The Baupost Group, L.L.C. (“Baupost”) was formed in May 1982 (originally as The Baupost Group, Inc.). Baupost’s Chief Executive Officer and principal owner, Seth A. Klarman, serves as Portfolio Manager and has been managing the investments of Baupost’s clients since the company’s inception. Baupost is the managing general partner to eleven domestic investment limited partnerships (each, a “Partnership,” collectively, the “Baupost Partnerships”). All of the Baupost Partnerships are privately offered investment vehicles exempt from registration as investment companies under the Investment Company Act of 1940, as amended (the “1940 Act”). Baupost Partners, L.L.C. (“Baupost Partners”), an affiliate of Baupost, serves as profit sharing general partner to the Baupost Partnerships (together with Baupost, the “General Partners”). Baupost has no ownership interest in Baupost Partners, but certain members and employees of Baupost are members of Baupost Partners. As managing general partner of each Partnership, Baupost is solely responsible for the management and administration of such Partnership, including the making of all investment decisions on behalf of such Partnership and the placing of all orders for the purchase and sale of investments. Baupost manages each Partnership pursuant to the investment strategy set forth in such Partnership’s limited partnership agreement (“LP Agreement”) and, if applicable, offering memorandum. Ten of the Baupost Partnerships invest in a wide range of public and private securities and assets (collectively, the “Primary Partnerships”). The eleventh Partnership is an overflow vehicle (the “Overflow Partnership”) to which no new investments are being allocated, other than follow-on investments and hedges. Baupost does not provide specifically tailored investment advice to investors in the Baupost Partnerships, and investors may not impose investment restrictions on their investment in the Baupost Partnerships. Contributions to and withdrawals from the Baupost Partnerships are subject to the terms and conditions set forth in the respective LP Agreements of the Baupost Partnerships in which investors are invested. Investors in the Baupost Partnerships are subject to restrictions on their ability to withdraw capital from the Baupost Partnerships. Baupost, has the right, in its sole discretion, to waive or alter some or all of the applicable restrictions on capital withdrawals and contributions (for example, notice periods, withdrawal of the portion of capital allocated to restricted investments, and other matters) or on transfers of limited partnership interests for investors as set forth in each Partnership’s LP Agreement and, if applicable, offering memorandum, and Baupost generally does waive notice periods for employees and certain former employees. Investors are urged to review the relevant LP Agreement and, if applicable, offering memorandum for additional information about matters addressed in this and other items throughout this Brochure. As of December 31, 2018, Baupost’s regulatory assets under management were approximately $30,747,206,417, all of which are managed on a discretionary basis. Baupost does not manage assets on a non-discretionary basis. please register to get more info

As compensation for its advisory services, Baupost receives a management fee from each of the Baupost Partnerships that is required to be paid in advance at the beginning of each quarter. The management fee is assessed based on relevant investor capital account balance as of the first business day of each fiscal quarter, taking into account capital contributions or withdrawals as of such date. Prior to applying the management fee rate, each capital account balance is reduced (but not below zero) by unrealized gains (net of unrealized losses) on any Illiquid asset (as defined in each Partnership’s LP Agreement) and reduced (but not below zero) by any positive adjusted profit sharing obligation allocated to such capital account. The management fee for a fiscal quarter is due and payable upon calculation. The management fee expense is evenly amortized over the quarter and deducted from each relevant investor’s capital account monthly. In addition, the General Partner(s) are eligible to receive performance-based compensation from the Baupost Partnerships, subject to, if applicable, loss carryforward limitations set forth in each LP Agreement. As a result of the profit sharing obligation, a certain portion of eligible profits initially allocated to each relevant investor in each Partnership is reallocated to the General Partner(s), subject to the limitations set forth in each applicable LP Agreement. The profit sharing obligation is accrued at least quarterly and is reallocated to the General Partner(s) annually. If an investor withdraws or transfers its interest during the year, a proportionate amount of the profit sharing obligation generally will be reallocated from the capital account of the investor to the capital account of the General Partner(s). The profit sharing obligation of each relevant investor in the Baupost Partnerships is 20% of eligible profits, as described in detail in each respective LP Agreement and, if applicable, offering memorandum. Any profit sharing obligation generated from unrealized gains on any Illiquid asset will be deferred for reallocation to the General Partner(s) until gains are realized except in the case of a full withdrawal of an investor’s capital balance. Management fees and profit sharing obligations are non-negotiable and non-refundable; however, Baupost may, in its sole discretion, waive these fees for certain investors in whole or in part, and generally does so for current employees, certain former employees, founders and certain related parties of the foregoing. Baupost may discontinue a fee waiver at any time, and generally discontinues fee waivers for departing employees. The aforementioned compensation of the General Partners is based upon the value of the Baupost Partnerships’ assets, which Baupost is responsible for determining. To mitigate this conflict, Baupost does not collect management fees, in any case, or profit sharing obligation on unrealized gains on any Illiquid asset, except in the case of a full withdrawal of an investor’s capital balance. Additionally, Baupost engages independent third parties to assist with valuing certain Illiquid assets. Baupost also engages an independent auditor to conduct periodic valuation testing (see Item 13 for additional detail).
Expenses
Baupost will, in consideration for management fees, bear its own overhead expenses incurred in connection with managing the affairs and business of the Baupost Partnerships, including expenses related to its office space, utilities, and employees (i.e., those persons participating in its payroll and those Baupost deems to be its employees), and all costs and expenses of travel undertaken by Baupost employees, including travel to perform due diligence related to acquiring prospective investments or to perform ongoing supervision of the Baupost Partnerships’ assets. The Baupost Partnerships will bear, or reimburse Baupost for, all organizational, restructuring and offering expenses and for all ordinary and extraordinary expenses incurred or advanced in the operation or management of the Baupost Partnerships and their investment activities as Baupost deems to be reasonable and necessary. The costs and expenses borne by the Baupost Partnerships (of which the investors bear their allocable share) include, without limitation: (i) Investment-related expenses, such as expenses related to sourcing investments, performing due diligence related to prospective investments or areas of investment, structuring, negotiating and executing acquisitions and dispositions of investments, and performing ongoing supervision and maintenance of investments, including but not limited to the following: a) brokerage fees and commissions; b) clearing and settlement charges and custodial and sub-custodial fees; c) fees and expenses (including travel expenses) charged by professional service providers (some of whom may be former employees of, or current or former consultants to, Baupost), such as legal, accounting, auditing, consulting (which may include the cost of consultants onsite at Baupost’s offices), investment banking, research (including expert network services and research provided by providers of brokerage services), class action monitoring (which may be in the form of a fixed fee or based on a percentage of the amount recovered by a Partnership in respect of such litigation, or a combination of both), advisory, lobbyist and other professional service providers; d) costs of retainers and transaction-based compensation or success fees, some of which may be discretionary, charged by third party consultants, operating partners, brokers and advisers (some of whom may be former employees of, or current or former consultants to, Baupost) in connection with sourcing investments in certain markets, any of which may be fixed or based on a percentage of the proceeds of sourced investments or a percentage of the amount invested, or a combination of the foregoing; e) management, development, profit-sharing or other fees or expenses (including, in certain instances, an operating partner’s operational and overhead expenses) charged by operating partners or third parties (some of whom may be former employees of, or current or former consultants to, Baupost) who manage certain investments (including joint ventures, investment companies, partnerships and other pooled investment vehicles), any of which such fees or expenses may be fixed or based on a percentage of the proceeds of managed investments or a percentage of the amount invested, or a combination of the foregoing; f) fees and expenses associated with the organization, operation and maintenance of special-purpose and other investment vehicles, including aggregating vehicles and service-providing vehicles, used in connection with the Baupost Partnerships’ investments, including (w) operational and overhead expenses such as office rent, personnel and information technology, (x) fees and expenses associated with developing, structuring, and winding up such entities, (y) costs of management of assets, including real property investments, owned by the Baupost Partnerships, and (z) legal, accounting, and operational support; g) fees and expenses associated with any advisory board or committee required or advisable in certain non-U.S. jurisdictions in connection with investments; h) interest and fees (including, without limitation, commitment, structuring, and underwriting fees) on margin loans, loan facilities, total return swaps and other indebtedness or other types of instruments, and related fees and expenses; i) any of the foregoing to the extent related to potential investments that were not consummated; and j) any other expenses related to a prospective investment, an existing investment or an area of investment; (ii) fees and expenses of professional service providers, including, without limitation, consultants and attorneys, including expenses for legal work related to Baupost Partnerships’ amendments, costs and expenses incurred in connection with the dissolution, winding up, termination and liquidation of the Baupost Partnerships and the costs of any litigation or investigation involving activities of the Baupost Partnerships; (iii) expenses related to (x) the Baupost Partnerships’ indemnification obligations under the LP Agreements, (y) director and officer liability insurance and errors and omissions liability insurance, including, without limitation, insurance that also provides coverage to the General Partners and their affiliates, officers, and employees, for indemnifiable and non-indemnifiable fees, expenses and losses, and (z) other insurance costs including insurance premiums, including insurance of which the General Partners and their affiliates are beneficiaries; (iv) administration fees and other expenses charged by or relating to the services of third- party providers of administration services; (v) expenses associated with pricing and investment valuation services; (vi) audit, accountant and tax preparation expenses; (vii) fees and expenses related to compliance with the rules of any self-regulatory organization or applicable law or regulation in connection with the activities of the Partnership, including, without limitation, any governmental, regulatory, licensing, filing or registration fees or taxes (including, without limitation, fees and expenses incurred in connection with the preparation and filing of Section 13 filings, Section 16 filings and other similar regulatory filings); (viii) costs associated with compliance with (x) anti-money laundering regulations, (y) know your customer and anti-money laundering requirements of service providers and other counterparties, and (z) the Baupost Partnerships’ know your customer review of prospective and existing investors, service providers and other counterparties; and (ix) other expenses associated with the operation of the Baupost Partnerships (these may include, for example, although not historically borne by the Partnership, expenses associated with organizing and conducting investor meetings). As stated above, the Baupost Partnerships will incur brokerage and other transactions costs when a broker-dealer is used in connection with an investment. For additional information regarding brokerage practices, please see Item 12 below. When a Baupost Partnership invests in joint ventures, including those with operating partners, or pooled investment vehicles, investors bear the cost of any management and performance fees of such third parties in addition to the fees of the General Partners. Under the circumstances set forth in the LP Agreements, certain tax-related expenses or regulatory expenses may be specially allocated by Baupost to the accounts of those investors to which the relevant expenses are attributable. Certain expenses may be borne in part by the Baupost Partnerships and in part by Baupost, such as in circumstances when a consultant provides services for the benefit of Baupost and other services for the benefit of the Baupost Partnerships or a specific Partnership investment. To the extent that any expenses or fees relate to all or some of the Baupost Partnerships (or to investments thereof), such expenses or fees are allocated on a pro rata basis across the Baupost Partnerships to align, as closely as practicable, the expense burden with the beneficiaries of the service or investment activity. The Baupost Partnerships also bear, in a similar manner, expenses in connection with transactions that were terminated or abandoned. The Overflow Partnership does not bear such expenses for any such transaction unless Baupost had previously determined that the Overflow Partnership should participate in such transaction (in which case, the Overflow Partnership would bear its applicable portion). please register to get more info

As described in Item 5 (“Fees and Compensation”), the General Partner(s) are eligible to receive performance-based compensation from the Baupost Partnerships. Baupost recognizes that managing partnerships with differing terms relating to performance-based fees (such as different loss carryforward limitations) presents potential conflicts of interest, including that Baupost may have an incentive to favor one Partnership over another when allocating investment opportunities. To mitigate these conflicts, Baupost’s policies and procedures seek to provide that investment personnel make decisions based on the best interests of the Baupost Partnerships, without consideration of Baupost’s financial interests. Baupost has adopted a Trade Allocation Policy that seeks to allocate investments to the Baupost Partnerships in a fair and equitable manner. Please see Item 11 for additional detail on Baupost’s Trade Allocation Policy. please register to get more info

Baupost’s clients are the Baupost Partnerships. Baupost manages one Partnership exempt from registration under Section 3(c)(1) of the 1940 Act and ten Partnerships exempt from registration under Section 3(c)(7) of the 1940 Act. Investors, which generally include high net worth individuals, corporations, charitable institutions, pension and profit sharing plans, trusts, individual retirement accounts and other entities, are admitted to the Baupost Partnerships at the discretion of Baupost, and contributions by investors to the Baupost Partnerships are accepted solely at the discretion of Baupost. Baupost also allows certain of its employees to invest in certain Baupost Partnerships. Some (but not all) of the Baupost Partnerships impose a minimum initial investment requirement of up to $25 million, which may be waived at the discretion of Baupost. please register to get more info

Baupost is an opportunistic, value-oriented, open mandate investment organization whose goal is to invest capital in such a manner as to achieve attractive risk-adjusted returns over an extended period of time. To achieve this objective the Baupost Partnerships seek to invest in assets which Baupost considers to be undervalued relative to their market price. The Baupost Partnerships seek to invest, either directly or indirectly, in securities and other assets that Baupost believes to have some or all of the following characteristics: they are currently out of favor, but have good prospects; they sell at a significant discount to underlying economic value; they have catalysts in place for the realization of underlying value; they are highly complex; they are somewhat or highly illiquid; and they sell at prices below what would reasonably be expected due to market imperfections and inefficiencies, including but not limited to temporary supply/demand imbalances, information gaps, and selling pressures. The Baupost Partnerships have a broad investment mandate that contemplates investing in a range of financial instruments, asset classes and geographic regions, including those with respect to which Baupost initially may have limited experience. An investment in the Baupost Partnerships entails various risks, including the speculative nature of the Baupost Partnerships’ activities, the illiquidity of interests in the Baupost Partnerships; the illiquidity of certain investments the Baupost Partnerships may make; and the risk that the securities markets may continue indefinitely to undervalue the Baupost Partnerships’ investments or that the investments may fail to appreciate as anticipated by Baupost. The Baupost Partnerships may invest in, subscribe for, purchase or otherwise acquire, and/or sell (including short sales) or otherwise dispose of securities and assets of all types, including, without limitation, stock (including preferred and convertible stock as well as common stock of any type), warrants, options, swaps, trade claims, bank debt (including undrawn revolvers), bonds, other debt instruments including self-originated loans, currency, futures, derivatives, commodities, contract rights of any kind, royalty interests, non-U.S. securities and other assets (including in emerging markets), structured investment vehicles, secured and unsecured instruments, asset-backed securities, commercial and residential mortgage-backed securities, real estate and related instruments, other complex financial instruments and rights and distressed assets. The securities in which the Baupost Partnerships invest include securities which are listed or traded on domestic or non-U.S. exchanges or other trading networks (including over the counter markets), as well as securities that are unlisted and trade infrequently or not at all. At times a significant amount of the Baupost Partnerships’ investments may be in securities or other assets that are not freely tradable or are otherwise illiquid. Such investments include interests in private equity investments, real estate, leveraged buy-out vehicles and joint ventures, which are typically organized as limited partnerships or limited liability companies, and are managed by third party asset managers that specialize in the particular class of assets under management. The Baupost Partnerships may also make investments in private investments in public equity (PIPEs), which generally are not registered with the SEC until after a certain time period from the date the private sale is completed, Rule 144A securities and other direct assets such as car loans, consumer loans, commodities or non-performing assets. Prospective investors should also consider the risks associated with the loss of key personnel of Baupost. Prospective investors should consult with their own advisers in order to understand the consequences of an investment in the Baupost Partnerships. Any investor not able to bear the risk of loss of his or her investment should not participate in the Baupost Partnerships. Baupost selects investments according to many criteria, which may include book value, estimated underlying economic value, current and projected future earnings, cash flow, yield, skills of management, future prospects of the business and current market price of the investment. Baupost utilizes several analytical techniques, which may include fundamental analysis, analysis of historical relationships, economic analysis, business cycle analysis, interest rate analysis and industry analysis to make its investment decisions.
Investment Risks
The types of investments made by the Baupost Partnerships are subject to certain risks. The following risk factors do not purport to be a complete list or explanation of the risks involved in an investment in the Baupost Partnerships. Investors are advised to review the applicable Partnership’s offering materials for a more extensive description of the risks of an investment in the Baupost Partnerships. Speculative Investment Strategy By its nature, all investing, including by the Baupost Partnerships, is speculative. Despite the Baupost Partnerships’ operating history, there is no assurance that the Baupost Partnerships will achieve their investment objective. Baupost’s assessment of the short-term or long-term prospects of investments may not prove accurate. No assurance can be given that any investment strategy implemented by Baupost on behalf of the Baupost Partnerships will be successful, and investors may suffer a significant loss of their invested capital. Past performance of the Baupost Partnerships is not indicative of future results, which may vary. Broad Discretion The Baupost Partnerships have a broad investment mandate that contemplates investing in a range of financial instruments, asset classes, and geographic regions, including those with respect to which Baupost initially may have limited experience. Value Style Baupost adheres to a value investment philosophy. As a result, there is a risk that the securities markets may continue indefinitely to undervalue the investments in the Baupost Partnerships’ portfolios or that the investments may fail to appreciate, as anticipated by Baupost. This risk may be greater for small and medium-sized companies, which could be more vulnerable to adverse developments and are less liquid to trade. The Baupost Partnerships frequently invest in securities, industries and asset classes that are out of favor or ignored by other investors. Investors incur the risk that such a contrarian strategy may not succeed and, to the extent that adverse economic and investment trends continue for an extended time, that the Baupost Partnerships may not achieve their goals. Even if a Partnership’s value-investment strategy is successful, there may be high portfolio turnover and, consequently, high transaction costs. Investment and Due Diligence Process Before making investments, Baupost conducts due diligence that it deems reasonable and appropriate based on the facts and circumstances applicable to each investment. Such due diligence often includes complex business, financial, tax, accounting and legal issues. When conducting due diligence and making an assessment regarding an investment, Baupost will rely on the resources reasonably available to it, which in some circumstances, whether or not known to Baupost at the time, may not be sufficient, accurate, complete or reliable. Due diligence may not reveal or highlight matters that could have a material adverse effect on the value of an investment. Control of Portfolio Investments The Baupost Partnerships may seek to influence or control management of various issuers. This activity may include investing in a potential takeover, leveraged buy-out or reorganization or otherwise by investing in public or private companies, including other entities that were organized in order to purchase securities for the purpose of influencing or controlling management. In addition, such investments may be structured in a manner that permits the Baupost Partnerships to have some input into the management of the vehicle by an operating partner or third party asset manager. For example, when making investments in companies, the Baupost Partnerships may also seek to influence or control management by, for example, discussing formally or informally with management different operating strategies, proposing shareholder resolutions, engaging in a proxy contest, serving on a board of directors or serving on a creditors’ committee established in connection with a company’s insolvency. The success of an investment predicated on the ability of the Baupost Partnerships to influence or control management depends upon, among other things: (i) Baupost’s ability to properly identify companies whose securities prices can be improved through corporate and/or strategic action; (ii) the Baupost Partnerships’ ability to acquire sufficient securities of such companies at a sufficiently attractive price; (iii) the Baupost Partnerships’ ability to build its position in accordance with applicable regulations; (iv) the willingness of the management of such companies and other security holders to respond positively to Baupost’s proposals; and (v) favorable movements in the market price of any such company’s securities in response to any actions taken by such company. There can be no assurance that any of the foregoing will occur. As noted herein, the Baupost Partnerships may acquire a “control” position in an issuer’s securities. This may subject the Baupost Partnerships to additional risks of liability for environmental damage, product defects, failure to supervise management, violation of governmental regulations and other types of liability in which the limited liability generally characteristic of business operations may be ignored. Although the Baupost Partnerships generally do not seek controlling positions in public companies, if a Partnership, acting alone or as part of a group, acquires beneficial ownership of more than 10% of a certain class of securities of a public company or places a director on the board of directors of such a company, under Section 16 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Baupost Partnerships may be subject to certain additional requirements and limitations. Furthermore, when the Baupost Partnerships’ ownership of an issuer’s securities exceeds certain thresholds, the Baupost Partnerships may be limited in its ability to engage in certain transactions, including taking certain short positions and making certain investments in or with respect to companies that compete with the issuer. Similar requirements and limitations may apply in non-U.S. jurisdictions. Significant Positions in Securities; Regulatory Requirements In the event the Baupost Partnerships acquire a significant stake in certain issuers of securities and such stake exceeds certain percentage or value limits, the Baupost Partnerships may be subject to regulation and regulatory oversight that may impose notification and filing requirements or other administrative burdens on the Baupost Partnerships and Baupost. Any such requirements may impose additional costs on the Baupost Partnerships and may delay the acquisition or disposition of the securities or the Baupost Partnerships’ ability to respond in a timely manner to changes in the markets with respect to such securities. In addition, “position limits” may be imposed by various regulators that may limit the Baupost Partnerships’ ability to effect desired trades. Position limits are the maximum amounts of gross, net long or net short positions that any one person or entity may own or control in a particular issuer’s securities. All positions owned or controlled by the same person or entity, even if in different accounts, may be aggregated for purposes of determining whether the applicable position limits have been exceeded and often are aggregated for the Baupost Partnerships. To the extent that a Partnership’s position limits were aggregated with the other Baupost Partnerships’ position limits, the effect on that Partnership and resulting restriction on its investment activities may be significant. If at any time positions managed by Baupost were to exceed applicable position limits, Baupost would be required to liquidate positions, which might include positions of such Partnership, to the extent necessary to come within those limits. Further, to avoid exceeding any position limits, the Baupost Partnerships might have to forgo or modify certain of its contemplated trades. Moreover, the presence of corporate governance mechanisms such as staggered boards, poison pills and classes of stock with increased voting rights may hinder Baupost’s ability to successfully execute any corporate governance strategy. Concentration of Investments It is expected that no single investment of a Partnership will exceed 10% of the assets of such Partnership at the time of purchase. The favorable performance of a particular investment or sale or other disposition or relatively unfavorable performance of other investments may increase the percentage of such Partnership’s assets in a single investment beyond 10%. However, Baupost reserves the right to acquire a single investment that exceeds 10% of the assets of any Partnership at the time of its purchase if it deems the investment advisable. During times when the Baupost Partnerships invest their assets in a small number of issuers, or in a larger number of issuers but with significant concentration of assets in only a few, the fair value of the Baupost Partnerships’ assets may fluctuate more widely than the fair value of a portfolio that invests in a greater number of issuers. This lack of diversification involves an increased risk of loss to the Baupost Partnerships if an issuer in which the Baupost Partnerships invest were unable to make interest or principal payments or if the market value of the issuer’s securities were to decline. Portfolio Turnover Portfolio turnover is not a limiting factor with respect to investment decisions. High portfolio turnover involves correspondingly greater brokerage commissions and other transaction costs, which will be borne by the Baupost Partnerships. Alternatively, if portfolio turnover is relatively low, the Baupost Partnerships may be subject to higher brokerage commissions for execution services in order to also obtain research services than the commissions the Baupost Partnerships would otherwise pay for execution and research services if its trading volume were higher. Cash Balances The Baupost Partnerships typically hold significant cash or cash equivalent balances. The Baupost Partnerships generally hold any cash balances they may accumulate for investment, reinvestment, and distribution to the Partners or reserves for unfunded obligations in short-term debt securities, either taxable or, in whole or in part, tax-exempt, in securities subject to repurchase agreements, in taxable or tax-exempt money market mutual funds or in bank accounts. These cash balances are most typically held in securities issued by or backed by the government of the United States. The cash balances of the Baupost Partnerships (including amounts held in short-term debt securities, money market mutual funds or bank accounts) will vary from time to time as Baupost may deem advisable and may at any particular time amount to a significant portion of the assets of the Baupost Partnerships. Pending investment or reinvestment, such cash balances may not significantly appreciate in value. Alternatively, Baupost may deem it advisable to hold low or no cash balances whatsoever from time to time. Leverage and Guarantees While they have not historically done so, the Baupost Partnerships may engage in trading on margin by borrowing funds and pledging securities as collateral, thereby utilizing leverage. Although leverage increases returns if the Baupost Partnerships earn a greater return on the incremental investments purchased with borrowed funds than it pays for such funds, the use of leverage decreases returns if the Baupost Partnerships fail to earn as much on such incremental investments as it pays for such funds. The effect of leverage in a declining market would also result in a greater decrease in the Baupost Partnerships’ Net Asset Value than if the Baupost Partnerships were not so leveraged. If the assets, if any, used to secure the borrowing decrease in value, the Baupost Partnerships may be required to pledge additional collateral to the lender in the form of cash or securities to avoid liquidation of those assets or potential liquidation of the leveraged asset. The Baupost Partnerships have in the past and expect in the future to invest in entities that are themselves subject to leverage, which may be substantial, including private equity and real estate vehicles. Debt may be placed on investments, including real estate, at the time of purchase, or subsequent to purchase. In limited circumstances, the Baupost Partnerships may provide additional security or a guarantee in connection with the issuance of such debt, or in connection with other types of obligations of portfolio investments. Baupost may also cause the Baupost Partnerships to guarantee or backstop certain obligations of third parties such as its operating partners in connection with underlying transactions. In connection with purchase obligations or other commitments, a Partnership may incur financial obligations on a joint basis with other Baupost Partnerships, other affiliated entities (e.g., special- purpose vehicles), or third parties, including but not limited to guarantees, or obligations undertaken by Baupost on behalf of the funds it manages, which financial obligations may exceed such Partnership’s pro rata share of its interest in the applicable investment. However, such Partnership will not incur a financial obligation on a joint basis with another of the Baupost Partnerships, other affiliated entity, or third party unless Baupost believes that such Partnership and the other of the Baupost Partnerships, other affiliated entities, or third parties that are parties to the joint obligation will each be able to bear its pro rata share of the relevant obligation. In connection with the foregoing, such Partnership may enter into contribution agreements in order that such Partnership will not bear more than its pro rata share of any such joint obligation. Cybersecurity Risk Cybersecurity risks are present for issuers of securities in which the Baupost Partnerships invest, which could result in material adverse consequences for such issuers, and may cause the Baupost Partnerships’ investment in such securities to lose value. Such issuers may process, store and transmit large amounts of electronic information, including information relating to the transactions of the issuers. Similarly, service providers of issuers may process, store and transmit such information. Even if an issuer or service provider has procedures and systems in place that it believes are reasonably designed to protect such information and prevent data loss and security breaches, such measures cannot provide absolute security. The techniques used to obtain unauthorized access to data, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time. Hardware or software acquired from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Network-connected services provided by third parties to the issuers may be susceptible to compromise, and an issuer’s systems or facilities may be susceptible to employee error or malfeasance, government surveillance, or other security threats. In general, cyber-attacks are deliberate, but unintentional events may have similar effects. Cyber-attacks include, among others, stealing or corrupting data maintained online or digitally, preventing legitimate users from accessing information or services on a website, releasing confidential information without authorization, and causing operational disruption. Terrorism and Catastrophe Risks The Baupost Partnerships may be subject to the risk of loss arising from exposure that it may incur, indirectly, due to the occurrence of various events, including, without limitation, hurricanes, earthquakes, and other natural disasters, terrorism and other catastrophic events. Risk Arising from Potential Control Group Liability. In 2013, a U.S. federal appeals court decision found that certain supervisory and portfolio management activities of a private equity fund could cause a fund to be considered a trade or business for these purposes, and, thus, liable for withdrawal liability owed by a fund's portfolio company to an underfunded multi-employer plan which covered the employees of the portfolio company. Under ERISA, upon the termination of a tax-qualified single employer defined benefit pension plan, the sponsoring employer and all members of its "controlled group" will be jointly and severally liable for 100% of the plan's unfunded benefit liabilities whether or not the controlled group members have ever maintained or participated in the plan. In addition, the U.S. Pension Benefit Guaranty Corporation (the "PBGC") may assert a lien with respect to such liability against any member of the controlled group on up to 30% of the collective net worth of all members of the controlled group. Similarly, in the event a participating employer partially or completely withdraws from a multiemployer (union) defined benefit pension plan, any withdrawal liability incurred under ERISA will represent a joint and several liability of the withdrawing employer and each member of its controlled group. A "controlled group" includes all "trades or businesses" under 80% or greater common ownership. This common ownership test is broadly applied to include both "parent-subsidiary groups" and "brother-sister groups" applying complex exclusion and constructive ownership rules. However, regardless of the percentage ownership that the Baupost Partnerships hold in one or more of its portfolio investments, the Baupost Partnerships cannot be considered part of an ERISA controlled group unless the Baupost Partnerships are considered to be a "trade or business". If the Baupost Partnerships were determined to be a trade or business for purposes of ERISA, it is possible, depending upon the structure of the investment by the Baupost Partnerships and/or its affiliates and other co-investors in a portfolio investment and their respective ownership interests in the portfolio investment, that any tax-qualified single employer defined benefit pension plan liabilities and/or multiemployer plan withdrawal liabilities incurred by the portfolio investment could result in liability being incurred by the Baupost Partnerships, with a resulting need for additional capital contributions, the appropriation of Baupost Partnerships assets to satisfy such pension liabilities and/or the imposition of a lien by the PBGC on certain Baupost Partnerships assets. Moreover, regardless of whether or not the Baupost Partnerships were determined to be a trade or business for purposes of ERISA, a court might hold that one of the Baupost Partnerships’ portfolio investments could become jointly and severally liable for another portfolio investment's unfunded pension liabilities pursuant to the ERISA "controlled group" rules, depending upon the relevant investment structures and ownership interests as noted above.
Investment Risks Associated with Specific Investment Types
Equity Securities Generally The value of equity securities of public and private, listed and unlisted companies and equity derivatives generally varies with the performance of the issuer and movements in the equity markets. As a result, the Baupost Partnerships may suffer losses if they invests in equity instruments of issuers whose performance diverges from Baupost’s expectations or if equity markets generally move in a single direction and the Baupost Partnerships have not hedged against such a general move. The Baupost Partnerships also may be exposed to risks that issuers will not fulfill contractual obligations such as, in the case of convertible securities or private placements, delivering marketable common stock upon conversions of convertible securities and registering restricted securities for public resale. Preferred Stock Investments in preferred stock involve risks related to priority in the event of bankruptcy, insolvency or liquidation of the issuing company and how dividends are declared. Preferred stock ranks junior to debt securities in an issuer’s capital structure and, accordingly, is subordinate to all debt in bankruptcy. Preferred stock generally has a preference as to dividends. Such dividends are generally paid in cash (or additional shares of preferred stock) at a defined rate, but unlike interest payments on debt securities, preferred stock dividends are payable only if declared by the issuer’s board of directors. Preferred stock may also be subject to optional or mandatory redemption. Convertible Securities A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by the Baupost Partnerships is called for redemption, the Baupost Partnerships will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on a Partnership’s ability to achieve its investment objective. Debt Securities Fixed-income securities are subject to market and credit risk. Market risk relates to changes in a security’s value as a result of changes in interest rates generally. Credit risk relates to the ability of the issuer to make payments of principal and interest. Debt securities in which the Baupost Partnerships invest may or may not be rated by rating agencies such as Moody’s Investors Service, Inc. (“Moody’s”) or Standard & Poor’s Ratings Services (“S&P”), and, if rated, such rating may range from the very highest to the very lowest, currently C for Moody’s and D for S&P. Securities rated below investment grade (below Baa3 if rated by Moody’s and below BBB- if rated by S&P) normally provide a yield or yield to maturity that is significantly higher than that of investment-grade issues, but are predominately speculative with respect to capacity to pay interest and repay principal. The lower-rated categories include debt securities that are in default and debt securities of issuers that are insolvent. The rating assigned to a security by Moody’s or S&P does not reflect an assessment of the volatility of the security’s market value or the liquidity of an investment in the security. The values of lower-rated securities (including unrated securities of comparable quality) generally fluctuate more than those of higher-rated securities, although they may be less sensitive to interest rate changes. In addition, the lower rating reflects a greater possibility that the financial condition of the issuer, adverse changes in general economic conditions, or an unanticipated rise in interest rates, may impair the ability of the issuer to make payments of principal and income. The inability (or perceived inability) of issuers to make timely payment of interest and principal would likely make the values of fixed-income securities held by the Baupost Partnerships more volatile and could limit the Baupost Partnerships’ ability to sell their securities at prices approximating the values the Baupost Partnerships had placed on such securities. In addition, the market price of lower-rated securities is likely to be more volatile because: (i) an economic downturn or increased interest rates may have a more significant effect on the yield, price and potential for default; (ii) the market may at times become less liquid or respond to adverse publicity or investor perceptions, increasing the difficulty in disposing of the securities; and (iii) past legislation has limited (and future legislation may further limit) investment by certain institutions in lower-rated securities or the tax deductibility of the interest by the issuer, which may adversely affect the value of such securities. The Baupost Partnerships will not necessarily dispose of a security when its rating is reduced below its rating at the time of purchase and may buy more. Certain securities held by the Baupost Partnerships may permit the issuer of such securities at its option to “call,” or redeem, its securities. If an issuer were to redeem securities held by the Baupost Partnerships during a time of declining interest rates, the Baupost Partnerships may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The Baupost Partnerships may at times invest in so-called “zero-coupon” bonds and “payment-in- kind” bonds. Zero-coupon bonds do not pay interest currently for their entire lives and normally are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Such investments may experience greater fluctuation in market value in response to changes in market interest rates than bonds which pay interest currently in cash. Both zero coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments, but also may require a higher rate of return to attract investors who are willing to defer receipt of such cash. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently. Certain debt instruments held by the Baupost Partnerships may be non-performing or in default. Furthermore, the obligor or relevant guarantor may also be in bankruptcy or liquidation. There can be no assurance as to the amount and timing of payments, if any, with respect to such debt instruments. The Baupost Partnerships may invest in liquid bonds that later become illiquid (e.g., the issuer of a bond held by the Baupost Partnerships enters into bankruptcy proceedings causing interest payments on the bond to be deferred or the maturity date of the bond to be deferred indefinitely). Distressed Investments The Baupost Partnerships have in the past and expect in the future to invest in the securities and obligations of distressed and bankrupt issuers, including debt obligations that are in covenant or payment default. Such investments generally are considered speculative. The repayment of defaulted obligations is subject to significant uncertainties. Defaulted obligations might be repaid, if at all, only after lengthy workout or bankruptcy proceedings, during which the issuer might not make any interest or other payments and the amount of any recovery may be affected by the relative security of the Baupost Partnerships’ investment in the capital structure of the issuer. In certain periods, there may be little or no liquidity in the markets for these securities or instruments. In addition, the prices of such securities or instruments may be subject to periods of abrupt and erratic market movements and above-average price volatility. It may be more difficult to value such securities and the spread between the bid and asked prices of such securities may be greater than normally expected. If Baupost’s evaluation of the risks and anticipated outcome of an investment in a distressed security should prove incorrect, the Baupost Partnerships may lose a substantial portion or all of their investment or they may be required to accept cash and/or securities with a value less than the Baupost Partnerships’ original investment. In addition, distressed investments may also be adversely affected by laws relating to, among other things, fraudulent transfers and other voidable transfers or payments, lender liability and the bankruptcy court’s power to disallow, reduce, subordinate, recharacterize debt as equity or disenfranchise particular claims. Payments and distributions may be disgorged if any such payment or distribution is later determined to have been a fraudulent conveyance or a preferential payment. The EU Bank Recovery and Resolution Directive (2014/59/EU) (collectively with secondary and implementing EU rules, and national implementing legislation, the “BRRD”) equips national authorities in member states of the European Union with tools and powers for preparatory and preventive measures, including, in the case of derivatives transactions, powers to close-out such transactions or suspend any rights to close-out such transactions if a relevant institution is deemed likely to fail. Illiquid Investments The Baupost Partnerships have in the past and expect in the future to purchase illiquid investments, which include securities whose disposition is restricted by the securities laws, by agreement or by other characteristics inherent in the investment or in the markets or other mechanisms by which such investment trades. For example, Baupost frequently invests in investment vehicles whose principal assets are comprised of real estate. These investments are typically highly illiquid. The Baupost Partnerships may not be able to readily dispose of illiquid investments or may be contractually prohibited from disposing of such securities for a period of time. Accordingly, if the Baupost Partnerships’ portfolios become more heavily weighted towards illiquid investments, the Baupost Partnerships’ ability to redeem limited partnership interests in cash will be limited. Securities that have not been registered under the Securities Act of 1933, as amended (the “1933 Act”) are referred to as private placements or restricted securities and are purchased directly from the issuer or in the secondary market. Limitations on resale may have an adverse effect on the marketability of such securities. The Baupost Partnerships may have to register such restricted securities in order to dispose of them, resulting in additional expense and delay. For example, the Baupost Partnerships may purchase shares in PIPEs. Until the public registration process is completed, PIPEs are restricted as to resale and the Baupost Partnerships cannot freely trade the securities. This restricted period can last many months and the price of the security may fall during such restricted period. If the issuer is unable to obtain an effective resale registration statement for a PIPE, the PIPE will remain restricted under U.S. securities laws (subject to the availability of some other exemption) and the Baupost Partnerships may be unable to recover from the issuer an amount sufficient to compensate for the loss of liquidity of such security. There is no assurance that any restricted securities will be publicly registered, or that the registration will remain in effect. Trading volume also may be limited even for registered securities. In addition, the Baupost Partnerships have in the past and expect in the future to invest in private equity investments. Such securities are illiquid and difficult to price for a variety of reasons. Because those securities are not regularly traded, even among institutional investors, a reliable arms-length price often is not available as a pricing benchmark. Furthermore, the value of illiquid investments of private companies may depend heavily on the complex legal rights attached to the securities themselves that are difficult to evaluate. The Baupost Partnerships invest in liquid securities that may later become illiquid, for example, because Baupost or an affiliate serves on a creditor’s or other committee in a bankruptcy proceeding or due to trade or other restrictions on certain securities. Such restriction may be of uncertain or protracted duration. Bank Loans The Baupost Partnerships have in the past and expect in the future to invest in bank loans. Risks associated with bank loans include (i) the fact that prepayments may occur at any time without premium or penalty and that the exercise of prepayment rights during periods of declining spreads could cause the Baupost Partnerships to reinvest prepayment proceeds in lower-yielding investments; (ii) the borrower’s inability to meet principal and interest payments on its obligations (i.e., credit risk); and (iii) price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the borrower and general market liquidity (i.e., market risk). If bank loans become nonperforming, the loans may require substantial workout negotiations or restructuring that may result in, among other things, a substantial reduction in the interest rate and/or a substantial write-down of the principal of the loan. In addition to the risks noted above, due to required third-party consents or other reasons, certain loans may not be purchased or sold as easily or as quickly as publicly traded securities. Moreover, historically, the trading volume in the loan market has not been as liquid as the market for public securities. The Baupost Partnerships may acquire interests in loans either directly (by way of assignment (“Assignment”)) or indirectly (by way of participation (“Participation”)) or through the acquisition of synthetic securities, structured finance securities or interests in lease agreements that have the general characteristics of loans and are treated as loans for withholding tax purposes. The Baupost Partnerships may also originate loans. The purchaser, in an Assignment of a loan obligation, typically succeeds to all the rights and obligations of the selling institution (the “Selling Institution”) and becomes a lender under the loan or credit agreement with respect to the debt obligation. In contrast, Participations acquired by the Baupost Partnerships in a portion of a debt obligation held by a Selling Institution typically result in a contractual relationship only with such Selling Institution, not with the obligor. The Baupost Partnerships would have the right to receive payments of principal, interest and any fees to which it is entitled under the Participation only from the Selling Institution and only upon receipt by the Selling Institution of such payments from the obligor. In purchasing a Participation, the Baupost Partnerships generally will have no right to enforce compliance by the obligor with the terms of the loan or credit agreement or other instrument evidencing such debt obligation, nor any rights of setoff against the obligor, and the Baupost Partnerships may not directly benefit from the collateral supporting the debt obligation in which it has purchased the Participation. As a result, the Baupost Partnerships would assume the credit risk of both the obligor and the Selling Institution. In the event of the insolvency of the Selling Institution, the Baupost Partnerships may be treated as a general creditor of the Selling Institution in respect of the Participation and may not benefit from any setoff between the Selling Institution and the obligor. Purchasers of loans are predominately commercial banks, investment funds and investment banks. As secondary market trading volumes increase, new loans frequently contain standardized documentation to facilitate loan trading that may improve market liquidity. There can be no assurance, however, that future levels of supply and demand in loan trading will provide an adequate degree of liquidity or that the current level of liquidity will continue. Because holders of such loans may be provided confidential information relating to the borrower, the unique and customized nature of the loan agreement and the private syndication of the loan, loans are not purchased or sold as easily as publicly traded securities are purchased or sold. In addition, historically the trading volume in the loan market has been small relative to the market for high yield debt securities. Loan Origination The Baupost Partnerships have in the past and may in the future engage in loan origination activities. Such activities may subject the Baupost Partnerships or Baupost to regulatory requirements under the laws of certain jurisdictions. If the Baupost Partnerships originate loans with the intention of issuing participations to others with respect to the Baupost Partnerships’ exposure to such loans, and if the Baupost Partnerships are unable to successfully close transactions for such participations, the Baupost Partnerships will be forced to hold their excess interest in such loans for an indeterminate period of time. Trade Claims The Baupost Partnerships have in the past and expect in the future to purchase claims against companies, including insolvent companies. These claims are typically unsecured and generally represent money due to a creditor or a supplier of goods or services to such company. An investment in trade claims is speculative and carries a high degree of risk. Trade claims are illiquid instruments which generally do not pay interest and there can be no guarantee that the debtor will ever be able to satisfy the obligation on the trade claim. Such claims are typically unsecured and may be subordinated to other unsecured obligations of a debtor, and generally are subject to defenses of the debtor with respect to the underlying transaction giving rise to the trade claim. Although Baupost endeavors to protect against such risks in connection with the evaluation and purchase of claims, trade claims are subject to risks not generally associated with standardized securities and instruments due to the idiosyncratic nature of the claims purchased. These risks include the risk that the debtor may contest the allowance of the claim due to disputes the debtor has with the original claimant or the inequitable conduct of the original claimant, or due to administrative errors in connection with the transfer of the claim. Recovery on allowed trade claims also may be impaired if the anticipated dividend payable on unsecured claims in the bankruptcy is not realized or if the timing of the bankruptcy distribution is delayed. Accordingly, if the Baupost Partnerships do receive payment in respect of the trade claim investment, it may be in an amount less than what the Baupost Partnerships paid for or otherwise expect to receive in respect of the claim. Additionally, there can be restrictions on the purchase, sale, and/or transferability of trade claims during all or part of a bankruptcy proceeding. The markets in trade claims generally are not regulated by U.S. federal securities laws or the SEC. The purchase and sale of trade claims are generally consummated by written contract between the parties and contain customary language regarding the return of a portion of the purchase price in the event that all or a portion of the claim is disallowed or rejected. Because trade claims are unsecured, holders of trade claims may have a lower priority in terms of payment than certain other creditors in a bankruptcy proceeding. Because they are not negotiable instruments, trade claims are typically less liquid than negotiable instruments. Given these factors, trade claims often trade at a discount to other pari passu instruments. Sovereign Debt The Baupost Partnerships have in the past and expect in the future to invest in sovereign debt. Investment in sovereign debt can involve a high degree of risk. The governmental entity that controls the repayment of sovereign debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of the debt. A governmental entity’s willingness or ability to repay principal and interest when due may be affected by, among other factors, its cash flow situation, the extent of its non-U.S. reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the governmental entity’s policy toward the International Monetary Fund, the political constraints to which a governmental entity may be subject, and changes in governments and political systems. At certain times, certain countries (particularly emerging market countries) have declared moratoria on the payment of principal and interest on external debt. Governmental entities may also depend on expected disbursements from non-U.S. governments, multilateral agencies and others to reduce principal and interest arrearages on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a governmental entity’s implementation of economic reforms and/or economic performance and the timely service of such debtor’s obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third parties’ commitments to lend funds to the governmental entity, which may further impair such debtor’s ability or willingness to service its debts in a timely manner. Consequently, governmental entities may default on their sovereign debt. Holders of sovereign debt may be requested to participate in the rescheduling of such debt and to extend further loans to governmental entities. There is no bankruptcy proceeding by which sovereign debt on which governmental entities have defaulted may be collected in whole or in part. Initial Public Offerings Investments in initial public offerings (or shortly thereafter) may involve higher risks than investments in secondary public offerings or purchases on a secondary market due to a variety of factors, including, without limitation, the limited number of shares available for trading, unseasoned trading, lack of investor knowledge of the issuer and limited operating history of the issuer. In addition, some companies that make initial public offerings are involved in relatively new industries or lines of business, which may not be widely understood by investors. Some of these companies may be undercapitalized or regarded as developmental stage companies, without revenues or operating income, or the near-term prospects of achieving them. These factors may contribute to substantial price volatility for such securities and, thus, for the value of the Baupost Partnerships’ interests. From time to time, the Baupost Partnerships may purchase equity securities in an initial public offering. Such offerings are considered “new issues,” as defined in Rule 5130 of the Financial Industry Regulatory Authority, Inc. (“FINRA”). Rule 5130 generally prohibits members of FINRA from selling new issues to an account in which a “restricted person” (as defined in Rule 5130) has an interest, unless the fund has a mechanism in place that excludes such “restricted person” from receiving allocations of profits and losses from new issues. Furthermore, FINRA Rule 5131 generally prohibits members of FINRA from selling new issues to an account in which directors and executive officers of certain public and non-public companies (or persons receiving material support therefrom) have an interest, unless the fund has a mechanism in place that excludes such persons restricted by Rule 5131 from receiving allocations of profits and losses from the new issue. To allow the Baupost Partnerships to participate in new issues, Baupost has developed and implemented procedures to treat separately the interests in the Baupost Partnerships of “restricted persons” and persons covered by FINRA Rule 5130, on the one hand, and persons not so restricted or covered, on the other, relying on the representations investors make in a subscription agreement or periodic questionnaires distributed by Baupost to make such determinations. If an investor is unable or unwilling to complete the applicable information in a subscription agreement or periodic questionnaires, Baupost may treat such investor as a restricted person and that investor may not be able to participate in any profits or losses attributable to such Partnership’s investment, if any, in new issues. Short Sales While not core to the investment strategy, the Baupost Partnerships from time to time engage in short sales (and also gain short exposure through the use of derivatives, including forward sales, futures, and swaps). In a short sale, the seller sells a security that it does not own, typically a security borrowed from a broker or dealer. Because the seller remains liable to return the underlying security that it borrowed from the broker or dealer, the seller must purchase or otherwise acquire the security prior to the date on which delivery to the broker or dealer is to be made. The Baupost Partnerships will typically engage in short sales when Baupost believes the value of the security will decline or as part of a hedging strategy or as part of a stub trade. Short sales exposes the Baupost Partnerships to the risk of liability for the market value of the security sold. If the price of the security sold short increases between the time of the short sale and the time the Baupost Partnerships replace the borrowed security, the Baupost Partnerships will incur a loss; conversely, if the price declines, the Baupost Partnerships will realize a gain. Any gain will be decreased, and any loss increased, by the transaction costs associated with short sales. Although the Baupost Partnerships’ gain is limited to the price at which they sold the security short, their potential loss is unlimited if the Baupost Partnerships do not own the security. In addition, there can be no assurance that securities necessary to cover a short position will be available for purchase or that securities will be available to be borrowed by the Baupost Partnerships at a reasonable cost. If a request for return of borrowed securities occurs at a time when other short sellers of the security are receiving similar requests, a “short squeeze” can occur, and the Baupost Partnerships may be compelled to replace borrowed securities previously sold short with purchases on the open market at the most disadvantageous time, possibly at prices significantly in excess of the proceeds received in originally selling the securities short. The SEC has in the past adopted interim rules requiring reporting of all short positions above a certain de minimis threshold and may in the future adopt rules requiring monthly public disclosure of short positions. In addition, other non-U.S. jurisdictions where the Baupost Partnerships may trade have adopted reporting requirements. Securities of Small-to-Medium Sized Companies The Baupost Partnerships have in the past and expect in the future to invest in securities of small- to-medium sized companies. Such companies may have limited product lines, markets or financial resources, and may be dependent on a limited management group. The risk of bankruptcy or insolvency of many smaller companies (and the corresponding losses to investors) may be higher than for larger, “blue-chip” companies. Securities of small-to-medium sized companies may be traded in the over-the-counter (“OTC”) markets. While OTC markets have grown rapidly, many OTC securities trade less frequently and in smaller volumes than exchange-listed securities. The values of these securities may fluctuate more sharply than exchange-listed securities, and the Baupost Partnerships may experience some difficulty in acquiring or disposing of positions in these securities at prevailing market prices. Pooled Investment Vehicles, Joint Ventures and Pass-Through Entities The Baupost Partnerships have in the past and expect in the future to invest in other pooled investment vehicles, including real estate investment trusts, investment companies registered under the Investment Company Act, unregistered investment vehicles, and other private investment vehicles managed by third parties including operating partners engaged by Baupost to manage those investments. When the Baupost Partnerships invest in joint ventures, including those with operating partners, or pooled investment vehicles, investors bear the cost of management and performance fees of third parties in addition to the fees of the General Partners and their affiliates. Such investments may have limited liquidity and any investment by the Baupost Partnerships in such vehicles will have the risks inherent in the instruments in which such vehicles invest. A claim asserted against a pooled investment vehicle in which the Baupost Partnerships invest could be enforced against all of the assets of such vehicle. For example, the value of the Baupost Partnerships’ investments in a pooled vehicle could be adversely affected even if the claim relates to an investment from which the Baupost Partnerships were excused from participating or relates to a particular class or subclass of interests that the Baupost Partnerships did not hold. Company Ownership and Use of Special Purpose Vehicles The Baupost Partnerships may from time to time own a controlling interest in companies in which it has invested. Because of its ownership, representation on the board of directors or other governing body and/or contractual rights, the Baupost Partnerships may be perceived as controlling, participating in the management of or influencing the conduct of such companies. This could expose the assets of the Baupost Partnerships generally to claims (for example, arising from environmental, pension or Foreign Corrupt Practices Act exposure) by such company, its other security holders, its creditors, governmental agencies or other third parties. Such liability may not be limited to any particular asset, such as the investment giving rise to the liability, and may exceed the value of the particular investment giving rise to the liability. In addition, Baupost has in the past and expects in the future to use special-purpose entities in connection with certain transactions. Similar considerations may apply to these special-purpose entities. In addition, the bona fides of such entities may be subject to later challenge based on a number of theories, including veil piercing or substantive consolidation. Accordingly, investors could find their limited partnership interests in the Baupost Partnerships adversely affected by a liability arising out of a particular investment (including in circumstances where a particular investor does not otherwise have exposure to the investment because it is a restricted investment). Third-Party Involvement The Baupost Partnerships have in the past and expect in the future to hold a portion of its investments through partnerships, joint ventures, securitization vehicles or other entities with third- party investors. Joint venture investments involve various risks, including the risk that the Baupost Partnerships will not be able to implement investment decisions or exit strategies because of limitations on the Baupost Partnerships’ control of the property under applicable agreements with joint venture partners, the risk that a joint venture partner may become bankrupt or may at any time have economic or business interests or goals that are inconsistent with those of the Baupost Partnership, the risk that a joint venture partner may be in a position to take action contrary to the Baupost Partnerships’ objectives, the risk of liability based upon the actions of a joint venture partner and the risk of disputes or litigation with such partner and the inability to enforce fully all rights (or the incurrence of additional risk in connection with enforcement of rights) one partner may have against the other, including in connection with foreclosure on partner loans because of risks arising under state law. In addition, the Baupost Partnerships may be liable for actions of its joint venture partners. Private Equity and Venture Capital Investments The Baupost Partnerships make private equity and venture capital investments, which involve a high degree of business and financial risk. Although Baupost may acquire control positions and/or seek protective provisions, including in certain circumstances board representation, in connection with certain of its private equity and/or venture capital investments, in other instances the Baupost Partnerships take minority positions in companies in which they invest or invest in a purely passive role. With respect to minority, private equity and/or venture capital investments, Baupost may not be in a position to exercise control over the management of such companies, and, accordingly, may have a limited ability to protect its position in such companies. Early-stage companies with little or no operating history may require substantial additional capital to support expansion or to achieve or maintain a competitive position, may produce substantial variations in operating results from period to period or may operate at a loss. Such companies may face intense competition, including competition from companies with greater financial resources, more extensive development, better marketing and service capabilities and a larger number of qualified management and technical personnel. Such competition, as well as other factors, may adversely affect the performance of such investments and result in substantial losses. The Baupost Partnerships may make private equity investments in highly leveraged companies. The use of such leverage may present additional risks, including that it may increase the exposure of such companies to adverse economic factors such as downturns in the economy or deterioration in the conditions of such companies or their respective industries. In the event any such company cannot generate adequate cash flow to meet debt service, the Baupost Partnerships may suffer a substantial loss of capital invested. Master Limited Partnerships Investments in securities of Master Limited Partnerships (“MLPs”) involves certain risks that differ from investments in common stock, including risks related to limited control and limited rights to vote on matters affecting MLPs, risks related to potential conflicts of interest between an MLP and the MLP’s general partner, including those arising from incentive distribution payments, cash flow risks, dilution risks and risks related to the general partner’s right to require unit-holders to sell their common units at an undesirable time or price. Many of the Baupost Partnerships’ investments in MLPs will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. In addition, certain tax risks are associated with investments in MLPs. Real Estate-Related Transactions The Baupost Partnerships have in the past and expect in the future to invest in real estate and in real estate-related securities. Real estate-related securities include securities that are backed by, represent interests in or are secured by real estate, as well as securities issued by companies or limited partnerships or limited liability companies that invest in real estate or interests in real estate. Investments in real estate and real estate-related securities entail certain risks due to a variety of factors, including uncertainties surrounding the underlying real estate ventures and hidden defects that might not be discovered despite reasonable due diligence. Factors affecting the performance of real estate ventures may include changes in interest rates, excess supply of real property in certain markets, satisfactory completion of construction, sufficient level of occupancy, adequacy of financing available in capital markets, competent management, rent levels and maintaining adequate rent to cover operating expenses, regulatory limits on rents, local and regional markets for competing assets, changes in applicable zoning and other laws and governmental regulations (including taxes), the ability to obtain use or development entitlements and other regulatory permits and permissions, possible environmental liabilities and social and economic trends. Real estate investments that the Baupost Partnerships may make include investments in non-U.S. properties. In addition to the risks associated with real estate investment generally, investment in non-U.S. properties and ventures involves additional risks such as currency exchange rate risk, liquidity risk, and the risk of unfamiliar or changing property ownership and tax laws. See “Non- U.S. Securities and Emerging Markets Securities” below. Many of the real estate-related securities in which the Baupost Partnerships may invest will not be readily marketable. Investments in real estate and in real estate-related securities that are not readily marketable entail additional risks, such as difficulty in pricing the real estate or security for purposes of determining the particular Baupost Partnership’s net asset value (the “Net Asset Value”) and the possibility that the Baupost Partnerships would be unable to sell the real estate or security at a price that Baupost believes fairly represents its intrinsic value when they decide to sell the real estate or security. The Baupost Partnerships frequently engage third-party operating partners to manage day-to-day operations of certain real estate interests. These operations are typically performed by the operating partner’s personnel, not by personnel of Baupost or any of its affiliates and Baupost typically does not exercise day-to-day control over or management of the operating partners. In addition, operating partners often identify potential investment opportunities to Baupost and may be compensated by the Baupost Partnerships in connection therewith. While operating partners may co-invest in and receive a share of the profits from the assets they manage, there is a risk that their interests may not be directly aligned with those of the Baupost Partnerships and their decisions, actions or omissions may adversely affect the Baupost Partnerships. Since operating partners may manage assets held by the Baupost Partnerships and assets not held by the Baupost Partnerships, operating partners may face conflicts of interest between choices that may favor one investment over another, as well as decisions regarding devotion of time and resources. When Baupost Partnerships invest in joint ventures, including those with operating partners, or pooled investment vehicles, investors generally bear the cost of management and performance fees to third parties in addition to the fees of Baupost and its affiliates. Potential Environmental Liability of Real Estate Investments Under various U.S. and non-U.S. federal, state and local laws, ordinances and regulations, an owner of real property may be liable for the costs of removal or remediation of certain hazardous or toxic substances on or in such property. Such enactments often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances, and the liability under such enactments has in certain circumstances been interpreted to please register to get more info

There is one disciplinary event regarding a Partner of Baupost, as follows: Between 2003 and 2005, private funds managed by Baupost made three French real property investments alongside third parties through Luxembourg companies (the “Luxembourg Entities”). Thomas Blumenthal, a Partner, was appointed as a director of the Luxembourg Entities. Subsequent to the 2006 sale of these investments, the French Tax Administration (“FTA”) opened tax audits of the Luxembourg Entities. The FTA alleged that the Luxembourg Entities were not eligible for beneficial tax treatment under the France-Luxembourg tax treaty, and thus were required to pay income tax in France. One of the three Luxembourg Entities successfully proved in French court that no tax was due. The remaining two Luxembourg Entities appealed the FTA’s assessment to the French Supreme Tax Court. On March 31, 2017, the French Supreme Tax Court ruled against these Luxembourg Entities. In 2011, the FTA referred for investigation potential charges against all of the directors of the two remaining Luxembourg Entities, including Mr. Blumenthal, alleging that these Luxembourg Entities and their directors had engaged in tax fraud as a result of the failure by these Luxembourg Entities to pay income tax in France. On January 11, 2017, Mr. Blumenthal was notified that a Magistrate Judge had charged the directors of these two Luxembourg Entities, including Mr. Blumenthal, with committing criminal tax fraud. Following a trial, the court on June 20, 2018 convicted the directors of the two Luxembourg entities, including Mr. Blumenthal, of criminal tax fraud and sentenced each director to a fine and a suspended sentence. As to Mr. Blumenthal, the order of conviction imposed a fine of approximately US$43,000, together with a suspended sentence of four years. The directors of the Luxembourg entities, including Mr. Blumenthal, were also determined to be jointly and severally liable as a civil matter for the balance of the income taxes and related interest and penalties determined to be due in respect of the Luxembourg Entities. The Baupost Partnerships that owned these investments paid their portion of the taxes, interest and penalties in 2017; the unpaid balance relates to an insolvent co-investor. Mr. Blumenthal acted in good faith for the benefit of the Baupost Partnerships, having followed advice from prominent international tax advisors in connection with these investments. Baupost strongly disagrees with this verdict and, with the full support of Baupost, Mr. Blumenthal has appealed the judgment. All components of the judgment are suspended during the pendency of the appeal. The Baupost Partnerships will not bear any portion of the appellate defense costs, the fine or the additional tax obligation. The verdict does not impact Mr. Blumenthal’s continuing role as a Partner at Baupost. please register to get more info

Neither Baupost nor any of its management persons is registered, or has an application pending to register, as a broker-dealer, registered representative of a broker-dealer, futures commission merchant, commodity pool operator, commodity trading advisor, or associated person of any of the foregoing entities. Baupost does not recommend or select other investment advisers for the Baupost Partnerships for which we receive compensation directly or indirectly from those advisers, nor does Baupost have other business relationships with those advisers that create a material conflict of interest. As disclosed in Item 4, Baupost Partners serves as the profit sharing general partner to some of the Baupost Partnerships. Additionally, pursuant to a Sourcing and Sub-Management Agreement, Baupost Group International LLP, an affiliate of Baupost and investment adviser authorized by the U.K. Financial Conduct Authority, provides advisory services to Baupost by augmenting the sourcing of potential investments in Europe. please register to get more info

Trading
Baupost has adopted a Code of Ethics (the “Code”), which, amongst other things, (i) sets forth the standards of professional conduct to which Baupost requires all “supervised persons,” as defined in Section 202 of the Advisers Act, to adhere in accordance with our fiduciary obligations; (ii) governs the personal securities transactions of Baupost’s supervised persons; and (iii) requires all supervised persons to report any violations of the Code to Baupost’s chief compliance officer. The general principles of the Code seek to minimize conflicts of interest and, in accordance with fiduciary obligations, place the interests of the Baupost Partnerships first. As such, the Code provides that supervised persons conduct their personal investment activities in a manner that places the interests of the Baupost Partnerships first. The Code restricts or prohibits certain personal investment transactions by supervised persons in any account in which they have beneficial ownership, or any account in which they have investment discretion, including family charitable foundations. Supervised persons may buy or sell certain “reportable securities” (as defined in the Code) for their own account only with prior written authorization by Baupost Compliance. In addition, among other things, supervised persons are (i) prohibited from buying or selling a security on the same day on which Baupost has a pending buy or sell order with respect to such security; (ii) required to disclose all personal reportable securities holdings upon commencement of employment and annually thereafter; and (iii) required to report all personal reportable securities transactions quarterly. Supervised persons who are defined as “Investment Personnel” under the Code (generally, those employees who make investment recommendations on behalf of the Baupost Partnerships) are prohibited from purchasing “public securities” (as defined in the Code). In addition, Investment Personnel are prohibited from buying or selling securities for seven days before or after one of the Baupost Partnerships trades in such security. The restrictions of the Code do not preclude purchases of interests in the Baupost Partnerships. Supervised persons may be investors of the Baupost Partnerships, and some of the key personnel of Baupost have significant interests in the Baupost Partnerships as investors. Baupost will provide a copy of the Code to any investor or potential investor upon request. Transactions with Affiliates The LP Agreements do not prohibit the Baupost Partnerships from participating in transactions in which Baupost or any investor is directly or indirectly interested (including, subject to compliance with the Advisers Act, any transaction between the Baupost Partnerships and Baupost or an affiliate thereof). In connection with such transactions, the Baupost Partnerships, on the one hand, and Baupost and its affiliates, on the other hand, may have conflicting interests. Baupost may also face conflicts of interest in connection with purchase or sale transactions (involving an investment by a Partnership) with an affiliate of such Partnership (including the other Baupost Partnerships), including with respect to the consideration offered by, and the obligation of, Baupost and such other affiliate. Although the Baupost Partnerships have not historically engaged in principal transactions between the Baupost Partnerships and Baupost or an affiliate thereof, they may do so and in such circumstances Baupost will either (i) seek the consent of the majority in interest of the investors of the relevant Partnership(s) or (ii) appoint an independent body (such as, for example, an advisory board or another person or persons) to represent the interests of the investors. The consent of such independent body or of the majority in interest of the investors shall be deemed to be the consent of a Partnership, including for purposes of the Advisers Act. Any such independent body or person(s), and the members thereof, will not owe any fiduciary or other duties to the investors or the Partnership and may be indemnified out of a Partnership’s assets. Cross Trades While it has not historically done so, Baupost may determine that it would be in the best interests of some or all of the Baupost Partnerships to engage in a cross trade, such as the transfer of a financial instrument or an illiquid investment from one fund to another, for a variety of reasons, including tax considerations, liquidity considerations, to rebalance the portfolios of the Baupost Partnerships, or to reduce transaction costs that may arise in an open market transaction. If Baupost decides to effect a cross trade between some or all of the Baupost Partnerships, Baupost will have determined that the trade is in the best interests of all of the Partnerships involved. In executing cross trades, Baupost could face a potential conflict of interest with respect to the allocation of investment opportunities. A cross trade between two Partnerships may occur as an “internal cross” that is reflected in the books and records of each Partnership at a price determined in accordance with Baupost’s valuation policy. If Baupost effects an internal cross on behalf of some or all of the Baupost Partnerships, Baupost will not receive any commission in connection with the completion of the transaction. Alternatively, Baupost may execute cross trades with the assistance of a broker-dealer that executes and books the transaction at the close of the market on the day of the transaction, and the applicable Partnerships may pay such broker-dealer a commission in respect thereof. Baupost may cause the Baupost Partnerships to engage in cross trades with respect to illiquid assets. Baupost is responsible for determining the fair value of the illiquid assets of the Baupost Partnerships; however there is no guarantee that the value determined by Baupost with respect to a particular asset will represent the value that will be realized by the Baupost Partnerships on the eventual disposition of the related investment or that would be realized upon an immediate disposition of the investment. There is a risk that Baupost’s valuation determination with respect to illiquid assets subject to a cross trade could operate to the detriment of one client in favor of another. Baupost has a conflict of interest in a range of situations, including for example where the applicable cross trades entered into by a Partnership (i) are with other of the Baupost Partnerships in which Baupost and its affiliates and employees own substantial interests, or (ii) involve circumstances where Baupost’s compensation is tied to a greater degree to the performance of one party to the cross trade. Allocations of Investment Opportunities and Sales Certain prospective investments may be appropriate for several of the Baupost Partnerships and, because of Baupost’s, its affiliates’, and employees’ investments in the Baupost Partnerships, there may be a conflict of interest in the allocation of investment opportunities among the Baupost Partnerships. The allocation of such investments among the Baupost Partnerships is determined by Baupost in its best judgment and in its sole discretion taking into account such factors as it believes relevant. Generally, allocations of liquid purchases among the Baupost Partnerships with similar investment objectives are made pro rata based on each Partnership’s available buying capacity, which is determined based on projected and available cash in excess of reserve levels established by Baupost. Allocations of illiquid asset purchases among the Baupost Partnerships are generally made pro rata, based on each Partnership’s available buying capacity (as determined in the discretion of Baupost) and on such Partnership’s capacity for restricted investments, where applicable, or otherwise in the discretion of Baupost. Allocations of sales are generally made pro rata based on the ownership of the existing position by the Baupost Partnerships. Baupost may in its sole discretion depart from the general allocation principles set forth herein, including where doing so would, in Baupost’s sole discretion, be appropriate based upon certain factors, including but not limited to the relative size of the Baupost Partnerships, current holdings, availability of cash for investment, the size of the investments generally, limitations concerning illiquid investments, tax considerations, regulatory restrictions, legal considerations, and the need to re-size risk. Other allocation methodologies used by Baupost can include allocations based on relative net asset value of the Baupost Partnerships and order size, among others. Although Baupost and its affiliates intend to allocate investment opportunities and sales in a manner that is fair to all the entities involved, there can be no assurances that an investment opportunity which comes to the attention of Baupost and its affiliates would not be allocated wholly or primarily to the some Baupost Partnerships, with another Partnership being unable to participate in such investment opportunity or participating only on a limited basis. Notwithstanding the foregoing, new investments are no longer allocated to the Overflow Partnership, other than (i) investment-level hedges with respect to existing investments held by the Overflow Partnership, and (ii) follow-on investments made in respect of existing investments held by the Overflow Partnership. The Overflow Partnership generally participates in aggregated sales orders with the other Baupost Partnerships if the Overflow Partnership holds the investment being sold. A particular investment may be bought or sold for only one or some of the Baupost Partnerships, or at different times for more than one but less than all clients. Likewise, a particular investment may be bought for one or more of the Baupost Partnerships when one or more of the other Baupost Partnerships are selling the investment. It is also possible that one or more of the Baupost Partnerships may engage in short sales of an investment owned or being purchased by other Baupost Partnerships or vice versa. There can be no assurance that a Partnership will not receive less (or none) of a certain investment than it would otherwise receive if Baupost did not have to allocate such investment among multiple clients. Allocation of Hedges and Follow-on Investments Allocations of portfolio-level hedge purchases among the Baupost Partnerships are generally made pro rata based on their net asset values. Net asset value, for allocation purposes, is the most current period-end Partnership net asset value, which may be adjusted for projected cash flow activity. Allocations of purchases specific to an existing investment, such as investment hedges or follow- on investments, are generally made pro rata based on the allocation of that existing position across the Baupost Partnerships. Follow-on investments include additional investments made by a joint venture or pooled investment vehicle in which a Partnership is already invested. Accordingly, allocations may be fixed for discrete investments made by such joint ventures or pooled investment vehicles over a period of several years. A Partnership may make two or more investments that have hedging properties with respect to one another. Because of the varying participation by investors in restricted investments and new issues, among other factors, investors may participate in these types of complementary investments in a proportion that may vary significantly from that of other investors, or may participate in only one of the underlying investments and not the other(s). As a result, such investors may not obtain Baupost’s intended hedging ratio for the applicable investments. Investments in Different Layers of the Capital Structure and Related Conflicts The Baupost Partnerships may invest in different layers of the capital structure of an issuer, and may make investments in one or more issuers or instruments that may involve economic conflict with respect to one another. For example, upon liquidation or bankruptcy of an issuer, distributions are generally made in a manner providing priority to, respectively, secured creditors, unsecured creditors, preferred equityholders and common equityholders. The Baupost Partnerships may at times hold both debt and equity of the same issuer, and may hold different types of debt and different types of equity. Additionally, the Baupost Partnerships may invest in the equity or debt of an issuer while at the same time investing in certain rights or claims against such issuer. Further, any of the foregoing investments may be restricted investments or new issues, while others may not be, resulting in a potential conflict given that not all investors participate in restricted investments or new issues. In certain circumstances, such as when an issuer defaults on its debt or seeks protection from creditors in bankruptcy, a conflict of interest can arise in that the action taken to protect the interest of one set of security holders may be at the potential detriment of other holders of the same issuer’s securities or instruments. If the Baupost Partnerships own securities and instruments of the same issuer in different levels of seniority, action taken for the benefit of some of the Baupost Partnerships may favor that set of the Baupost Partnerships at the expense of another. Depending on the extent to which such an investor participates in restricted investments and on the timing of their capital contributions and withdrawals, the returns of an individual investor, including investors who are Baupost employees, may vary from the returns of a Partnership generally and of those experienced by other investors. If the Baupost Partnerships own securities and instruments of the same issuer in different levels of seniority, action taken for the benefit of some of the Baupost Partnerships may favor that set of the Baupost Partnerships at the expense of another. Baupost will endeavor to manage any such potential conflict(s) in a manner that is fair to the Baupost Partnerships, by, among other things, making investment decisions related to such investments on independent grounds based on the economics and investment objectives of each investing Partnership. please register to get more info

It is Baupost’s policy, in placing each transaction for a Baupost Partnership, to seek “best execution.” Accordingly, Baupost will seek to obtain an outcome for a purchase or sale of a security that is in the best long-term economic interests of the Baupost Partnerships, subject to the circumstances of the transaction and the quality and reliability of the executing broker or dealer. Best execution is not measured solely by reference to commission rates or price. Baupost may cause the Baupost Partnerships to pay a broker a higher commission rate or price than what another broker might charge if it believes that the difference in cost is reasonably justified in seeking what is in the best long-term economic interests of the Baupost Partnerships. Baupost believes that for the vast majority of securities transactions for the Baupost Partnerships, best execution is not quantifiable, but rather is a set of quality standards – a trading process that seeks to maximize the value of a Partnership’s portfolio over the course of time, given the stated investment objectives and circumstances. In short, Baupost seeks to achieve the best overall end result for each Partnership, the key components of which include honorable intentions, a dedicated staff, up-to-date information and systems, reputable broker-dealers and sufficient oversight. Maximizing long term profit for the Baupost Partnerships takes precedence over short-term goals of cost efficiency in connection with individual trades. Factors. In determining whether a particular broker or dealer is likely to provide best execution, Baupost takes into account all factors that it deems relevant to the broker’s or dealer’s execution capability, including:
• The overall reputation, experience and financial stability of the broker-dealer;
• The quality of the broker-dealer relationship with Baupost, including the attention, consistency and quality of trading personnel with whom transactions are conducted;
• Research services, including the quality of proprietary research and investment ideas that ultimately become meaningful positions in a Partnership’s portfolio of investments and the ability of the broker-dealer to provide access to company management and industry specialists, subject to the restrictions and limitations discussed in the Research Services Section below;
• The broker-dealer’s trading expertise, including the ability to minimize total trading costs and to trade without impacting the market;
• The ability, when possible, to maintain Baupost’s anonymity when executing a trade;
• The quality of execution, including the broker-dealer’s infrastructure in areas such as order handling, clearing and settlement;
• The ability to provide ad hoc information or other services;
• The quality of service rendered by the broker-dealer in prior transactions; and
• The belief that the broker-dealer charges a fair and reasonable fee for each trade, and that Baupost has been treated fairly and honestly in prior trades. In determining whether a particular broker or dealer is likely to provide best execution in a particular transaction, Baupost will also take into account the following factors:
• The price, including commissions or spread;
• The size of the transaction;
• The timing of the transaction, taking into account market prices and trends;
• The nature of the market for the security;
• Whether the broker-dealer has the ability to transact in the share size and price sought by Baupost, and the ability to in fact execute and settle the trade;
• Whether the broker-dealer is informed about the investment and involved in the particular market in which the investment trades; and
• The difficulty of execution for the type of security and market in which it trades. In addition, Baupost considers the use of electronic trading tools such as crossing networks and execution algorithms when placing trades on behalf of the Primary Partnerships, particularly when trading equities. These tools enable Baupost to transact passively and source liquidity anonymously. However, when the trade size is substantial, the requirements unusual or the issue illiquid, any of which may necessitate additional time for the trade to be executed, Baupost will often rely on the expertise and ability of individuals to assess and react to market conditions as they develop. In addition, when purchasing or selling OTC securities with market makers, Baupost generally seeks market makers it believes to be actively and effectively trading the security being purchased or sold. Research Services. Many securities firms offer to provide investment managers (such as Baupost) a variety of services and benefits that go beyond execution, clearance and settlement of transactions. These services and benefits include such things as (i) the broker-dealer firms’ proprietary research reports and analytical products, (ii) information and advice about market conditions and individual securities, (iii) investment opportunities that may be attractive for the Baupost Partnerships, and (iv) opportunities to meet with company management. Investment managers often seek to recognize broker-dealers who provide these services or benefits by directing transactions to these broker-dealers, or by paying higher commissions to these broker- dealers than would otherwise be appropriate. A potential conflict of interest is presented in every instance where an investment manager chooses to place a client trade with a broker-dealer that has furnished the manager with services or benefits other than order execution, clearance and settlement (unless the manager has paid the full value of such services and benefits using the manager’s own assets). The conflict arises because the manager receives a benefit for which it does not need to pay and has an incentive to select a broker- dealer based on its own interest in receiving such benefits, as opposed to the clients’ interest in receiving most favorable execution. Because of this conflict of interest, the law places strict limits on investment managers’ discretion to place transactions with broker-dealers who are providing services or benefits to the investment manager. Baupost attempts to minimize such potential conflicts through the use of commission-sharing arrangements whereby a portion of the commission dollars generated through Baupost’s normal trading activity are aggregated and periodically allocated through a third party to firms that provide research services to Baupost. Research services that Baupost may receive include research reports, investment ideas, access to issuer management and investment conferences and other information that assists Baupost in providing investment advisory services to the Baupost Partnerships. Baupost finds commission sharing arrangements to be valuable because by separating the execution and research capabilities of different broker-dealers, Baupost can concentrate trading with those broker-dealers that provide superior execution while still obtaining valuable research from other broker-dealers and research providers. Baupost’s use of commissions to pay for research and related services is undertaken pursuant to the safe-harbor provisions of Section 28(e) of the Securities Exchange Act of 1934 and in accordance with SEC interpretive guidance regarding the application of such provisions. In addition, broker-dealers may provide Baupost with access to proprietary research reports which are used for the Baupost Partnerships. Since these and other products and services are generally made available by broker-dealers as part of a bundled business package to Baupost (which may or may not use such products and services) without regard to rates of commission or volume of business, it is Baupost’s understanding that such broker-dealers do not set discrete prices for such products and services. Accordingly, Baupost does not separately compensate such broker-dealers for the provision of such services and does not believe that it pays a premium for such broker- dealers’ services. Baupost does trade with certain broker-dealer firms that provide valuable research and other services. However, the only circumstances in which Baupost, in selecting a broker-dealer to execute a transaction for a Baupost Partnership, may take into account research services or benefits provided by the broker-dealer are when Baupost has determined, in good faith, that the amount of commission on the transaction is reasonable in relation to the value of the research or other benefit from the broker-dealer, viewed in terms of either that transaction or Baupost’s overall responsibilities to the Baupost Partnerships. Baupost does not recommend, request or require that a Baupost Partnership execute transactions through a specific broker-dealer or permit any Baupost Partnership to direct Baupost’s transactions to a particular broker, nor does Baupost consider, in selecting broker-dealers, whether we receive or a related person receives client referrals from a broker-dealer or a third party. Trade Aggregation Once Baupost has determined that an investment will be purchased for all Primary Partnerships, Baupost will aggregate the Primary Partnerships’ orders and place the aggregated order with a single broker or dealer for execution. As the Overflow Partnership is not making new investments other than follow-on investments, it will not participate in aggregated purchase orders with the Primary Partnerships unless the investment is a follow-on investment or an investment-level hedge. The Overflow Partnership will participate in aggregated sales orders with the Primary Partnerships. The Baupost Partnerships that participate in an aggregated trade each generally pay their pro rata share of the total cost of the trade and receive their pro rata share of the proceeds. From the standpoint of a single Partnership, simultaneous identical portfolio transactions for such Partnership and other Baupost Partnerships may decrease the prices received, and increase the prices required to be paid, by that Partnership for its portfolio sales and purchases. In effecting transactions, it may not always be advisable, or consistent with the investment objectives of the Baupost Partnerships, to take or liquidate the same investment positions at the same time or at the same prices.
Trade Errors
Baupost has established a Trade Error Policy to handle trade errors (as defined in the Policy) that may arise in connection with placing trades on behalf of the Baupost Partnerships. Baupost attempts to correct errors as soon as practicable after discovery. If a Partnership realizes a gain from a trade error or the correction thereof, the gain will remain with that Partnership. If a Partnership realizes a loss, Baupost will evaluate the trade error in light of the standard of care owed to that Partnership under the relevant LP Agreement. Accordingly, the cost of trade errors will be borne by the Baupost Partnerships unless attributable to the fraud, gross negligence or willful misconduct of Baupost. please register to get more info

Baupost’s investment staff monitor the Baupost Partnerships’ investments on an ongoing basis. Additionally, Baupost, as managing general partner of the Baupost Partnerships, performs a monthly review of the Baupost Partnerships’ accounts and ensures that each Partnership is in compliance with its LP Agreement. As part of this review, Baupost verifies that all income and loss items, management fee, and profit sharing obligation are allocated appropriately to each investor in the applicable Partnership. This allocation review is performed by Baupost’s Portfolio Valuations, Accounting, & Reporting department under the supervision of the Portfolio Controller and is overseen by Baupost’s Chief Financial Officer. The books and records of the Baupost Partnerships are also subject to external verification. The financial statements of the Baupost Partnerships are prepared and audited in conformity with accounting principles generally accepted in the United States of America (“GAAP”) at each calendar year-end. Additionally, periodically throughout each year, Baupost engages an independent auditor to perform certain procedures for the Primary Partnerships including but not limited to independent valuation testing, custody verification, mathematical accuracy testing of trial balances and capital accounts, and management fee, profit sharing obligation, and income allocation testing. Investors in the Baupost Partnerships are provided with regular written or electronic reports communicating information relating to capital account value, Baupost Partnership Net Asset Value, portfolio allocation, and performance. Regular reporting is provided at the capital account level, at the Partnership level, and consolidated across Baupost’s entire portfolio of Partnerships with substantially similar investment objectives. Investors receive various written or electronic reports on a monthly, quarterly and annual basis. Reports are distributed in hard copy or electronically, mainly through Baupost’s website. Investors who are members of Baupost’s Advisory Board may receive additional information. Finally, Baupost holds periodic investor webcasts and meetings to provide updates on investment activity and performance of the portfolio. These oral communications are generally archived for a limited period on Baupost’s website for the benefit of investors. please register to get more info

Baupost does not compensate any person for client referrals, nor do we receive any economic benefit from someone who is not a client for providing investment advice or other advisory services to the Baupost Partnerships. please register to get more info

Under Rule 206(4)-2 of the Advisers Act (often referred to as the “Custody Rule”), Baupost is deemed to have custody of client funds or securities in any circumstances under which (i) we actually possess funds or securities, (ii) we are authorized to withdraw funds or securities from the Baupost Partnerships (for example, to deduct fees), or (iii) we or a related person serves in a legal capacity, such as general partner, which affords us access to funds or securities of the Baupost Partnerships. Accordingly, Baupost has engaged a PCAOB-registered independent accounting firm to perform an annual audit of the financial statements of each Partnership prepared in accordance with GAAP, which are distributed to all investors within 120 days of each Partnership’s fiscal year end. In addition, the assets of each Partnership are generally held (other than certain privately offered securities) with “qualified custodians” (as defined in the Custody Rule), which may be a broker- dealer, bank or another type of institution, as required by the Custody Rule. These qualified custodians do not send account statements to investors in the Baupost Partnerships. please register to get more info

Baupost has discretionary authority over all assets it manages for the Baupost Partnerships as described in the respective LP Agreements. This discretionary authority is conferred on Baupost pursuant to each Partnership’s LP Agreement. please register to get more info

Baupost has sole authority to vote the Baupost Partnerships’ securities, and we adhere to an internal Proxy Voting Policy that governs our practices in exercising this voting authority. Our policy is to vote proxies on securities held by the Baupost Partnerships in a manner that seeks to maximize their long-term economic interests, although Baupost considers both the short-term and long-term implications of each proposal in determining the optimal vote. If Baupost should determine that a material conflict of interest exists in voting a proxy (e.g., if an employee of Baupost may personally benefit if the proxy is voted in a certain manner), Baupost’s procedures provide for the Proxy Voting Committee to convene and to determine the appropriate vote. If the Proxy Voting Committee is unable to reach a decision, Baupost, at its own expense, will engage a competent third party to determine the appropriate vote based on Baupost’s Proxy Voting Policy. Information regarding how Baupost votes proxies is available to the Baupost Partnerships. Additionally, the Baupost Partnerships have access to Baupost’s Proxy Voting Policy. please register to get more info

Baupost does not require or solicit prepayment of any fees six months or more in advance and does not have any financial condition that would impair its ability to meet contractual commitments to the Baupost Partnerships. please register to get more info