Item 5: Fees and Compensation
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.
Management Fee
Generally, the Management fees payable by the Feeder Funds for investment management
services (“Management Fee”) are payable monthly in advance, at a rate equal to 0.1042%-
0.1667% (1.25%-2% per annum) of the net asset value of each capital account corresponding
Investor account. A pro rata portion of the Management Fee will be paid out by any Investor
on subscriptions/redemptions made on any date that does not fall on the first day of a calendar
month, based on the actual number of days remaining in such partial month.
The precise Management Fee will be determined in relation to each Investor’s class of share
interest (“Interest”).
Magnolia Road Capital LP Form ADV Part 2A
In Magnolia Road’s sole discretion, the Management Fee may be waived, reduced or calculated
differently with respect to certain Investors, including employees and affiliates of the Adviser.
Performance Allocation
Generally, at the end of each fiscal year, an incentive allocation (the “Incentive Allocation”)
equal to 12.5%-20% of net capital appreciation is allocable to an affiliate of the Adviser and the
Funds’ seed investors, in the aggregate, and is determined at the time of an investor’s
withdrawal/redemption. Such incentive allocation is subject to a traditional high water mark.
With respect to those investors in the Funds that have opted to participate in side pocket
investments of the Funds, an incentive allocation with respect to those side pocket investments
will only be made on realized appreciation. In the sole discretion of the General Partner,
Incentive Allocation may be waived, reduced or calculated differently with respect to certain
Investors including employees and affiliates of the Adviser.
Expenses
Magnolia Road is responsible for and will pay all overhead expenses of an ordinary and
recurring nature in connection with its services to the Funds such as office space and utilities,
administrative services, and secretarial, clerical and other personnel to the Funds.
We will bear the costs of providing such goods and services, except to the extent such goods,
services, costs and expenses are (i) provided for through soft dollars generated by the Fund,
(ii) provided under arrangements with the Seed Investors or (iii) are Fund expenses as
provided below.
The Feeder Funds will bear their own expenses and its pro rata share of the Master Fund’s
expenses, including, without limitation, the Management Fee; transaction-related expenses
(“Transaction Expenses”) (which include all transaction-based expenses incurred in
executing investments including brokerage commissions, expenses relating to short sales,
clearing and settlement charges, expenses associated with consummating bank debt trades,
dealer spreads, custodial fees, bank service fees, interest expenses and legal expenses
associated with the consummation of a transaction); investment-related travel expenses
(which are travel expenses related to the purchase, sale or transmittal of, or due diligence
regarding, the Fund’s investments, whether or not such investments are consummated,
incurred by us); professional fees (including, without limitation, expenses of consultants,
investment bankers, attorneys, accountants and other experts) relating to investments; fees
and expenses of the Governance Committee; fees and expenses relating to software tools,
programs or other technology utilized in managing the Fund (including, without limitation,
third-party software licensing, implementation, data management and recovery services and
custom development costs but excluding, for the avoidance of doubt, all costs and expenses
of any order management systems utilized by us to manage the Funds); research and market
data (including, without limitation, any computer hardware and connectivity hardware (e.g.,
telephone and fiber optic lines) incorporated into the cost of obtaining such research and
market data); administrative expenses (including fees and expenses of the Administrator); legal
expenses; external accounting and valuation expenses (including, without limitation, the cost
of accounting software packages); audit and tax preparation expenses; costs related to errors
and omissions insurance; costs of printing and mailing reports and notices; entity-level taxes;
corporate licensing; regulatory expenses (including, without limitation, legal fees, filing fees and
costs associated with FATCA (as defined herein) compliance); organizational expenses;
expenses incurred in connection with the offering and sale of the Interests (including travel
expenses) and other similar expenses related to the Fund (other than any fees payable to any
placement agent, which will be paid by us either directly or indirectly by reducing the
Management Fees owed); indemnification expenses; and extraordinary expenses. Generally,
Magnolia Road Capital LP Form ADV Part 2A
Fund expenses, other than the Management Fee and any expenses which the General Partner
determines in its sole discretion should be allocated to a particular Partner or Partners and
expenses relating specifically to a Special Investment, will be charged to the Capital Accounts
of all the Partners on a pro rata basis. To the extent that expenses to be borne by the Fund
are paid by us, the Fund will reimburse such party for such expenses.
We may pay or advance to the Fund funds to pay for organizational expenses and expenses
incurred in connection with the initial offering and sale of the Interests and other similar
expenses related to the Fund. As such, we are entitled to reimbursement from the Fund.
Generally, Fund expenses, other than the Management Fee and any expenses which we or our
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