Item 5: Fees and Compensation
Investment Advisory Fees
For strategies other than the synthetic lending strategy:
WSC charges an annual blended fee, quarterly in arrears, based on assets under management as
shown below. The annual fee is typically based on an average of the daily balance in the client's
account throughout the billing quarter, including cash and cash equivalents.
Amount Subject to Fee (Per Client Basis) 1 Annual Fee
First $500,000 0.70%
$500,001 through $5,000,000 0.60%
Over $5,000,001 0.50%
For example, a client with an average daily value of $1,000,000 in assets under management
throughout the billing quarter would be subject to the following quarterly fee:
First $500,000 billed at .70% = $3,500/4 quarters = $875
Next $500,000 billed at .60% = $3,000/4 quarters = $750
Total quarterly fee = $875 + $750 = $1,625
WSC’s fees are generally negotiable, and the final fee schedule will be memorialized in the client’s
advisory agreement or sub-advisory agreement in the case of indirect clients. Further, upon
request, WSC may aggregate the assets of related accounts (e.g., accounts of family members
living in the same household) to reach lower advisory fee breakpoints. In addition, WSC has the
right to waive/reduce any client fees, including fees charged on cash and cash equivalents and
on assets managed outside of the firm’s main investment strategies, and will consider the
aggregate assets under management under a sub-advisory agreement when making this
determination. This can result in similarly situated clients paying different investment advisory
fees. Because investment advisory fees can differ among clients, WSC could be inclined to give
more time and attention to (or otherwise favor) accounts paying a higher fee. WSC has written
procedures contained in the Compliance Manual and Code of Ethics that are intended to ensure
that clients are treated fairly. In addition, WSC waives fees for certain employees and their family
members of certain third-party investment advisers with whom WSC has a sub-advisory
relationship. This creates an incentive for these individuals to invest their clients' assets with
WSC.
WSC does not offer performance-based fees to new clients, although some existing qualified
clients pay a 20.00% performance fee based on capital appreciation in lieu of the investment
advisory fee indicated above in accordance with their investment management agreement. If the
client's portfolio rises in value, the client will pay 20.00% on that increase in value, but if the
portfolio drops in value, 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.” Some performance fees are subject to a hurdle rate of return as disclosed in
the client’s advisory agreement. The performance fee for an account subject to a hurdle rate of
return is based on capital appreciation above the SPDR® Bloomberg Barclays 1-3 Month T-Bill
ETF return. The high-water mark is the highest value of the client’s account on the last day of any
previous quarter, after accounting for the client’s deposits or withdrawals for each billing period.
1 With respect to indirect clients, the blended fee breakpoints are based on the asset under
management for each indirect client and not the aggregate assets under management under the
sub-advisory agreement.
Asset-based and performance-based investment advisory fees are withdrawn directly from the
client's accounts with client's written authorization on a quarterly basis. On a limited basis, such
quarterly fees are invoiced and billed directly to the client.
Clients may terminate the agreement by providing written notice within five business days,
unless a longer period is stipulated in the investment management agreement or in another form
of writing. Clients must pay the prorated fee for the billing period in which the termination
occurs, up to and including the day of termination. For indirect clients in the structured notes
strategy, if a third-party investment advisor or indirect client terminates their agreement with
respect to the indirect client’s account on or before the first anniversary of the establishment of
such account, the third-party investment adviser shall pay or cause to be paid to WSC the costs
and advisory time expended in identifying and executing the investments. WSC shall provide a
calculation of such costs, not to exceed a sum equal to 0.25% of the assets under management of
the account on the day prior to the notice of termination. WSC has the right however to
waive/reduce this fee.
For the synthetic lending strategy:
WSC charges an annual fee based on the absolute value of the short box spread options held in
the account at maturity. If the absolute value of the short box spread options held in the account
at maturity is less than $500,000, then the annual fee is 0.55% (55 basis points) of the absolute
value. If the absolute value of the short box spread options held in the account at maturity is
$500,000 or more, then the annual fee is 0.30% (30 basis points) of the absolute value. The annual
fee is charged quarterly in arrears.
For example, a client with a value of short box spread options held in the account at maturity of
($400,000), WSC will calculate the fee using $400,000 and the client would be subject to the
following quarterly fee:
$400,000 billed at .55% = $2,200/4 quarters = $550
For example, a client with a value of short box spread options held in the account at maturity of
($1,000,000), WSC will calculate the fee using $1,000,000 and the client would be subject to the
following quarterly fee:
$1,000,000 billed at .30% = $3,000/4 quarters = $750
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