ITEM 5: FEES AND COMPENSATION
Method of Compensation and Fee Schedule
XLM calculates its fees based upon a percentage of assets under management. At
XLM’s discretion and on rare occasions, fees may be negotiated. In these circumstances, our
negotiated fee schedule will be set forth in your agreement. Our standard fee schedule is:
Value of Assets Effective (Annualized) Percentage
• $25,000 to $50,000 1.75%
• $50,001 to $500,000 $875 + 1.375% above $50,000
• $500,001 to $2,000,000 $7,062 + 1.00% above $500,000
• $2,000,001 to $4,000,000 $22,062 + 0.75% above $2,000,000
• $4,000,001 and above $37,062 + 0.50% above $4,000,000
Investment advice fees are paid quarterly and in advance. The initial investment advice
fee is prorated based upon the number of days remaining in the applicable calendar quarterly
period. For each subsequent calendar quarter, the investment advice fee will be determined by
averaging the market value of the assets under management as of the month end for each of the
previous quarter’s three months (or the lesser of three months).
For example, for an account opened on March 1st with one million dollars under manage-
ment, the initial fee would be calculated by multiplying the percentage of days under manage-
ment in the quarter by the quarterly fee. The calculation is as follows:
The percentage of days of management in the initial period is calculated by dividing the
thirty-one days in March by the 90 days in the quarter, which represents 34.44 percent of the
days within the quarter. The quarterly management fee is the annualized management fee
divided by four. Thus, for one million dollars, the quarterly fee equals $7,062 plus $5,000 (one
percent of the difference between one million dollars and five hundred thousand dollars), divided
by four, which is $3,015.50. Accordingly, in this example, the initial fee for the period March
1st through March 31st is $1,038.53. That is, $3,015.50 multiplied by .3444 equals $1,038.53.
As stated above, investment advice fees are paid quarterly and in advance. Therefore,
continuing the preceding example, if the market value of the assets under management were nine
hundred thousand dollars on March 31st, then the amount invoiced on April 1st would be
$2,765.50. The calculation of the payment for the period April 1st through June 30th is as
follows:
The average of the market value of assets under management as of the month end for
each of the previous quarter’s three months, or the lesser of three months, would be the nine
hundred thousand dollars of market value on March 31st. Thus, the quarterly investment advice
fee calculation for nine hundred thousand dollars of assets under management is $7,062 plus
Part 2A of Form ADV 2 XLM Capital Management, LLC
$4,000 (one percent of the difference between nine hundred thousand and five hundred
thousand), divided by four, or $2,765.50.
Continuing the preceding example, if the market value of the assets under management at
the end of the subsequent months were $950,000 on April 30th, $1,100,000 on May 31st, and
$1,250,000 on June 30th, then the amount invoiced in July would be $3,265.50. This amount
would constitute payment in advance for investment advice for the period July 1st through
September 30th.
The calculation for this invoice is as follows: ($950,000 + $1,100,000 + $1,250,000)
divided by three equals $1,100,000, which is the average market value of assets under manage-
ment as of the month end for each of the previous quarter’s three months. The quarterly invest-
ment advice fee for one million one hundred thousand dollars of assets under management equals
$7,062 plus $6,000 (one percent of the difference between one million one hundred thousand and
five hundred thousand), divided by four, or $3,265.50.
Billing
Generally, clients are billed for investment advisory services by way of an invoice
delivered by the U.S. Postal Service to the client’s mailing address. Occasionally, clients
authorize us under our agreement to directly deduct our fees from their account. If you provide
us such authorization, at the same time we submit our request for payment to your custodian, you
will be sent a notice from us. In addition, the custodian’s periodic statements will show each fee
deduction from your account. You may withdraw this authorization for direct deduction of these
fees at any time by notifying us or your custodian in writing.
Other Fees
XLM investment advice fees do not include brokerage commissions, transaction fees, and
other related costs and expenses which are incurred by the client. Clients may incur charges
imposed by custodians, brokers or other third parties. Such fees may include fees charged by
managers, custodial fees, 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. Mutual fund and exchange traded funds also charge internal management fees,
which are disclosed in a fund’s prospectus. Consequently, for any type of fund investment, it is
important for you to understand that you are directly and indirectly paying two levels of advisory
fees and expenses: one layer of fees at the fund level and one layer of advisory fees and
expenses to us. XLM does not receive any portion of these other fees.
Refund Of Prepaid Investment Fees
Either of us may terminate our agreement at any time by providing the other party with
written notice. If the agreement is terminated prior to the end of a billing period, the unearned
portion of the investment advice fee for that billing period that is paid in advance will be
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