ITEM 5: FEES AND COMPENSATION
Performance and Management Fees
IAMHK typically charges a management fee based on the percentage of assets under management,
and a performance fee based on the percentage of net capital appreciation. These fees vary between
different Funds, but are generally up to 2.0% per annum of assets under management and up to
IvyRock Asset Management (HK) Limited ADV Part 2A
25% performance fee. We are only entitled to performance fees if cumulative profits generated
exceed either the previous highest level of cumulative profits (high water mark) and/or a market
performance benchmark. This method of calculating the performance fee is prevalent in the
alternative investment field.
In limited circumstances, IAMHK may negotiate specific terms of investment for certain
prospective investors in the Funds differing from the terms applicable to other investors. When we
enter into these arrangements, a rebate may be paid by IAMHK to the relevant investor. This may
result in certain investors paying a lower management or performance fee than that specified in
the offering documents for the Fund.
IvyRock China Equity Feeder Fund and IvyRock China Focus Feeder Fund (the “Feeder Funds”)
are feeder funds that invest in the IvyRock China Equity Master Fund and IvyRock China Focus
Master Fund (the “Master Funds”), respectively. Fund investors invest either in the Master Funds
directly or through the Feeder Funds. The Master Funds and the Feeder Funds pay the designated
management and performance fees to IAMHK. Ivy Little Rock I Limited is owned by the Master
Funds and one external investor. Ivy Little Rock I Limited pays a designated performance fee to
IAMHK.
Neither we nor any of our “supervised persons” (as defined in the glossary of terms to SEC Form
ADV) accept compensation for the sale of securities or other investment products, including asset-
based sales charges or service fees from the sale of mutual funds. In limited circumstances,
IAMHK may negotiate specific terms of investment for certain investors in the Funds differing
from the terms applicable to other investors.
Charging asset-based fees and performance-based fees may create a potential conflict of interest
because it creates an incentive to allocate the best-performing assets into the Funds on which we
charge performance-based fees. Also, the allocation of performance fees at different rates, or
subject to different hurdle rates, may create an incentive to disproportionately allocate time,
services or functions to accounts or vehicles allocating such fees at a higher rate (or subject to a
lower hurdle rate), or to allocate investment opportunities to such accounts.
We recognize the possibility of such a conflict and address it through our allocation policy. In
particular, IAMHK’s policy is to allocate investment opportunities fairly and equitably, to the
extent possible, over a period of time. To ensure fairness in the allocation of investment
opportunities amongst our clients, we consider various factors including but not limited to: the
client’s investment objectives and strategies; existing portfolio composition; net asset value; cash
levels and cash availability; securities’ trading liquidity; market exposure; industry sector
exposure; and the suitability of investments for the clients. Where an investment opportunity is
suitable for two or more clients, we seek to provide clients with equal access to such investment
opportunities to the extent possible, and generally seek to employ allocation methods such as pro-
rata allocation.
Valuation of Assets
The management fee and the performance-based fees charged to clients are calculated based on
valuations ascribed to the portfolio holdings of each. There can be no assurance that the value
IvyRock Asset Management (HK) Limited ADV Part 2A
assigned to an investment at a certain time will equal the value that each portfolio is ultimately
able to realize. IAMHK addresses this conflict by adhering to its valuation policies and employing
an independent third party to assist in certain valuation decisions / support valuation matters, and
employing independent third-party pricing sources to the extent practicable.
Fee Waivers
We may, in our sole discretion, waive all or part of any fees or expenses payable by or attributable
to clients. IAMHK and/or its personnel may invest in the Fund and not be subject to management
fees or performance-based fees with respect to their investments therein.
Expenses and other Fees
The Funds’ investors generally bear certain and expenses of the Funds. Such expenses may
include, but are not limited to: brokerage commissions and charges; all fees and expenses of
transactional, risk, market data and trade-related services; all administrative expenses; fees and
charges of custodians and clearing agencies; income taxes, withholding taxes, transfer taxes and
other charges and duties of governments, agencies or regulatory bodies; fees and expenses of legal
advisers, administrators, net asset value calculation agents, accountants and independent auditors;
Directors’ fees and expenses; the costs of printing and distributing any memorandum and
subscription materials and any reports and notices to investors or prospective investors. Each client
also will bear its own organizational fees and expenses.
Please see Item 12, “Brokerage Practices,” below for a discussion of certain brokerage expenses.
We have no affiliated broker-dealers.
We do not ask or require our clients to pay any fees in advance of the related advisory services.