Item 5 – Fees and Compensation
PROSPECTIVE INVESTORS ARE STRONGLY ENCOURAGED TO CAREFULLY REVIEW NOT ONLY THIS BROCHURE, BUT
ALSO ANY APPLICABLE CONFIDENTIAL OFFERING MEMORANDA (“COM”). ALL DISCUSSIONS OR REFERENCES TO
ANY FUND IN THIS BROCHURE ARE QUALIFIED IN THEIR ENTIRETY AND MAY BE SUPPLEMENTED AND SUPERSEDED
BY THE APPLICABLE COM, SUBSCRIPTION AGREEMENT(S), AND/OR OTHER GOVERNING DOCUMENT(S)
(COLLECTIVELY, “FUND DOCUMENTS”).
A. Generally, we receive a management fee and an incentive allocation, where applicable and as described
below, from the Funds. Fees vary both among the Funds and between a Fund’s share classes.
B. Management fees and incentive allocations, as well as other terms, are more fully described in each Fund’s
respective Fund Documents. Typically, management fees for each applicable Fund are paid quarterly in
advance based on the value of each Investor’s capital account as of the first day of each calendar quarter or
the date of an Investor’s capital contribution, if other than the beginning of a quarter. In our sole discretion,
we may waive or modify the management fee for certain Investors, including, but not limited to, members,
partners, affiliates, or employees of Octagon or Octagon Investments GP, LLC (the “General Partner”),
relatives of each such person, and trusts or other entities for their respective benefit(s).
Fees related to the Octagon Special Opportunities Fund, LP, and each applicable series investment (the
“Special Opportunities Fund”), which are received for consideration in each series investment’s capital
commitments, due diligence, other services relating to financings or a Series’ exercise of management rights,
including, without limitation, directors’ fees, commitment fees, closing fees, monitoring fees, transaction fees
and investment banking fees (collectively, “Transaction Fees”) shall be paid to or retained by the General
Partner, the Investment Manager or their Affiliates. For the avoidance of doubt, break-up fees, if any, from
broken deals will not be treated as Transaction Fees, unless otherwise determined by the General Partner in
its sole discretion.
On a case by case basis, the General Partner, in its sole discretion, may waive a Fund’s management fees for
some investors.
Subject to any loss carryforward provisions (“High-Water Marks”) discussed in a Fund’s applicable Fund
Documents, we also generally receive an incentive allocation from each Investor at the end of each calendar
year via a reallocation from such Investor’s capital account to the General Partner’s capital account, calculated
at a specified percentage based on the terms of the applicable Fund Documents.
The General Partner or its affiliate receive performance compensation in the form of carried interest
distributions where earned and subject to the terms of the applicable Fund Documents. Carried interest
distributions made to the General Partner are subject to a “clawback” provision, where applicable, whereby
the General Partner or its affiliates may be required to return carried interest distributions as defined in each
Fund agreement. Such clawback may permit the General Partner to receive, as cash advance against carried
interest distributions, an amount sufficient to enable the General Partner or its affiliate to satisfy its tax liability
attributable to its right to receive such carried interest distributions.
C. Subject to the terms of the Funds’ Fund Documents, the Funds generally pay all costs and expenses related to
its investments and its operations, including brokerage and other transaction costs (please see Item 12 for a
discussion on our Brokerage Practices); data fees; clearing and settlement charges; outsourced trading service
expenses; trade break fees; research (including research-related travel expenses incurred with respect to
specific potential or existing investments and portfolio management systems) that fall within Section 28(e) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”); fees paid to consultants providing
services in respect of such systems; brokerage products, services, and systems (including order management
systems); legal fees and other expenses in connection with conducting due diligence and negotiating the terms
of investments (including investment-related travel expenses incurred with respect to specific potential or
existing investments), regardless of whether such investments are consummated; investment-related
expenses; custodial fees, consulting fees; directors’ and officers’ fees and expenses (including for individual
regulatory filings referable to a Fund); administrator fees and expenses; third-party valuation services;
expenses and costs of expert networks; expenses and costs of obtaining surveys, analysis, or other data sets
from third-parties related to investments or sectors in which the Fund may invest; attending investor and
industry related conferences; initial and variation margin, interest, and commitment fees on debit balances
or borrowings; stock borrowing fees (including, without limitation, dividend payments on short positions) and
proxy solicitation expenses; the amortized portion of organizational costs of the Funds (including a pro rata
share organizational costs); legal expenses (including expenses relating to regulatory or similar investigations,
inquiries and “sweeps”); audit and tax preparation expenses; accounting fees; insurance expenses including
costs of any liability insurance obtained on behalf of the Funds or officers’ and directors’ insurance;
government and regulatory costs and expenses (including filing and license fees and preparation and
submission of filings and licenses, including Section 13 filings, Form PF preparation and filing fees, blue sky
...