Item 5 – Fees and Compensation
Standard Fee Schedule (Management Fee plus Performance Fee)
This fee structure is available only to investors who meet the definition of a “Qualified Client” under Rule
205-3 under the Advisers Act, which is as follows:
i. An investor that immediately after entering into the contract has at least $1,100,000 under the
management of the investment advisor; or
ii. An investor entering into the contract (and any person acting on his behalf) that the investment advisor
reasonably believes, immediately prior to entering into the contract, either:
a. Has a net worth, excluding primary residence (together, in the case of a natural person, with assets
held jointly with a spouse), of more than $2,200,000 at the time the contract is entered into; or
b. Is a qualified purchaser as defined in section 2(a)(51)(A) of the Investment Company Act of 1940
at the time the contract is entered into (in general, investor has investments greater than
$5,000,000); or
iii. A knowledgeable employee of the advisory Firm.
Management Fee. The Fund pays a monthly fee to the Portfolio Manager based on the Fund’s net assets
marked to market at the beginning of each calendar month (the “Management Fee”). The Management
Fee for any month is an amount equal to 0.166% of the value of each limited partner’s Capital Account
(i.e., 2.0% per annum) without accrual of the Performance Fee. The Management Fee will be payable in
arrears at the beginning of each month. The minimum capital contribution of a new limited partner is
$200,000. The Portfolio Manager may, at its sole discretion, waive the minimum contribution, and/or
waive or reduce the Management Fee charged to limited partners that are members, directors, principals,
employees, or affiliates of the GP or the Portfolio Manager, relatives of such persons, and certain large,
strategic, or initial investors.
Performance Fee. Additionally, the Fund pays a fee (the “Performance Fee”) quarterly based on the
Fund’s account performance equal to 20% of each of the limited partner’s share of net profits after the
Fund’s assets are marked to market at the end of such quarter, subject to loss carryforward provisions
and a high-water mark. The Performance Fee will be payable in arrears at the end of each calendar
quarter, and upon a withdrawal of limited partnership interests during the year. The Performance Fee has
been structured to reward the Portfolio Manager only for performance that surpasses the highest net
asset value previously attained. Net profits for a particular quarter will be calculated so that income and
gains are not double-counted due to intervening losses. In this regard, new net profits will occur only
when cumulative losses allocated to a limited partner’s interests from prior periods have been offset by
gains achieved in subsequent periods. The Portfolio Manager may, at its sole discretion, waive or reduce
the Performance Fee charged to limited partners that are members, directors, principals, employees, or
affiliates of the GP or the Portfolio Manager, relatives of such persons, and certain large, strategic, or
initial investors. Please see the Private Offering Memorandum for more details. The Performance Fee
creates an incentive for the Portfolio Manager to cause the Fund to make investments that are riskier or
more speculative than would be the case if this fee were not made. (Please see Item 6 for more detailed
disclosures of potential conflicts of interest related to performance fees).
In addition, Seven Hills pays any fees associated with maintaining a brokerage account as well as any
commission fees, ticket charges, service charges, prime brokerage fees, etc., associated with buying or
selling securities. Commissions are negotiable with the executing broker-dealer. Please see the Private
Offering Memorandum for more information on fees.
Fee Payments & Termination
Management and Performance fees are deducted in arrears from each partner’s capital account at the
direction of the Fund administrator. For limited partners of Seven Hills, please see the Private Offering
Memorandum for information on terminating a limited partnership and the effect such termination has
upon fee assessment.
Other TDAM Compensation Related to Seven Hills
The Firm, acting in its capacity as a broker-dealer, carries the account of the Fund. In this role, the Firm
receives additional economic benefits. Direct economic benefits include commissions for executing
trades for the Fund and potential other fees directly related to activity in the account. Please see Item 14
for additional detail on compensation received by TD&Co. related to accounts held at RBC. All of these
potential costs to the Fund for carrying a brokerage account and engaging in brokerage activities create
a potential conflict of interest to the Portfolio Manager as there can be an incentive for directing the Fund’s
investments toward a certain provider or certain activities. As a general matter, the Portfolio Manager
considers it appropriate to execute trades utilizing the Firm’s custodian. When executing transactions for
Seven Hills, the Firm charges a transaction fee not to exceed 1.25 cents per share on equity transactions
and $1.25 per contract on option transactions. Because commissions, fees, etc., received for executing
transactions for Seven Hills, or carrying the account of Seven Hills through RBC, provides an economic
benefit to the Firm’s shareholders (including William D. Davis Jr., who also is the controlling partner of
the GP), the Advisor has an incentive to execute transactions through TD&Co. and to clear/custody
through RBC, which may not result in the lowest available brokerage commissions or custodial fees for
the Fund. Because transaction fees arise each time a trade is executed for the Fund’s account, we have
a greater incentive to trade frequently in the Fund’s account.
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