Item 4 - Services, Fees and Compensation
(i) MVS® 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 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, in our view, “Super Cycles” can encompass industrial and/or technological developments, similar to the internet wave of the 90s, that potentially can change the way individuals consume, socialize and communicate with one another.
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. Third, individual small to large cap equities are researched.
Market Value Securities (MVS®) offers a strategic, discretionary fee-based, long-term approach to Global Asset Allocation portfolios of mainly small to large cap individual equities. Additionally, at times this program reserves the option to purchase preferred, convertible preferred stocks, warrants, rights offering and options. Qualified participants, with signed Options Trading, and Margin Application on file, will participate, when deemed appropriate, in purchasing of options (Level 1) for Growth, Speculation, and Income, in Spread Trading (Level 2), and in Uncovered Options Trading (Level 3) for Speculation and Income. 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, in general, on supply and demand analysis.
At the end, a rigorous due diligence process is implemented for identifying and selecting individual equities that sell at 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 (MVS®) 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 general asset management guidelines in an attempt to achieve favorable risk/reward performance results independent of the market’s strength or weakness. The following are the disciplines implemented: (i) The portfolio, in general, can’t hold less than twenty stocks, (ii) Individual equity positions, in general, can’t exceed 15% of the portfolio value, (iii) Economic Sector holdings, in general, can’t exceed 45% of the portfolio value, (iv) Industry group holdings can’t, in general, exceed 30% of the portfolio value, (v) Account total cash position, in general, can’t exceed 30% of portfolio value; thereafter, the initial gradual process of allocating the funds per the program’s investment discipline, and (vi) In general, the portfolio can’t hold less than six Economic Sectors. In general, Tamar Securities, LLC’s “Top Down” global value strategy and its bottom up individual stock selection determine its ongoing asset allocation weighting among its underlying individual equity positions. The investment process is gradual, fundamental in nature, and occasionally, technically driven. Implementing, fundamental and technical analysis to uncover oversold market conditions can lead to excessive cash balances in the interim.
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, ADV Part 2A – Firm Brochure Page 12 Tamar Securities, LLC Technology and Telecommunications grew to 40% of the S&P 500 Index in February of 2000, and during the Japanese Real Estate bubble, properties in that country were valued at more than the entire combined U.S Real Estate market. When these signs are apparent, we will attempt to rotate out of the Economic Sectors, Sub-Industries, and their related Individual Equities in favor of new undervalued Economic Sectors and SubIndustries in the world’s economy.
Lastly, periodic ongoing reviews are scheduled with all clients.
This process includes the followings:
• Review of the entire portfolio as well as its underlying Economic Sectors, SubIndustries and their respective Individual Equities benchmarked each quarter against their respective Equity and World Indexes;
• Recalibrate each client’s asset allocation models as his or her life circumstances change, and;
• Present consolidated reporting that incorporates the Market Value Securities (MVS®) portfolio with the entire holdings of the clients’ other investments disciplines.
MVS® 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 | 2.25% |
| Next $500,000 | 1.75% |
| Over $1,000,000 | 1.25% |
*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.