Item 5. Fees and Compensation
A. Advisory Fees and Compensation
We receive a management fee and a performance fee from our Clients for investment management
services pursuant to investment management agreements with each Client and applicable Fund
offering documents. In certain circumstances, FJ has reduced the typical management fees and
performance fees charged to certain investors in the Funds and for certain other Clients pursuant
to “side letters” or the applicable investment management agreement based on substantial capital
commitments to a Fund (or combination of Funds) or to a separately managed account.
Our investment advisory fees are negotiable at our sole discretion. We may impose a minimum
fee and we reserve the right to waive fees in our sole discretion.
Our fee schedule for our Funds is as follows:
Management Fees. We typically charge 0.125% of the monthly net asset value of outstanding
interests. This equates to an annual management fee of approximately 1.5%. In the case of the
Hybrid Fund, a drawdown vehicle, the management fee is only charged on called capital. In the
case of the separately managed accounts, we typically charge 1.0% to 1.5% per annum
management fee.
Performance-Based Fees. We typically charge 20% of the new net profits, calculated annually (or
on redemption dates other than year-end), subject to a “high-water mark”. The Long/Short Fund
provides certain investors who meet minimum eligibility requirements and who are designated as
“Founders Investments” with a reduced performance-based fee of 15%. The Hybrid Fund is a
closed end vehicle which charges a water-fall-based performance fee that is allocated when profits
exceed a priority return of eight percent (8.0%) on called capital. See Item 6 below (Performance-
Based Fees) for additional information. Typically, we charge separately managed accounts a
performance-based fee of 17.5% to 20%, calculated in accordance with the respective investment
management agreement.
A Fund or another Client may pay a management fee that is higher or lower than that of another
Fund or Client, based on factors such as the amount of assets managed for the account as well as
Fund or Client risk parameters.
Please refer to Item 4.C. above and Item 6 below (Side-by-Side Management) for additional
information.
B. Payment of Fees.
Both the managed account Clients and the Funds are billed either directly for fees or, pursuant to their
prior authorization in the investment management agreement. Fees are deducted from their accounts
at the qualified custodian and paid to our Firm. Currently, Funds are directly debited for fees. The
other Funds/Clients are either sent an email or supporting schedule that serves as the invoice, and the
Funds/Clients then send a wire payment to us.
The Fund Administrator for the Funds provides the fee calculations for the Funds. The fee for the
sub-advised Funds/Clients is calculated by the Fund Administrator or the primary adviser to the
Fund/Client, as applicable, and then verified by us. The primary adviser or the Fund Administrator
sends its calculation to FJ Capital for confirmation and approval.
In the case of the Onshore Fund and the Offshore Fund, the management fee is calculated and paid
in advance on the first day of each month and the performance fee is billed annually (or on a
redemption date that is not year-end). In the case of the Long/Short Fund and the Offshore Long/Short
Fund, the management fee is payable quarterly in arrears, calculated as of the last day of each month
during the quarter. In the case of the sub-advised Funds or Clients, management fees are billed
quarterly, either in advance or in arrears and the performance fee is billed annually (or on a redemption
date that is not year-end).
In the case of the Hybrid Fund, the management fee is paid quarterly in advance, generally equal to
1.5% (0.375 quarterly) of the Net Asset Value (“NAV”) of each Member’s Capital Account Value.
In the event of a Capital Commitment Drawdown during any quarterly period, there shall be a pro
rata daily adjustment of such management fee applied to such Capital Commitment Drawdown
amount and included in the amount of such management fee payable in the subsequent quarter.
C. Other Fees and Expenses.
The Funds pay all of their respective ordinary and extraordinary expenses, which may include,
without limitation, legal, compliance, bookkeeping, accounting, auditing, recordkeeping,
administration, and clerical expenses (including expenses incurred in preparing reports and tax
information to investors and regulatory authorities and expenses for specialized administrative
services); printing and duplication expenses; investment related travel expenses, investment
research expenses, market data, newswire and data processing expenses; brokerage commissions,
bank charges, custody fees and borrowing costs; the expenses of the offering of interests and filing
fees; liability insurance; investment and operating expenses; and such other reasonable expenses
necessary to perform the operation of the particular Fund.
Operating expenses of the Master Fund, excluding operating expenses specific to the Offshore
Fund (i.e., the Series A Members), are allocated pro rata to the capital accounts of all Members.
The Series A Members are composed of a series of shares held by the Offshore Fund. In addition
to their pro rata allocation of the Master Fund’s operating expenses, Series A is also allocated,
subject to a 1% cap of the average NAV of the Offshore Fund, operating expenses associated with
Series A as well as the Offshore Fund’s organization and offering costs reimbursement to us. Each
series of Participating Shares of the Offshore Fund is then allocated its pro rata share of the
operating expenses specific to the Offshore Fund and its other expenses.
In the case of the Master Long/Short Fund, such operating expenses are allocated pro rata to the
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