Sanders Morris LLC

Fees and Compensation - Item 5
WRAP FEE PROGRAMS
SM offers a number of wrap fee programs to clients. The fees and the manner in which they
are charged by SM for these programs vary. The fee schedule is established in a client’s
written agreement applicable to the advisory service selected by the client. For a complete
description of the compensation structure of the programs, clients should refer to the Wrap
Fee Program Brochure (Part 2A Appendix 1 of Form ADV) prepared by the respective
program sponsor of the programs in which the client is interested.

The client should be aware that lower fees for comparable services may be available in
other SM programs or from other sources.

A portion of the Advisory Fee is paid to the Representative. The Advisory Fee earned may be
more or less than what SM or its Representatives might earn from other programs available
in the financial services industry or if the services were purchased separately. Therefore,

SM and its Representatives may have a financial incentive to recommend one program over
other programs or services.

Please refer to the Other Financial Industry Activities and Affiliations section below, in
particular the subsection Broker Dealers” Sanders Morris LLC, for important disclosure as
the receipt of certain fees and commissions by the Representative and the conflicts
resulting therefrom.

For accounts that contain mutual funds or ETFs, each mutual fund or ETF bears its own
fees and expenses (none of which are shared with SM or its affiliates) as disclosed in the
applicable prospectus or product description. The Advisory Fee does not cover fees or
expenses charged by any mutual fund or ETF held in the account.

For accounts that utilize margin, the Advisory Fee does not include margin interest. The use
of margin could increase the fees in your account, as the market value of your investment
portfolio increases. Utilizing margin as a strategy creates a conflict of interest since SM
stands to receive increased advisory fees and SM will receive margin revenue. SM is
credited a percentage of the interest assessed on margin accounts by Pershing. This
credit creates a conflict of interest since SM receives additional compensation beyond the
advisory fees collected on accounts custodied at Pershing.

In addition, the Advisory Fee does not include debit balances, wire transfer fees, overnight
check fees, margin interest, account transfer fees, IRA and retirement plan fees, SEC fees,
12b-1 fees for certain money market funds, or other fees or taxes required by law.

Please refer to the “Brokerage Practices” section below, which further describes the factors
that SHMI considers in selecting or recommending broker dealers for client transactions
and determining the reasonableness of their compensation (e.g., commissions).

Wrap Fee Programs Offered by SM

Focus Program
The Total Program Fee for FOCUS includes the Advisor Fee, which is shared by SM and the
Representative, and the Program Administrative Fee paid to the sponsor, administrator, or
custodian of the program.

The negotiable Advisor Fee compensates SM and the Representative for investment
advisory services provided, pursuant to the Focus Asset Management Program Agreement.
This fee covers the management and other account related services provided by SM and
the Representative, such as investment advice, investment selection, and the allocation
and reallocation of investments. The Advisor Fee may be discounted at the discretion of
the Representative.

The non-negotiable Program Administrative Fee compensates SM and Pershing, the
program’s custodian, for the cost of execution, clearance and custody, fee calculation and
deduction, and performance reporting.

The Total Program Fee is payable quarterly and may be deducted either in advance or in
arrears using the following formula:
                      Account Value x Fee Schedule x # of days in the billing cycle
                                        365 (366 if leap year)

The account value for fee calculation purposes is based on the market value of the
securities held in the account. The calculation excludes illiquid investments such as
private placements, non-traded REITs, annuities, investments that include a publicly
disclosed selling concession such as underwritten offerings, and any other securities
previously designated by the client. The calculation follows a blended (or “not retroactive”)
schedule where the fee schedule for each asset level is calculated using the relevant
formula above. The fee for each asset level will then be added together to determine the
total fee due for the specified period. Under certain circumstances, fees may be
negotiated.

When advance billing is selected, the initial Total Program Fee is due in full on the effective
date of the advisory agreement. The effective date is defined as the date when the account
is accepted by SM, and the fee is based on the account value on that date. The fee
calculation is prorated if the account has been added to the billing system at any time
other than the beginning of a billing cycle. Subsequent quarterly fees are determined on
the first day of each calendar quarter based on the total value of the account as of the
close of business on the last business day of the previous quarter and are due the following
day. In the event that the advisory agreement is terminated prior to the end of a period for
which a quarterly fee has been paid, fees are recalculated based on the length of service
and unearned fees are returned to the client.

When arrears billing is selected, the Total Program Fee is deducted from the account at the
end of the calendar quarter. When selecting arrears billing, the client must also elect if
billing is to be based upon either the account value on the last day of the calendar quarter
or the average daily account value.

If the client elects to be billed in arrears based on account value on the last day of the
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Types of Clients - Item 7
SM may provide advisory services to individuals, high net worth individuals, pooled
investments, plan sponsors, trusts, estates, corporations, institutions, and other
businesses.

There is no minimum asset requirement to become a client of SM. However, certain
products, wrap fee programs and platforms may require minimum asset values.

Methods of Analysis, Investment Strategies and Risk of Loss - Item 8

SM and its Representatives use a wide variety of methods, including charting, fundamental
analysis, quantitative, qualitative analysis and technical analysis to determine investment
strategies for clients. The primary sources of information used to conduct these types of
analysis are financial newspapers and magazines, inspections, research prepared by third
parties, independent sources and affiliated entities, ratings services, press releases, and
annual reports, prospectuses and other filings with the SEC. The implementation of these
strategies varies based upon the individual client.

Each client’s account is managed on the basis of the client’s financial situation,
sophistication and knowledge, investment objectives (e.g. suitability) and instructions. The
Representative works with the client to obtain sufficient information to provide
individualized investment advice and is reasonably available to consult with the client on
an ongoing basis. Clients are permitted to impose reasonable restrictions on the
management of the account.

A quarterly custodial statement, containing a description of all account activity is provided
to the client, in electronic or paper form at the direction of the client. The Representative
reviews the overall performance of each account on a periodic basis in order to ensure that
transactions are suitable based on the client’s investment objectives, meet quality
expectation of the client and comply with any investment restrictions requested by the
client.

Clients who choose a third-party Portfolio Manager are advised to review carefully and
should carefully review the third-party firm’s Form ADV Part 2 for information on their
investment strategy. Investment strategies vary by the Portfolio Manager selected.

Investing in any type of security involves risk of loss that clients should be prepared to bear.
SM does not guarantee the performance of an account or any specific level of
performance. Market values of the securities in the account will fluctuate with market
conditions. When the account is liquidated, it may be worth more or less than the amount
invested.

Some strategies incorporate allocations to alternative investments, including mutual funds
or ETFs invested in real estate investment trusts, master limited partnerships, managed
futures, commodities, covered calls, long/short strategies, and other non-traditional
investments. Investment strategies also include allocation to international/global
investments.

Investment in a portfolio that includes alternative investments presents additional risks
which the client should consider when making an investment decision. These risks may
include adverse market conditions risk, counterparty risk, currency exchange risk,
derivatives risk, emerging markets risk, high portfolio turnover, leverage risk, and other risks
depending on the investment. Alternative investments are frequently asset classes that are
referred to as non-correlated (investments that move contrary to, or without influence
from, broader markets). While including non-correlated assets may result in smoother
portfolio performance with less volatility, there are no assurances that non-correlated
assets will not decline in value.

Preferred Securities Risk: Preferred Securities have similar characteristics to bonds in that
preferred securities are designed to make fixed payments based on a percentage of their
par value and are senior to common stock. Like bonds, the market value of preferred
securities is sensitive to changes in interest rates as well as changes in issuer credit quality.
Preferred securities, however, are junior to bonds with regard to the distribution of
corporate earnings and liquidation in the event of bankruptcy. Preferred securities that are
in the form of preferred stock also differ from bonds in that dividends on preferred stock
must be declared by the issuer’s board of directors, whereas interest payments on bonds
generally do not require action by the issuer’s board of directors, and bondholders
generally have protections that preferred stockholders do not have, such as indentures that

are designed to guarantee payments – subject to the credit quality of the issuer – with
terms and conditions for the benefit of bondholders. In contrast preferred stocks generally
pay dividends, not interest payments, which can be deferred or stopped in the event of
credit stress without triggering bankruptcy or default. Another difference is that preferred
dividends are paid from the issue’s after-tax profits, while bond interest is paid before
taxes.

Inverse Funds: Inverse mutual funds and ETFs, which are sometimes referred to as "short"
funds, seek to provide the opposite of the single-day performance of the index or
benchmark they track. Inverse funds are often marketed as a way to profit from, or hedge
exposure to, downward moving markets. Some inverse funds also use leverage, such that
they seek to achieve a return that is a multiple of the opposite performance of the
underlying index or benchmark (i.e., -200%, -300%). In addition to leverage, these funds
may also use derivative instruments to accomplish their objectives. As such, inverse funds
are highly volatile and provide the potential for significant losses.

Cybersecurity Risks: Our firm and our service providers are subject to risks associated with
a breach in cybersecurity. Cybersecurity is a generic term used to describe the technology,
processes, and practices designed to protect networks, systems, computers, programs,
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