Item 5: Fees and Compensation
General
Kildonan Castle provides investment advisory services to each of the Funds pursuant to separate
investment advisory and/or letter agreements (the “Agreements”). The Agreements for each Fund,
along with specific organizational documents of the Fund, set forth in detail the fee structure
relevant to each such Fund. The terms of the Agreements are generally established at the time of
the formation of the applicable Fund.
Kildonan Castle typically receives compensation from fees based on a percentage of assets under
management and profit allocations. Investors should review all fees charged by Kildonan Castle
and others to fully understand the total amount of fees to be paid by a Fund and, indirectly, by
their Investors.
Management Fee
The Funds pay Kildonan Castle an annual management fee (the “Management Fee”) at a rate of
1.5% (per annum). The Management Fee is payable quarterly in advance. Kildonan Castle and its
affiliates reserve the right to waive or reduce management fees for certain investors, including
employees, family members, strategic partners, advisors and consultants and others as may be
determined in Kildonan Castle’s sole discretion. In the limited circumstances when a
redemption/withdrawal is made as of a date other than the end of a calendar quarter, the
Management Fee will be appropriately pro-rated and the excess returned to the relevant Investor.
All fees received by Kildonan Castle are deducted directly from Fund or Investor accounts.
Profit Allocation
Generally, on the last day of a Fiscal Year or the date of a redemption, distribution or transfer of
an Investor’s shares/interest, a portion of each Fund’s new net income may be allocated to the
capital account of its Managing Member or Profit Allocation Shareholder as a “profit allocation.”
The manner of calculation of such profit allocation is disclosed in the Governing Fund
Documents, and may vary by fund. Generally, however, 15% - 17.5% of the investment profits of
the Funds are allocated as profit allocation to such Funds’ Managing Member/Profit Allocation
Shareholder subject to a High Water Mark. As is the case with Management Fees, Kildonan
Castle and its affiliates reserve the right to waive or reduce profit allocation for certain investors,
including employees, a limited number of strategic partners, advisors and consultants and others
as may be determined in Kildonan Castle’s sole discretion.
Other Expenses Charged to the Funds
In addition to management fees and profit allocations, the Funds’ Investors will bear indirectly the
fees and expenses charged to the Funds. The Master Fund will bear transaction fees and costs in
connection with its investments and trading, including assignment fees, hedging costs, spreads,
mark-ups on securities, swaps and forwards, commodity trading-related expenses, short dividends,
currency and other hedging costs, brokerage commissions (including options and futures trades),
interest expenses in respect of margin accounts, repurchase agreements and other indebtedness
and other similar costs and expenses. The Funds, as an investor in the Master Fund, will generally
each bear its pro rata share of these costs and expenses.
Investors should review all fees charged by Kildonan Castle, its affiliates, and others to fully
understand the total amount of fees to be paid by the Funds and, indirectly, their Investors.
Organizational Expenses
The Master Fund will pay (including through reimbursement of Kildonan Castle) the expenses of
organizing the Funds and the Master Fund and the initial offering of shares and interests in the
Funds.
Other Expenses
The Funds will each bear its own expenses, including but not limited to, the Management Fee and
fees payable to the Administrator, the Funds’ legal, accounting, administrative expenses, auditing,
tax preparation and other professional expenses, directors and officers insurance, the transaction
expenses described above, filing fees and expenses, custodial fees, bank services fees, the costs of
printing and distributing periodic and annual reports and statements, expenses relating to updating
Fund disclosure materials or terms of investment, regulatory and compliance expenses directly
related to the Fund, software, data bases and other technical and telecommunications services,
equipment used in the investment management process and hardware directly related to the Fund,
expenses paid to third-party vendors associated with the Funds’ internal accounting, order
management and risk management systems, interest on any indebtedness and other borrowing
charges, the costs of brokerage services (for additional information, see “Item 12: Brokerage
Practices,” below), the Funds’ pro rata share of the Master Funds’ operational expenses (as
described below) and the Funds’ pro rata share of the operational expenses of any acquisition
vehicles utilized (collectively, the “Operational Expenses”). To the extent that multiple funds or
accounts advised by Kildonan Castle benefit from the same Operational Expenses, Kildonan
Castle will equitably allocate such Operational Expenses among the Funds and such other funds
and accounts. Kildonan Castle and its delegates will each bear the costs of providing their
respective services to the Funds and the Master Fund, as applicable, including their general
overhead (including Kildonan Castle’s general regulatory and compliance expenses and the initial
and ongoing costs and expenses associated with registration of Kildonan Castle as an investment
adviser under the Advisers Act, if applicable), salaries of employees (including research analysts)
and office expenses. Included in such costs borne by Kildonan Castle are expenses in connection
with the ongoing offering of the shares and interests, including the cost of printing and
distributing offering materials and other marketing materials (including, travel and other expenses
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