Item 5. Fees and Compensation
Advisory Fees and Compensation.
Meru Capital charges the Fund Clients an investment management fee calculated at a quarterly
rate of 0.375% based on the value of the client’s net assets under management. Investment
management fees are charged each quarter in advance based on the total net asset value of the
client’s account (including net unrealized appreciation or depreciation of investments and cash,
cash equivalents, accrued interest and accrued incentive allocation if any) on the first day of the
quarter. Investment management fees for the Fund Clients are not negotiable.
If a new client account is established during a quarter, or a client makes an addition to its account
during a quarter, the investment management fee will be charged as of the effective date of the
investment management agreement or the date of the additional contribution based on the value
of the assets as of the applicable date and will be prorated for the number of days remaining in the
quarter.
A related person of Meru Capital may receive a performance-based allocation from the Fund
Clients. This allocation is determined at the end of each calendar year, or upon a termination or
Part 2A of Form ADV Meru Capital
withdrawal of assets, using a fixed percentage based on a share of the net profits of each client
account. The performance-based allocation is 20% of the net profits of the applicable Fund
Client. The amount of this performance-based allocation is not negotiable.
Management and performance fees with respect to any separately managed accounts are
individually negotiated and established pursuant to each separately managed account’s governing
documents. Such fee rates do not exceed the rates charged to the Fund Clients.
Meru Capital, in its sole discretion, may waive or reduce management fees for current and former
employees and affiliates of Meru Capital.
Payment of Fees.
Investment management fees are deducted directly from the Fund Clients’ accounts by the
administrator from the custodian accounts and performance-based allocations are allocated from
the clients’ accounts to a related person of Meru Capital.
Fees with respect to any separately managed accounts are paid pursuant to each separately
managed account’s governing documents.
Other Fees and Expenses.
In addition to paying investment management fees and performance-based allocations as
described above, client accounts will also be subject to other operating and investment expenses.
For the Fund Clients, these expenses will include (if applicable):
o legal, compliance, regulatory, administrator (including middle and back-office
services), tax, audit (including custody audit, if applicable) and accounting
expenses (including third party accounting services and software) to the extent
such services are related to the Fund Clients;
o shareholder proxy voting services;
o organizational expenses;
o investment expenses such as commissions, non-exclusive consulting fees,
research fees and expenses (including reasonable research-related travel, meals
and lodging);
o Bloomberg, Reuters, Markit and such other multimedia, analytical, database and
news services and related terminals for delivery of such services;
o expenses incurred in respect of statistical and pricing services, market data,
newswire services, periodicals, publications, databases and data services, news
and quotation equipment and services and portfolio services and software
(including Imagine Software and such other software and technology supporting
any executions or risk management of strategies pursued by the Fund Clients or
any affiliated entity);
o interest on margin accounts and other indebtedness;
o borrowing charges on securities sold short;
o custodial fees;
o bank service fees;
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o fees charged by any exchange-traded fund or pooled investment vehicle that the
Fund Clients invest in;
o Fund Clients-related insurance costs (including directors and officers insurance
and errors and omissions insurance);
o the Directors’ fees and expenses;
o certain extraordinary expenses, such as litigation expenses; and
o any other expenses related to the purchase, sale or transmittal of the assets of the
Fund Clients.
Any Fund Client that is a feeder fund will bear its pro rata share of the expenses of any master
fund.
Expenses borne by separately managed accounts are set forth in their governing documents and
may include any of the expenses set out above. These expenses generally include at least all
custodial and clearing fees, brokerage commissions, interest and withholding or transfer taxes
incurred in connection with trading for the separately managed account. A certain percentage of
expenses incurred by Meru Capital in connection with the investment management services
provided to its separately managed account clients are reimbursed quarterly in arrears by Meru
Capital’s separately managed account clients, but this reimbursement may be capped. Expenses
relating to items that are shared by the Fund Clients and the separately managed accounts will be
shared on a pro rata basis as determined by Meru Capital in its discretion. Meru Capital may pay
for any expenses allocable to its separately managed account clients to the extent such expenses
are either not covered by governing documents of such clients or exceed a cap.
Prepayment of Fees.
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