ITEM 5 – FEES AND COMPENSATION
Item 5.A Describe how you are compensated for your advisory services. Provide your fee
schedule. Disclose whether the fees are negotiable.
Panning Capital is generally compensated for its advisory services to the Funds
through an investment management fee (the “Management Fee”) based on a
percentage of assets under management. The Management Fee is payable
monthly in advance in an amount equal to 1/12 of 1.75% of value of each Series
A investor’s investment in the relevant Fund as of the first business day of each
month, 1/12 of 2.00% of value of each Series B investor’s investment in the
relevant Fund as of the first business day of each month and 1/12 of 1.25% of
value of each Series C investor’s investment in the relevant Fund as of the first
business day of each month. As noted above, Day 1 Investors are entitled to a
reduced Management Fee. Specifically, Day 1 Investors in Series A are subject
to a Management Fee rate of 1.5% per annum and Day 1 Investors in Series B are
subject to a Management Fee rate of 1.75% per annum.
Fees may be negotiable for certain investors under certain circumstances. The
Management Fee is waived or reduced for Panning Capital’s employees and their
family members.
In addition, consistent with the relevant provisions of the Advisers Act and Rule
205-3 adopted thereunder, affiliates of Panning Capital are entitled to receive
performance-based compensation in the form of a profit allocation (the “Profit
Allocation”) from the Funds based on net profits (including both realized and
unrealized gains and losses) allocated to each investor. The Profit Allocation is
made to Panning MM in its capacity as the managing member of the Domestic
Fund and to Panning GP in its capacity as the general partner of the Intermediate
Fund.
The Profit Allocations made by the Funds are subject to a loss carryforward
provision (a “high water mark”) such that no Profit Allocation will be made with
respect to an investor’s investment in a Fund until any net loss allocated to such
investor’s investment is first recovered (taking into account interim withdrawals,
redemptions and distributions). The Profit Allocation is calculated and made
annually at a rate of 17.5% of the net profit allocated to each Series A investor’s
investment in the relevant Fund during the period, a rate of 20% of the net profit
allocated to each Series B investor’s investment in the relevant Fund during the
period, and a rate of 12.5% of the net profit allocated to Series C investor’s
investment in the relevant Fund during the relevant period, subject in each case
to the high water mark procedure discussed above.
It is critical that investors refer to the relevant Fund’s confidential private
placement memorandum, confidential offering memorandum and other
governing documents for a complete understanding of how Panning Capital
is compensated for its advisory services. The information contained herein
is a summary only and is qualified in its entirety by such documents.
Item 5.B Describe whether you deduct fees from clients’ assets or bill clients for fees
incurred. If clients may select either method, disclose this fact. Explain how often
you bill clients or deduct your fees.
Fees are deducted from each Fund’s assets. Investors do not have the ability to
choose to be billed directly for fees incurred. The Management Fee with respect
to the Funds is generally payable monthly in advance and will be prorated in the
event of a contribution, withdrawal or redemption during the month. The Profit
Allocation is calculated and charged at the end of each fiscal year (or at the time
of an investor withdrawal or redemption).
It is critical that investors refer to the relevant confidential private
placement memorandum, confidential offering memorandum and other
governing documents for a complete understanding of how fees are deducted
from their assets. The information contained herein is a summary only and
is qualified in its entirety by such documents.
Item 5.C Describe any other types of fees or expenses clients may pay in connection with
your advisory services, such as custodian fees or mutual fund expenses. Disclose
that clients will incur brokerage and other transaction costs, and direct clients to
the section(s) of your brochure that discuss brokerage.
Each Fund bears its own administrative and operational expenses, including but
not limited to, the Management Fee and fees payable to the relevant Fund’s
administrator; any legal, administration, auditing, accounting (including third-
party accounting services), tax preparation and other professional expenses; bond
surveillance fees; due diligence costs; insurance expenses; transaction expenses;
market data expenses; filing fees and expenses (including regulatory filings made
in respect of the Funds such as Form PF preparation and filing expenses); research
expenses (including research-related travel); the costs of printing and distributing
annual reports and statements and expenses in connection with the ongoing
offering of the interests in each Fund, including the cost of producing and
distributing offering memoranda and other marketing materials, and expenses
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