Item 5. Fees and Compensation
The Firm uses the following fee structure for the Fund:
The Offshore Fund will pay to the Firm a monthly advisory fee equal to an annual rate of 2% of
the net asset value of the Fund as of the end of each month.
The Firm will also receive as of the end of each fiscal year, an incentive fee equal to 20% of net
profits.
Generally, with respect to the profit allocation and the incentive fee, if a Fund has a net loss during
any fiscal year, during a subsequent fiscal year, there will be no profit allocation made or incentive
fee payable until the amount of the net loss previously allocated has been recouped.
Although fee terms are not negotiable, Sovarnum may waive or reduce fees or allocations due from
any client or any investor in the Fund.
In addition to Sovarnum’s fees and allocations, the Fund will bear certain operating expenses and
fees, including but not limited to taxes, offering and investment expenses which may be
determined as relating to investment of the Fund’s assets, such as brokerage commissions, initial
and variation margin and interest expense, execution expenses and exchange fees, administrative
expenses, directors’ fees and expenses, legal expenses, internal and external accounting expenses,
audit and tax preparation expenses, corporate licensing, custodial fees and set-up costs and other
expenses associated with the operation of the Fund. Consistent with the terms of the offering
documents and management agreements of the Fund, investment expenses, expenses related to the
calculation of net asset value, and expenses related to the investment of the assets of the Fund, as
determined in the discretion of Sovarnum, include, but are not limited to, research and data
expenses, and expenses related to trading systems and platforms (including exchange fees).
Currently, Sovarnum manages only the Fund. In the event Sovarnum manages other pooled
investment vehicles or managed accounts in the future, Sovarnum expects to allocate expenses
between the Fund and the other clients. Sovarnum will make such allocations in its discretion,
from time to time, consistent with the Governing Documents of the Fund and the applicable
governing documentation of its other clients, and other disclosures and documentation provided
to the Fund and other clients and any underlying Fund and client investors.
If the Fund incurs any expense, properly chargeable to the Fund, related exclusively to the
operations of the Fund, such Fund will be allocated 100% of any such Fund expense. In the
event of a shared expense in connection with the activities of the Fund and other pooled
investment vehicles or managed accounts Sovarnum manages in the future, the Firm, as
appropriate, will allocate such expense among the clients approximately in proportion to the size
of each respective client, i.e., on a pro rata basis based on the relative size of the client, or in such
other manner as the Firm deems fair and reasonable.