Item 5: Fees and Compensation
DESCRIPTION OF COMPENSATION AND BASIC FEE SCHEDULE
In consideration of our advisory services, we and/or our affiliates generally are entitled to receive management fees
and/or performance-based fees or allocations from each of the Funds and with respect to each investor. The fees
applicable to each Fund are described in detail in the applicable governing and offering documents. A brief
summary of our advisory fees is set forth below.
Apogee Fund
With respect to each investor who was admitted to the Apogee Fund after June 30, 2005, we are entitled to receive
management fees, payable quarterly in arrears, equal to 0.375% (1.5% per annum) of the net assets of the capital
account of each such investor. With respect to each investor who was admitted to the Apogee Fund on or before
June 30, 2005, we are entitled to receive management fees, payable quarterly in arrears, equal to 0.25% (1.0% per
annum) of the net assets of the capital account of each such investor.
With respect to investors admitted to the Apogee Fund on or after June 1, 2002, we are entitled to receive incentive
allocations equal to 20% of each investor’s allocable share of net profits for the applicable performance period.
With respect to investors admitted to the Apogee Fund prior to June 1, 2002, we are entitled to receive incentive
allocations equal to 20% of each investor’s allocable share of net profits for the year in excess of a “hurdle return
amount.” A hurdle return amount is equal to 3% per annum of the net asset value of such investor’s capital account
at the beginning of the year, as described more fully in the offering memorandum. Incentive allocations are subject
to a “high water mark” limitation. As a result, we receive no incentive allocation when the amount of an investor’s
interest has fallen below an amount at which the incentive allocation was previously assessed.
General
We and/or certain of our affiliates may alter the management fees, Early Withdrawal Fees (as defined below),
performance allocations and/or carried interests in our discretion.
Our advisory fees with respect to each Fund and each investor generally are not negotiable. However, Paradigm
may enter into arrangements with certain investors that grant different terms (including lower fees) to such investors
than the terms generally applicable to other investors.
PAYMENT OF FEES
Apogee Fund
Management fees are payable by investors quarterly, in arrears, as of the last business day of each calendar quarter.
Management fees are deducted directly from the capital account of each investor. Incentive allocations are allocated
directly from the capital account of each investor as of the end of each applicable calendar year.
OTHER FEES AND EXPENSES
Apogee Fund
In addition to management fees and incentive allocations, the Apogee Fund generally bears all legal, accounting,
auditing and other expenses incurred in connection with offering interests and the operation of the Apogee Fund,
and all extraordinary expenses. The Apogee Fund generally is responsible for and pays all brokerage fees. See