Item 5: Fees and Compensation
Fees are determined and assessed in a manner specific to each Client and in accordance with
a Fund’s Offering Documents and an SMA’s Investment Management Agreement (“IMA”). It is
important that Investors and Clients refer to the relevant Offering Documents and legal
agreements for a complete understanding of fees and expenses they may pay through an
investment in any Fund or SMA. The information contained herein is a summary only and is
qualified in its entirety by such Offering Documents and Investment Management Agreements.
All Clients of Stratome follow the same expense structure described below.
Any new fund launched by Stratome in the future may have materially different terms than
those summarized below. Any SMA Client may have materially different, negotiated terms.
It should be noted that fees paid by the Funds are negotiable by Investors only prior to an
investment in the Fund, at the discretion of the General Partner.
Management Fee
The Master Fund pays to the Investment Manager a management fee, calculated at an annual
rate of: (i) 1.25% of each Founders’ capital account; and (ii) 1.5% of each Series A capital
account (the “Management Fee”). The Management Fee will be paid quarterly in advance,
based on the value of each Investor’s capital account as of the first day of each calendar
quarter, adjusted for contributions and withdrawals made during the quarter. The
Management Fee is deducted in calculating net profit or net loss for purposes of computing
the Incentive Allocation (as described below). To the extent the Management Fee is paid by
the Master Fund, no Management Fee will be paid by the Onshore or Offshore Funds. The
Investment Manager, in its sole discretion, may change the level at which it receives the
Management Fee.
The Investment Manager, in its sole discretion, may also waive or modify the Management
Fee for Investors, including, without limitation, those Investors that are members, principals,
employees or affiliates of the General Partner and Investment Manager, relatives of such
persons, and for certain large or strategic investors.
The SMA has a similar Management Fee structure to the Funds but each SMA’s terms are
subject to negotiation with the Firm. Currently, the SMA Management Fee will be paid
quarterly in advance, based on the value of the SMA’s capital account as of the first day of
each calendar quarter, adjusted for contributions and withdrawals made during the quarter.
The Management Fee will be deducted in calculating net profit or net loss for purposes of
computing the Incentive Fee (as described below).
Incentive Allocation
At the end of each fiscal year, there will be reallocated from the capital account of each
Investor to the capital account of the General Partner at the Master Fund level an amount
equal to: (i) 15% of each Investor’s share of profits (including net unrealized gains on
investments) attributable to a Founders’ capital account as of that fiscal year; and (ii) 20% of
each Investor’s share of net profits (including net unrealized gains on investments)
attributable to a Series A capital account as of that fiscal year (such allocations, the “Incentive
Stratome Capital Management LP Form ADV Part 2A Brochure
Allocation”); in each case, the Incentive Allocation will be subject to a loss carryforward
provision.
When calculating the Incentive Allocation, the Management Fee and all items of income, loss
and expense incurred by the Fund will be taken into account. To the extent the Incentive
Allocation is taken at the Master Fund level, no Incentive Allocation will be taken at the Fund
level. The General Partner, in its sole discretion, may change the level at which it receives the
Incentive Allocation.
In the event that an Investor withdraws capital (in whole or in part) or retires at any time other
than at the end of the fiscal year, the deduction of the Incentive Allocation will be made with
respect to such withdrawn capital as though it were being made at the end of a fiscal year.
The Funds’ fiscal years end on December 31 of each year.
The General Partner, in its sole discretion, may waive or modify the Incentive Allocation for
Investors, including, without limitation, those Investors that are members, principals,
employees or affiliates of the General Partner or the Investment Manager, relatives of such
persons, and for certain large or strategic investors.
Incentive Fee for Separately Managed Account Clients
The incentive for managing the SMA is a percentage of the Net Profits (as hereinafter defined)
for each fiscal year (“Incentive Fee”) payable after the end of such fiscal year, provided that
for purposes of computing the Incentive Fee, Net Profits for any fiscal year shall be reduced
by the Loss Carryforward (as hereinafter defined) applicable to such year. The SMA’s fiscal
year ends on December 31 of each year. In the event of a mid-year withdrawal from an SMA,
the Incentive Fee will be charged on such withdrawn amounts at such time.
“Net Profits” or “Net Losses” for any fiscal year shall mean the net operating profits or net
operating losses determined on the accrual basis of accounting. The term “Loss Carryforward”
applicable to a particular fiscal year shall mean the sum of all prior years’ Net Losses not
subsequently offset by prior years’ Net Profits; provided that the Loss Carryforward shall be
reduced proportionately to reflect net withdrawals from the SMA.
Other Types of Fees or Expenses
The Investment Manager renders its services to the Clients at its own expense and is
responsible for its overhead expenses including: office rent; furniture and fixtures; stationery;
supplies; secretarial/internal administrative services; salaries and bonuses; entertainment
expenses; employee insurance; payroll taxes; and its own compliance expenses.
All other expenses are paid by the Master Fund (including direct expenses of the Onshore and
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