Item 5 Fees and Compensation
DESCRIPTION OF COMPENSATION AND BASIC FEE SCHEDULE
Separately Managed Accounts
Management Fees: Hourglass management fees for separately managed accounts are based upon a
percentage of assets under management. Rates generally begin at our maximum fee of 1.00% per
year and are negotiated between you and your portfolio manager. The amount of the negotiated fee
is dependent upon the size of the account, investment strategy, and overall client household
relationship. Larger accounts generally have a smaller negotiated fee. Fees can be tiered for an
account or household relationship. As an example, this means that the first $10 million of the account
or household may be charged at a rate of 1.00% per year, the next $40 million charged at a rate of
.85% per year, and amounts over $50 million are charged at a rate of .70% per year. The fee that is
negotiated between you and your portfolio manager is disclosed to you in the agreement that you
sign in advance of services being provided.
The fee is calculated using the market value of all cash and investments under management.
Management fees are not adjusted for deposits or withdrawals that occur during the quarter. Some
assets may be excluded from the fee calculation based on the client’s specific situation. Fees are billed
quarterly in arrears based on the value of all cash and investments under management at the end of
each calendar quarter rounded to the nearest dollar. The valuation is on an accrual basis and includes
accrued interest, dividends, and positions held as of trade date. If an account is managed for less
than a quarter the fee is calculated on a pro-rata basis.
A portion of the account may be invested in money market funds, mutual funds, exchange-traded
funds, or unit investment trusts, resulting in additional expenses related to these investments. These
additional expenses include, but are not limited to, transaction costs, administrative fees, marketing
and distribution expenses, and redemption or exchange fees. A description of these fees and
expenses is available in each investment company security’s prospectus.
On a case-by-case basis, Hourglass determines an appropriate fee structure based on the size,
complexity, and investment objectives of the client's account. Fee arrangements may include a
combination of a management fee and performance-based fee or may be solely limited to a
management fee or a performance-based fee. The terms and conditions of the fee structure are
mutually agreed upon and identified in the written Investment Management Agreement between
Hourglass and the client. Hourglass groups certain related client accounts for the purpose of achieving
the minimum account size and determining the annualized fee.
Performance-Based Fees: Hourglass may charge a performance-based fee (also known as an incentive
fee) on cash and investments under management in addition to or in place of a management fee. To
be charged a performance-based fee, a client must either demonstrate a net worth of at least
$2,200,000 (excluding their primary residence) or must have at least $1,100,000 in assets under
management with Hourglass.
Performance-based fees are calculated as a percentage of the total portfolio performance, net of the
Hourglass management fees, if applicable. This net performance includes unrealized gains; as such,
Hourglass may receive increased compensation regarding these unrealized gains. The performance-
based fee is calculated annually at the end of the defined service period.
The fees charged for this service will be determined by the client's individual circumstances and will
never exceed 20% of the account's net performance. The actual fees and terms are disclosed to the
client before entering into this type of arrangement in the written Investment Management
Agreement between Hourglass and the client.
The client needs to understand the proposed method of compensation and its risks prior to entering
into the contract. Accordingly, clients paying performance-based fees are directed to the
"Performance-Based Fees" section (Item 6) below for more comprehensive disclosures, including
potential conflicts of interest resulting from this type of fee arrangement.
PERFORMANCE-BASED FEES WILL ONLY BE CHARGED IN ACCORDANCE WITH THE PROVISIONS OF
REG. 205-3 OF THE INVESTMENT ADVISERS ACT OF 1940.
Clients with a performance-based fee who elect to terminate their contracts will be charged on the
performance of the account for the measuring period as of the termination date, pro-rated from the
date on which the performance-based fee was last assessed.
Limited Negotiability of Advisory Fees: Although Hourglass has established the aforementioned fee
schedule(s), it retains the discretion to negotiate alternative fees on a client-by-client basis. Client
facts, circumstances and needs are considered in determining the fee schedule. These include the
complexity of the client assets to be placed under management, anticipated future additional assets,
related accounts, portfolio style, account composition, and reporting requirements, among other
factors. The specific annual fee schedule is identified in the written Investment Management
Agreement between Hourglass and each client.
Termination of the Advisory Relationship: An Investment Management Agreement may be canceled at
any time, by either party, for any reason upon receipt of 30 days written notice.
Mutual Fund Fees: All fees paid to Hourglass for investment advisory services are separate and
distinct from the fees and expenses charged by mutual funds and/or ETFs (exchange traded funds) to
their shareholders. These fees and expenses are described in each mutual fund's prospectus. These
fees will generally include a management fee, other fund expenses, and a possible distribution fee. If
the mutual fund also imposes sales charges, a client may pay an initial or deferred sales charge. A
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