FEES AND COMPENSATION
A. Advisory Fees
The Adviser generally charges a fee for providing advisory services to separately
managed accounts solely based on a percentage of the client’s assets under
management. The basic annual fee is 1% of assets under management. These fees
may be negotiated based on the size of and types of investments to be made for the
client account, as well as special account structure requirements, the client’s
objectives or other special considerations.
In a few cases, the Adviser and a client have agreed to a 1% maximum annual fee
that consists of a lower fee based on assets under management in combination with
a performance-based fee based on capital appreciation, if any, earned by the
account. The Adviser may receive the performance-based fee for each calendar
quarter (or partial calendar quarter, where applicable) in which capital appreciation
in the client’s account equals or exceeds an agreed-upon percentage, subject to a
“high-water mark provision.” This arrangement could result in an annual advisory
fee rate that is lower than 1%, but not higher.
The Adviser reserves the right to change, reduce or waive fees in its discretion. For
purposes of computing the fee, the value of assets in the client’s account is equal to
the market value of the securities, or, in the absence of a market value, the fair
value as determined in good faith by the Adviser.
B. Frequency and Method of Advisory Fee Payment
The Adviser’s fees are charged on a quarterly basis. Clients pay the advisory fee
(whether based on assets under management and/or performance) either directly
based on a bill that the Adviser sends to the client, or by instructing their custodian
to wire the fee to the Adviser based on a bill that the Adviser sends to the custodian
and the client. Clients may select either method.
C. Other Fees or Expenses
The Adviser receives no fee from clients other than the advisory fee. However,
clients will also pay certain third party fees and expenses such as custodian fees and
transaction fees. Please see Item 12., “Brokerage Practice” below, for more
information on broker-dealers we use for client transactions.
In some cases, the Adviser’s clients will have their accounts domiciled at a bank or
broker-dealer that provides management of idle cash balances through a sweep
arrangement. In that case, the client often will pay a separate advisory fee to the
bank or broker for this service. Since clients pay the Firm an advisory fee based on
the total market value of their account, these clients may pay two advisory fees with
respect to idle cash balances.
D. Timing of Advisory Fee Payments
The Adviser’s fees based on assets under management are generally charged in
advance. If an account is closed, the Adviser will refund any previously-paid fees
ratably based on the number of calendar days remaining after the termination date
in the period for which the fees have been prepaid. Advisory fees based on
performance are generally charged at the end of each calendar quarter or at the
time an account is closed, for results of the just-ended quarter or other period.
E. Compensation for the Sale of Investment Products
This is not applicable, since neither the Adviser nor any of its employees accepts
compensation for the sale of securities or other investment products.