Item 5. Fees and Compensation
Management Fees
Pursuant to investment management agreements and the governing documents of the Moon Capital
Funds, Moon Capital charges a quarterly Management Fee of up to 0.5% per quarter (2.0% per annum)
of the net assets or capital of each Moon Capital Fund that it manages. The Management Fee differs
both within certain Moon Capital Funds and across the various Moon Capital Funds.
The Management Fee for the Moon Flagship Fund is paid to Moon Capital from the proceeds of
realization(s) or deemed realization(s) of Special Investments.
If new or additional investors make investments to a Moon Capital Fund on any date other than as of the
first day of a calendar quarter, a pro rata portion of the Management Fee will be paid out of the
subscription amount, based on the actual number of days remaining in such partial quarter. If an
investor redeems at any time other than as of the last day of a calendar quarter, a pro rata portion of the
Management Fee (based on the actual number of days remaining in such partial quarter) attributable to
the amount being redeemed will be repaid by Moon Capital to the applicable Moon Capital Fund, for the
benefit of the redeeming investor.
Moon Capital, in its discretion, may elect to reduce, waive or calculate differently the Management Fees
with respect to affiliated entities, Mr. Moon, his family members, certain professional personnel of
Moon Capital and its affiliates and trusts and other entities established for the benefit of such persons
(collectively, “Affiliated Investors”) or other investors.
Moon Capital (a) generally waives Management Fees for Affiliated Investors and (b) has entered, and
may in the future enter, modified Management Fee arrangements with investors that are not Affiliated
Investors (each, together with its affiliates, an “Unaffiliated Investor”) on terms more favorable than
those described herein conditioned upon (i) satisfaction of increased investment minimums by such
Unaffiliated Investor(s), (ii) a commitment by such Unaffiliated Investor(s) to remain invested in the
relevant Moon Capital Fund for a specified period of time and/or (iii) such other factors as Moon Capital
may deem appropriate.
The Moon Performance Plus Fund’s investors are all currently Affiliated Investors from whom Moon
Capital does not receive Management Fees.
Incentive Allocations
Moon Capital is entitled to receive a percentage of investment profits in the form of performance-based
allocations (the “Incentive Allocations”) from the Moon Capital Funds. Accordingly, an amount,
generally calculated as of the end of each fiscal year (other than an unrecovered loss year in which the
“modified high water mark” is in effect), equal to up to 30% of the net realized and unrealized
appreciation in the net asset value of the applicable Moon Capital Fund during each fiscal year (adjusted
for any redemptions made during the fiscal year) will be reallocated from the net asset value of the
capital account or series of shares, as applicable, of investors in such Moon Capital Funds to Moon
Capital. In calculating appreciation upon which the Incentive Allocation is based, appreciation or
depreciation from realized (or deemed realized) illiquid investments that have been designated as
Special Investments will be included, but unrealized appreciation or depreciation of such Special
Investments will not be included. The net asset value of the capital account or series of shares, as
applicable, of investors will be reduced as a result of the Incentive Allocation.
In certain Moon Capital Funds, the Incentive Allocations are subject to a “modified high water mark”
calculation. Generally, this modified high water mark comes into effect if the net asset value of an
investor’s series of shares or capital account in a Moon Capital Fund decreases in any given year (other
than as a result of a redemption). In this case, the Incentive Allocations in future years will be reduced
to a lower percentage of the net realized and unrealized appreciation in the net asset value of an
investor’s capital account or series of shares in a Moon Capital Fund until that investor recovers the
previously incurred loss in the net asset value of that investor’s capital account or series of shares plus
an additional amount in excess of such previously incurred loss (adjusted for redemptions). After the
modified high-water mark is overcome (by recovering the net loss plus the excess amount), the Incentive
Allocation percentage reverts to its original percentage on subsequent increases in net asset value. The
modified high-water mark will be appropriately adjusted for redemptions.
Thus, notwithstanding the fact that past losses have not been fully recovered, a capital account or series
of shares may be subject to a reduced Incentive Allocation.
The Incentive Allocations and “modified high water mark” calculations differ both within certain Moon
Capital Funds and across the various Moon Capital Funds.
In the event a Moon Capital Fund is terminated other than as of the end of a fiscal year or an investor
redeems other than as of the end of a fiscal year, an Incentive Allocation will be reallocated to Moon
Capital with respect to the redeemed amount through the date of termination or the redemption date, as
applicable.
If an investor has an interest in a Special Investment, but no longer has an interest in the applicable
Moon Capital Fund, the amount that must be recovered before an Incentive Allocation will be made will
revert back to the original, unadjusted amount. Accordingly, the amount of new losses that must be
recovered will equal actual losses dollar-for-dollar without increasing the modified high-water mark by
150%. Any appreciation in excess of such actual losses will be subject to the full Incentive Allocation
rate. The Incentive Allocation will be made upon the realization or deemed realization of the Special
Investment.
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