ITEM 5. FEES AND COMPENSATION
As provided under the governing documents and investment management agreements of the Funds,
Lomas or its affiliates will receive from the Funds both a quarterly management fee at a fixed rate and
may also receive an annual performance allocation based upon the performance of the Funds, as described
below. Although Lomas has entered into agreements with the Partnerships providing for the below fees
or allocations, Lomas is permitted to negotiate alternative fees or allocations on a client-by-client basis
with other funds or separate account clients that it manages in the future. Different client facts and
circumstances will be considered in determining such fees or allocations, including the client’s investment
strategy, assets under management, account composition, investment restrictions, reporting requirements,
economies of scale, if any, and any other factors Lomas deems relevant. All such fees will be set forth in
agreements with such clients.
Management Fee
With respect to the Partnerships, Lomas is paid 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 Partnerships (each a “Capital Account”). For Lomas
Capital Funds and Lomas Enhanced Funds, the Management Fee is generally charged at a quarterly rate
of 0.375% (1.50% annually), and for Lomas peAk Fund, the Management Fee is generally charged at a
quarterly rate ranging from 0.125% (0.5% annually) to 0.3125% (1.25% annually). The Management Fee
is debited against each investor’s Capital Account and paid to Lomas for its services pursuant to the terms
of an investment management agreement. In the case of an investor admitted to a Partnership 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 or Lomas, as the case may be, is permitted to, 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”).
With respect to SMAs, Lomas is entitled to receive a Management Fee. Such Management Fees are
payable monthly or quarterly in arrears after receipt of an invoice for services rendered, as set forth in the
governing agreements with such SMA.
Performance Allocation
For each fiscal year, the General Partner or Lomas, as the case may be, may be entitled to a performance
allocation (the “Performance Allocation”). For Lomas Capital Funds and Lomas Enhanced Funds, the
Performance Allocation is 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. 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.
For certain clients, Lomas also maintains a Performance Allocation calculation where a “modified high
water mark” limitation is used. Under such calculation, a memorandum loss recovery account is
maintained with respect to each investor and is increased for each fiscal year by 200% of the aggregate
net capital depreciation, if any, allocated to such investor’s Capital Account for such fiscal year and
decreased (not below zero) by 100% of 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 only receive 50% of its Performance Allocation with respect to
that investor until such investor’s loss recovery account has been reduced to zero.
For Lomas peAk Fund, the Performance Allocation will generally have a range of 0% to 12.5% of any net
profit allocable to each investor for such fiscal year in excess of (i) any loss recovery with respect to such
investor’s Capital Account, as described below, adjusted for contributions, withdrawals and distributions
and (ii) the net profit or loss that would have been realized with respect to such investor’s Capital
Account had such Capital Account been invested in the S&P 500 Total Return Index (or other index as
agreed to between Lomas and underlying investors) for the applicable period. 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.
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