Item 5 - Fees and Compensation
Investment Advisory Fees
RHM provides investment management services on a fee basis, meaning that clients pay an annual fee
based upon the amount of assets under the Firm’s management. For typical balanced equity and fixed
income portfolios, this fee range is as follows:
PORTFOLIO VALUE ANNUAL FEE
Under $2,000,000 1.0%
$2,000,000 - $5,000,000 0.75% – 0.85%*
Above $5,000,000 Negotiable
* Clients with investment portfolios between $2,000,000 and $5,000,000 are generally charged 85 basis
points (0.85%) during the initial year of an engagement and 75 basis points (0.75%) thereafter.
For separately managed fixed income portfolios in excess of $1,000,000, the Firm generally charges
35 to 45 basis points (0.35% – 0.45%), depending upon the size and complexity of the client’s
portfolio.
The investment advisory fees are prorated and charged quarterly in arrears, based upon the market
value of the assets being managed by RHM on the last day of the previous quarter. If assets in excess
of $10,000 are deposited into or withdrawn from an account after the inception of a billing period,
the fee payable with respect to such assets is adjusted to reflect the change in portfolio value. For the
initial term of an engagement, the fee is calculated on a pro rata basis. In the event the Agreement is
terminated, the fee for the final billing period is prorated through the effective date of the termination
and the outstanding balance is charged to the client, as appropriate.
Fee Discretion
Red Hook Management Investment Adviser Brochure 5
RHM, in its sole discretion, may negotiate to charge a greater or lesser fee based upon certain criteria,
such as anticipated future earning capacity, anticipated future additional assets, dollar amount of assets
to be managed, related accounts, account composition, pre-existing client relationship, account
retention and pro bono activities.
Additional Fees and Expenses
In addition to the fee paid to RHM, clients may also incur certain charges imposed by other financial
institutions and third parties, such as broker-dealers, custodians, banks, trust companies, etc.
(collectively “Financial Institutions”). These additional charges may include securities brokerage
commissions, transaction fees, custodial fees, charges imposed directly by a mutual fund or ETF in
the account, as disclosed in the fund’s prospectus (e.g., fund management fees and other fund
expenses), 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.
You will pay fees and costs whether you make or lose money on your investments. Fees and costs will
reduce any amount of money you make on your investments over time.
Fee Debit
The Agreement and the separate agreement with any Financial Institutions generally authorize RHM
to debit its clients’ accounts for the amount of the management fee and to directly remit that fee to
RHM. Any Financial Institutions recommended by RHM have agreed to send statements to clients
not less than quarterly indicating all amounts disbursed from the account, including the amount paid
directly to RHM. Alternatively, clients may elect to have RHM send them an invoice for payments.
Account Additions and Withdrawals
Clients may make additions to and withdrawals from their account at any time, subject to RHM’s right
to terminate an account. Additions may be in cash or securities provided that the Firm reserves the
right to liquidate any transferred securities or decline to accept particular securities into a client’s
account. Clients may withdraw account assets on notice to RHM, subject to the usual and customary
securities settlement procedures. However, RHM designs its portfolios as long-term investments and
the withdrawal of assets may impair the achievement of a client’s investment objectives. RHM may
consult with its clients about the options and implications of transferring securities. Clients are advised
that when transferred securities are liquidated, they may be subject to transaction fees, fees assessed
at the mutual fund level (i.e., contingent deferred sales charge) and/or tax ramifications.