Item 4 - Services, Fees and Compensation

  • Description of our services, including the types of portfolio management services, provided under each program. We must indicate the wrap fee charged for each program, or, if fees vary according to a schedule, provide such schedule.  Further, we are required to indicate whether fees are negotiable and identify the portion of the total fees, or range of fees, paid to portfolio managers.

    Market Value Securities (MVS®) offers a strategic, discretionary fee-based, long-term approach to Global Asset Allocation portfolios of small to large cap individual equities. The investment philosophy is founded on the belief that superior investment performance depends primarily on investing in the most attractive global Economic Sectors, and Sub-Industries based on supply and demand analysis.

    (i) MVS® Wrap Fee Program:


    The program endorses a top-down value discipline that seeks to identify globally undervalued Markets, Economic Sectors, Industries, and Specific Securities in “Super Cycles” that sell at deep discounts to both their respective and historical intrinsic values. “Super Cycles” are defined as undervalued Economic Sectors, and Industries in the Global Economy that our firm believes are best positioned for “Long-Term Growth”. For example, it is believed that currently “Super Cycles” are driven, first by the industrialization of China, and India, and second by an intense Global demand for digital Mobile Computing. As these nations become more industrialized, and the world will consume respectively more energy, natural resources and mobile computing then these processes will potentially result in increased demand for Energy, Natural Resources, and Mobile Computing.

    The first step in the process analyzes the relative attractiveness of global Economic Sectors, and their Sub-Industries. This is done first via in-depth analysis of supply and demand fundamentals, and growth rate projections. Second, global Economic Sectors and Sub-Industries are identified and selected.

    Next, individual small to large cap equities are researched. At the end, a rigorous due diligence process is implemented for identifying and selecting individual equities that sell at deep discounts to their respective and historical intrinsic values. Intrinsic values are determined by using discounted cash flow and relative valuation models. The fundamental analysis used to select the individual equities that end up making the Market Value Securities portfolio includes primarily low absolute and relative valuations such as price/earnings, price/book, price/cash, and debt to equity ratios. Other fundamental research followed is based on analysis of barriers to entry, market share, return on equity, growth projections, liquidity, market capitalization, free cash flow generation, debt structure, management tenure, quality of brand, and franchise value.

    The program utilizes asset management restrictions in order to achieve favorable risk/reward performance results independent of the market’s strength or weakness. The followings are the disciplines implemented: 1) The portfolio can’t hold less than twenty stocks, 2) Individual equity value can’t exceed 10% of portfolio value, 3) Economic Sector holding can’t exceed 45% of portfolio value, 4) Industry group holding can’t exceed 20% of portfolio value, 5) Account total cash position can’t exceed 30% of portfolio value, and 6) The portfolio can’t hold less than six Economic Sectors. The sell discipline for any Economic Sector, Sub-Industries, and Individual Securities is based on supply/demand and/or individual equity fundamentals.

    Our firm believes that prior to a “Super Cycle” peak companies will have massive capital expenditures associated with Growth, Mergers and Acquisitions activities. Eventually, at the height of a “Super Cycle” the sector and its individual equities will dominate the market from an earnings and market capitalization stand point. For example, Technology and Telecommunications grew to 40% of the S&P 500 Index in February of 2000, and during the Japanese Real Estate bubble properties of this country were valued at more than the entire combined U.S Real Estate market. When these signs are apparent, we will rotate out of the Economic Sectors, Sub-Industries, and their related Individual Equities in favor of new undervalued Economic Sectors and Sub-Industries in the world’s economy.

    Lastly, periodic ongoing reviews are scheduled with all clients. This process includes the followings: (i) Review of the entire portfolio as well as its underlying Economic Sectors, Sub-Industries and their respective Individual Equities benchmarked each quarter against their respective Equity and World Indexes, (ii) Recalibrate each client’s asset allocation models as his or her life circumstances change, and (iii) Present consolidated reporting that incorporates the Market Value Securities (MVS®) portfolio with the entire holdings of the clients’ other investments disciplines.

    MVS® Wrap Program Fee Schedule:

    All Equity discretionary money managed programs which includes Market Value Securities (MVS®) will adhere to the following pricing schedule:

      Assets Under Management   Annual Net Fee Assessed
      First $500,000   2.50%
      Next $500,000   2.00%
      Over $1,000,000   1.50%

    Our firm’s fees are generally not negotiable.  Further, our firm’s fees are billed on a pro-rata annualized basis quarterly in advance based on the value of your account on the last day of the previous quarter.

  • Explanation that a wrap fee program may cost you more or less than purchasing such services separately and description of the factors that bear upon the relative cost of the program, such as the cost of the services if provided separately and the trading activity in your account(s).

    wrap fee program allows our clients to pay a specified fee for investment advisory services and for the execution of transactions. The advisory services may include portfolio management and/or advice concerning selection of other advisers, and the fee is not based directly upon transactions in your account. Your fee is bundled with our costs for executing transactions in your account(s). This results in a higher advisory fee to you. We do not charge our clients higher advisory fees based on their trading activity, but you should be aware that we may have an incentive to limit our trading activities in your account(s) because we are charged for executed trades. In order to overcome this potential conflict of interest, clients may choose to pay all transactions’ costs associated with the ongoing management of their accounts. By participating in a wrap fee program, you may end up paying more or less than you would through a non-wrap fee program where a lower advisory fee is charged, but trade execution costs are normally passed directly through to you by the executing broker.
  • Description of any fees that you may pay in addition to a wrap fee, and description of the circumstances under which you may pay these fees, including, if applicable, mutual fund expenses and mark-ups, mark-downs, or spreads paid to market makers.

    You may pay custodial fees, charges imposed directly by a mutual fund, index fund, or an exchange traded fund which shall be disclosed in the fund’s prospectus (i.e., fund management fees and other fund expenses), mark-ups and mark-downs, spreads paid to market makers, wire transfer fees and other fees and taxes on brokerage accounts and securities transactions. These fees are not included within the wrap-fee you are charged by our firm.
  • If someone recommending a wrap fee program to you, receives compensation as a result of your participation in the program, we must disclose this fact.   Further, we are required to explain, if applicable, that the amount of the compensation may be more than what the person would receive if you participated in our other wrap fee programs or paid separately for investment advice, brokerage and other services.  Finally, we must explain that someone recommending a wrap fee program may have a financial incentive to recommend the wrap fee program over other programs or services.

    We do not recommend or offer the wrap program services of other providers. Our investment advisory representatives receive a portion of the advisory fee that you pay us, either directly as a percentage of your overall fee or as their salary from our firm. In cases where our investment advisory representatives are paid a percentage of your overall advisory fee, this may create an incentive to recommend that you participate in a wrap fee program rather than a non-wrap fee program (where you would pay for trade execution costs) or brokerage account where commissions are charged. This is because, in some cases, we may stand to earn more compensation from advisory fees paid to us through a wrap fee program arrangement if your account is not actively traded.