Davidson Kempner Capital Management LP, a Delaware limited partnership (the "Registrant" or "DKCM") and its
Affiliates (as defined in Item 10 below) have provided investment advice and investment management services to
private investment funds for over 30 years. DKCM and its Affiliates began managing capital for unaffiliated
investors in 1987. Certain of the Affiliates are included in DKCM's Form ADV as relying advisers. The relying
advisers are identified in Schedule R of DKCM's Form ADV Part 1.
DKCM has affiliates in London, Hong Kong and Dublin. DKCM's U.K. affiliate, Davidson Kempner European
Partners, LLP, a limited liability partnership organized under the laws of England and Wales ("DKEP"), was
established in 2004 and has been authorized and regulated by the U.K. Financial Conduct Authority since its
establishment. DKCM's Hong Kong affiliate, Davidson Kempner Asia Limited, a Hong Kong private company
limited by shares ("DK Asia"), was established in 2010 and has been licensed with the Hong Kong Securities and
Futures Commission since its establishment. DKCM's Irish affiliate, Davidson Kempner Ireland DAC, an Irish
designated activity company ("DK Ireland"), was established in 2017. All three entities are under common control
with DKCM.
In connection with providing investment management services to private investment funds that are organized as
domestic limited partnerships or offshore corporations or limited partnerships (collectively, the "Private Funds" or
the "Clients"), the Registrant or an Affiliate has been appointed as the investment adviser, investment manager,
general partner or manager with full discretionary authority with respect to investment decisions on behalf of, and
trading in, the Clients' accounts. The Registrant and its Affiliates are sometimes collectively referred to as the
"Adviser."
The advice the Adviser provides with respect to the Private Funds is made in accordance with the investment
objectives and guidelines set forth in the respective offering memorandum and/or other governing documents for
each Private Fund. As of the date hereof, the Adviser provides advice to the following Private Funds:
• Davidson Kempner Distressed Opportunities Fund LP, a Delaware limited partnership ("DKDOF");
• Davidson Kempner Distressed Opportunities International Ltd., a Cayman Islands exempted company
("DKDOI");
• Davidson Kempner Distressed Opportunities International (Cayman) Ltd., a Cayman Islands exempted
company ("DKDOI Cayman"), which invests substantially all of its assets in DKDOI;
• Davidson Kempner Institutional Partners, L.P., a Delaware limited partnership ("DKIP");
• Davidson Kempner International, Ltd., a British Virgin Islands business company ("DKIL");
• Davidson Kempner International (BVI), Ltd., a British Virgin Islands business company ("DKIL BVI"),
which invests substantially all of its assets in DKIL;
• Davidson Kempner Long-Term Distressed Opportunities Fund LP, a Delaware limited partnership
("DKLDOF");
• Davidson Kempner Long-Term Distressed Opportunities Fund II LP, a Delaware limited partnership
("DKLDOF II");
• Davidson Kempner Long-Term Distressed Opportunities Fund III LP, a Delaware limited partnership
("DKLDOF III");
• Davidson Kempner Long-Term Distressed Opportunities Fund IV LP, a Delaware limited partnership
("DKLDOF IV");
• Davidson Kempner Long-Term Distressed Opportunities Fund V LP, a Delaware limited partnership
("DKLDOF V");
• Davidson Kempner Long-Term Distressed Opportunities International LP, a Cayman Islands exempted
limited partnership ("DKLDOI"), which invests substantially all of its assets in DKLDOI Master (as
defined below);
• Davidson Kempner Long-Term Distressed Opportunities International II LP, a Cayman Islands exempted
limited partnership ("DKLDOI II"), which invests substantially all of its assets in DKLDOI Master II (as
defined below);
• Davidson Kempner Long-Term Distressed Opportunities International III LP, a Cayman Islands exempted
limited partnership ("DKLDOI III"), which invests substantially all of its assets in DKLDOI Master III
(as defined below);
• Davidson Kempner Long-Term Distressed Opportunities International III (AIV) LP, a Delaware limited
partnership ("DKLDOI III AIV"), which invests substantially all of its assets in DKLDOI III Holdco and
DKLDOI III Holdco II (each as defined below) and has been formed as an alternative investment vehicle
of DKLDOI III;
• Davidson Kempner Long-Term Distressed Opportunities International IV LP, a Cayman Islands exempted
limited partnership ("DKLDOI IV"), which invests substantially all of its assets in DKLDOI Master IV
(as defined below);
• Davidson Kempner Long-Term Distressed Opportunities International IV (AIV) LP, a Delaware limited
partnership ("DKLDOI IV AIV"), which invests substantially all of its assets in DKLDOI IV Holdco (as
defined below) and has been formed as an alternative investment vehicle of DKLDOI IV;
• Davidson Kempner Long-Term Distressed Opportunities International V LP, a Cayman Islands exempted
limited partnership ("DKLDOI V"), which invests substantially all of its assets in DKLDOI Master V (as
defined below);
• Davidson Kempner Long-Term Distressed Opportunities International Master Fund LP, a Cayman Islands
exempted limited partnership ("DKLDOI Master");
• Davidson Kempner Long-Term Distressed Opportunities International Master Fund II LP, a Cayman
Islands exempted limited partnership ("DKLDOI Master II");
• Davidson Kempner Long-Term Distressed Opportunities International Master Fund III LP, a Cayman
Islands exempted limited partnership ("DKLDOI Master III");
• Davidson Kempner Long-Term Distressed Opportunities International Master Fund IV LP, a Cayman
Islands exempted limited partnership ("DKLDOI Master IV");
• Davidson Kempner Long-Term Distressed Opportunities International Master Fund V LP, a Cayman
Islands exempted limited partnership ("DKLDOI Master V");
• Davidson Kempner Partners, a New York limited partnership ("DKP");
• Davidson Kempner Special Opportunities Fund III LP, a Delaware limited partnership ("DKSOF III");
• Davidson Kempner Special Opportunities Fund IV LP, a Delaware limited partnership ("DKSOF IV");
• Davidson Kempner Special Opportunities Fund III-A LP, a Delaware limited partnership ("DKSOF III-
A");
• Davidson Kempner Special Opportunities International II LP, a Cayman Islands exempted limited
partnership ("DKSOI II"), which invests substantially all of its assets in DKSO Master II (as defined
below);
• Davidson Kempner Special Opportunities International III LP, a Cayman Islands exempted limited
partnership ("DKSOI III"), which invests substantially all of its assets in DKSO Master III (as defined
below);
• Davidson Kempner Special Opportunities International IV LP, a Cayman Islands exempted limited
partnership ("DKSOI IV"), which invests substantially all of its assets in DKSO Master IV (as defined
below);
• Davidson Kempner Special Opportunities International IV (DI) LP, a Cayman Islands exempted limited
partnership ("DKSOI IV (DI)"), which invests substantially all of its assets in DKSO Master IV (DI) (as
defined below);
• Davidson Kempner Special Opportunities International III (AIV) LP, a Delaware limited partnership
("DKSOI III AIV"), which invests substantially all of its assets in DKSOI III Holdco and DKSOI III
Holdco II (each as defined below) and has been formed as an alternative investment vehicle of DKSOI
III;
• Davidson Kempner Special Opportunities Master Fund II LP, a Cayman Islands exempted limited
partnership ("DKSO Master II");
• Davidson Kempner Special Opportunities Master Fund III LP, a Cayman Islands exempted limited
partnership ("DKSO Master III");
• Davidson Kempner Special Opportunities Master Fund IV LP, a Cayman Islands exempted limited
partnership ("DKSO Master IV");
• Davidson Kempner Special Opportunities Master Fund IV (DI) LP, a Delaware limited partnership
("DKSO Master IV (DI)");
• DK LDOI III Aggregate Holdco LP, a Delaware limited partnership ("DKLDOI III Holdco");
• DK LDOI III Aggregate Holdco II LP, a Delaware limited partnership ("DKLDOI III Holdco II");
• DK LDOI IV Aggregate Holdco LP, a Delaware limited partnership ("DKLDOI IV Holdco");
• DK SOI III Aggregate Holdco LP, a Delaware limited partnership ("DKSOI III Holdco");
• DK SOI III Aggregate Holdco II LP, a Delaware limited partnership ("DKSOI III Holdco II");
• M.H. Davidson & Co., a New York limited partnership ("Co.");
• M.H. Davidson & Co. 520 LP, a Delaware limited partnership ("Co. 520");
• Davidson Kempner Employee Fund LLC, a Delaware limited liability company ("Onshore Employee
Fund"); and
• Davidson Kempner Employee Fund International LP, a Cayman Islands exempted limited partnership
("Offshore Employee Fund").
DKIP, DKIL, DKIL BVI and DKP are multi-strategy funds and are collectively known as the "Multi-Strategy
Funds."
DKDOF, DKDOI and DKDOI Cayman are funds focused on distressed investing and are collectively known as
the "Distressed Funds."
DKLDOF, DKLDOI Master, DKLDOI (each, an "LDO I Fund"), DKLDOF II, DKLDOI Master II, DKLDOI II
(each, an "LDO II Fund"), DKLDOF III, DKLDOI Master III, DKLDOI III, DKLDOI III AIV, DKLDOI III
Holdco, DKLDOI III Holdco II (each, an "LDO III Fund"), DKLDOF IV, DKLDOI Master IV, DKLDOI IV,
DKLDOI IV AIV and DKLDOI IV Holdco (each, an "LDO IV Fund"), DKLDOF V, DKLDOI Master V, DKLDOI
V (each, an "LDO V Fund") are drawdown funds focused on distressed investing and are collectively known as the
"Long-Term Funds."
DKSOI II, DKSO Master II (each, an "SOF II Fund"), DKSO Master III, DKSOI III, DKSOF III, DKSOI III AIV,
DKSOI III Holdco, DKSOI III Holdco II (each, an "SOF III Fund"), DKSOF IV, DKSOI IV, DKSO Master IV,
DKSOI IV (DI), DKSO Master IV (DI) (each, an "SOF IV Fund") and DKSOF III-A are closed-end funds focused
on certain distressed opportunities and are collectively known as the "Special Opportunities Funds."
Co., Co. 520, the Onshore Employee Fund and the Offshore Employee Fund are proprietary funds (the "Proprietary
Funds").
Offers to sell interests in the Private Funds are made only by means of a Private Fund's private placement
memorandum and/or other governing documents, which contain information concerning an investment in the
Private Fund, including a description of the material terms and risks of an investment.
For its Multi-Strategy Funds and Co., the Adviser engages primarily in the following types of investment strategies:
• Distressed Investments: The Adviser effects this strategy by investing in the securities and financial
instruments of issuers that are (or are perceived to be) experiencing financial distress or are overleveraged,
are attempting to complete an out-of-court restructuring, are involved in a bankruptcy or similar
proceeding and/or are involved in substantial litigation.
• Risk Arbitrage: The Adviser invests in mergers and acquisitions (or "risk") arbitrage situations where
issuers are the subject of proposed changes in corporate structure or control, such as tender or exchange
offers, mergers, unsolicited merger proposals, spin-offs, split-offs, liquidations and recapitalizations.
• Long/Short Equities: The Adviser effects this strategy by investing in a long/short equities portfolio of
securities that can be readily valued and trade at a discount or premium to the fair value of the underlying
assets.
• Convertible Arbitrage: The Adviser invests in convertible arbitrage situations that attempt to extract value
from the options "embedded" in convertible securities when such options appear mispriced relative to
similar stand-alone options or historical volatility levels.
• Long/Short Credit: The Adviser invests in performing corporate high-yield and investment-grade bonds,
credit default swaps and other debt that the Adviser believes are mispriced and have catalysts for credit
improvement or deterioration.
The Distressed Funds' investment objective is to generate positive absolute returns on capital through investments,
long and short, in the securities and other financial instruments (including, without limitation, senior, secured and
unsecured bank debt and public debt, junior debt, trade claims, equities, convertible securities, options, futures,
swaps (including credit default swaps) and other derivatives) of issuers that: (i) are (or are perceived to be)
experiencing financial distress or are overleveraged; (ii) are attempting to complete an out-of-court restructuring,
including spin-offs and recapitalizations; (iii) are involved in a bankruptcy, liquidation, or similar proceeding;
and/or (iv) are involved in substantial litigation. Investments primarily are made in the lower part of a distressed
company's capital structure.
The Long-Term Funds' investment objective is primarily to make investments in less liquid and/or longer-duration
private and public securities, other financial instruments and other assets, including, without limitation, senior,
secured and unsecured bank debt and public debt, mezzanine and junior debt, bonds, notes, trade claims, equities
and convertible securities, options, swaps (including credit default swaps), and other derivatives of U.S. and non-
U.S. companies and other obligors that are (i) experiencing financial distress; (ii) attempting to complete an out-
of-court restructuring, including spin-offs and recapitalizations; (iii) involved in a bankruptcy, liquidation or similar
proceeding; (iv) involved in substantial litigation; and/or (v) expected to have an investment horizon greater than
two years. Portfolio investments may include, among other things, corporate investments, real estate loans, real
estate and real estate-related investments (including, without limitation, "hard" real estate assets such as land,
buildings and development projects), hard assets and loans backed by hard assets (e.g., shipping vessels; aircraft;
oil and gas), asset-backed and structured products (including residential mortgage-backed securities ("RMBS"),
commercial mortgage-backed securities ("CMBS"), collateralized debt obligations ("CDOs") and collateralized
loan obligations ("CLOs")), longer-dated liquidations, private lending, claims of any type, other opportunities in
distressed investments and situations resulting from capital dislocations.
The Special Opportunities Funds' investment objective is primarily to make investments in certain distressed
opportunities. The Special Opportunities Funds will only invest in portfolio investments that are also being
purchased by one or more of the Multi-Strategy Funds, the Distressed Funds and the Long-Term Funds and for
which the Adviser has determined that such other funds have received their appropriate allocations and there is
additional capacity for an investment by the Special Opportunities Funds.
Co. 520 invests the capital of the Registrant's Managing Members (as defined in Item 10) and certain former
managing members of the Registrant, members of the immediate families of such persons, and trusts or other
entities for their benefit. Co. 520 invests alongside the Multi-Strategy Funds by investing through Co., and also
makes investments in certain of the Multi-Strategy Funds, Distressed Funds, Long-Term Funds and Special
Opportunities Funds.
The Onshore Employee Fund and the Offshore Employee Fund invest the capital of certain eligible employees of
DKCM and its affiliates. The Onshore Employee Fund's and the Offshore Employee Fund's investment objectives
are to invest, through Co., alongside the Multi-Strategy Funds and in DKDOF.
Each of the strategies used by Davidson Kempner, including (i) distressed investing, (ii) mergers and acquisitions
(or "risk") arbitrage, (iii) long/short equities, (iv) convertible and volatility arbitrage and (v) long/short credit, has
its own risk committee that oversees the risk management of that strategy. Each risk committee is chaired by either
Anthony A. Yoseloff, Executive Managing Member of the Registrant or Conor Bastable, Managing Member of the
Registrant, and is comprised of Jeff Hurwitz, the Chief Risk Officer of the Registrant, and one or more primary
investment decision-makers that are involved in the management of the particular strategy, and may also include
traders and other investment professionals responsible for the particular strategy, investment professionals that are
not involved in the management of the strategy and/or certain other managing members of the Registrant. Risk
committees generally meet on a weekly, bi-weekly or monthly basis.
The Adviser's regulatory assets under management were approximately $35.9 billion as of January 31, 2020 and
its net assets under management were approximately $33.1 billion as of January 31, 2020. All managed assets are
discretionary; there are no non-discretionary assets under management. DKCM and its Affiliates do not manage
any wrap fee programs.
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client transactions and determining the reasonableness of their compensation (e.g., commissions).
Each Private Fund bears its own operating and other expenses, including, but not limited to, (i) investment-related
expenses whether relating to investments that are consummated or unconsummated (e.g., brokerage, prime
brokerage and futures commission merchant fees, commissions and expenses; due diligence costs; investment
banking fees; sourcing or finder's fees (which may include a management fee component and/or a performance fee
component); fees and related out-of-pocket expenses, including travel, paid to DK Hawthorne (as defined below)
(but not general overhead or operating expenses); expenses relating to securities sold short, including borrowing
charges; clearing and settlement charges; custodial fees; bank service fees; interest expense; consulting, appraisal
and other professional fees (including investment bankers', attorneys' and accountants' fees); fees relating to proxy
research, voting and claims settlement services; expenses incurred by and relating to any Private Fund subsidiary
or special purpose vehicle; investment- related travel and lodging expenses) and other expenses related to the
purchase, monitoring, sale, settlement, custody, transmittal or valuation of investments; (ii) research-related
expenses (including, without limitation, news and quotation equipment and services, market data services, third
party research consultant services, data providers and analytic services); (iii) investment- and trading-related
computer hardware and software expenses (including order management and other systems) and data licensing and
data warehouse expenses (e.g., Bloomberg and pricing feeds); (iv) expenses related to portfolio and risk
management products and services (including, without limitation, expenses related to portfolio and risk
management software); and (v) operational expenses, including without limitation, expenses incurred in connection
with currency exchanges and currency hedging (all or a portion of which may be allocated to a particular class of
shares); legal and compliance expenses; professional fees (including, without limitation, expenses of consultants,
valuation firms, attorneys, accountants, public relations firms and other experts); expenses related to regulatory and
compliance filings, licenses, registrations, fees and taxes associated with the Private Fund and its investment
activities (including, without limitation, expenses related to consulting services, software and systems in connection
with such filings), e.g., Form PF and AIFMD filings (including Annex IV); the costs and expenses incurred in
connection with any indebtedness of the Private Fund and its subsidiaries and special purpose vehicles (including,
without limitation, the costs of establishing such indebtedness and loan administration costs); accounting, audit and
tax compliance and preparation expenses (including, without limitation, accounting-, audit- or tax-related computer
hardware and software); organizational expenses; expenses relating to the offer and sale of shares or interests;
expenses incurred in connection with negotiating and complying with provisions of any side letter; fees and
expenses of the Board of Directors; Management Fees; fees to the administrator and auditor; costs of preparing and
distributing reports and notices; expenses related to the maintenance of the Private Fund's registered offices;
corporate licensing and related fees; cybersecurity insurance and liability insurance and related insurance for the
benefit of the Board of Directors, the Adviser and its affiliates (including the Private Fund's pro rata portion of any
applicable insurance premiums); withholding and transfer fees; taxes; and extraordinary expenses (including,
without limitation, indemnification expenses; fees and expenses incurred in connection with any tax audit by any
taxing authority and any related administrative settlement and judicial review; and fees and expenses incurred in
connection with the reorganization, dissolution, winding-up or termination of the Private Fund) and other similar
expenses related to the Private Fund. For the avoidance of doubt, the expense categories listed above include fees
and costs of information technology hardware, software and other technology related to such expense categories
(including, without limitation, costs of data services; data management and recovery services; and software
licensing, implementation, and development). A portion of research-related expenses may be paid for using "soft
dollars."
Any expenses common to the Private Fund and any other funds or accounts managed by the Adviser or its affiliates
generally will be borne by such entities in an equitable manner as determined by the Adviser. Although the Adviser
will attempt to allocate such expenses on a basis that it considers equitable, it may not be possible to precisely
determine what portion of such shared expenses are attributable to each of the Private Funds and there can be no
assurance that such expenses will in all cases be allocated proportionately. Accordingly, some portion of services
paid for by one Private Fund may be used in some portion for the benefit of another Private Fund.
The Adviser will bear the costs of office space, personnel and overhead necessary for the Adviser’s and the Private
Funds’ operations, utilities, entertainment and certain travel expenses. However, a number of the Private Funds’
investments may be held through special purpose vehicles (“SPVs”) that invest on behalf of one or more of the
Private Funds where the Adviser believes it is beneficial to do so. SPVs may be structured to incur overhead
expenses directly. In such circumstances, the Adviser will reimburse or otherwise credit the SPV or the applicable
Private Fund for such costs, including by offsetting such costs against Management Fees or other payables owed
by the Private Fund to the Adviser.
The above description of the Private Fund expenses is not intended to be exhaustive. For a description of the fees
and expenses borne by each Private Fund, please see the applicable Private Fund's offering memorandum and/or
other governing documents.
Item 6
Performance-Based Fees and Side-By-Side Management
Performance-Based Fees
Performance Compensation for the Multi-Strategy Funds and the Distressed Funds is generally equal to 20% of net
realized and unrealized capital appreciation for each year, excluding unrealized appreciation attributable to Special
Investments, after making up any losses carried forward from prior years. Performance Compensation is generally
charged after the close of each calendar year and upon interim-year withdrawals.
Performance Compensation for the Long-Term Funds is in the form of carried interest generally equal to 20% of
the net capital appreciation upon realization, the allocation and distribution of which is subject to hurdles, waterfalls
and clawbacks. Performance Compensation for the Special Opportunities Funds is in the form of carried interest
of up to 15% of the net capital appreciation upon realization, the allocation and distribution of which is subject to
hurdles, waterfalls and clawbacks.
The Adviser has discretion with respect to setting the Performance Compensation and determining whether to
reduce, waive or calculate differently the Performance Compensation with respect to investors that are affiliates,
employees, partners or former partners of the Adviser, members of the immediate families of such persons, and
trusts or other entities for their benefit.
All Performance Compensation will be charged in accordance with Section 205 of the Investment Advisers Act of
1940, as amended, (the "Advisers Act") and Rule 205-3 thereunder.
The Performance Compensation arrangements are not the product of an arm's-length negotiation with any third
party, and, because Performance Compensation is generally calculated on a basis that includes unrealized capital
appreciation, it may be greater than if such compensation were based solely on realized gains.
In certain circumstances, performance-based fee arrangements may create an incentive for the Adviser to direct the
best investment ideas to, or to allocate or sequence trades in favor of, (i) Private Funds with performance
compensation arrangements over Private Funds that are not charged, or from which the Adviser will not receive
(e.g., because the Private Fund is below its high water mark), performance compensation, and (ii) Private Funds
from which the Adviser will receive a greater performance compensation over Private Funds from which the
Adviser will receive lesser performance compensation. Performance-based fee arrangements may also create an
incentive for the Adviser to make investments that are riskier or more speculative than would be the case if a
performance-based compensation arrangement were not in effect. In addition, performance-based fee arrangements
may create an incentive for the Adviser to time investments, and the realization of investments, so as to maximize
the Performance Compensation rather than the return of the Private Fund.
The Adviser has adopted allocation policies, which are further described below, to ensure that all of the Clients are
treated fairly and equally and to prevent conflicts from influencing the allocation of investment opportunities among
the Clients.
Side–by-Side Management Through Co., the Registrant's Managing Members (as defined in Item 10) and certain former managing members
of the Registrant, members of the immediate families of such persons, and trusts or other entities for their benefit
and certain eligible employees, indirectly invest side-by-side with the Multi-Strategy Funds. Through Co. 520, the
Registrant's Managing Members and certain former managing members of the Registrant, members of the
immediate families of such persons, and trusts or other entities for their benefit, indirectly invest in certain of the
Multi-Strategy Funds, Distressed Funds, Long-Term Funds and Special Opportunities Funds.
The Adviser intends to allocate investment opportunities to the Clients in a manner that it believes to be appropriate
in light of the investment objectives of the Clients. The Adviser may be presented with investment opportunities
that fall within the investment objectives of multiple Clients and multiple Clients may employ substantially similar
strategies.
In general, the Adviser seeks to allocate investment opportunities relating to new positions among the investment
portfolios of the Multi-Strategy Funds, Co., the Distressed Funds and the Long-Term Funds (the "Relevant Funds")
based on pre-determined allocation methodologies, as modified from time to time, including, without limitation,
pro rata allocations based on capital attributable to the relevant strategy of each of the Relevant Funds. The Special
Opportunities Funds will co-invest alongside one or more of the Relevant Funds in an investment only after those
entities have received their appropriate allocation of such investment. When the Adviser deems it appropriate and
consistent with the interests of a Long-Term Fund or a Special Opportunities Fund, the Adviser may provide co-
investment opportunities to one or more affiliated investment vehicles formed to co-invest with, or invest alongside,
such Long-Term Fund or Special Opportunities Fund, as permitted by the relevant governing documents of such
fund. When adding to a previously-created investment position that is consistent with the investment program of
several of the Relevant Funds, the Adviser's allocation process will allocate the additional investment in a manner
that seeks to cause each Relevant Fund's ownership of the aggregate investment in the position to be its
pro rata
share of the entire position based on the then-current net asset values of the applicable Relevant Funds. Thus, while
the additional investment itself might not be allocated
pro rata, the resulting total position will be, or will be closer
to,
pro rata based on the then-current net asset values of the applicable Relevant Funds.
If necessary,
pro rata allocation will not be used when deviations are warranted as a result of differing investment
restrictions, different liquidity requirements (for example, as a consequence of investor subscriptions or
redemptions), the size of the opportunity (for example, where allocations would result in odd-lots or a de minimis
allocation to one or more of the Clients) or other differentiating circumstances (including tax, regulatory or other
considerations). In particular, where a Client employs an investment program dedicated to a specialized strategy
(such as distressed debt) and other Clients also invest a portion of their portfolio in such strategy, the Adviser will
identify each such Client and establish a pre-determined allocation ratio with respect to investments in such
specialized strategy. Ratios will be based on the assets of each Client invested in such specialized strategy and will
be modified from time to time. In certain circumstances, based upon the risk/reward profile of particular
investments, certain investments may be allocated
pro rata across the related portfolios of the Clients based on
capital attributable to such portfolio.
In general, when the Adviser determines that it would be appropriate for the Clients to participate in an investment
opportunity, the Adviser will seek to aggregate orders for all of the participating Clients, on an equitable basis. The
Clients that participate in an aggregated order will generally participate at the average price for all of the
transactions in that security with respect to each buy/sell program on a given business day, with transaction costs
generally shared
pro rata based on the Clients' participation in the transaction. The effect of such aggregation may
operate on some occasions to a Client's disadvantage. Specifically, if the Adviser has determined to invest at the
same time for more than one of the Clients, the Adviser may place combined orders for all such Clients
simultaneously and if any order is not filled at the same price, it may average the prices paid. Similarly, if an order
on behalf of more than one Client cannot be fully executed under prevailing market conditions, the Adviser may
allocate the securities traded among the different Clients on the basis that it considers equitable. In these
circumstances, each Client would pay, in connection with the acquisition of securities by more than one Client, the
average price per unit acquired, which may be higher than if it had acted alone, and it may otherwise not be able to
execute an investment decision as effectively as it could have if it had acted alone. There may be corresponding
potential disadvantages when more than one Client simultaneously seeks to dispose of commonly held securities
and other investment positions.
Situations may occur where a Client could be disadvantaged because of the activities conducted by the Adviser for
other Clients. Such situations may be based on, among other things: legal restrictions on the combined size of
positions which may be taken for all Clients managed by the Adviser or the difficulty of liquidating an investment
for more than one Client where the market cannot absorb the sale of the combined positions; or the determination
that a particular investment is warranted only if hedged with an option and there is a limited availability of such
options. Instances also may arise where the Adviser determines an investment opportunity to be suitable for more
than one Client but the market is too illiquid to enable each to participate to the extent advisable. In the above
situations, or in other situations in which conflicts arise, the Adviser will endeavor to allocate investment
opportunities fairly; nevertheless, from time to time as any given conflict situation arises, such conflict may be
resolved in a manner detrimental to a particular Client.
In addition, the Adviser may give advice or take action with respect to the investments of one or more Clients that
may not be given or taken with respect to other Clients with similar investment programs, objectives, and strategies.
Accordingly, Client accounts with similar strategies may not hold the same securities or instruments or achieve the
same performance. The Adviser also may advise Clients with conflicting programs, objectives or strategies. These
activities also may adversely affect the prices and availability of other securities or instruments held by or
potentially considered for one or more Clients.
The Adviser and its personnel may have conflicts in allocating their time and services among the Clients. The
Adviser will devote as much time to each Client as the Adviser deems appropriate to perform its duties in
accordance with its management agreements.
From time to time, subject to applicable restrictions under the Private Funds' investment guidelines and restrictions,
the Adviser may direct one of its Private Funds to sell securities to, or buy any securities from, another Private
Fund through a cross transaction in which neither the Adviser nor a related person will receive compensation. Any
such transaction will be effected based on the then current independent market price and consistent with valuation
procedures established by the Adviser. To the extent that any such cross transaction may be viewed as a principal
transaction due to the ownership interest in the Private Fund by the Adviser and its personnel or affiliates, the
Adviser will comply with the requirements of Section 206(3) of the Advisers Act, including that the Adviser will
notify the relevant Private Fund (or an independent representative of the Private Fund) in writing of the transaction
and obtain the consent of the Private Fund (or an independent representative).
The Adviser may purchase securities offered in initial public offerings ("New Issues") on behalf of certain of the
Clients. Pursuant to FINRA Rule 5130, FINRA Rule 5131 and FINRA/NASD interpretations thereof, the Adviser
may allocate New Issues among the Clients eligible to invest in New Issues in proportion to their relative capital
balances or any other basis that it considers in compliance with the FINRA rules. However, Clients without
sufficient available capital may not be allocated New Issues. The Adviser does not allocate the profits and losses
from New Issues to fund investors who are "restricted persons" under the FINRA rules.
Item 7 Types of
Clients
As noted in Item 4 above, the Adviser provides investment advice and investment management services to the
Private Funds, which are pooled investment vehicles that are organized as domestic limited partnerships or offshore
corporations or limited partnerships (e.g., hedge funds). Investors in the Proprietary Funds are comprised solely of
the Registrant's Managing Members and certain former managing members of the Registrant, members of the
immediate families of such persons and trusts or other entities for their benefit and certain eligible employees.
Investors in the Multi-Strategy Funds, the Distressed Funds, the Long-Term Funds and the Special Opportunities
Funds may include some or all of the following: individuals; banks or thrift institutions; investment companies;
pension and profit sharing plans; trusts, estates or charitable organizations; corporations or other business entities;
certain eligible employees; and affiliates of the Registrant.
Generally, investors in the Multi-Strategy Funds, the Distressed Funds, the Long-Term Funds and the Special
Opportunities Funds must make a minimum investment of $2 million to $5 million, as applicable, to such Private
Fund. In addition, investors in such Private Funds generally must be "accredited investors," as defined in Rule
501(a) of Regulation D, promulgated pursuant to Section 4(2) of the Securities Act of 1933, as amended, and
"qualified purchasers," as defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended.
Item 8 Methods of Analysis, Investment Strategies and Risk of Loss
The Adviser invests Client assets using a variety of arbitrage and other event-driven strategies, including "risk"
arbitrage transactions and investments in financially distressed companies. The Adviser's investment decisions and
advice with respect to the Private Funds are in accordance with their investment objectives and guidelines as set
forth in each Private Fund's respective private placement memorandum and/or other governing documents. The
Adviser regularly obtains advice from attorneys, accountants and other experts to assist in its analysis of investment
situations.
As noted in Item 4 above, the Adviser's significant investment strategies include: (i) distressed investing; (ii)
mergers and acquisitions (or "risk") arbitrage; (iii) long/short equities; (iv) convertible and volatility arbitrage; and
(v) long/short credit.
8.A. Methods of Analysis and Investment Strategies
The Adviser's distressed investments strategy involves investing in securities or other financial instruments of
stressed or distressed companies undergoing liquidation, restructuring, refinancing pressures or substantial
litigation. As distressed investment opportunities are identified, they are subjected to rigorous, fundamental,
bottom up analysis. This analysis addresses, where appropriate, legal, financial, regulatory, litigation and timing
issues. Investment memoranda summarizing the investment's thesis, likely sequence of events, and potential risks
and rewards are generally prepared for every distressed investment (other than asset-backed products for which
detailed models are prepared), and updated over the course of the investment life.
The Adviser's merger arbitrage strategy involves investing in securities with an announced or anticipated hard
catalyst and a clearly defined risk/return trade profile. Hard catalysts include, among other things, announced
merger or takeover offers (friendly and unsolicited), tender offers, auctions, exchange offers, spin-offs, re-
capitalizations and legal/regulatory events. In response to, or in anticipation of, a hard catalyst event, the Adviser
conducts a detailed analysis of the business and financial conditions of the relevant company, analyzes the processes
surrounding the event and determines how the anticipated outcome of the event may affect the trading prices of the
company's securities. Based on this analysis, the Adviser attempts to purchase these securities at a discount to what
it believes their value will be on the consummation of the proposed event and may structure investments to seek to
maximize potential returns.
The Adviser's long/short equities strategy involves investing in (i) long positions that the Adviser believes are
undervalued by the market relative to their intrinsic or fundamental value and trade at a discount to such value and
(ii) short positions that the Adviser believes to be fundamentally overvalued by the market and trade at a premium
to fair value.
The Adviser's convertible and volatility arbitrage strategy encompasses traditional convertible bond arbitrage, as
well as opportunistic relative value volatility trades.
The Adviser's long/short credit strategy invests in performing corporate high-yield and investment-grade bonds,
credit default swaps and other debt. The Adviser uses a fundamental research process to analyze individual
companies and sectors in the credit markets and then initiates long positions in companies that the Adviser believes
are undervalued and have catalysts for credit improvement and initiates short positions in companies that the
Adviser believes are overvalued and have catalysts for credit deterioration.
As part of its investment activities or to hedge against the risk of market fluctuation, the Adviser takes short
positions and utilizes certain other hedging techniques when appropriate. Such techniques may include capital
structure arbitrage to take advantage of inefficiencies in the pricing between securities of the same or affiliated
issuers, short positions in debt or equity securities in the cash market and use of the credit derivatives market to
establish short positions in securities. The Adviser may also use various indices to partially hedge the Client's
portfolio or certain positions during certain market cycles. The Adviser is not obligated to hedge a Client's portfolio,
and there is no guarantee that its hedges will be successful.
In making event driven investments, the Adviser may invest at any or all levels of an issuer's capital structure,
including equity and debt securities and derivative products.
8.B. Certain Material Risks
Investing in securities involves risk of loss that clients should be prepared to bear. Because these risk factors are
not a complete list or explanation of all of the risks to investors in the Private Funds, all such investors should read
this brochure and any offering memorandum and/or other governing documents of the particular Private Fund
before making an investment in that Private Fund.
Distressed Investing The Adviser may invest in "below investment grade" securities and obligations of issuers in weak financial
condition, experiencing poor operating results, having substantial capital needs or negative net worth or facing
special competitive or product obsolescence problems, including companies involved in bankruptcy or other
reorganization and liquidation proceedings. There are risks associated with distressed investing. Specifically, it
frequently may be difficult to obtain information as to the true condition of entities in troubled condition. Such
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
or disenfranchise particular claims. In addition, troubled companies' ability to pay their debts on schedule could be
affected by adverse interest rate movements, changes in the general economic climate, economic factors affecting
a particular industry or specific developments within such companies. There is no minimum credit standard that is
a prerequisite to the Adviser's investment in any instrument, and a significant portion of the obligations and
securities in which the Adviser invests may be less than investment grade.
The level of analytical sophistication, both financial and legal, necessary for successful investment in companies
experiencing significant business and financial difficulties is unusually high. There is no assurance that the Adviser
will correctly evaluate the value of the assets underlying the loans or the prospects for a successful reorganization
or similar action. In any reorganization or liquidation proceeding relating to a company in which the Adviser
invests, the Client may lose its entire investment, may be required to accept cash or securities with a value less than
the Client's original investment and/or may be required to accept payment over an extended period of time. Under
such circumstances, the returns generated from the Adviser's investments may not compensate the Client adequately
for the risks assumed.
In liquidation (both in and out of bankruptcy) and other forms of corporate reorganization, there exists the risk that
the reorganization will be unsuccessful (due to, for example, failure to obtain requisite approvals), will be delayed
(for example, until various liabilities, actual or contingent, have been satisfied) or will result in a distribution of
cash or a new security, the value of which will be less than the purchase price of the security in respect of which
such distribution is made.
In certain transactions, the Adviser may not be "hedged" against market fluctuations, or, in liquidation situations,
may not accurately value the assets of the company being liquidated. This can result in losses, even if the proposed
transaction is consummated.
Some of the investments the Adviser make may require active monitoring and representation on official and
unofficial creditors committees for the company. Accordingly, the Adviser may seek representation on such
committees from time to time if the Adviser, in its discretion, determines that such representation is necessary or
advisable to protect or further the Client's interests. Serving on an official or unofficial committee increases the
possibility that the Adviser will be deemed an "insider" or a "fiduciary" of the company it has so assisted and may
restrict the Adviser's trading of investments in such company. Should such assistance be provided before a
company enters bankruptcy proceedings, the bankruptcy court, under certain conditions such as a finding of fraud
or inequitable conduct, may invoke the doctrine of "equitable subordination" with respect to any claim or equity
interest in such company and subordinate any such claim or equity interest in whole or in part to other claims or
equity interests in such company. Claims of equitable subordination may also arise outside of the context of the
Adviser's managerial activities. In addition, if representation on a creditors committee of a company causes the
Adviser to be deemed an affiliate of the company, the securities of such company may become restricted securities,
which are not freely tradable. As each Private Fund will indemnify the Adviser, its board of directors (if applicable)
or any other person serving on a committee on its behalf for claims arising from breaches of those obligations,
indemnification payments could adversely affect the return on such Private Fund's investment in a reorganization
company.
Risk Arbitrage
Mergers and acquisitions ("risk") arbitrage involves the purchase of securities of companies that are the subject of
announced or anticipated acquisition attempts, exchange offers, cash tender offers or corporate reorganizations or
restructurings such as mergers or liquidations. The arbitrageur derives its profit or loss by realizing the price
differential between the market price of the securities purchased and the value ultimately realized from their
disposition, plus any dividends and interest received, and less transaction costs such as brokerage commissions,
interest expenses and dividends payable as a result of short sales.
The primary risk in merger and acquisitions arbitrage is the risk that the proposed merger or acquisition does not
or appears that it will not materialize. In such a case, the market price of the securities will usually decline to a
level comparable to or below that which existed prior to the announcement, causing the Client to suffer a loss with
respect to any long positions that it has established in the underlying security. In addition, after the Adviser has
established a short position in connection with a risk arbitrage related investment, if it appears that the transaction
is proceeding contrary to expectations, the Adviser may experience losses by covering its short positions.
Long/Short Equities The Adviser may invest in equity securities and equity derivative securities that the Adviser believes are
undervalued by the market relative to their intrinsic or fundamental value and trade at a discount, or initiate short
positions that it believes are fundamentally overvalued by the market. The value of these securities generally will
vary with the performance of the issuer and movements in the equity markets. As a result, the Private Funds may
suffer losses if the Adviser invests in equity instruments of issuers whose performance diverges from the Adviser's
expectations or if equity markets generally move in a single direction and the Adviser has not sufficiently hedged
against such a general move. The Private Funds 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.
Convertible and Volatility Arbitrage Convertible arbitrage strategies involve investing in convertible securities that appear incorrectly valued relative to
their theoretical value. The strategy consists of the purchase (or short sale) of a convertible security coupled with
the short sale (or purchase) of the underlying security for which the convertible security can be exchanged to exploit
price differentials. The Adviser may seek to hedge out the risk inherent in the stock; the remaining risk may or
may not be hedged. The Adviser may engage in volatility arbitrage by using strategies that take advantage of the
difference between the forecasted future volatility of a security or index and the implied volatility of options based
on that security.
Convertible and volatility arbitrage strategies generally involve spreads between two or more positions. To the
extent the price relationships between such positions remain constant, no gain or loss on the position will occur.
Such positions, however, are subject to a substantial risk that the price differential could change unfavorably,
causing a loss to the spread position. An unfavorable change to the price differential could arise as a result of
various factors, including, without limitation, credit risk, equity performance risk, interest rate risk, option premium
risk, dividend policy risk, corporate action risk, volatility risk, financing risk, short-stock facilities risk and
counterparty credit risk. Substantial risks also are involved in borrowing and lending against such investments.
The prices of these investments can be volatile, market movements are difficult to predict, and financing sources
and related interest and exchange rates are subject to rapid change. Certain corporate securities may be
subordinated (and thus exposed to the first level of default risk) or otherwise subject to substantial credit risks.
Long/Short Credit
The long/short credit strategy involves investments in performing corporate high-yield and investment-grade bonds,
credit default swaps and other debt. Debt instruments face ongoing uncertainties and exposure to adverse business,
financial or economic conditions which could lead to the issuer's inability to meet timely interest and principal
payments. High-yield and investment-grade debt instruments are generally not exchange-traded and, as a result,
these instruments trade in the over-the-counter marketplace, which is less transparent than the exchange-traded
marketplace. The market values of certain high-yield debt instruments tend to reflect individual corporate
developments to a greater extent than do investment-grade debt instruments which react primarily to fluctuations
in the general level of interest rates, and high-yield debt instruments tend to be more sensitive to economic
conditions than are investment-grade debt instruments. Companies that issue high-yield debt instruments are often
highly leveraged and may not have available to them more traditional methods of financing. It is possible that a
major economic recession could disrupt severely the market for debt instruments and may have an adverse impact
on the value of such instruments. In addition, it is possible that any such economic downturn could adversely affect
the ability of the issuers of debt instruments, particularly high-yield debt instruments, to repay principal and pay
interest thereon and increase the incidence of default of such instruments.
Additionally, as investment-grade debt becomes lower-rated and approaches or becomes high-yield debt (or
vice
versa), there may be large fluctuations in the prices of these instruments because of changes in the ownership base
of such assets. Certain market participants are prohibited from investing in high-yield debt, so they would be forced
to sell any investment-grade debt that becomes high-yield debt, possibly at a depressed price. The purchasers of
such assets often demand higher interest rates on debt once it is considered high-yield, which could also negatively
affect the asset price.
Investments Outside of the United States The Adviser's investments outside of the United States may involve certain additional risks. Many financial
markets are not as developed or as efficient as those in the United States and certain Western European countries.
Therefore, investments in less efficient markets may have less liquidity and more price volatility than investments
in a more efficient market would have. In addition to business uncertainties, investments outside of the United
States may be affected by political, social and economic uncertainty affecting a particular country or region. The
legal and regulatory environment may also be different, particularly as to bankruptcy and reorganization. Financial
accounting and reporting standards and practices may differ, and there may be less publicly available information
in respect of such companies.
Special Investments
The Multi-Strategy Funds and the Distressed Funds may be invested in securities and instruments that the Adviser
determines to be illiquid and lacking a readily assessable market value or that the Adviser determines should be
held until the resolution of a special event or circumstance (each a "Special Investment"). Such Special Investments
may be maintained in special investment accounts. Special Investments generally are subject to the Management
Fee described in Item 5 and are carried at fair value (which may be cost) for purposes of determining the amount
of the Management Fee. Gains and losses attributable to Special Investments are not considered in determining
Performance Compensation until such gains and losses are realized.
Adviser Activities
In the course of operating its business, the Adviser or its affiliates may engage or enter into transactions with third
party service providers and counterparties that provide services to or engage in transactions with the Private Funds,
including prime brokers and other brokers, banks and other service providers. Such third-party service providers
may provide services that are beneficial to the Adviser, but not necessarily beneficial to the Private Funds, such as
capital introduction, banking services, consulting or advisory services. In particular, a financial institution which
provides a significant amount of services to the Private Funds (such as prime brokerage, custodial, execution and
other services) has provided a revolving line of credit to the Adviser secured by the Adviser's right to receive
management fees from the Multi-Strategy Funds. In addition, some service providers may be global firms with
affiliated banking or other financial advisory divisions, and may have various relationships with managing members
or employees of the Adviser or its affiliates, including providing personal services such as lines of credit, personal
loans, banking, advisory, tax or accounting services.
Because the Adviser uses service providers that also provide services to the Private Funds, the Adviser may be
subject to conflicts of interest relating to the selection of third party service providers and counterparties on behalf
of the Private Funds.
The Adviser may also be faced with certain conflicts when engaging DK Hawthorne. Although it is expected that
the Adviser will engage a combination of DK Hawthorne and third party operating partners, and it is expected that
fees paid to DK Hawthorne by the Private Funds or their portfolio companies will not generate a profit, the Adviser
may be incentivized to engage DK Hawthorne in order to recoup the costs of DK Hawthorne. In addition, although
DK Hawthorne will be under the control of or under common control with the Adviser, the liability of the Adviser
and its affiliates for the acts and omissions (or alleged acts and omissions) of DK Hawthorne and their employees
and representatives, will be limited. As with respect to third party operating partners or other service providers to
the Private Funds or their portfolio companies, the liability of DK Hawthorne will be governed by separate
agreements with the Private Funds and/or their portfolio companies. DK Hawthorne will not have any fiduciary
duties to the Private Funds.
Cybersecurity Risk As part of its business, the Registrant processes, stores and transmits large amounts of electronic information,
including information relating to the transactions of the Private Funds and personally identifiable information of
investors. Similarly, service providers of the Registrant and the Private Funds, including the Private Funds’
administrator, may process, store and transmit such information. The Registrant has procedures and systems in
place that it believes are reasonably designed to protect such information and prevent data loss and security
breaches. However, 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 Registrant may be susceptible to compromise, leading to a breach of the Registrant's network.
The Registrant's systems or facilities may be susceptible to employee error or malfeasance, government
surveillance, or other security threats. Web-based services provided by the Registrant or the Private Funds’
administrator to investors may also be susceptible to compromise. A breach of the Registrant’s information systems
may cause information relating to the transactions of the Private Funds and personally identifiable information of
investors to be lost or improperly accessed, used or disclosed.
The service providers of the Registrant and the Private Funds are subject to the same electronic information security
threats as the Registrant. If a service provider fails to adopt or adhere to adequate data security policies, or in the
event of a breach of its networks, information relating to the transactions of the Private Funds and personally
identifiable information of investors may be lost or improperly accessed, used or disclosed.
The loss or improper access, use or disclosure of the Registrant’s or the Private Funds’ proprietary information may
cause the Registrant or the Private Funds to suffer, among other things, financial loss, the disruption of its business,
liability to third parties, regulatory intervention or reputational damage. Any of the foregoing events could have a
material adverse effect on the Private Funds.
Alternative Data
The Adviser expects to obtain and use alternative data in its investment process. Alternative data may consist of
datasets that have been culled from a variety of sources, such as internet usage, payment records, financial
transactions, weather and other physical phenomena sensors, applications and devices (such as smartphones) that
generate location and mobility data, data gathered by satellites, and government and other public records databases
(this data is sometimes referred to as "big data" or "alternative data"). The Adviser intends to apply this alternative
data to better anticipate micro- and macro-economic trends and otherwise to develop or improve trading or
investment themes.
The analysis and interpretation of alternative data involves a high degree of uncertainty and may entail significant
expense, including technological efforts, that are expected to be borne – in whole or in part – by the Private Fund.
No assurance can be given that the Adviser will be successful in utilizing alternative data in its investment process.
Moreover, there has been increased scrutiny from a variety of regulators regarding the use of alternative data in this
manner, and its use or misuse under current or future laws and regulations could create liability for the Adviser and
the Private Funds in numerous jurisdictions. The Adviser cannot predict what, if any, regulatory or other actions
may be asserted with regard to alternative data, but any adverse inquiries or formal actions could cause reputational,
financial, or other harm to the Adviser or to the Private Funds. Conversely, any future limitations on the use of
alternative data could have a material adverse impact on the performance of the Private Funds.
Assumption of Catastrophe Risks
The Adviser may be subject to the risk of loss arising from direct or indirect exposure to various catastrophic events,
including the following: hurricanes, earthquakes and other natural disasters; labor strikes; war, terrorism and other
armed conflicts; cyberterrorism; major or prolonged power outages or network interruptions; and public health
crises, including infectious disease outbreaks, epidemics and pandemics. To the extent that any such event occurs
and has a material effect on global financial markets or specific markets or issuers in which the Adviser invests (or
has a material negative impact on the operations of the Adviser or the service providers of the Adviser), the risks
of loss can be substantial and could have a material adverse effect on the Adviser and its Clients’ investments.
Item 9 Disciplinary Information
To the best of the Adviser's knowledge, there are no legal or disciplinary events that the Adviser believes would be
material to the Clients' or prospective Clients' evaluation of the Adviser's advisory business or the integrity of its
management.
Item 10 Other Financial Industry Activities and Affiliations
Neither the Adviser nor its management personnel (i) are registered as broker-dealers or (ii) have any application
pending to register with the SEC as a broker-dealer or registered representative of a broker-dealer.
Neither the Adviser nor its management personnel (i) are registered as a futures commission merchant, commodity
pool operator, commodity trading advisor or an associated person of the foregoing or (ii) have any application
pending to register with respect to any of the foregoing.
The Adviser does not recommend or select other investment advisers for its Clients.
10.C. Material Relationships
The Registrant and its Affiliates provide investment advice and investment management services to the Private
Funds listed in Item 4 above. The Registrant or one or more of its Affiliates serves as the investment adviser,
investment manager, general partner or manager with full discretionary authority with respect to investment and
trading decisions on behalf of the Clients' accounts.
DKEP and DK Asia are advisers to the Registrant.
The Registrant is the investment manager of the Multi-Strategy Funds and Co., and subadviser to the Distressed
Funds, the Long-Term Funds and the Special Opportunities Funds. The limited partners of the Registrant are
Anthony A. Yoseloff, Eric P. Epstein, Avram Z. Friedman, Conor Bastable, Morgan P. Blackwell, Shulamit
Leviant, Patrick W. Dennis, Gabriel T. Schwartz, Zachary Z. Altschuler, Joshua D. Morris and Suzanne K. Gibbons
(the "Managing Members"), with Anthony A. Yoseloff serving as Executive Managing Member and Patrick W.
Dennis and Gabriel T. Schwartz serving as Co-Deputy Executive Managing Members.
Davidson Kempner Advisers Inc., a New York corporation ("DKAI"), is the general partner of DKIP. The
Managing Members are also the voting shareholders of DKAI and the members of the Board of Directors of DKAI.
MHD Management Co., a New York limited partnership ("MHD"), is the general partner of DKP. MHD
Management Co. GP, L.L.C., a Delaware limited liability company ("MHD GP"), is the general partner of MHD.
Certain of the Managing Members are also the managing members of MHD GP, with Anthony A. Yoseloff serving
as Executive Managing Member.
DKIL GP LLC, a Delaware limited liability company ("DKIL GP"), is a shareholder of DKIL and provides
oversight of DKCM's investment of DKIL's assets. Each of the Managing Members is a managing member of
DKIL GP, with Anthony A. Yoseloff serving as Executive Managing Member.
DK Management Partners LP, a Delaware limited partnership ("DKMP"), is the investment manager of each of the
Distressed Funds. Each of the Managing Members is a limited partner of DKMP. The Registrant provides
administrative and investment management services to DKMP.
DKDOI GP LLC, a Delaware limited liability company ("DKDOI GP"), is a shareholder of DKDOI and provides
oversight of DKMP's investment of DKDOI's assets. Each of the Managing Members is a managing member of
DKDOI GP, with Anthony A. Yoseloff serving as Executive Managing Member.
DK Group LLC, a Delaware limited liability company ("DKG"), is the general partner of DKDOF. Each of the
Managing Members is a managing member of DKG, with Anthony A. Yoseloff serving as Executive Managing
Member.
DK Long-Term Management LP, a Delaware limited partnership ("DKLTM"), is the investment manager of each
of the Long-Term Funds and the Special Opportunities Funds. Each of the Managing Members is a limited partner
of DKLTM. The Registrant provides administrative and investment management services to DKLTM.
Davidson Kempner Long-Term Distressed Opportunities GP LLC, a Delaware limited liability company ("DKLDO
GP"), is the general partner of each LDO I Fund and each SOF I Fund. Each of the Managing Members is a
managing member of DKLDO GP, with Anthony A. Yoseloff serving as Executive Managing Member.
Davidson Kempner Long-Term Distressed Opportunities GP II LLC, a Delaware limited liability company
("DKLDO GP II"), is the general partner of each LDO II Fund. Each of the Managing Members is a managing
member of DKLDO GP II, with Anthony A. Yoseloff serving as Executive Managing Member.
Davidson Kempner Long-Term Distressed Opportunities GP III LLC, a Delaware limited liability company
("DKLDO GP III"), is the general partner of each LDO III Fund. Each of the Managing Members is a managing
member of DKLDO GP III, with Anthony A. Yoseloff serving as Executive Managing Member.
Davidson Kempner Long-Term Distressed Opportunities GP IV LLC, a Delaware limited liability company
("DKLDO GP IV"), is the general partner of each LDO IV Fund. Each of the Managing Members is a managing
member of DKLDO GP IV, with Anthony A. Yoseloff serving as Executive Managing Member.
Davidson Kempner Long-Term Distressed Opportunities GP V LLC, a Delaware limited liability company
("DKLDO GP V"), is the general partner of each LDO V Fund. Each of the Managing Members is a managing
member of DKLDO GP V, with Anthony A. Yoseloff serving as Executive Managing Member.
Davidson Kempner Special Opportunities GP II LLC, a Delaware limited liability company ("DKSO GP II"), is
the general partner of each SOF II Fund. Each of the Managing Members is a managing member of DKSO GP II,
with Anthony A. Yoseloff serving as Executive Managing Member.
Davidson Kempner Special Opportunities GP III LLC, a Delaware limited liability company ("DKSO GP III"), is
the general partner of each SOF III Fund and SOF III-A. Each of the Managing Members is a managing member
of DKSO GP III, with Anthony A. Yoseloff serving as Executive Managing Member.
Davidson Kempner Special Opportunities GP IV LLC, a Delaware limited liability company ("DKSO GP IV"), is
the general partner of each SOF IV Fund. Each of the Managing Members is a managing member of DKSO GP
IV, with Anthony A. Yoseloff serving as Executive Managing Member.
M.H. Davidson & Co. GP, L.L.C., a Delaware limited liability company ("MHD & Co. GP"), is the general partner
of Co. Each of the Managing Members is a managing member of MHD & Co. GP, with Anthony A. Yoseloff
serving as Executive Managing Member.
M.H. Davidson & Co. 520 GP LLC, a Delaware limited liability company ("MHD & Co. 520 GP"), is the general
partner of Co. 520. Each of the Managing Members is a managing member of MHD & Co. 520 GP, with Anthony
A. Yoseloff serving as Executive Managing Member.
DK Employee Fund Management LLC, a Delaware limited liability company ("Onshore Employee Fund
Manager"), is the manager of the Onshore Employee Fund. Certain of the Managing Members are managing
members of the Onshore Employee Fund Manager, with Anthony A. Yoseloff serving as Executive Managing
Member.
DK Employee Fund International Management LLC, a Delaware limited liability company ("Offshore Employee
Fund GP"), is the general partner of the Offshore Employee Fund. Certain of the Managing Members are managing
members of the Offshore Employee Fund GP, with Anthony A. Yoseloff serving as Executive Managing Member.
The Registrant, DKAI, MHD, MHD GP, DKIL GP, DKMP, DKDOI GP, DKG, DKLTM, DKLDO GP, DKLDO
GP II, DKLDO GP III, DKLDO GP IV, DKLDO GP V, DKSO GP II, DKSO GP III, DKSO GP IV, MHD & Co.
GP, MHD & Co. 520 GP, Onshore Employee Fund Manager and Offshore Employee Fund GP are affiliates
(collectively, "Affiliates"), subject to the common control of the Managing Members. As noted in Item 6, through
Co., the Managing Members invest side-by-side with the Multi-Strategy Funds, and through Co. 520, invest in
certain of the Multi-Strategy Funds, Distressed Funds, Long-Term Funds and Special Opportunities Funds. In
addition, the Registrant and the Affiliates and their personnel may also invest in eligible Private Funds of their
choosing but are not required to invest in all Private Funds. It is expected that, if such investments are made, the
size and nature of these investments will change over time.
Certain of the Private Funds’ investments (each, a "Portfolio Investment") are expected to require a high level of
monitoring of, or involvement in, portfolio company or asset-level business operations. When the Adviser
determines it to be appropriate to carry out its investment strategy with respect to a particular Portfolio Investment,
the Adviser may retain, advise or require the relevant portfolio company or holding company ("portfolio company")
to retain, the services of one or more operational or strategic consultants to provide expertise in various business
areas. These consultants ("operating partners") may be third parties or they may be employees of an affiliate of the
Adviser. The Adviser has established an affiliate, Davidson Kempner Hawthorne Partners ("DK Hawthorne ") that
will provide operating partner services exclusively to the Private Funds, their respective portfolio companies or
assets as well as to the Adviser. Engagements of DK Hawthorne will be on terms no less favorable to a Private
Fund than could be obtained from a third party that is not affiliated with the Adviser. DK Hawthorne will be
controlled by the Adviser.
DK Hawthorne will be engaged to provide assistance to portfolio companies or otherwise with respect to assets
owned by the Private Funds in a variety of business areas, including (i) business, operations and financial planning
and/or budgeting; (ii) organization and administrative consulting; (iii) corporate governance and best practices; (iv)
operational and infrastructure buildout; (v) executive recruiting and executive compensation/management incentive
plans; (vi) asset-level consulting and business plan execution; (vii) project management and transition management;
(viii) risk and liability consulting (e.g., insurance; environmental); (ix) technology and information security
consulting; and (x) serving as operating executive and/or providing management oversight, including as director
(or similar). To the extent DK Hawthorne has employees with relevant asset or industry expertise, it may also be
retained for the purpose of providing due diligence or research services to the Adviser in respect of Portfolio
Investments and prospective Portfolio Investments, the costs of which also may be borne by the relevant Private
Funds. The services provided by DK Hawthorne will be separate from and additional to the services that the
Adviser and its affiliates provide in respect of the Private Funds.
DK Hawthorne will charge fees and related out-of-pocket expenses, including travel (but not general overhead or
operating expenses), to portfolio companies, the Private Funds and/or the Adviser and its affiliates for the services
described above. Fees may be structured in a variety of ways, including fixed fees, hourly fees, asset-based fees,
commitment-based fees, contingency fees and other formulations. Due to the affiliate relationship between DK
Hawthorne and the Adviser, fees for services will not be negotiated at arm's length. Fees paid to DK Hawthorne
will not generate a profit for DK Hawthorne or the Adviser and its affiliates (other than minimum profits required
by tax or other regulatory laws in jurisdictions applicable to DK Hawthorne); rather, fees charged by DK
Hawthorne on an annual basis will not exceed the costs of DK Hawthorne including, without limitation: (i)
personnel-related expenses such as salaries, benefits and payroll taxes, (ii) overhead expenses such as rent, utilities
and administrative expenses and (iii) the cost of software and systems used in providing the services. In addition
to fees received by DK Hawthorne, employees of DK Hawthorne may receive compensation directly from portfolio
companies in the form of directors' fees, salaries, consultant fees, other cash compensation, participation in
management incentive plans, equity options, success fee bonuses and other incentive compensation arrangements.
Fees and expenses paid to DK Hawthorne will be in addition to the Management Fee and Performance
Compensation.
Consistent with the allocation of expenses relating to third party service providers, including third party operating
partners, the fees paid to DK Hawthorne generally will be borne by the Private Funds invested in the relevant
investment or transaction or, to the extent that DK Hawthorne was retained to provide assistance to the portfolio
company, directly by the relevant portfolio company. Until January 1, 2021, the Adviser or its affiliates will make
the Distressed Funds whole for their share of DK Hawthorne fees and expenses. DK Hawthorne will generally be
entitled to indemnification under the terms of their service contracts or other arrangements entered into with the
Private Funds, the portfolio companies or the Adviser and the costs and expenses of such indemnification, if agreed
to by the Privates Funds or the portfolio companies, would ultimately be borne by the Private Funds.
On an ad hoc basis, DK Hawthorne may provide services to the Adviser and its affiliates that are payable by the
Adviser. In such circumstances, the attributable costs of DK Hawthorne will be borne by the Adviser.
Item 11 Code of Ethics, Participation or Interest in
Client Transactions and Personal Trading
The Adviser strives to adhere to the highest industry standards of conduct based on principles of professionalism,
integrity, honesty and trust. In seeking to meet these standards, the Adviser has adopted a Code of Ethics (the
"Code"). The Code incorporates the following general principles that all employees are expected to uphold:
employees must at all times place the interests of Clients first; all personal securities transactions must be conducted
in a manner consistent with the Code and any actual or potential conflicts of interest or any abuse of an employee's
position of trust and responsibility must be avoided; employees must not take any inappropriate advantage of their
positions at the firm; information concerning the identity of securities and financial circumstances of the Clients,
including the Clients' investors, must be kept confidential; and independence in the investment decision-making
process must be maintained at all times.
With respect to restrictions on personal securities transactions, limited trading by employees is permitted.
"Permitted" employee transactions include investments in ETFs, iShares, HOLDERS, SPDRs, QQQQs, closed-end
mutual funds, options on ETFs and index options, physical commodities or currencies, non-defaulted government
bonds of any sovereign government, variable and indexed annuities and private investments, such as investments
in private investment funds, including funds of funds and real estate investments, which do not compete with the
investment strategies of the Adviser. Employees are required to report to the Adviser any transactions in the
foregoing securities and, in certain circumstances, transactions in such securities require pre-approval. Employees
may also engage in "exempt" transactions which include investments in money-market funds, unaffiliated open-
end mutual funds, unaffiliated unit investment trusts that are invested exclusively in one or more open-end mutual
funds, certificates of deposit, bankers' acceptances, high-quality short-term debt obligations and direct obligations
of the U.S. government. Employees are not required to report to the Adviser any transactions in the foregoing
securities. Except for extremely limited circumstances, e.g., liquidating legacy positions or receipt of such
investments as an inheritance, gift or distribution, employees are prohibited from transacting in corporate debt,
common and preferred stock, warrants, convertibles, options on securities, futures, interests in investment clubs,
IPOs or limited offerings, municipal bonds and commercial paper. Employees must be granted approval for the
disposition of legacy positions or investments held as a result of inheritances, gifts or distributions.
When liquidating such positions in prohibited investments, employees must submit a trade pre-approval request
which requires the pre-approval of Compliance, Trading and the employee’s manager. Employees are generally
prohibited from liquidating legacy positions if the Adviser holds a position in the issuer.
Employees are prohibited from short-term trading and, as a result, must maintain permitted investment positions in
their personal accounts for a minimum of 30 days, calculated on a first-in/first-out basis.
Unless an exception is granted, employee personal accounts must be maintained at the broker-dealers designated
by the Adviser. Duplicate confirmations for all transactions must be provided to the Adviser as well as duplicate
monthly account statements, regardless of where the account is maintained.
Upon hire, employees are required to submit to Compliance a report disclosing all personal accounts over which
they exercise influence, control or discretion, and any permitted or prohibited investments held in those accounts.
On a quarterly and annual basis, all employees must submit reports disclosing all permitted and prohibited personal
investment transactions.
The Adviser will provide a copy of the Code to any investor or prospective investor upon request. A copy of the
Code may be requested by contacting the Adviser at the address or telephone number listed on the cover page of
this document.
The Adviser also has a Material Non-Public Information Policy and Procedures (the "MNPI Policy") that are
designed to prevent the misuse of material, non-public information. The Adviser's personnel are required to certify
to their compliance with the Code, including the MNPI Policy, on a periodic basis.
As noted previously, the Adviser has full discretionary authority to manage the investments of the Clients, including
authority to make decisions with respect to which securities are bought and sold, the amount and price of those
securities, th
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