Item 5 – Fees and Compensation
A. Advisory Fees and Compensation – Each Fund pays a quarterly “management fee” to
the Adviser, equal to 0.5% (approximately 2.0% annually) of each Investor’s share of their
relevant Fund’s net asset value. In addition, as noted in more detail in Item 6, an
“incentive allocation” (also from time to time referred to herein as a “performance
allocation” or “performance fee”) of 20% of the net profit above the “loss carryforward”
(or “highwater mark”) is charged to the account of each Investor on an annual basis. The
Offering Memoranda contains additional information on the calculation of the incentive
allocation and management fee.
Waiver of, or reduction in the rate of, the management fee or incentive allocation may be
permitted by the Adviser or its affiliate, as the case may be.
The Adviser or its affiliates may enter into side letter agreements with certain Investors
that provide for fee reductions, modified liquidity terms, or other preferential rights. Such
arrangements may create conflicts of interest because other Investors will not receive
similar terms. The Adviser seeks to address such conflicts in a manner consistent with its
fiduciary duty.
B. Payment of Fees - Fees charged are deducted from the Funds’ assets. Management
fees are paid to the Adviser quarterly in advance, as of the first day of each quarter. A pro
rata management fee will be charged to Investors on any amounts invested in the midst
of any quarter.
The management fee is calculated based on each Investor’s capital account value as of
the beginning of each calendar quarter. For subscriptions or redemptions occurring
during a quarter, the management fee is prorated based on the number of days invested
during such quarter.
Performance fees are calculated on the basis of the Feeder Fund’s interest in its Master
Fund and payable annually (see Item 6). The performance fee is payable to the general
partner of the relevant Master Fund, an affiliate of the Adviser.
An Investor’s monthly account statement shows an Investor’s holdings in the Fund net of
all fees and expenses.
C. Other Fees and Expenses - The Funds pay (or reimburse) the Adviser or its affiliates for
(i) all expenses incurred in connection with the ongoing offer and sale of interests in the
Funds, including, but not limited to, printing of the Offering Memoranda and exhibits, and
documentation of performance and the admission of Investors, (ii) all operating expenses
of the Funds such as tax preparation fees, governmental fees and taxes, administrator
fees, costs of communications with Investors, and ongoing legal, accounting, auditing,
bookkeeping, consulting and other professional fees and expenses, (iii) all Fund research
and trading costs and expenses (e.g., brokerage commissions, margin interest, expenses
related to short sales, custodial fees and clearing and settlement charges), and (iv) all fees
and other expenses incurred in connection with the investigation, prosecution or defense
of any claims, assertion of rights or pursuit of remedies, by or against the Funds,
including, without limitation, professional and other advisory and consulting expenses
and travel expenses, and whether or not pursuant to bankruptcy or other legal
proceedings, or participation in informal committees of creditors or other security holders
of an issuer.
As noted above, Investors in the Funds also incur brokerage and other transaction costs.
Item 12 also further describes the factors that the Adviser considers in selecting or
recommending broker-dealers for transactions and determining the reasonableness of
their compensation (e.g., commissions).
In addition, note that subject to any standard of liability stated in an investment
management agreement or limited partnership agreement, each Fund will bear the cost,
or receive the benefit, of a trade error that was made in regard to its portfolio trading.
Funds will not bear the cost, or receive the benefit of, any error associated with another
Fund, and it is the responsibility of the Adviser to allocate such costs/benefits accurately.
Investors are subject to the foregoing fees and expenses regardless of whether any profit
is made on investments.
The Exceptional Value Domestic Fund and the Exceptional Value Offshore Fund subject
redemptions during the first 24 months after investment to a 5% early redemption fee.
Any such early redemption fee is retained by the applicable Fund for the benefit of
remaining Investors.
D. Prepayment of Fees – As noted in Item 5(B) above, the management fee charged to
the Funds is paid quarterly in advance. Once charged to an Investor’s account, there is
no refund of any of the fees and expenses that have been charged.
E. Additional Compensation and Conflicts of Interest - No supervised person of the
Adviser accepts compensation for the sale of securities or other investment products.