Item 5: Fees and Compensation
A. Advisory Fees and Compensation.
Key Square or one of its affiliates typically receives compensation from each Client based on a
percentage of assets under management and a percentage of the performance achieved for such
Client. As described below, Key Square charges each applicable Client an annual management fee
equal to a percentage of the assets managed by Key Square, and each product (or in the case of a
master/feeder structure, the master fund) makes a performance-based allocation or pays a
performance-based fee, as applicable, equal to a percentage of its net appreciation, subject to certain
limitations further described below. Performance-based allocations and fees are calculated after
deducting certain expenses, including, without limitation, brokerage commissions, management
fees, operational and research costs (as more fully described below).
Generally speaking, 2 Key Square or an affiliate is expected to receive a management fee (the
“Management Fee”) from applicable Clients payable, in advance, at the beginning of each calendar
quarter at a rate of between 0.3725% (1.5% per annum) and 0.75% (3.0% per annum) of the net
asset value of assets under its management.
With respect to current Clients, certain affiliates of Key Square are expected to receive performance-
based compensation, equal to between 15% of the net capital appreciation attributable to each
applicable Client for the preceding fiscal year. In calculating the annual net capital appreciation of
each Client, prior losses are carried forward and must be made up before performance-based
compensation is made. Performance-based compensation is generally assessed at the end of the
fiscal year of the respective Client or upon full or partial withdrawal of an investor’s capital and
paid to certain affiliates of Key Square.
In the event that an investor is permitted or required to withdraw or redeem completely or partially
from any Client other than at the end of the fiscal year, generally the performance-compensation
with respect to such investor for such year will be determined, at the time of withdrawal, with
respect to the portion being withdrawn or redeemed through the applicable withdrawal date.
In general, fees of the Funds are not negotiable, although the applicable Investment Manager will
have the discretion to permit certain investors to invest in each Fund on different fee terms. There
are, and may in the future be, different or negotiated fee schedules and other terms negotiated
Some Clients currently (or may in the future) have lower or higher Management Fees for its investors, or no
Management Fee at all.
between Key Square and underlying Client investors. In addition, Key Square, either directly or
through one of its affiliates, has the discretion to waive all or a portion of the Management Fee
and/or performance-based allocations. In general, principals, partners and employees of Key Square
do not pay management fees and are not subject to performance-based allocations. In addition,
affiliates of Key Square, partners and employees (and former partners and former employees) of
Key Square, immediate family members of such persons, trusts or other entities primarily for such
persons’ benefit or for charitable purposes, friends and strategic investors may be granted a waiver
with respect to the management fees and the performance-based allocation, at the discretion of Key
Square or one of its affiliates. In addition, Key Square, the Funds or the General Partners have
entered, and may in the future enter, into side letters or similar written agreements with investors,
which have the effect of establishing rights under, or altering or supplementing the terms of, the
relevant governing documents including the Management Fee or performance-based allocation.
Existing and prospective investors and Clients should refer to their respective offering
memorandum or constituent documents, as applicable, for detailed information with respect to the
fees and expenses associated with each Client, as applicable. The information contained here is a
summary only and is qualified in its entirety by such documents.
B. Payment of Fees and Incentive Compensation.
The Investment Manager will deduct fees from the assets of each Fund’s investors invested in each
Fund. Investors in the Funds will not have the ability to choose to be billed directly for fees incurred.
Managed account Clients are expected to be invoiced for fees incurred.
C. Expenses.
In addition to the fees and compensation described above, each Client bears its own operational
expenses as more fully described in the offering documents of each Fund and Investment
Management Agreement of the Clients. Such expenses generally include, but are not limited to,
legal and other organizational expenses including all expenses relating to the initial and ongoing
offer and sale of interests and the negotiation of side letters, operating and other expenses, including,
but not limited to, investment-related expenses (e.g., consulting, advisory, investment banking,
valuation, legal and other professional fees relating to investments, broken deal expenses and other
transactional charges, fees or costs, research-related expenses, including, without limitation, news
and quotation equipment and services, market data services (e.g., Reuters) and/or portfolio risk
management services); brokerage commissions; clearing and settlement charges; custodial fees;
interests expenses legal expenses (including with respect to litigation and threatened litigation, if
any, including with respect to past holdings); any compliance expenses incurred in connection with
Fund operations and portfolio holdings, including regulatory filings (e.g., filings with the SEC
including Form PF and expenses related to the offering and sale of interests in compliance with the
Directive 2011/61/EU on Alternative Investment Fund Managers (the “AIFMD”) and Article 10 §
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