Item 5 – Fees and Compensation
Separately Managed Accounts
The minimum account size for a Separately Managed Account is $5 million, however, Azarias in its
sole discretion may accept accounts with lower initial asset levels in any product it offers to clients.
The standard asset-based advisory fee schedules in effect are described below. Fees may be
negotiated or modified at the discretion of Azarias upon consideration of the nature and size of the
client relationship, application of a performance-based fee, the specific services provided to the
client and/or other special circumstances applicable to a client such as the type of product or the
imposition of restrictions on the account.
Azarias manages separate account clients under a performance-based fee arrangement in reliance
upon Rule 205-3 of the Investment Advisers Act of 1940. Clients who are subject to a performance-
based fee must be “Qualified Clients” within the meaning of Rule 205-3 (see Item 6 below). The
terms and specific manner by which performance-based fees are charged are established pursuant to
an investment management agreement negotiated with each client. Under a performance-based fee
arrangement, Azarias will receive an annual asset-based fee and, if the account outperforms a
specified benchmark or index over a specified time period, an additional performance-based fee will
be realized. The standard performance-based fee is 15%. Where a fund outperforms its benchmark,
these arrangements will result in a total annual fee that is higher than the standard annual asset-based
fee.
Fee Schedule - Focused Small Cap Value
The standard asset-based annual management fee schedules are as follows:
• 75 basis points annually on assets under management with a 15% performance fee applied to
excess returns over an agreed upon small cap index with a high-water mark.
Performance fees for accounts invested in the Focused Small Cap Value Strategy are realized
annually based on the closing value on December 31 st of each year. In the event a client liquidates
more than 1% of their invested balance prior to year-end, a performance fee will be assessed on the
portion of the assets liquidated based on the value of the account immediately prior to the withdrawal
date.
Currently the highest fee charged to a Separately Managed Account is 75 bp with a 10%
performance fee applied to excess returns over an agreed upon small cap index.
Fee Schedule - Uranium Opportunity Strategy
• 75 basis points annually on assets under management and a 10% performance fee upon
liquidation.
Performance fees for the Uranium Opportunity Strategy will generally be realized upon liquidation
and dissolution of the strategy but may be accelerated and realized at the time of liquidation in the
event an investor liquidates more than 1% of the account’s total value prior to the strategy’s
dissolution.
The adviser reserves the right to, and has, waived or reduced fees for certain clients. Management
fees and carried interest for Azarias’ employees and related accounts invested with Azarias may be
reduced or waived in their entirety.
Private Funds
As noted above, Azarias serves as the investment manager to Private Funds. ACM, LLC serves as
the general partner to each Private Fund. ACM, LLC, and Azarias are affiliated entities under
common control. As the general partner to Azarias’ Private Funds, ACM, LLC shares in the profits
and losses of each Private Fund and is entitled to receive a performance allocation equal to a
percentage of net profits of the capital accounts in the partnership under certain circumstances, as
fully set forth in the private placement memorandum of each Private Fund (see above). For its
investment management services, Azarias charges an annual investment management fee of 1.50%
of the assets in each capital account, calculated and payable monthly in arrears. Azarias or ACM
LLC in its sole discretion, may waive all or a portion of its management fee or performance
allocation for certain investors in the Private Funds.
Portfolio Valuation for Fee Calculation
• Separately Managed Accounts: Portfolio valuations are generally based upon information
obtained from the third-party administrator through the use of a pricing vendor. Portfolio valuations
may sometimes be higher or lower than a portfolio valuation calculated by a custodian bank due to
variations in pricing methodology. In the event Azarias is unable to obtain a price for a security from
a pricing vendor or if the price received from the pricing vendor is deemed by Azarias to be
unreliable, Azarias may obtain a quote from an alternate source it deems reliable or will determine
the “fair value” of the security in question pursuant to Azarias’ Valuation Policy.
• Private Funds: Portfolio valuations are obtained by the Private Fund’s administrator
through the use of a pricing vendor. If no pricing vendor information is available for a particular
security or the price is deemed by Azarias to be unreliable, Azarias will obtain a quote from an
alternate source or Azarias will determine the “fair value” of the security pursuant to Azarias’
Valuation Policy.
Fee Billing
The specific manner in which fees are charged by Azarias is established in Azarias’ written
investment management agreement. Asset-based fees for management of Separately Managed
Accounts are paid quarterly in arrears. Fees are calculated as a percentage of assets under
management based on the asset value of the Account as of the last day of each calendar quarter
except that contributions or withdrawals from the Account during any calendar quarter in amounts
greater than 1% asset value, will be prorated on a daily basis for the period the funds were managed
by Azarias and the account value shall be increased or decreased, as the case may be, for purposes
of the fee calculation.. All management fees are billed by Azarias directly to the client or may,
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