Item 5. Fees and Compensation
Nezu HK provides investment management services on a fee basis, which includes fees based
upon the net asset value of the assets under management by Nezu HK, as well as fees based on
performance of the Fund and Accounts. Applicable fees are set forth in detail in the Fund’s
Offering Documents, or in the investment management agreement for each Account. A brief
summary of Nezu HK’s advisory fees is provided below. Investors and the Accounts should refer
to the relevant Offering Documents/respective investment management agreement for a
complete understanding of how Nezu Asia is compensated for its advisory services.
Management Fee
The Fund will pay to Nezu HK a fee for investment management services (the “Management Fee”)
of 2.00% annually. This annual Management Fee is prorated and charged monthly, in arrears,
based on the net asset value of the Fund as of the end of each month. Nezu HK, in its sole
discretion, may choose to reduce or waive the Management Fee payable. It should be noted that
certain classes of interests/shares offered by the Fund may be charged a lower Management Fee.
Incentive Allocation/Incentive Fee
Nezu HK is also entitled to receive an annual performance-based Incentive Allocation (the
“Incentive Allocation”) from the Fund.
Nezu HK is eligible to receive from the Fund an annual Incentive Allocation/Incentive Fee of
20.00% based on net profits, subject to a “Loss Carryforward Provision,” as set forth in detail in
the Offering Documents. Under the Loss Carryforward Provision, Nezu HK may not allocate an
Incentive Allocation/Incentive Fee with respect to a fiscal year, until any net loss previously
allocated to each Investor’s interest/share has been offset by subsequent net profits.
Nezu HK may waive or modify fees for Investors that are members, employees or affiliates of
Nezu Asia and relatives of such persons and for certain large or strategic investors.
Nezu HK deducts applicable fees from each Investor’s capital account or allocates fees
proportionally to each Investor’s share based on the calculation of the Client’s independent third
party administrator. Investors do not have the option to request an invoice for fees. The
payment arrangement for fees related to individual Accounts is fully set forth in each Account’s
investment management agreement. Nezu Asia generally remits an invoice for fees relating to
the management of Accounts; however, such terms are negotiated on an individual basis.
Nezu USA and Nezu Japan each receive a fee from Nezu HK for their advisory services.
Expenses
The Fund will bear its own expenses, including fees paid to Nezu HK, the administrator and proxy
agent, directors’ fees and expenses, legal, accounting, administration, auditing and other
professional expenses, fees and expenses related to various regulatory filings (or portions
thereof) made with respect to the assets of such Fund (including, but not limited to, Section 13
filings, Section 16 filings and Form PF and similar expenses), research expenses, all investment
expenses such as trading services and support including commissions, interest on margin
accounts and other indebtedness, custodial fees, bank service fees and other reasonable
expenses related to the purchase, sale or transmittal of the Fund’s assets. Further, the Fund will
bear the costs of any trade errors.
The Fund may be deemed to be paying for research and other services with “soft” or commission
dollars. Refer to Item 12 – Brokerage Practices for further information.
The Accounts are each subject to different terms and fees as such fee arrangements and terms
are individually negotiated between Nezu HK and the respective Account. A complete
description of all fees and expenses for the Accounts is disclosed within the respective Account’s
investment management agreement.
Expenses borne by certain Clients may differ from the expenses born by other Clients. In certain
instances, a Client may bear expenses that Nezu Asia has agreed to bear for one or more other
Clients. In other instances, the other Clients may bear expenses that Nezu Asia has agreed to
bear for a particular Client.
Common expenses (such as, but not limited to, certain research and investment expenses)
frequently will be incurred on behalf of several Clients. Nezu Asia seeks to allocate those
common expenses among such Clients in a manner that is fair and reasonable over time.
However, expense allocation decisions will involve potential conflicts of interest (e.g., an
incentive to favor accounts that pay higher incentive fees, or conflicts relating to different
expense arrangements with certain Clients). Nezu Asia may use a variety of methods to allocate
common expenses among the Clients including methods based on assets under management,
relative use of a product or service, the nature or source of a product or service, the relative
benefits derived by the Clients from a product or service, or other relevant factors. Nonetheless,
investors should note that the portion of a common expense that Nezu Asia allocates to a
particular Client for a particular product or service, may not reflect the relative benefit derived
by such Client from that product or service in any particular instance. Nezu Asia’s expense
allocations often depend on inherently subjective determinations and, accordingly, expense
allocations made by Nezu Asia in good faith will be final and binding on the Clients.
It is critical that Investors/Accounts refer to their respective Offering Documents/investment
management agreements for a complete understanding of how Nezu Asia is compensated for
its advisory services. The information contained herein is a summary only and is qualified in
its entirety by the relevant governing documents.