Item 5 – FEES AND COMPENSATION
The Company charges a quarterly management fee for its services as an investment adviser.
This fee is a percentage of the value of the assets under management. There is no minimum fee.
The annualized basic fee schedule is as follows:
Assets Under Management Percentage
First $40 million 1.00% per annum
Next $60 million 0.75% per annum
Thereafter 0.60% per annum
Under the terms of the Company’s current form of investment advisory agreement for SMA
clients, the quarterly management fee is billed at the end of each calendar quarter for services
rendered during the quarter. The fee is calculated using the market value of all cash and
investments held in each SMA account on the last business day of the calendar quarter. If an
account is managed for less than a quarter, the fee is calculated and reduced on a pro rata basis.
Under the terms of the Company’s previous form of investment advisory agreement for SMA
clients and upon the request of a SMA client, the quarterly management fee is billed at the
beginning of each calendar quarter for services to be rendered during the quarter. The fee for
such clients is calculated using the market value of all cash and investments held in the SMA
account on the last business day of the previous calendar quarter. If a SMA client that prepays
its fees terminates its investment advisory agreement with the Company, the unearned fee will be
rebated to the client on a pro rata basis based on the date that the investment advisory agreement
formally terminated.
SMA clients are billed quarterly for management fees by the Company, and such fees are
payable by the client upon receipt of our invoice. The Company does not deduct its fees from
SMA clients’ assets, though some of the Company’s SMA clients elect to have their fees paid
directly by the client’s custodian out of their assets.
Fees for SMA clients do not include any brokerage commissions, custodial fees, banks fees,
margin interest, national securities exchange fees, wire transfer fees or other costs or fees
charged by a client’s broker or custodian. All of these fees are paid directly by SMA clients.
Please see Item 12: Brokerage Practices below for additional information about brokerage. If a
mutual fund, including a money market mutual fund, in which the client’s SMA account is
invested charges a fee or expense, such fees and expenses will be borne by the client and will be
in addition to the management fees charged by the Company.
Although the Company has established the aforementioned management fee schedule, it retains
the discretion to negotiate alternative management fees on a client-by-client or investor-by-
investor basis. Client or investor facts, circumstances and needs are considered in determining
the management fee schedule. These include, among other things, the amount of assets placed
under management, anticipated future additional assets, related accounts, portfolio style and
reporting requirements. The specific annual management fee schedule for each client is
identified in the written investment advisory agreement between the Company and a SMA client.
Subject to certain limited exceptions, the Company may vary the management fee paid by any
particular SMA client without notice to other SMA clients.
Each SMA client may generally terminate its investment adviser contract with the Company at
any time and for any reason upon delivery of 30 days written notice.