Item 5 Fees and Compensation
Fees
XM is entitled to receive a management fee (the “Management Fee”) in consideration of the
management and administrative services provided to the Funds. The Management Fee is payable
monthly in arrears and is equal to 0.5% on an annualized basis for Class A and Class B interests of
each investor’s capital account, on the first calendar day of each month. The Investment Manager
reserves the right not to charge a Management fee to the General Partner or any investoraffiliated with
the General Partner. The General Partner or XM in its discretion may waive or reduce the Management
Fee chargeable to any investor. If XM is not acting as Investment Manager for an entire month, the
Management Fee will be prorated for such partial month. The Investment Manager or General Partner
is also entitled to receive an incentive fee (the “Incentive Allocation”) as described below in Item 6
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Performance Based Fees and Side-by-SideManagement.
For SMAs the Management Fee is separately negotiated between XM and each Client and can vary.
XM is also entitled to Incentive Allocation for SMAs as long as Clients meet the definition of a
“qualified client” under the Investment Advisers Act of 1940 (as amended, the “Advisers Act”).
Incentive Allocations are also separately negotiated with each Client and are further described below
in Item 6 Performance Based Fees and Side-by-Side Management. XM in its discretion may waive or
reduce the Management Fee chargeable to any SMA Client.
Expenses
The Funds shall bear all operating expenses and other costs of the Funds including, but not limited to:
(i) accounting, bookkeeping, tax and auditing fees and expenses (including the allocable share of the
costs, fees and expenses relating to internal accounting and tax preparation functions); (ii) legal fees
and expenses, including, but not limited to, fees and expenses incurred in connection with this
constituent fund documents, any offering the Funds, contracts and investments; (iii) all fees and
disbursements of the Funds’, the General Partner’s and the Investment Manager’s attorneys,
consultants and other third parties performing work benefiting the Funds or otherwise in connection
with the Funds’ investment activities (including, without limitation, the legal and other fees, costs and
expenses of such parties in or related to any proxy contest or other shareholder initiative or proceeding
and in any threatened or actual litigation or governmental investigation or proceeding, and the amount
of any judgments or settlements paid in connection with such proxy contest, shareholder initiative or
litigation, or fines or penalties levied as a result of any such investigation or proceeding ); (iv)
insurance and bonding costs; (v) all trading expenses and transaction costs, including, but not limited
to, brokerage commissions and expenses relating to short sales, clearing and settlement charges,
interest on loans and debit balances, margin interest, broker service fees and other clearing and
custodial expenses; (vi) fees or assessments in connection with any regulatory registrations,
qualifications and/or approvals of the Funds, the General Partner or the Investment Manager, and
related compliance fees and expenses, deemed appropriate by the General Partner or the Investment
Manager; (vii) such research and portfolio management expenses as the General Partner or XM deems
appropriate, which may include, but are not limited to, expenses incurred in connection with due
diligence investigations or research as to investments or potential investments, including travel,
lodging and other expenses incurred in connection with visits to companies, meetings, research
symposiums and communications with company management, security holders, analysts and other
third parties, costs of research reports, data feeds and databases, news wires and quotation services,
periodical subscription fees and costs of software (including risk control) utilized by the General
Partner or XM in connection with managing the Funds’ portfolio; (viii) fees of the Funds’ registered
agent; (ix) fees of the Funds’ Administrator; (x) the cost of preparation and distribution of reports and
statements to investors; (xi) all filing and recording fees; (xii) all custodial fees, bank service fees, and
fees or expenses associated with insuring the Funds’ assets; (xiii) the Management Fee; (xiv) all
applicable federal, state, local and foreign taxes payable by the Funds; and (xv) any extraordinary
expenses, such as indemnification and litigation expenses. Notwithstanding the foregoing, any
expense relating specifically to a side pocket account shall be charged against the capital accounts of
the investors participating in such side pocket account in proportion to their respective interests in
such side pocket account.
Expenses incurred in the organization of the Funds will be borne or reimbursed by the Funds. For
financial reporting purposes, organizational expenses will be amortized by the Funds during its first
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60 months of operations. Amortization of such expenses over a period that is up to 60 months is a
divergence from U.S. generally accepted accounting principles, which may, in certain circumstances,
result in a qualification of the Funds’ annual audited financial statements. In such instances, the
General Partner or XM may make modifications to its accounting practices in order to eliminate such
qualifications.
Furthermore, the General Partner and/or the Investment Manager reserve the exclusive right, in their
sole discretion, to pay for all or a portion of Fund expenses and to not seek reimbursement therefor
from the Funds.
Except as otherwise set forth in the SMAA, SMA Clients generally bear the expenses relating to their
account including, but are not limited to, trading expenses, brokerage commissions and other
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