Item 5. Fees and Compensation
Under its investment advisory agreements, Northern Fund Management America LLC. is either paid by
Northern Fund Management Bermuda Ltd 95% of the revenue earned less expenses by the Northern Fund
Management Bermuda Ltd pursuant to its own investment advisory agreements or paid by an Investment
Vehicle a fee equal to 1.5% per year of the aggregate capital commitments during the commitment period
and thereafter 1.5% per year of the original cost basis of portfolio investments still held by the Investment
Vehicle and not written off by the Investment Vehicle, subject to other arrangements with certain investors.
Under its investment advisory agreements, the Northern Fund Management Bermuda Ltd is paid by an
Investment Vehicle a fee equal to 1.5% per year of the original cost basis of portfolio investments still held
by the Investment Vehicle and not written off by the Investment Vehicle, subject to other arrangements with
certain investors.
Under its investment advisory agreements, the Northern Shipping Fund Management LLC is paid by an
Investment Vehicle a fee equal to 1.5% per year of the original cost basis of portfolio investments still held
by the Investment Vehicle and not written off by the Investment Vehicle, subject to other arrangements with
certain investors.
While the Advisers endeavor to pass along portfolio investment related transaction expenses of the
Investment Vehicles to its counter-parties, the Investment Vehicles may be subject to other portfolio
investment transaction and fund expenses, including (i) transaction expenses incurred in connection with
the sourcing, evaluation and potential acquisition of portfolio investments, regardless of whether such
acquisitions are actually consummated, and in connection with the purchase, holding, monitoring, exchange
and sale of portfolio investments and other assets, including, but not limited to, placement fees, asset
specialist fees, sales commissions, appraisal fees, taxes, brokerage fees, underwriting commissions and
discounts, unaffiliated third-party investment banking fees, advisory fees, custodial, trustee, record keeping
and other administration fees, and information services; (ii) legal, auditing, consulting, accounting, valuation
services, loan servicing, and other professional expenses; (iii) organizational costs; (iv) costs and expenses
for the preparation of financial statements, tax returns and IRS Schedules including K-1 and 8621; (v)
expenses attributable to regulatory filings to the extent made with respect to an Investment Vehicle or its
assets; (vi) litigation expenses of an Investment Vehicle; (vii) insurance premiums; (viii) taxes, fees and
other governmental charges; (ix) winding up expenses; (x) expenses relating investor defaults; (xi) litigation
and the amount of any related judgment or settlement; (xii) costs and expenses related to Investment Vehicle
advisory committee, board and investor meetings; and (xiii) expenses incurred in connection with any
restructuring or amendments to the governing documents of an Investment Vehicle; (xiv) any indemnification
obligation and any other indemnity contribution or reimbursement obligations of an Investment Vehicle. The
Investment Vehicles may invest through intermediate holding companies, and in connection therewith, will
bear their pro rata share of the holding companies’ operating and other expenses including, in addition to
those listed above: sales expenses, legal expenses; internal and external accounting, audit and tax
preparation expenses; and organizational expenses.
The allocation of expenses by each of the Advisers between it and any client and among clients represents
a potential conflict of interest for the Advisers. The Advisers have adopted an expense allocation policy that
is designed to address this potential conflict. The Advisers allocate direct expenses to each client in
accordance with the client's arrangements with the Adviser (including applicable client disclosures). The
Advisers seek to allocate shared expenses for products and services benefitting the Advisers and the client
and not covered in the client's arrangements in a fair and reasonable manner. The Advisers allocate
common client expenses among multiple clients primarily pro rata based on assets under management as
of the beginning of each period in which the expenses are paid. The Advisers may deviate from this standard
allocation method if it determines that an expense disproportionately benefits a particular client or group of
clients.
The Advisers also serve as administrative agent for third parties with respect to certain investments in which
its clients may have an interest, and it may receive fees from those third parties for providing services as
administrative agent.