Item 5: Fees and Compensation
As compensation for our advisory services, KG receives a management fee and a performance
allocation. Detailed information concerning the management fee and performance allocation
arrangements for each of the Funds are set forth in the Offering Documents for each of the
Funds and a summary of such details follows below.
Management Fees and Performance Allocation
Investors in the Master Fund and Offshore Feeder Fund are subject to a monthly management
fee of 0% - 0.16667% (0% - 2.0% per annum) which is based upon the aggregate capital account
balance of each investor that are subject to a management fee in accordance with the share
class that they are subscribed to (before taking into account estimated any accrued
performance allocation).
KGMM receives a performance allocation of net profits (realized and unrealized) subject to a
hurdle rate and catch up provisions for Class A and Class B investors in the Master Fund and
Offshore Feeder Fund in accordance with the share class they are subscribed to. The
performance allocation is deducted and reallocated from each investor’s capital account, as
per the terms which are set forth in the Offering Documents. For Class A, the performance
allocation accrues monthly and is paid at the end of the calendar year. For Class B-1, which is
no longer offered, the performance allocation accrues monthly and is paid at the end of the
third year from each contribution date. For Class B-2, the performance allocation accrues
monthly and is paid at the end of each year.
Investors in KG European and KG Co-Invest are subject to specific management fees and
performance allocation terms, which are set forth in their respective Offering Documents. KG
European and KG Co-Invest pays to KG an annual management fee of 1.00%, which is paid in
arrears, and is based upon the amount of invested committed capital. Investors in KG
European and KG Co-Invest are subject to a waterfall distribution, calculated separately for
each investor based upon the investor’s pro rata share. KG European and KG Co-Invest may
distribute cash or shares, in its discretion and as prudent given market conditions.
KG may, in its sole discretion, waive or modify the management fee and other fees for
investors, employees or affiliates, relatives of those persons, and for certain large or strategic
investors.
Withdrawal Fee
Investors in Class A in the Master Fund and the Offshore Feeder Fund that withdraw all or
any portion of their interest prior to having held such interest for a full 12 months may be
subject to an early withdrawal fee equal to 5% of the amount withdrawn. Investors in Class B
in the Master Fund and the Offshore Feeder Fund that withdraw all or any portion of their
interest prior to having held such interest for a full 36 months may be subject to an early
withdrawal fee equal to 10% of the amount withdrawn. This fee will be treated as additional
profit to the Master Fund as of the withdrawal date and will be allocated pro rata except to
the interests of the withdrawing investor.
Investors in KG European are not subject to such early withdrawal fees nor are they allowed
any withdrawal rights.
Expenses
Master Fund and Offshore Feeder Fund
KG Funds Management LLC Form ADV Part 2A
In addition to the management fees, performance allocation and withdrawal fees, the Master
and Offshore Feeder Funds will be subject to certain expenses related to the provision of
KG’s advisory services. Such expenses include, without limitation, brokerage commissions and
all other investment expenses, insurance premiums, “bid”/“offer” spreads, interest expense
on borrowings, transfer taxes, custodial fees, transaction fees incurred in connection with
options, swaps and other derivative transactions, research-related expenses, due diligence
expenses, fees and expenses for consulting, the cost of business travel related to the Master
and Offshore Feeder Funds, the directors’ fees, audit and legal fees (or a portion thereof), the
administrator’s fees and expenses, accounting fees (or a portion thereof), organizational
expenses and other similar expenses. The Offshore Feeder Fund bears its proportionate share
of the operating expenses and may pay a portion of the Master Fund’s audit, legal and/or
accounting fees, in amounts it will determine in its sole discretion from time to time.
KG European and KG Co-Invest
In addition to the management fees and performance allocation, KG European and KG Co-
Invest will be subject to certain expenses related to the provision of KG’s advisory services.
Such expenses include, without limitation, all costs, expenses and liabilities associated with its
investments, offering of interests, audit, tax and legal fees, other professional and consulting
fees, custodial fees, interest expense on borrowings, organizational expenses, and other similar
expenses.
Each of the Funds are charged individually with the expenses which are relevant to the
provision of KG’s advisory services, as is set forth in each Fund’s Offering Documents.
For further details on expenses related to the Firm’s brokerage practices, please refer to