Item 5: Fees and Compensation
It is critical that prospective investors refer to the relevant Fund’s Governing Documents for a
complete understanding of fees and expenses they pay to Toronado. The information contained
herein is a summary only and is qualified in its entirety by such documents.
Toronado Partners LLC Form ADV Part 2A
The Funds
Management Fee. The Funds pay an asset-based management fee (the “Management Fee”) to
Toronado quarterly in advance. The Management Fee is generally equal to 1.5% per annum of
the value of the Funds’ net assets under management.
Performance Compensation. In addition, the General Partner is entitled to a special allocation
of net profits experienced by the investors in the Funds, (the “Special Profit Allocation”). The
Special Profit Allocation is generally calculated and paid annually on December 31st, generally
in an amount equal to 20% of the net profits (realized and unrealized), if any, from the
performance of the Funds. A Special Profit Allocation is also calculated and allocated upon an
investor’s withdrawal or redemption from a Fund, but only on the amount withdrawn or
redeemed. Payment of the Special Profit Allocation is subject to a “high water mark:” paid only
after losses, if any, have been recovered.
As a general matter, Toronado has the discretion to alter, reduce or waive the Management Fee
or Special Profit Allocation (collectively the “Fund Fees”) and arrangements with particular
investors may vary. Toronado has reduced or waived the Fund Fees for certain early investors
and its employees, and has provided discounted fees through side letter agreements for investors
making large contributions or those committing to a longer lock-up period.
Toronado deducts Management Fees quarterly, on the first day of the quarter, from the Fund’s
assets, and Special Profit Allocations annually, on the last day of the year, and when investors
withdraw. Fund investors do not have the ability to choose to be billed directly for fees incurred.
Funds pay management fees in advance (based on the relevant Fund’s assets at the beginning
of the quarter).
The foregoing represents Toronado’s basic compensation arrangements. Although Toronado
believes its fees are competitive, lower fees for comparable services may be available from
other investment advisers.
Withdrawal Fee. Under certain circumstances detailed in the Governing Documents (including
relating to Class B Interests as described below), investors may be required to pay withdrawal
fees. Withdrawal fees are paid back into the Funds and not to Toronado and may be waived by
the General Partner of the Master Fund or the Board of Directors of the Offshore Fund in its
sole discretion.
The Funds’ Interests are issued into subsets of Interests that are referred to for convenience as
“Classes.” There are currently two subsets of Interests: “Class A” and “Class B.” Interests which
are both available for investment.
Class A and Class B both allow redemptions after an investor has maintained an investment in
the Partnership for a minimum of twelve (12) months (the “Lock-Up Period”). After completion
of the Lock-Up Period, Class A or Class B investors may generally withdraw all or any part of
the balance of its Capital Account with respect to such Class as of (i) the last day of any calendar
quarter on at least 45 days’ prior notice to the General Partner, but Class B redemptions are
subject to a withdrawal fee on any amount in excess of the Class B Eligible Withdrawal Amount
(defined as 20% of the greater of (a) the initial amount contributed with respect to the particular
capital contribution into Class B or (b) the highest month end balance in such investor’s Class
B Capital Account relating to a particular Capital Contribution since the date such Capital
Contribution was made). Class B withdrawal fees are equal to three percent (3%) of the Excess
Withdrawal Amount, provided that such fee will be reduced to one and a half percent (1.5%) if
the Master Fund’s aggregate assets under management attributable to Class B Interests are less
than $75,000,000 at the time of such withdrawal.
Toronado Partners LLC Form ADV Part 2A
Expenses. In addition to Toronado’s Management Fees and Special Profit Allocations, Funds
also bear expenses incidental to their ongoing operation including, without limitation, all
trading costs and expenses, all interest and commitment fees on loans and debt balances, all
costs and expenses of negotiating and entering into contracts and arrangements and making
investments and similar expenses in terminating those contracts and arrangements and
disposing of the Funds’ investments, all costs and expenses incurred in performing investment
research including but not limited to subscriptions to research and risk management services,
obtaining research pieces from brokers, speaking with experts through expert network
providers, visiting companies and attending research conferences, costs and expenses
associated with regulatory filings of the Funds, General Partner, the Investment Adviser or their
affiliates relating to the Funds, all costs and expenses associated with registering the Fund’s
restricted Securities, all costs and expenses incurred in attempting to protect or enhance the
value of the Funds’ investments, all income taxes, withholding taxes, transfer taxes and other
governmental charges and duties, all fees and charges of custodians, clearing agencies and
banks, all administration, bookkeeping, recordkeeping, legal, accounting, auditing, tax
preparation and all professional, expert and consulting fees and expenses arising in connection
with the Funds’ activities, all fees, costs and expenses of offering and selling Fund interests and
communicating with existing and prospective investors, all costs and expenses of investing the
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