ITEM 5 FEES AND COMPENSATION
Fees and Expenses
Fees and expenses applicable to separately managed account Clients are
individually negotiated and memorialized in such Client’s investment management agreement
(“IMA”). Circumstances considered when negotiating fees may include, without limitation,
customary market rates, specialized guidelines, and other performance/incentive fee
arrangements with the Client.
Fees and expenses generally applicable to Fund investors are as follows:
Management Fee
Investors in the Funds bear a management fee (the “Management Fee”), payable
quarterly in advance, equal to 0.5% (a 2% annual rate) of the beginning net asset value of each
capital account or shares, as the case may be, of an investor. The Management Fee will be
prorated for any capital contribution or withdrawal by an investor that is effective other than as
of the first day of a fiscal quarter.
Incentive Allocation
Investors in the Funds may be charged an incentive allocation on performance
(the “Incentive Allocation”). Generally, the Funds’ incentive allocation is 20% of the net capital
appreciation in the net asset value (“NAV”) of an investor’s capital account or shares, as the
case may be, for a given fiscal year or such shorter period, in the event that an investor redeems
other than at the end of a fiscal year), after reduction of the Management Fee and adjusted for
any redemptions, and subject to a high water mark. Further details are disclosed in the Funds’
respective Confidential Private Placement Memorandum. The Investment Adviser may waive,
reduce or calculate differently the Management Fee or Incentive Allocation with respect to
certain investors. The Firm’s receipt of an Incentive Allocation is intended to align the Firm’s
interests with those of its Clients, and to provide the Firm with a greater incentive to manage
assets well. Such fees will be structured and charged in a manner consistent with the
requirements of applicable law. The nature of the performance-based fees, however, creates
potential conflicts of interest among the Firm, its associated persons, and Clients.
Additional Fees and Expenses
Our Clients are responsible for certain additional costs and expenses related to
the trading and investment activity that we conduct for their accounts; this incudes expenses
incurred by them directly as well as reimbursements of expenses that we incur on their behalf.
While the organizational documents and investment management agreements relating to any
specific Client will dictate the actual expenses relating to that Client, additional costs and
expenses that we currently charge to the Fund include, without limitation, the Management
Fee; investment expenses, whether or not such investments are consummated (such as
brokerage commissions, expenses relating to short sales, clearing and settlement charges,
custodial fees, bank service fees and interest expenses); investment-related travel expenses
incurred by the Firm related to the purchase or sale of, or due diligence regarding, the Fund's
investments, whether or not such investments are consummated; third-party professional fees
(including, without limitation, expenses of consultants, investment bankers, attorneys,
accountants and other experts) relating to investments; fees and expenses relating to software
tools, programs or other technology utilized in managing the Fund (including, without
limitation, third-party software licensing, implementation, data management and recovery
services and custom development costs); research and market data (including, without
limitation, any computer hardware and connectivity hardware incorporated into the cost of
obtaining such research and market data); administrative expenses (including, without
limitation, fees and expenses of the Funds’ administrator); third-party legal expenses; third-
party accounting and valuation expenses (including, without limitation, the cost of accounting
software packages); audit and tax preparation expenses; premiums for liability insurance
covering the Offshore Fund’s Board of Directors, the Master Fund’s General Partner, the Firm
and the members, officers, employees and agents of any of them; costs of printing and mailing
reports and notices; entity-level taxes; entity licensing; regulatory expenses (including fees and
expenses related to preparing and making regulatory and compliance filings associated with the
Fund and its investment activities, such as filing fees and costs of software and systems relating
to such filings, including, but not limited to, Form PF and similar filings); organizational
expenses; update expenses; any costs and expenses incurred by the Fund in connection with
converting into a “standalone fund” outside of the current “mini-master” structure,
implementing a full “master-feeder” structure, or adapting to another structural reorganization;
expenses incurred in connection with the offering and sale of the Funds’ interests or shares, as
the case may be, and other similar expenses related to the Fund; indemnification expenses; and
extraordinary expenses.
Prepayment of Fees
As discussed above, we generally deduct Management Fees directly from a Fund
investor’s account, usually on a quarterly basis and in advance. A pro rata portion of such
Management Fees will be paid in respect of any subscriptions made by new or existing investors
on any date that does not fall on the first day of a fiscal quarter. If a Fund investor redeems or
withdraws other than as of the last day of a fiscal quarter, we will repay a pro rata portion of
any applicable Management Fee (based on the actual number of days remaining in the fiscal
quarter) to the Fund for distribution to such investor. For a managed account, this practice varies
depending on the specific arrangement with an individual client.
Additional Compensation
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