
(ii) We are entitled to an advance “Draw” on our Performance Fee that is carried
forward as a reduction to future Performance Fees until the full amount of the
aggregate unearned Draw is earned, and subsequently reduces dollar-for-dollar,
such Performance Fees.
The General Partner and/or Investment Manager, as applicable, will have the right to reduce,
waive, assign, participate, share, reallocate or modify the Incentive Allocation allocable with
respect to any Investor (including the General Partner and any affiliates of the General Partner
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