Item 5: Fees and Compensation
Description of Fees
The annual investment management fee is based on a percentage of the investable
assets according to the following fee schedule:
Fee Rate Per Annum
1.00% of the first $2,000,000
.75% of the portfolio value over $2,000,000 up to $5,000,000
.50% of the portfolio value in excess of $5,000,000
Fees are payable quarterly in arrears based upon the market value on the last day of the
quarter. The management fee is computed by determining the market value of the
account using the following guidelines: (a) for marketable securities: the current market
price provided by custodian; (b) for securities for which there exists no active market (such
as illiquid securities), by using such information as Blue Oak, in good faith, deems relevant
to determine the value thereof, or in the absence of such information, at cost; and (c) for
cash or equivalents, at dollar value.
Fees are not prorated depending upon when investments are made or withdrawn during
the quarter. For example, if a client makes new investments in the middle of the quarter,
a full quarterly fee will apply to those investments. On the other hand, if a client withdraws
funds in the middle of the quarter, no fees will apply to the withdrawn investments, since
they will not be reflected in the quarterly ending value.
Services provided for the above fees are for investment advice and regular reporting of
asset holdings, valuations and performance reviews. The client’s investment management
fee to the Firm is determined in accordance with the above standard fee structure, with
exceptions negotiated on a case-by-case basis at our discretion. Any deviations from the
fee structure are based on a number of factors including the nature and length of the
client relationship, the services requested, account composition, the amount of work
involved, the amount of assets placed under management and the attention needed to
manage the account.
Fee Billing
Clients authorize Blue Oak to deduct its quarterly investment advisory fee directly from
their custodial account. This authorization is granted under the terms of the client’s signed
investment management agreement and the client’s instructions to the custodian. It is the
client’s responsibility to verify the accuracy of the fee calculation, as the custodian will not
determine whether the fee is properly calculated.
Custodian and Brokerage Fees
Please see Item 12 below for an explanation of our brokerage practices. Clients incur
certain charges imposed by their custodians and other third parties such as custodial fees,
deferred sales charges, odd-lot differentials, transfer taxes, wire transfer and electronic
fund fees, and other fees and taxes on brokerage accounts and securities transactions.
Additionally, clients will incur charges by the executing broker-dealer in the form of
brokerage commissions and transaction fees on the investment transactions entered into
for their account(s). All of these charges, fees and commissions are in addition to Advisor’s
investment management fee.
Fund Disclosures
Investment vehicles such as mutual funds, closed-end funds, exchange traded funds and
alternative investment funds offer a wide range of objectives and strategies; the types of
securities held by such funds vary widely depending upon the specific objectives and
strategies of the vehicle. These investment vehicles incur brokerage and other expenses
and their sponsors typically compensate themselves through fees charged directly to the
fund. Clients indirectly pay for the expenses and advisory fees charged by the funds in
which their assets are invested in addition to the advisory fee charged by Blue Oak Capital.
All such funds incur operating expenses in connection with the management of the fund.
Investment funds pass some or all of these expenses through to their shareholders (the
individual investors in the funds) in the form of management fees. The management fees
charged vary from fund to fund. In addition, funds charge shareholders (individual
investors in the funds) other types of fees such as early redemption or transaction fees.
These charges also vary widely among funds. As a result, clients will still pay management
fees and other, “indirect” fees and expenses as charged by each mutual fund (or other
fund) in which they are invested.
Clients are provided a copy of a fund prospectus for each fund in which they invest by
their custodian or by the fund sponsor rather than by Blue Oak Capital. As required by
law, a prospectus represents the fund’s complete disclosure of its management and fee
structure. In addition, a fund’s prospectus can be obtained directly from the fund.
Bond Disclosure
Clients whose assets are invested in bonds purchased directly from an underwriter or on
the secondary market may pay a sales credit or sales concession on the trade (in lieu of
a sales commission). The client’s custodian may also impose a fee on the transaction as
well.
General Fee Disclosure
We believe our investment management fees are competitive with the fees charged by
other investment advisors in the San Francisco Bay area for comparable services.
However, comparable services may be available from other sources for lower fees than
those charged by Blue Oak Capital.
Blue Oak Capital receives no sales commissions on investment products purchased or sold
for client accounts.
We do not provide clients advice as to the tax deductibility of our advisory fees. Clients
are directed to consult a tax professional to determine the potential tax deductibility of
the payment of advisory fees.