On the first day of a new Fiscal Year §1.5, all of the Yearly and Annualized Capital Accounts §6.5 from the prior Fiscal Year, both for the Fund and the individual Limited Partners, will be combined into new Yearly Capital Accounts. The beginning balance of the new Yearly Capital Accounts will be the closing balances on the last day of the prior Fiscal Year, less all Fees §3.3.

After the first day of the Fiscal Year, the beginning balance of the Yearly Capital Account is affected by any Withdrawals and Redemptions §6.2. To accurately charge Fees on Withdrawals and Redemptions a new Annualized Capital Account is created and debited. To accurately determine performance a “performance ratio” (PR) is calculated which is the existing Yearly Capital Account “beginning balance” (yBBal) divided by the “ending balance” (yEBal) at the time of Withdrawals and Redemptions. The “beginning balance” of the new Annualized Capital Account is the Withdrawals and Redemptions (WR) multiplied by the performance ratio (PR). The Yearly Capital Account’s “beginning balance” is debited by the amount of the “beginning balance” of the new Annualized Capital Account to determine the “adjusted beginning balance” of the Yearly Capital Account. The “ending balance” of the Yearly Capital Account is reduced by the amount of Withdrawals and Redemptions to determine the “adjusted ending balance of the Yearly Capital Account.

PR = Performance Ratio
WR = Withdrawal or Redemption
aBBal = Annualized Capital Account Beginning Balance
aEBal = Annualized Capital Account Ending Balance
yBBal = Yearly Capital Account Beginning Balance
yEBal = Yearly Capital Account Ending Balance

PR = yBBal / yEBal
aBBal = (WR * PR)
aEBal = WR
adjusted yBBal = existing yBBal - aBBal
adjusted yEBal = existing yEBal - aBBal

The Yearly Capital Account of the Limited Partner is used to determine Fees (Sec. 3.3) charged the Limited Partner on capital invested for a full Fiscal Year. If the performance of the Yearly Capital Account is above the Hurdle Rate (Sec. 3.4) and High Water Mark (Sec. 3.5), the Yearly Capital Account of the Limited Partner is charged an annual Management Fee (Sec. 3.6) and a Performance Fee (Sec. 3.7).

To determine the Fees charged, the dollar amount of the Yearly Capital Account performance is defined as the difference between the “ending balance” (yEBal) and the “beginning balance” (yBBal). The “Net Performance” on which fees are based, is the performance in dollars less both the Hurdle Rate in dollars and the High Water Mark. If the “Net Performance” is greater than zero then an annual Management Fee and Performance Fee are charged. The annual Management Fee is 1.5% of the “ending balance”. The Performance Fee is 20% of the “Net Performance minus the annual Management Fee. Performance Amount = yEBal - yBBal Hurdle Amount = (Hurdle Rate) x yBBal Net Performance = Performance Amount - Hurdle Amount - High Water Mark if Net Performance > 0 Then Annual Management Fee = yEBal x 1.5% Performance Fee = (Net Performance - Annual Management Fee) x 20%