A. Description of the Advisory Firm H&H International Investment, LLC (hereinafter “H&H”) is a Limited Liability Company
organized in the State of California. The firm was formed in November 2017.
B. Types of Advisory Services
Portfolio Management Services H&H offers ongoing portfolio management services based on the individual goals,
objectives, time horizon, and risk tolerance of each client. H&H creates an Investment
Policy Statement for each client, which outlines the client’s current situation (income, tax
levels, and risk tolerance levels). Portfolio management services include, but are not
limited to, the following:
• Investment strategy • Personal investment policy
• Asset allocation • Asset selection
• Risk tolerance • Regular portfolio monitoring
H&H evaluates the current investments of each client with respect to their risk tolerance
levels and time horizon. H&H will require discretionary authority from clients in order to
select securities and execute transactions without permission from the client prior to each
transaction. Risk tolerance levels are documented in the Investment Policy Statement,
which is given to each client.
H&H seeks to provide that investment decisions are made in accordance with the
fiduciary duties owed to its accounts and without consideration of H&H’s economic,
investment or other financial interests. To meet its fiduciary obligations, H&H attempts
to avoid, among other things, investment or trading practices that systematically
advantage or disadvantage certain client portfolios, and accordingly, H&H’s policy is to
seek fair and equitable allocation of investment opportunities/transactions among its
clients to avoid favoring one client over another over time. It is H&H’s policy to allocate
investment opportunities and transactions it identifies as being appropriate and prudent
among its clients on a fair and equitable basis over time.
Services Limited to Specific Types of Investments
H&H generally limits its investment advice to fixed income securities, equities, options
and non-U.S. securities, although H&H primarily recommends equities. H&H may use
other securities as well to help diversify a portfolio when applicable.
C. Client Tailored Services and Client Imposed Restrictions H&H offers the same suite of services to all of its clients. However, specific client
investment strategies and their implementation are dependent upon the client Investment
Policy Statement which outlines each client’s current situation (income, tax levels, and risk
tolerance levels). Clients may not impose restrictions in investing in certain securities or
types of securities in accordance with their values or beliefs.
D. Wrap Fee Programs
A wrap fee program is an investment program where the investor pays one stated fee that
includes management fees, transaction costs, and certain other administrative fees. H&H
does not participate in wrap fee programs.
E. Assets Under Management
H&H has the following assets under management:
Discretionary Amounts: Non-discretionary Amounts: Date Calculated: $ 3,006,528,577.82 $0.00 December 31st 2019
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A. Fee Schedule
Asset-Based and Performance-Based Fees for Portfolio Management Fee options are disclosed here:
(1) 2.1% management fee based on asset under management; or
(2) 25% performance fee for appreciation above 3% for qualified clients; or
(3) 2.1% management fee based on asset under management PLUS a 25% performance fee
for appreciation for the account.
In option 2, if the portfolio rises in value over 3%, then the client will pay 25% on that
increase in value, but if the portfolio drops in value, then the client will not incur a new
performance fee until the portfolio reaches the last highest value when performance fee is
calculated, adjusted for withdrawals and deposits, which is generally known as a “high
water mark”.
In option 3, a management fee of 2.1% will be charged in addition to a performance fee or
25% for the appreciation for the account. If the portfolio rises in value over the initial
deposit, then the client will pay 25% on that increase in value, but if the portfolio drops in
value, then the client will not incur a new performance fee until the portfolio reaches the
last highest value, adjusted for withdrawals and deposits, which is generally known as a
“high water mark”.
These fees are generally negotiable and the final fee schedule will be memorialized in the
client’s advisory agreement. This service may be canceled with 30 days’ advanced notice.
H&H requests clients provide 30 days advanced notice to withdraw or liquidate funds.
B. Payment of Fees
Payment of Asset-Based and Performance-Based Portfolio Management
Fees Performance-based portfolio management fees are withdrawn directly from the client's
accounts with client's written authorization on an annual basis. Performance fees are paid
annually in arrears or otherwise specified in the contract (i.e., every year or every three
years).
Asset-based portfolio management fees are withdrawn directly from the client’s accounts
monthly in arrears based on the calculation at the end of the month. In certain cases, our
firm will agree to directly invoice.
C. Client Responsibility For Third Party Fees
Clients are responsible for the payment of all third party fees (i.e. custodian fees,
brokerage fees, mutual fund fees, transaction fees, etc.). Those fees are separate and
distinct from the fees and expenses charged by H&H. Please see Item 12 of this brochure
regarding broker-dealer/custodian.
D. Prepayment of Fees
H&H collects its fixed management fees monthly in arrears and performance fees
annually in arrears or otherwise specified in the contract (i.e., every three years). H&H
does not collect fees in advance.
E. Outside Compensation for the Sale of Securities to Clients Neither H&H nor its supervised persons accept any compensation for the sale of
investment products, including asset-based sales charges or service fees from the sale of
mutual funds.
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H&H manages accounts that are billed on performance-based fees (a share of capital gains on or
capital appreciation of the assets of a client) and will manage accounts that are not billed on
performance-based fees. Managing both kinds of accounts at the same time presents a conflict of
interest because H&H and/or its supervised persons have an incentive to favor accounts for
which H&H receives a performance-based fee. H&H addresses the conflicts by ensuring that
clients are not systematically advantaged or disadvantaged due to the presence or absence of
performance-based fees. H&H seeks best execution and upholds its fiduciary duty for all clients.
Clients paying a performance-based fee should be aware that investment advisers have an
incentive to invest in riskier investments when paid a performance-based fee due to the higher
risk/higher reward attributes.
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H&H generally provides advisory services to High-Net-Worth Individuals as well as company
accounts with some accounts as offshore personal investment accounts (PIC accounts).
There is no account minimum for any of H&H’s services.
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A. Methods of Analysis and Investment Strategies
Methods of Analysis H&H’s methods of analysis include Fundamental analysis.
Fundamental analysis involves the analysis of financial statements, the general financial
health of companies, and/or the analysis of management or competitive advantages.
Investment Strategies
H&H uses long term stock trading and options trading.
Investing in securities involves a risk of loss that you, as a client, should be prepared to bear.
B. Material Risks Involved Methods of Analysis
Fundamental analysis concentrates on factors that determine a company’s value and
expected future earnings. This strategy would normally encourage equity purchases in
stocks that are undervalued or priced below their perceived value. The risk assumed is
that the market will fail to reach expectations of perceived value.
Investment Strategies H&H's use of options trading generally holds greater risk, and clients should be aware
that there is a material risk of loss using any of those strategies.
Long term trading is designed to capture market rates of both return and risk. Due to its
nature, the long-term investment strategy can expose clients to various types of risk that
will typically surface at various intervals during the time the client owns the investments.
These risks include but are not limited to inflation (purchasing power) risk, interest rate
risk, economic risk, market risk, and political/regulatory risk.
Options transactions involve a contract to purchase a security at a given price, not
necessarily at market value, depending on the market. This strategy includes the risk that
an option may expire out of the money resulting in minimal or no value, as well as the
possibility of leveraged loss of trading capital due to the leveraged nature of stock options.
Investing in securities involves a risk of loss that you, as a client, should be prepared to bear.
C. Risks of Specific Securities Utilized
H&H's use of options trading generally holds greater risk of capital loss. Clients should
be aware that there is a material risk of loss using any investment strategy. The investment
types listed below are not guaranteed or insured by the FDIC or any other government
agency.
Equity investment generally refers to buying shares of stocks in return for receiving a
future payment of dividends and/or capital gains if the value of the stock increases. The
value of equity securities may fluctuate in response to specific situations for each
company, industry conditions and the general economic environments.
Fixed income investments generally pay a return on a fixed schedule, though the amount
of the payments can vary. This type of investment can include corporate and government
debt securities, leveraged loans, high yield, and investment grade debt and structured
products, such as mortgage and other asset-backed securities, although individual bonds
may be the best known type of fixed income security. In general, the fixed income market
is volatile and fixed income securities carry interest rate risk. (As interest rates rise, bond
prices usually fall, and vice versa. This effect is usually more pronounced for longer-term
securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and
credit and default risks for both issuers and counterparties. The risk of default on treasury
inflation protected/inflation linked bonds is dependent upon the U.S. Treasury defaulting
(extremely unlikely); however, they carry a potential risk of losing share price value, albeit
rather minimal. Risks of investing in foreign fixed income securities also include the
general risk of non-U.S. investing described below.
Options are contracts to purchase a security at a given price, risking that an option may
expire out of the money resulting in minimal or no value. An uncovered option is a type
of options contract that is not backed by an offsetting position that would help mitigate
risk. The risk for a “naked” or uncovered put is not unlimited, whereas the potential loss
for an uncovered call option is limitless. Spread option positions entail buying and selling
multiple options on the same underlying security, but with different strike prices or
expiration dates, which helps limit the risk of other option trading strategies. Option
transactions also involve risks including but not limited to economic risk, market risk,
sector risk, idiosyncratic risk, political/regulatory risk, inflation (purchasing power) risk
and interest rate risk.
Non-U.S. securities present certain risks such as currency fluctuation, political and
economic change, social unrest, changes in government regulation, differences in
accounting and the lesser degree of accurate public information available.
Past performance is not indicative of future results. Investing in securities involves a risk of loss that you, as a client, should be prepared to bear.
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A. Criminal or Civil Actions
There are no criminal or civil actions to report.
B. Administrative Proceedings There are no administrative proceedings to report.
C. Self-regulatory Organization (SRO) Proceedings There are no self-regulatory organization proceedings to report.
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A. Registration as a Broker/Dealer or Broker/Dealer Representative Neither H&H nor its representatives are registered as, or have pending applications to
become, a broker/dealer or a representative of a broker/dealer.
B. Registration as a Futures Commission Merchant, Commodity Pool Operator, or a Commodity Trading Advisor
Neither H&H nor its representatives are registered as or have pending applications to
become either a Futures Commission Merchant, Commodity Pool Operator, or
Commodity Trading Advisor or an associated person of the foregoing entities.
C. Registration Relationships Material to this Advisory Business and Possible Conflicts of Interests
Eric Hu as the Vice President of H&H Evergreen Foundation. In this role he identifies
projects that need donation funding for their non-profit foundation. He will not offer
clients and services from this outside business activity. Should a conflict of interest arise,
H&H will always act in the best interest of the client.
D. Selection of Other Advisers or Managers and How This Adviser is Compensated for Those Selections
H&H does not utilize nor select third-party investment advisers.
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Transactions and Personal Trading A. Code of Ethics H&H has a written Code of Ethics that covers the following areas: Prohibited Purchases
and Sales, Insider Trading, Personal Securities Transactions, Exempted Transactions,
Prohibited Activities, Conflicts of Interest, Gifts and Entertainment, Confidentiality,
Service on a Board of Directors, Compliance Procedures, Compliance with Laws and
Regulations, Procedures and Reporting, Certification of Compliance, Reporting
Violations, Compliance Officer Duties, Training and Education, Recordkeeping, Annual
Review, and Sanctions. H&H's Code of Ethics is available free upon request to any client
or prospective client.
B. Recommendations Involving Material Financial Interests H&H does not recommend that clients buy or sell any security in which a related person
to H&H or H&H has a material financial interest.
C. Investing Personal Money in the Same Securities as Clients From time to time, representatives of H&H may buy or sell securities for themselves that
they also recommend to clients. This may provide an opportunity for representatives of
H&H to buy or sell the same securities before or after recommending the same securities
to clients resulting in representatives profiting off the recommendations they provide to
clients. Such transactions may create a conflict of interest. H&H will always document
any transactions that could be construed as conflicts of interest and will never engage in
trading that operates to the client’s disadvantage when similar securities are being bought
or sold.
D. Trading Securities At/Around the Same Time as Clients’ Securities
From time to time, representatives of H&H may buy or sell securities for themselves at or
around the same time as clients. This may provide an opportunity for representatives of
H&H to buy or sell securities before or after recommending securities to clients resulting
in representatives profiting off the recommendations they provide to clients. Such
transactions may create a conflict of interest; however, H&H will never engage in trading
that operates to the client’s disadvantage if representatives of H&H buy or sell securities
at or around the same time as clients.
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A. Factors Used to Select Custodians and/or Broker/Dealers
Custodians/broker-dealers will be recommended based on H&H’s duty to seek “best
execution,” which is the obligation to seek execution of securities transactions for a client
on the most favorable terms for the client under the circumstances. Clients will not
necessarily pay the lowest commission or commission equivalent, and H&H may also
consider the market expertise and research access provided by the broker-
dealer/custodian, including but not limited to reputation of the broker dealer / custodian,
customer service quality, access to written research, oral communication with analysts,
admittance to research conferences and other resources provided by the brokers that may
aid in H&H's research efforts. H&H will never charge a premium or commission on
transactions, beyond the actual cost imposed by the broker-dealer/custodian.
H&H recommends Schwab Institutional, a division of Charles Schwab & Co., Inc.
(“Schwab”) as a custodian for client accounts. Schwab offers services to independent
investment advisers which include custody of securities, trade execution, clearance and
settlement of transactions. Schwab enables us to obtain many no-load mutual funds
without transaction charges and other no-load funds at nominal transaction charges.
Schwab does not charge client accounts separately for custodial services. Client accounts
will be charged transaction fees, commissions or other fees on trades that are executed or
settle into the client’s custodial account. Transaction fees may be charged via individual
transaction charges. These fees are negotiated with Schwab and are generally discounted
from customary retail commission rates. This benefits clients because the overall fee paid
is often lower than would be otherwise. Schwab does not charge transaction fees for U.S.
listed equities and exchange traded funds.
1. Research and Other Soft-Dollar Benefits While H&H has no formal soft dollars program in which soft dollars are used to pay
for third party services, H&H may receive research, products, or other services from
custodians and broker-dealers in connection with client securities transactions (“soft
dollar benefits”). H&H may enter into soft-dollar arrangements consistent with (and
not outside of) the safe harbor contained in Section 28(e) of the Securities Exchange
Act of 1934, as amended. There can be no assurance that any particular client will
benefit from soft dollar research, whether or not the client’s transactions paid for it,
and H&H does not seek to allocate benefits to client accounts proportionate to any soft
dollar credits generated by the accounts. H&H benefits by not having to produce or
pay for the research, products or services, and H&H will have an incentive to
recommend a broker-dealer based on receiving research or services. Clients should be
aware that H&H’s acceptance of soft dollar benefits may result in higher commissions
charged to the client.
2. Brokerage for Client Referrals H&H receives no referrals from a broker-dealer or third party in exchange for using
that broker-dealer or third party.
3. Clients Directing Which Broker/Dealer/Custodian to Use H&H does not require clients to use a specific broker-dealer to execute transactions.
In certain instances, clients may seek to limit or restrict our discretionary authority in
making the determination of the brokers with whom orders for the purchase or sale
of securities are placed for execution, and the commission rates at which such
securities transactions are effected. Clients may seek to limit our authority in this area
by directing that transactions (or some specified percentage of transactions) be
executed through specified brokers in return for portfolio evaluation or other services
deemed by the client to be of value. Any such client direction must be in writing (often
through our advisory agreement), and may contain a representation from the client
that the arrangement is permissible under its governing laws and documents, if this
is relevant.
Our firm provides appropriate disclosure in writing to clients who direct trades to
particular brokers, that with respect to their directed trades, they will be treated as if
they have retained the investment discretion that our firm otherwise would have in
selecting brokers to effect transactions and in negotiating commissions and that such
direction may adversely affect our ability to obtain best price and execution. In
addition, our firm will inform clients in writing that the trade orders may not be
aggregated with other clients’ orders and that direction of brokerage may hinder best
execution.
B. Aggregating (Block) Trading for Multiple Client Accounts
If H&H buys or sells the same securities on behalf of more than one client, then it may
(but would be under no obligation to) aggregate or bunch such securities in a single
transaction for multiple clients in order to seek more favorable prices, lower brokerage
commissions, or more efficient execution. In such case, H&H would place an aggregate
order with the broker on behalf of all such clients in order to ensure fairness for all clients;
provided, however, that trades would be reviewed periodically to ensure that accounts
are not systematically disadvantaged by this policy. H&H would determine the
appropriate number of shares and select the appropriate brokers consistent with its duty
to seek best execution, except for those accounts with specific brokerage direction (if any).
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A. Frequency and Nature of Periodic Reviews and Who Makes Those Reviews
All client accounts for H&H's advisory services provided on an ongoing basis are
reviewed at least annually by Eric Hu, Chief Compliance Officer, with regard to clients’
respective investment policies and risk tolerance levels. All accounts at H&H are assigned
to this reviewer.
B. Factors That Will Trigger a Non-Periodic Review of Client Accounts
Reviews may be triggered by material market, economic or political events, or by changes
in client's financial situations (such as retirement, termination of employment, physical
move, or inheritance).
C. Content and Frequency of Regular Reports Provided to Clients Each client of H&H's advisory services provided on an ongoing basis will receive a
quarterly report detailing the client’s account, including assets held, asset value, and
calculation of fees. This written report will come from the custodian.
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A. Economic Benefits Provided by Third Parties for Advice Rendered to Clients (Includes Sales Awards or Other Prizes) H&H does not receive any economic benefit, directly or indirectly from any third party
for advice rendered to H&H's clients.
With respect to Schwab, H&H receives access to Schwab’s institutional trading and
custody services, which are typically not available to Schwab retail investors. These
services generally are available to independent investment advisers on an unsolicited
basis, at no charge to them so long as a total of at least $10 million of the adviser’s clients’
assets are maintained in accounts at Schwab Advisor Services. Schwab’s services include
brokerage services that are related to the execution of securities transactions, custody,
research, including that in the form of advice, analyses and reports, and access to mutual
funds and other investments that are otherwise generally available only to institutional
investors or would require a significantly higher minimum initial investment. For H&H
client accounts maintained in its custody, Schwab generally does not charge separately
for custody services but is compensated by account holders through commissions or other
transaction-related or asset-based fees for securities trades that are executed through
Schwab or that settle into Schwab accounts.
Schwab also makes available to H&H other products and services that benefit H&H but
may not benefit its clients’ accounts. These benefits may include national, regional or
H&H specific educational events organized and/or sponsored by Schwab Advisor
Services. Other potential benefits may include occasional business entertainment of
personnel of H&H by Schwab Advisor Services personnel, including meals, invitations to
sporting events, including golf tournaments, and other forms of entertainment, some of
which may accompany educational opportunities. Other of these products and services
assist H&H in managing and administering clients’ accounts. These include software and
other technology (and related technological training) that provide access to client account
data (such as trade confirmations and account statements), facilitate trade execution (and
allocation of aggregated trade orders for multiple client accounts, if applicable), provide
research, pricing information and other market data, facilitate payment of H&H’s fees
from its clients’ accounts (if applicable), and assist with back-office training and support
functions, recordkeeping and client reporting. Many of these services generally may be
used to service all or some substantial number of H&H’s accounts. Schwab Advisor
Services also makes available to H&H other services intended to help H&H manage and
further develop its business enterprise. These services may include professional
compliance, legal and business consulting, publications and conferences on practice
management, information technology, business succession, regulatory compliance,
employee benefits providers, human capital consultants, insurance and marketing. In
addition, Schwab may make available, arrange and/or pay vendors for these types of
services rendered to H&H by independent third parties. Schwab Advisor Services may
discount or waive fees it would otherwise charge for some of these services or pay all or
a part of the fees of a third-party providing these services to H&H. H&H is independently
owned and operated and not affiliated with Schwab.
B. Compensation to Non – Advisory Personnel for Client Referrals H&H does not directly or indirectly compensate any person who is not advisory
personnel for client referrals.
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When advisory fees are deducted directly from client accounts at client's custodian, H&H will be
deemed to have limited custody of client's assets and must have written authorization from the
client to do so. Clients will receive all account statements and billing invoices that are required in
each jurisdiction, and they should carefully review those statements for accuracy.
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H&H provides discretionary investment advisory services to clients. The advisory contract
established with each client sets forth the discretionary authority for trading. Where investment
discretion has been granted, H&H generally manages the client’s account and makes investment
decisions without consultation with the client as to when the securities are to be bought or sold
for the account, the total amount of the securities to be bought/sold, what securities to buy or
sell, or the price per share.
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H&H acknowledges its fiduciary obligation to vote proxies on behalf of those clients that have
delegated to it, or for which it is deemed to have, proxy voting authority. H&H will vote proxies
on behalf of a client solely in the best interest of the relevant client and has established general
guidelines for voting proxies. H&H may also abstain from voting if, based on factors such as
expense or difficulty of exercise, it determines that a client’s interests are better served by
abstaining. Further, because proxy proposals and individual company facts and circumstances
may vary, H&H may vote in a manner that is contrary to the general guidelines if it believes that
doing so would be in a client’s best interest to do so. If a proxy proposal presents a conflict of
interest between H&H and a client, then H&H will disclose the conflict of interest to the client
prior to the proxy vote and, if participating in the vote, will vote in accordance with the client's
wishes.
Clients may obtain a complete copy of the proxy voting policies and procedures by contacting
H&H in writing and requesting such information. Each client may also request, by contacting
H&H in writing, information concerning the manner in which proxy votes have been cast with
respect to portfolio securities held by the relevant client during the prior annual period.
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A. Balance Sheet H&H neither requires nor solicits prepayment of more than $1,200 in fees per client, six
months or more in advance, and therefore is not required to include a balance sheet with
this brochure.
B. Financial Conditions Reasonably Likely to Impair Ability to Meet Contractual Commitments to Clients Neither H&H nor its management has any financial condition that is likely to reasonably
impair H&H’s ability to meet contractual commitments to clients.
C. Bankruptcy Petitions in Previous Ten Years H&H has not been the subject of a bankruptcy petition in the last ten years.
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