ITEM 5 FEES AND COMPENSATION
Calculation and Payment of Management Fees
We are compensated based on an annual management fee calculated as a percentage of assets
under management.
Non-Performance-Based Fees - Generally, the annual fee is 1.5% of assets under management
for non-performance-based accounts. This fee is paid in advance on a quarterly basis
Performance-Based Fees - For performance-based accounts to qualified investors we will
charge 0.5% annually on all assets with the fee billed quarterly and paid in advance, plus 10%
of the appreciation on the assets under management on an annual basis in arrears. The
performance fee of 10% will apply only to the extent the performance a) is greater than 0% net
of all fees, and b) the performance when calculated exceeds the previous high-water mark.
Should the performance at the end of any given year not exceed “a” and “b” from this sentence,
there will be no performance fee earned by the Firm. The Firm will always be entitled to the
0.5% annual fee.
While the fees are generally not negotiable, we reserve the right, in our sole discretion, to charge
certain clients a lower or higher fee than other clients. Amendments to the schedule of fees charged
to separate account clients may be made by us at any time with sufficient written notice to you,
subject to your written approval of any proposed change in the fee schedule. The change may be
enacted by executing an addendum to the original agreement. If your account is tailored to your
individual needs and not based on a trading model, the annual fee is negotiable with the individual
client.
Each portfolio is valued at the end of each quarter for purposes of calculating the fee for the next
quarter, and on the last day of the year for the purposes of calculating the fee for the just concluded
year. Fees billed in advance are assessed pro-rata for any portion of a quarterly period in which
the investment management agreement is executed at any time other than the first day of a calendar
quarter. Prepaid management fees are refundable on a pro-rata basis for the remaining balance of
a calendar quarter in the event an account is terminated during a calendar quarter.
There is no refund of any fee on those portfolios billed in arrears. If a portfolio being billed in
arrears is terminated prior to the end of the year, the calculation of the performance fee will be
determined at the date of termination and the performance will be annualized and measured against
the previous high-water mark. If the annualized performance exceeds the previous high water
mark, the 10% performance fee will be applied to the annualized appreciation with the amount due
the advisor determined on a pro-rata basis to the date of termination.
You may terminate your relationship with us by providing us with the applicable written notice,
not to exceed thirty days, as can be found in your investment management agreement with us.
Deduction of Fees
We request that you authorize and direct the custodian of your account to pay our fees directly to
us from the portfolio. However, it is your option to authorize this process and if you do not approve
of the direct deduction from your account, we may submit periodic invoices directly to you or the
custodian as you request. If you should choose not to allow for the direct deduction of your
management fees, we may, at our discretion, decline to accept the account.
We do not have access to your funds for payment of fees without written consent by you provided
to the custodian. Further, at your request, we will send you an invoice showing the amount of the
fee, the value of your account on which the fee is based, and the specific manner in which the fee
was calculated. You should also review your account statements to ensure that the correct fee has
been deducted.
Other Expenses
The fee that you are being charged by us for the investment management of your assets is exclusive
of, and in addition to, brokerage commissions, transaction fees, borrowing charges on securities
sold short, custodial fees, and any other related costs and expenses. We do not receive any portion
of these commissions, fees, other costs and expenses.
In addition, a portion of your assets may be invested in mutual funds or exchange traded funds.
These funds charge an annual internal management fee as outlined in their prospectuses which is
deducted directly from your account balance by that fund. We do not receive any of these
additional fees; however, these fees do represent an additional fee that you are paying above that
being charged by us.
Accordingly, you should review the fees charged by other third-party managed mutual funds, and
our fees to fully understand the total amount of fees to be paid by you and to thereby evaluate the
advisory services provided.
ERISA Accounts
Where we accept ERISA accounts we are deemed to be a fiduciary to those accounts that are
employee benefit plans or individual retirement accounts (IRAs) pursuant to the Employee
Retirement Income and Securities Act ("ERISA"), and regulations under the Internal Revenue
Code of 1986 (the "Code"), respectively.
As such, our Firm is subject to specific duties and obligations under ERISA and the Internal
Revenue Code that include among other things, restrictions concerning certain forms of
compensation. To avoid engaging in prohibited transactions, we may only charge fees for
investment advice about products for which our Firm and/or our related persons do not receive any
commissions or 12b-1 fees, or conversely, investment advice about products for which our Firm
and/or our related persons receive commissions or 12b-1 fees, however, only when such fees are
used to offset our advisory fees. ERISA rule 408(b)(2) requires full disclosure of our services,
compensation, and any potential conflicts of interest should you enter in an agreement with us.
Sales Compensation
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