ITEM 5 – FEES AND COMPENSATION
The specific manner in which fees are charged by Cornerstone is established in a client’s written
agreement with Cornerstone. Clients are billed directly for fees. Depending on the specifics of
a client’s investment management agreement, fees may be payable monthly or quarterly in
arrears, based on the value of assets under management at the end of the applicable period.
Management fees will be prorated for each capital contribution and withdrawal made during
the applicable period (with the exception of de minimis contributions and withdrawals).
Cornerstone’s fees are exclusive of brokerage commissions, transaction fees, and other related
costs and expenses which shall be incurred by the client. Clients may incur certain additional
charges imposed by custodians, brokers, and other third parties such as fees charged by
managers, 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. To the extent client assets are invested in mutual funds and exchange
traded funds, such funds charge advisory, administrative and other fees, which are disclosed in
a fund’s prospectus. As a result, clients will pay two levels of advisory fees with respect to such
assets, one to Cornerstone and one to the fund’s investment adviser. Fund charges, fees and
commissions are exclusive of and in addition to Cornerstone’s fee, and Cornerstone does not
receive any portion of these commissions, fees, or costs.
Advisory arrangements may be terminated by the client upon assignment or by either party
upon prior written notice according to the termination provisions outlined in the investment
management agreement. If a contract is terminated, advisory fees are subject to pro‐rata
adjustment based upon the date of termination.
PORTFOLIO VALUATION
Where Cornerstone is responsible to price a client’s portfolio for fee billing or investment
performance calculation purposes, Cornerstone will generally use pricing information provided
by an independent pricing service (the “Primary Pricing Source”).
Based on our investment style and the types of securities in which we generally invest on behalf
of our clients (see Item 8, “Methods of Analysis, Investment Strategies and Risk of Loss,” below
for additional information), the Primary Pricing Source is typically able to provide pricing
information for securities included within our clients’ portfolios. In the event the Primary
Pricing Source is unable to obtain a price, Cornerstone will determine a fair value for that
security.
When determining a fair value, our objective is to identify a price we believe we could
reasonably receive in a sale between market participants at the specific measurement date
without forced liquidation.
We would encounter a clear conflict when fair valuing securities, as we have an incentive to
value these securities higher in an effort to generate greater fees and higher investment
returns. We have controls in place to mitigate this conflict, including: 1) responsibilities in
establishing a fair valuation described above; 2) policies and procedures designed to provide
reasonable assurance securities are valued properly; and 3) involvement of the Pricing
Committee.
FEES FOR SERVICES
Fee schedules are negotiable and can vary depending on a variety of factors such as the type of
client, the size of the account, and the investment program selected.
Fees for Institutional Investment Management
Cornerstone’s advisory fees for the U.S. Large Cap Growth Equities mandate are based on a
percentage of assets under management in accordance with the following fee schedule:
Assets under management Annual fee rate
First $50,000,000 .67%
Next $25,000,000 .45%
Next $25,000,000 .325%
Next $100,000,000 .30%
on the balance .25%
Cornerstone’s advisory fees for the Focused U.S. Large Cap Growth Equities mandates are
based on a percentage of assets under management in accordance with the following fee
schedule:
Assets under management Annual fee rate
First $100,000,000 .75%
Next $50,000,000 .50%
Next $50,000,000 .375%
on the balance .35%
Clients of Cornerstone prior to January 13, 2013 may be subject to a different fee schedule than
that noted above. Certain exceptions to the fee schedule may apply depending on the
particular circumstances involved.
In addition to the management fees described above, there are other fees associated with the
management of your account. For example, the custodian for your account, which you
independently select, charges a custodial fee that varies by custodian. In addition, the broker‐
dealers that Cornerstone selects to execute transactions in your account charge a fee.
Brokerage and custody fees are not included in the investment management fee that you pay
to us. Instead, custodian fees are charged to you separately by your custodian and brokerage
fees affect your account during the trade execution process. Please refer to the “Brokerage
Practices” section below for additional information regarding our process for selecting brokers
to execute transactions in client accounts.
If client assets are invested in other investment companies (including but not limited to
exchange traded funds), the client becomes a shareholder of the investment company and
bears its proportionate share of the investment company’s management fee and other
expenses, as described within each fund’s prospectus. Such fees and other expenses are in
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