Item 5. Fees and Compensation
Our fees for portfolio management of the Funds and SMAs (the “Management Fees”), are
based upon a percentage of the net asset value of the investors’ interest in the Funds or
SMAs. The Management Fees are calculated and based on the terms of each client’s
advisory contract. Management Fees for the Funds and SMAs are charged quarterly in
arrears.
1.50% ELCO Select Fund, L.P. and SMAs
0.20% - 1.60% NFSMAs
Fixed Fee Arrangements: EMC charges a fixed fee for accounts under $100,000. Prior to
the execution of an agreement, the Client will be provided an estimated fee. Client may
cancel within five (5) business days of signing Agreement with no obligation and without
penalty. If the Client cancels after five (5) business days, any unearned fees will be
refunded to the Client, or any unpaid earned fees will be due to EMC.
Fees are negotiable and generally range between $50 and $500 on an annual basis. The
fee will never exceed 3.00% of the account value. These fees are charged
month/quarterly in arrears. EMC shall send Client an invoice or Client may agree to have
the fee deducted directly from the account.
Performance-Based Fees: In addition, the Fund, Financial Services Separately Managed
Account Program (“FS SMAP”), Water Opportunities Separately Managed Account
Program (“WO SMAP”), Infrastructure Income Separately Managed Account Program
(II SMAP) and Life Sciences Separately Managed Account Program (LS SMAP) pay or
will pay EMC performance-based compensation ("Performance Fees"). For the Fund, FS
SMAP, WO SMAP, II SMAP, or LS SMAP, the Performance Fees are calculated based
on a percentage of the net profits of the Funds/accounts at the end of each fiscal year and
are typically 20% of the allocable share of net profits above the previous "high water
mark".
NFSMAs will not pay EMC performance-based compensation.
EMC has contracted Mendon Capital Advisors, Corp., as sub-advisor of our Financial
Services focused SMAs and Water Asset Management, LLC as sub-advisor of our water
industry focused SMAs and Siegel Asset Management Partners as sub-advisor of our
energy infrastructure focused SMAs and Phenomic Capital, LLC as a consultant for our
life sciences focused SMAs, and granted the sub-advisors complete and sole investment
discretion and authority to manage the respective SMAs. EMC will share fees with
respect to the SMAs with the sub-advisor or consultant.
EMC will receive a performance-based fee only to the extent that, net profits exceed its
high watermark. In measuring an investor's/account's net profits for the calculation of
Performance Fees, EMC will typically include both realized and unrealized gains and
losses and net investment income during the relevant period. The calculation and
payment of the Performance Fees applicable is described in detail in the respective
offering documents for each Fund or in the Investment Advisory Agreement for FS
SMAP, WO SMAP, II SMAP or LS SMAP. Fund, FS SMAP, WO SMAP, II SMAP and
LS SMAP investors are requested to refer to the applicable documents for exact
information on the management and performance fees. The client accounts/strategies that
participate in IPOs generally are subject to performance fees. Such performance fees
may create an incentive for EMC to cause such clients (including the Fund, FS SMAP,
WO SMAP, II SMAP or LS SMAP, among others) to make investments which may be
riskier or more speculative than those which would be made under a different fee
arrangement. The Advisors Act and certain state laws restrict the payment of
performance-based fees, to investment advisors registered under such act. However, SEC
Rule 205-3 permits the payment of performance-based compensation to registered
investment advisers provided that the clients (including investors in investment vehicles
such as the Funds) meet certain financial qualifications. Please refer to Item 6 for more
information on management of accounts with performance-based fees.
The offerings of interests in the Funds, FS SMAP, WO SMAP, II SMAP, or LS SMAP
are structured to comply with this rule and accordingly EMC will only accept investors
who meet the qualifications set forth in Rule 205-3. Investors are requested to refer to the
applicable Fund Private Placement Memorandum or the Investment Advisory Agreement
for complete information on the services offered, and corresponding fees charged, by
EMC.
Depending on the particular arrangement with each client, we will either invoice clients
or directly debit their custodial accounts.
Fees are billed in arrears at the end of each quarter, based upon the billable balance on the
last day of the calendar quarter, pro-rated for additions and withdrawals.
GENERAL INFORMATION ON FEES
Negotiability of Fees: In certain circumstances, EMC's fees may be negotiable.
Fee Arrangement on SMAs: EMC splits fees with respect to SMAs with Mendon Capital
Advisors, Corp., Water Asset Management LLC, Siegel Asset Management Partners,
LLC and Phenomic Capital, LLC
Termination of Advisory Relationship: An advisory agreement may be canceled at any
time, by either party, for any reason upon receipt of 30 days prior written notice.
Investors in the Fund and SMA are requested to refer to the applicable Private Placement
Memorandum and Limited Partnership Agreement of the Fund or Investment Advisory
Agreement for complete information on withdrawals and in the case of the Funds,
applicable investment "lock-up" periods.
The client has the right to terminate an agreement without penalty within five business
days after entering into the agreement.
Under no circumstances will we charge SMAs or NFSMA’s fees in advance of services
rendered.
Mutual Fund Fees and Expenses: All fees paid to our firm for investment advisory
services are separate and distinct from the fees and expenses charged by mutual funds
to their shareholders. These fees and expenses are described in each fund's prospectus.
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