Item 5 Fees and Compensation
A. The fees applicable to each Client are set forth in detail in each Client’s Governing
Documents. A brief summary of those fees is provided below.
Investors in the Funds generally pay a management fee to Watermark on a monthly basis
in arrears, equal to an annual rate of between 1.0% to 2.0% of net assets depending on the
Fund. Generally, on a biannual basis or annual basis, each investor in any Fund also pays
a performance fee to Watermark equal to a percentage between 15.0% and 20.5%
(depending on the Fund) of the amount by which the net value of each account as of the
end of each measurement period exceeds the net value of the account as of the beginning
of that measuring period, subject to a high water mark. With respect to the Australian
Funds, management fees are calculated daily and paid monthly and performance fees
accrue monthly, but are paid annually. With respect to all Private Funds, performance fees
accrue daily and are paid annually (except as otherwise provided in the applicable
Governing Documents). Fees applicable to SMAs are negotiable, and individual
arrangements are based on specific factors, including, but not limited to, assets under
management and risk profile. Fees applicable to SMAs managed by Watermark may
include management fees (generally a percentage of assets), performance fees (generally a
percentage of profits) or some combination of the two. Clients in SMAs generally pay
performance fees on an annual basis unless otherwise provided in the applicable Governing
Documents.
Watermark may, in its sole discretion, reduce, waive or calculate differently the
management fee or performance fee with respect to certain clients or investors, including
shareholders, directors, officers, affiliates or employees of Watermark, its affiliates or the
Funds, or such person’s family members and trusts or other entities established for the
benefit of such person or his or her family.
Watermark may enter into “side letters” or similar agreements with certain investors in the
Funds, granting such investors specific rights, benefits or privileges that are not made
available to investors generally.
B. Watermark is authorized under the Governing Documents to charge and deduct
advisory fees directly from Client assets, at the times and in the amounts described above.
Watermark also receives advisory fees from certain Clients, including SMAs, as specified
in the relevant investment management agreement governing such relationship. Such fees
may be invoiced on a quarterly basis.
C. In addition to the fees payable to Watermark, each Fund (with certain exceptions
described in the Governing Documents) bears all other expenses incidental to its respective
operations and business, including, without limitation, organizational, operational and
other expenses (including, without limitation, any management fee payable to Watermark),
administrative fees and related costs, all transactional costs including brokerage, banking,
sales and purchase commissions and charges and exchange fees, fees and charges of
custodians and clearing agencies, interest and commitment fees on loans and debit
balances, income taxes, withholding taxes, transfer taxes and other governmental charges
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and duties, tax preparation expenses, any expenses associated with FATCA or CRS,
extraordinary expenses, including any litigation or regulatory investigation instituted
against the Fund or Watermark in connection with the affairs of the Fund, due diligence
and other research costs related to investments, any costs incurred in respect of meetings of
the directors of such Fund (including its committees) and meetings, if any, of investors in
the Fund, fees of the Fund’s legal advisers and auditors, director’s fees and expenses, the
costs of maintaining ownership of management shares of the Fund, the Fund’s registered
office in the Cayman Islands and the Fund’s registration as a mutual fund with the Cayman
Islands Monetary Authority and the costs of printing and distributing any offering
materials and any reports and notices to investors in the Fund. In the event a Private Fund
is structured in a “master-feeder” arrangement, the Private Fund may bear similar
proportionate costs in respect of its affiliated master fund, including, without limitation,
administrative and organizational expenses, auditing and tax preparation expenses and
extraordinary expenses.
See Item 12 “Brokerage Practices” below for factors Watermark considers in selecting or
recommending broker-dealers and determining the reasonableness of their compensation.
Each Fund also pays or reimburses Watermark where it has paid on behalf of the Fund any
of the Fund’s fees, expenses or costs.
D. Clients are not required to, and may not, pay fees in advance.
E. Neither Watermark nor its supervised persons will receive any compensation with
respect to the purchase or sale of securities or other investment products by any Client that
is not otherwise disclosed in the Governing Documents for a particular Client.
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