Item 5. Fees and Compensation
Philosophy’s fees and compensation are described in each Client Accounts’ Governing
Documents. All of Philosophy’s clients are “qualified purchasers” (as defined in Section
2(a)(51) of the Investment Company Act of 1940, as amended).
The Philosophy Funds
Philosophy is paid management fees from the Philosophy Funds quarterly in advance. An
investor who withdraws from the Philosophy Funds on a date other than the last day of a quarter,
however, does not receive a refund of the management fee previously paid. Philosophy has the
right to waive or modify the management fee payable with respect to any investor and has done
so with respect to internal capital. Philosophy is entitled to receive performance-based
allocations from certain Client Accounts, as further described in Item 6 – Performance-Based
Fees and Side-By-Side Management.
The Private Funds and the SMA
The Private Funds and the SMA pay management fees, which are paid quarterly in advance or
arrears. Such management fees are invoiced to, and paid by, the Private Funds and the SMA.
In the case of any Private Funds or SMA that pays management fees in advance, such fees
would be prorated if the advisory agreement relating to such Private Funds or SMA were
terminated mid – quarter. Philosophy is also entitled to receive performance-based fees from
the Private Funds and the SMA, as further described in Item 6. Client Accounts that invest in
exchange-traded funds (“ETFs”) and money market funds also pay, indirectly, investment
advisory fees to the managers of those funds.
Philosophy believes that its fees are competitive with fees charged by other investment advisers
for comparable services. Comparable services may be available, however, from other sources
for lower fees.
The disclosure in this Item 5, together with the disclosure in Item 12, allow a plan that is subject
to the Employee Retirement Income Security Act of 1974 and that invests in an investment fund
of which Philosophy is general partner, to use the “alternative reporting option” to report
Philosophy’s compensation as “eligible indirect compensation” on the Schedule C of the plan’s
Form 5500 Annual Return/Report of Employee Benefit Plan.
Relationships with Philosophy’s clients are terminable on expiration of the partnership’s term,
dissolution of the partnership or on Philosophy’s withdrawal as General Partner. Each investor
may withdraw a portion of such investor’s capital account in a fund on specified prior written
notice, on the last day of any calendar quarter, subject to substantial limitations, including a
“gate” that limits an investor’s withdrawals on each withdrawal date and other provisions in the
fund’s governing documents and described in detail in its offering documents. In all cases,
expenses, the pro rata portion of the management fee and the performance allocation or fee
through the date of termination are charged to the respective Client Account.
Expenses Generally
Each Client Account is responsible for its own costs and expenses all as described in each Client
Account’s offering documents or Client Account agreement, including, by way of example, but
not limited to, trading costs and expenses (such as brokerage commissions, expenses related to
short sales, and clearing and settlement charges), ongoing legal, accounting and bookkeeping
fees and expenses, and the fees and expenses charged by any fund administrator for its
accounting, bookkeeping and other services. In addition, certain Client Accounts pay additional
expenses, some of which are similar to those borne by the Fund. Such arrangements are
negotiated with the owner of each relevant client account on a case-by-case basis and are set
forth in the Governing Documents relating to such client account. Philosophy bears its own
operating, general, administrative and overhead costs and expenses, other than the expenses
described above.
In the case of the Philosophy Funds, each Fund will bear all costs and expenses of the Fund
organization and ongoing operations, to the extent permitted by applicable law, including,
without limitation: (a) all trading costs and expenses (such as, for example, brokerage
commissions and charges, expenses relating to short sales (in the case of the Flagship Fund),
clearing and settlement charges, option premiums, custodial and service fees, and higher
commissions, charges related to outsourced trading services or costs or expenses of trade order
management software and other portfolio, trading and risk management related software), (b)
all interest and commitment fees on loans and debit balances (on margin or otherwise), (c) all
costs and expenses of negotiating and entering into contracts and arrangements and making
investments (such as brokerage, legal, accounting, investment banking, appraisal and other
professional and consulting fees and expenses arising from particular investments and potential
investments) and similar expenses in terminating those contracts and arrangements and
disposing of each Philosophy Fund’s investments, (d) all research-related fees and expenses,
including but not limited to fees for research consultants and fees and expenses related to
research-related software and related equipment for quotation services, data feeds, publications
or other information sources (including Bloomberg, Reuters or similar providers), (e) all costs
and expenses associated with regulatory filings of the Philosophy Funds, the General Partner
and their affiliates relating to each Philosophy Fund (including, but not limited to filings under
section 13 of the securities Exchange Act of 1934 (the “Exchange Act”), and Form PF), (f) all
costs and expenses associated with registering the Philosophy Funds’ restricted securities, (g)
all costs and expenses incurred in attempting to protect or enhance the value of each Philosophy
Fund’s investments (including the costs and expenses of instituting and defending lawsuits or
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