Item 5 - Fees and Compensation
A. Below is a discussion of how the Adviser was compensated in connection with providing
advisory services to its Clients.
Management Fees. Limited partners or shareholders of the Funds pay a quarterly management
fee to the Adviser calculated at an annual rate of (i) 1.25% of each investor’s capital
account/shares attributable to Sub-Class One Interests/Shares and (ii) 1.5% of each investor’s
capital account/shares attributable to Sub-Class Two Interests/Shares. The management fee is
paid quarterly in advance, based on the value of each limited partner’s capital account/shares.
The management fee will be adjusted for contributions and withdrawals/redemptions made
during the quarter.
With respect to the services rendered to the SMA, the Adviser receives a quarterly management
fee which is based upon a percentage of the SMA’s net asset value as agreed upon between the
Adviser and the SMA holder. If additional capital is contributed to the SMA, or capital is
withdrawn, on a date other than the first or last business day of a quarter, the amount of the
management fee attributable to such capital for that quarter shall be pro-rated on a time
weighted basis, the credit for or debit of which shall be added to or subtracted from, as
applicable, the following quarter’s management fee, or to the extent the next quarter’s
management fee is insufficient for offset purposes, as many successive quarters as necessary,
or paid directly from the owing party to the owed party in the event the investment management
agreement is terminated.
Performance-based fees. An affiliate of the Adviser is entitled to receive an annual incentive
allocation equal to (i) 15% of the net profits attributable to each investor’s capital
account/shares attributable to Sub-Class One Interests/Shares; and (ii) 20% of the net profits
attributable to each investor’s capital account/shares attributable to Sub-Class Two
Interests/Shares, if any, in each case subject to a loss carryforward provision.
With respect to the SMA, the Adviser is entitled to an incentive-based fee, at the end of each
“Performance Period” (as defined in the investment management agreement between the
Adviser and the SMA holder). This performance fee in respect to each Performance Period is
equal to an agreed upon percentage of the amount, if any, by which (i) the net asset value of
the SMA (in U.S. dollars, before application of the current performance fee and after taking
into account the above referenced management fee and other expenses) as of the end of such
Performance Period, exceeds (ii) the net asset value of the Account at the beginning of the
Performance Period, in each case adjusted for contributions, withdrawals and distributions
during the Performance Period, provided that a performance fee is payable only to the extent
the excess of (i) over (ii) exceeds the “Loss Carryforward Account” (as defined in the
investment management agreement between the Adviser and the SMA holder) balance as of
such measurement date.
B. Fees owed by the Clients are deducted directly. As stated above, management fees are
calculated and paid quarterly in advance at the beginning of the quarter. Performance fees are
calculated and paid annually or at the end of the applicable Performance Period.
C. In addition to the fees described above, other expenses chargeable to the Funds include: Fund
legal, Fund administration expenses, audit and accounting expenses; operational and regulatory
compliance expenses (including but not limited to regulatory filings such as Form PF);
organizational expenses; out-of-pocket expenses of members of the advisory committee;
investment expenses such as commissions, research fees and expenses; interest on margin
accounts and other indebtedness; borrowing charges on securities sold short; custodial fees;
bank service fees; Fund-related insurance costs (including D&O and E&O insurance for the
Adviser); any Fund’s pro rata share of the expenses of a master fund; and any other expenses
related to the purchase, sale or transmittal of Fund assets.
Each Fund that invests in a master fund will indirectly bear the administrative and other
expenses of the master fund pro rata based on its interest in the master fund.
The SMA is also subject to additional fees such as custodial fees and investment expenses in
the form of commissions, research fees and expenses. These fees are fully described and listed
in each SMA’s investment management agreement.
Additionally, the Adviser maintains a written policy to ensure all expenses are properly
identified and allocated among Clients accounts.
A portion of the commissions generated on a Fund’s brokerage transactions may generate “soft
dollar” credits that the Adviser is authorized to pay for research and research related services
and products. Section 28(e) of the United States Securities Exchange Act of 1934, as amended
(the “Exchange Act”), provides a “safe harbor” to investment advisers who use soft dollars
generated by their advised accounts to obtain investment research and brokerage services that
provide lawful and appropriate assistance to the investment adviser in the performance of
investment decision-making responsibilities. In the event that the Adviser elects to use soft
dollars, it intends to limit such use to services that fall within the safe harbor afforded by
Section 28(e) of the Exchange Act.
Please refer to Item 12, Brokerage Practices, for more information.
D. As stated above, management fees are payable quarterly in advance and this management fee
will be adjusted for contributions and withdrawals/redemptions made during the quarter.
...