ITEM 5. FEES AND COMPENSATION
For our services to the Funds, we charge a Management Fee as described below. In
addition, Morris Associates, in its capacity as the General Partner of Fund I and as the
Manager of Fund II, may receive an annual performance allocation or carried interest, a
form of performance based compensation (hereinafter “Performance Fees”), as described
below.
MANAGEMENT FEES: In general, Morris Associates receives a monthly management
fee equal to 0.04165% to 0.0833% from each investor’s share of the Fund’s Net Asset
Value (the “Management Fee”). The Management Fee will generally be calculated and
payable to Morris Associates monthly, in arrears, as of the last day of each billing period.
PERFORMANCE FEES: Morris Associates, in its capacity as the General Partner of
Fund I and as the Manager of Fund II, is entitled to a percentage of the applicable Fund’s
distributions of net profits as performance compensation, generally 0% to 5%, only after
the applicable Limited Partner or Shareholder has received a return of its entire capital
contribution to the Fund and a preferred return as set forth in the applicable Fund offering
documents. In addition, generally, the distribution of performance compensation to the
General Partner or Manager is accelerated upon and with respect to any voluntary
withdrawal of profits by a Limited Partner or Shareholder, respectively.
GENERAL INFORMATION:
Personal Investments in Funds: Certain executive officers and/or other employees of
Morris Associates and/or their family members have invested or may invest a portion of
their personal net worth in one or more of the Funds. In addition, certain trusts and other
entities formed for the benefit of certain of the firm’s family members may invest in one
or more of the Funds.
Different Fee Schedules: The Management Fee and the Performance Fee may be
discounted or waived with respect to any investor for any particular period of time at the
sole discretion of Morris Associates. Such discounted rate or waiver is not available to all
or even most investors in the Funds.
Termination: In general, an investor in any of the Funds may withdraw all or any part of
its investment from any of the Funds as set forth in the applicable Fund’s offering
documents.
Investors in each Fund should refer to the appropriate Fund’s private placement
memorandum and offering documents for complete information regarding withdrawals
of investments.
Other Fees and Expenses: Prospective investors in any one of the Funds, each a fund of
funds, should note that he/she will incur at least two layers of fees: Our management fee
and performance based compensation, as set forth above, as well as the management fee
and/or a performance-based compensation charged by the underlying hedge funds in
which the Funds invest. This layering of fees is incorporated in the net income or loss of
the Funds, is not readily apparent to investors and will lower the investor’s overall return.
While it is not anticipated that mutual funds will be included in the clients' portfolios,
money market mutual funds may be used to “sweep” unused cash balances until they can
be appropriately invested. Investors should recognize that all fees paid to Morris
Associates for investment advisory services are separate and distinct from the fees and
expenses charged by mutual funds and other funds to their shareholders. These fees and
expenses are described in each fund's prospectus. These fees will generally include a
management fee, other fund expenses, and a possible distribution fee.
The Funds will also generally be responsible for certain Fund expenses, including, but
not necessarily limited to, legal expenses, professional fees (including, without limitation,
expenses of consultants and experts) relating to investments, accounting expenses,
auditing and tax preparation expenses, organizational expenses, government fees and
taxes, expenses incurred in connection with the offering and sale of the Fund’s interests
and other similar expenses related to the Fund. No Fund will be responsible for or
otherwise incur the expenses attributable to any other of the Funds.
In addition to fees paid to our firm, and to each of the underlying fund managers,
investors will also be responsible for the fees and expenses charged by custodians and
imposed by any broker dealer with which Morris Associates or an underlying fund
manager effects transactions for the Funds. Please refer to Item 12 of this brochure for
additional information regarding brokerage.
Side Letters: Morris Associates may in the future, waive or modify the terms of
investment for certain large or strategic investors, in side letters or otherwise, in its sole
discretion, including but not necessarily limited to, a waiver or lowering of the
Management or Performance Fees or fee structure. We may also agree to increased
transparency or reporting though we would typically provide similar increased
transparency and/or reporting to other investors upon their request.
“Side Pockets”: A portion of any of the Funds’ capital may, from time to time, be
invested in illiquid securities and instruments or which become illiquid after an
investment is made. Under these circumstances, Morris Associates has the authority to
hold such investments in separate, special situation sub-accounts (each a “Side Pocket”).
Side Pockets will generally carry significant or complete restrictions on transfer or
liquidation prior to the occurrence of events, which will typically be outside of our
control. A Fund investor may be required to hold Side Pocket assets for several years
before any disposition can be effected.
Direct Debiting: All fees are directly debited from each investor’s capital account as
appropriate.
General: The information provided above is merely a summary of some of the salient
terms and conditions of investing in the Funds. Investors and prospective investors
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