Item 5. Fees and Compensation
Description
Asset-Based Compensation
TWIN Capital charges each client an investment management fee based on the value of
the client’s assets under management. These fees are negotiable. Following are the
strategy-specific standard fee schedules:
1. TWIN Enhanced Equity – Enhanced Index with an S&P 500 Benchmark: The fee
schedule is 0.35% on the first $50 million; 0.20% on the next $50 million, and
negotiable thereafter.
2. TWIN Prime – Active Large/Midcap Strategy with a Russell 1000 Benchmark:
The fee schedule is 0.50% on the first $25 million; 0.35% on the next $25 million,
and negotiable thereafter.
3. TWIN Dividend Select- Stocks are selected from S&P 500 Index constituents
meeting a custom dividend screen. The benchmark is the S&P 500 Index: The
fee schedule is 0.35% on the first $50 million; 0.20% on the next $50 million, and
negotiable thereafter.
4. TWIN Small Cap - Small Cap Portfolio with a Russell 2000 Benchmark; the fee
schedule is first $10 million: 0.75%, next $15 million: 0.65%, next $25 million:
0.60%, 0.50% thereafter.
5. TWIN Balanced- The fee schedule is 0.60% on the first $10 million of account
assets under management and 0.40% thereafter. Balanced Individual fees are
1.0% of assets under management.
6. TWIN Enhanced 50- The fee schedule is 0.35% on the first $50 million; 0.20% on
the next $50 million, negotiable thereafter.
7. TWIN Tax Managed Large Cap- The fee schedule is 0.20% of assets under
management.
8. TWIN Tax Managed Tech Plus- The fee schedule is 0.20% of assets under
management.
An alternative management fee compensation arrangement based partially or entirely
on the investment performance of a client’s portfolio is provided for some of our
investment strategies. These arrangements are negotiated on a case-by-case basis
depending upon the investment strategy, account market value, and other factors.
Please contact us for more information.
Fixed-Fee Compensation
We also provide non-discretionary investment advice through consultation. The fees
charged for this advice may be negotiated as a percentage of assets or as a fixed
retainer fee for consulting based on the level and extent of services we provide to the
client. The fees charged for this advice are negotiable. We may receive payment for
these consulting and research services from a brokerage firm(s) through soft dollar
arrangement(s) between that broker and our mutual client.
We participate in a buy side alpha capture program. This program seeks to capture
alpha from third-party contributors through a proprietary web-based interface. This
interface enables the program sponsor to capture, analyze, and optimize ideas and
scores submitted by third-party contributors like us. The program sponsor’s strategy
trades systematically utilizing their own optimization models. The program sponsor pays
us a quarterly base fee with the opportunity for a performance bonus. This presents a
potential conflict of interest for our managed accounts as discussed in Section 8, Risk of
Loss.
Performance-Fee Compensation
We are also paid performance-based compensation, which is compensation that is
based on a share of capital gains on or capital appreciation of the assets we manage for
certain clients. When these arrangements are in place, the performance-based
compensation ranges from 10% to 35%. These fees are negotiable.
Fee Billing
Investment management fees are normally charged each quarter in arrears based on
the average of the total market value of the assets in the client account (including net
unrealized appreciation or depreciation of investments and cash, cash equivalents and
accrued interest) on the last day of each month during the quarter. If a new client
account is established during a quarter, the investment management fee will be
prorated for the number of days remaining in the quarter. If a client’s investment
management agreement is terminated during a quarter, the fee payable to us will be
calculated based on the value of the assets on the final valuation date and prorated for
the number of days during the quarter in which the investment management
arrangement was in effect.
Each client’s Investment Management Agreement will govern the specifics of how fees
are calculated for their account. Certain clients have asked us for changes to the
standard calculation described above, and we have accommodated these requests.
For example, some of our clients require a monthly fee calculation, different treatments
for contributions, withdrawals, and/or accrued income. We are willing to negotiate these
terms with our clients at their request.
Our clients may select the method by which they pay our management fees. We
typically bill the client directly and will use this method unless instructed otherwise by
the client. If the client prefers it, we can usually arrange to have our management fees
directly deducted from their account with our instruction to the client’s custodian.
Other Fees
In addition to paying investment management fees and, if applicable, performance-
based fees, client accounts will also be subject to other investment expenses such as
custodial charges, brokerage fees, commissions and related costs; interest expenses;
taxes, duties and other governmental charges; transfer and registration fees or similar
expenses; costs associated with foreign exchange transactions; other portfolio
expenses; and costs, expenses and fees (including, investment advisory and other fees
charged by investment advisers with, or funds in, which the client’s account invests)
associated with products or services that may be necessary or incidental to such
investments or accounts. Client assets may be invested in pooled investment vehicles.
In these cases, clients will bear their pro rata share of the underlying fund’s operating
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