Item 5: Fees and Compensation
Item 5.A.
Fees payable to Seven Eight Capital are set out in the applicable governing documents and in some cases
include a performance-based fee (the “Performance Fee”) and in all cases an asset-based management fee
(the “Management Fee”) and, together with the Performance Fee, the “Advisory Fees”.
Management Fee
Investors in the Feeder Funds pay us management fees based on the net asset value of each investor’s capital
at a rate of a Management Fee Percentage (as defined below). Management fees are calculated by the
administrator and are paid quarterly in advance from the client’s account under our instruction. The
“Management Fee Percentage” equals (i) for the first twelve (12) months after the launch of the master fund,
0.625% (two and one-half percent (2.5%) on an annualized basis); and (ii) thereafter, 0.5% (two percent
(2.0%) on an annualized basis). Capital contributions made on dates other than the first day of a calendar
quarter will be assessed a pro rata Management Fee at the time such capital contributions are made. All or
part of the Management Fee may be waived, reduced, rebated, discounted or, with the consent of the
applicable client(s), calculated differently by the Firm from time to time in its discretion.
Performance Fee
Currently, we are entitled to receive performance-based compensation from our clients (“Incentive
Allocations”) of an Incentive Percentage (as defined below) of the net profits attributable to each investor’s
investment in the Feeder Funds subject to a “high water mark” limitation. This means that we only receive
an Incentive Allocation when net profits for the performance period have recovered losses from prior years,
as described in the offering materials of the Feeder Funds. Incentive Allocations are paid to us and are
calculated by the administrator and deducted from the client’s account under our instruction.
The “Incentive Percentage” is determined as (i) Fifteen percent (15%) of the aggregate net capital
appreciation return from 0% to 10% (times the Annualization Factor (as defined below)); (ii) Twenty-five
percent (25%) of the aggregate net capital appreciation return from 10% to 20% (times the Annualization
Factor); and (iii) Forty-five percent (45%) on any remaining aggregate net capital appreciation return
thereafter. The “Annualization Factor” means the percentage of the fiscal year in which a particular
subscription is invested in the Fund (i.e. the number of days between January 1st (or another date of
subscription) and December 31st (or another date of withdrawal); divided by 365).
The Firm, in its discretion, may waive, reduce, with the consent of the applicable client(s), calculate
differently the Incentive Allocation and/or use a different Loss Recovery Account calculation.
Item 5.B.
Fees and expenses are automatically deducted from the Funds monthly. Some expenses may be advanced by
Seven Eight Capital and reimbursed by the respective client or Feeder Fund.
Item 5.C.
The master fund will bear, or reimburse Seven Eight Capital for advancing, their own expenses and those of
the feeder funds, to the maximum extent permitted by applicable law, including, without limitation, the
following:
(i) Expenses related to the research, execution and monitoring of actual and prospective investments (whether
or not consummated) and the consummation of investments, including, without limitation, the following:
third-party investment sourcing fees; consulting fees; expert fees; fees and expenses of and related to
obtaining research, analytics and market data (including, without limitation, third-party data sources and any
information technology hardware, software and data subscriptions (such as Bloomberg and FactSet) or other
technology incorporated into the cost of obtaining such research and market data); due diligence expenses
including, without limitation, consulting and appraisal fees; reasonable investment- and research-related
travel expenses (consistent with Seven Eight Capital’s travel policy); any outsourced trading provider fees;
brokerage and prime brokerage fees, commissions and expenses (including the costs of negotiating,
documenting and/or amending agreements with prime brokers, ISDAs and other agreements with trading and
financing counterparties); expenses relating to borrowing securities to be sold short; clearing and settlement
charges; custodial fees and expenses; bank service fees; interest expenses and other borrowing costs; fees and
expenses of proxy research and voting services; the pro rata portion of any broken deal expenses; fees and
expenses of third-party professionals, including, without limitation, consultants, investment bankers,
attorneys, accountants and service providers who, in each case, provide services to the Funds or provide
services to Seven Eight Capital with respect to the operation of the Funds, the general partner or the Principals
(on matters that would not have arisen but for their respective advisory relationships with the Funds); and
expenses relating to engagement with a company irrespective of the outcome of such engagement, such as
shareholder and management communication, soliciting proxies, hiring proxy advisory consultants, hosting
shareholder forums and proposing or nominating directors or executives, including sourcing, recruiting,
standby and indemnification and other expenses, regardless of whether the nomination is successful; (ii)
organizational fees and expenses and fees and expenses incurred in connection with the offering and sale of
the Interests, including, without limitation, the following: the preparation and amendment of the private
placement memorandum, the limited partnership agreement, the master partnership agreement, the exempted
limited partnership agreement of the offshore feeder, the investment management agreement and the Funds’
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