Item 5 – Fees and Compensation
Advisory Contracts and Fees
5.A. Adviser Compensation
Detailed descriptions of fees charged to Investors in the Fund are included in the Fund’s
offering documents. In addition, Punch Card and the Fund’s general partner have authority
to waive or reduce fees charged to certain Investors.
Asset-Based Compensation
Punch Card is paid a management fee, payable quarterly in advance, of 0.5% per year of the
value of each Investor’s interest in the Fund, calculated as of the first day of the calendar
quarter.
Performance-Based Compensation
The Fund’s general partner, which is owned by Mr. Lou, is entitled to receive an annual
performance-based allocation at the end of each fiscal year equal to 20% of the net capital
appreciation credited to each Investor for such fiscal year over a certain hurdle amount,
subject to a high-water mark. The performance allocation, if any, is calculated and
determined: (i) as of the end of the fiscal year; (ii) as of each withdrawal from the Fund by
an Investor; and (iii) in the general partner’s sole discretion, as of the effective date of a
transfer of interests, in each case with respect to the previous period. Performance-based
compensation complies with Rule 205-3 under the Investment Advisers Act of 1940, as
amended (the “Advisers Act”).
5.B. Direct Billing of Advisory Fees
Management fees and performance allocations, if any, are deducted directly from the
Fund’s account by its custodian, in accordance with invoices and instructions prepared by
Punch Card and the Fund’s offering documents.
5.C. Other Non-Advisory Fees
The management fee and the performance allocation are exclusive of brokerage
commissions, transaction fees, and other related costs and expenses that are incurred by
the Fund and indirectly borne by Investors. The Fund incurs certain charges for services
by custodians, brokers, administrators, lawyers, auditors and other third parties such as
custodial fees, wire transfer and electronic fund fees, audit and legal fees, and other fees
and taxes on brokerage accounts and securities transactions. The Fund’s portfolio may
include positions in mutual funds or exchange traded funds that also charge management
fees. Such charges, fees, and commissions are exclusive of, and in addition to, Punch Card’s
fees. Punch Card does not receive any portion of these commissions, fees, and costs.
Certain employees of Punch Card may serve as directors of portfolio companies in which
the Fund invests. In connection with such service, these employees may receive
compensation from the portfolio company. The Fund’s general partner has discretion to
determine whether such compensation is retained by the Fund, allocated to Punch Card, or
permitted to be retained by the employee. These arrangements create conflicts of interest,
as an employee’s receipt of compensation from a portfolio company may influence
decisions regarding the management, monitoring, or disposition of the Fund’s investment
in that company. Punch Card seeks to manage these conflicts through disclosure, oversight
by the Fund’s general partner, and policies designed to ensure that investment decisions
are made in the best interests of the Fund. Item 12 below describes the factors that Punch
Card considers in selecting broker-dealers for Fund transactions and determining the
reasonableness of their compensation (e.g., commissions).
5.D. Advance Payment of Fees
Fees include an annual management fee of 0.5%, which is generally payable quarterly as of
the first day of the quarter. Management Fees are charged on a prorated basis with respect
to capital contributions accepted on days other than the first business day of a calendar
quarter. If any Investor withdraws all or a portion of its capital account from the Fund on
any day other than the last day of a calendar quarter, such Investor’s capital account will be
credited, on the withdrawal date, with the unearned portion of the management fee
attributable to the percentage withdrawn as of such date.
5.E. Compensation for Sale of Securities or Other Investment Products
Neither Punch Card nor its supervised persons accept compensation for the sale of
securities or other investment products, including asset-based sales charges or service fees
from the sale of mutual funds.