Item 5 - Fees and Compensation
Except as noted below, fees for SMA clients are generally non-negotiable and are charged on a
quarterly basis, in arrears, at the rate of 0.5% of the assets under management, including accrued
dividends, as of the last business day of the calendar quarter (i.e., 2% annually). Dependent on the
individual arrangement selected by each SMA client, fees charged for Brave Warrior’s advisory
services may be deducted from the client’s account or paid by the client via check/wire. Brave
Warrior may adjust fees on a pro rata basis to reflect any material account contributions or
withdrawals that Brave Warrior, in its sole discretion, determines would result in material fee
adjustments.
Fees for the Private Funds include a management fee ranging from 1% to 2.4% annually and a
performance allocation calculated as a percentage of net profits, generally 15%, allocated to Limited
Partners, subject to the specific terms as outlined in each Funds’ governing documents. Fees are
payable to Brave Warrior GP, LLC, the Funds’ General Partner or Brave Warrior Advisors LLC, for
the offshore entities. Arlington Value Capital, LLC (or its designee) is entitled to receive a portion
of the management fee and performance allocation paid or allocated by each Private Fund to Brave
Warrior. Payments to Arlington Value Capital, LLC, will not result in an increase in the aggregate
fees or allocations to which Limited Partners of the Funds are subject.
Brave Warrior reserves the right to reduce or waive fees for client accounts. Brave Warrior provides
investment advice to accounts of the Principal, certain family members of, and family trusts or other
entities formed by or for the benefit of, the Principal, current and former employees, family members
of employees, two retired former traders, a charitable foundation funded by the principal, certain
contractors of the principal, and accounts valued near or less than $200,000 on a fee-waived basis.
Brave Warrior calculates its SMA management fees based on values derived from an independent
pricing source, which provides a master pricing file that ensures pricing uniformity for all of Brave
Warrior’s SMA clients’ management fees. Many of Brave Warrior’s SMA clients are custodied at
Pershing; however, some SMA Clients custody their assets at other qualified custodians. Each client
receives a statement from their custodian at least quarterly (see the Custody section for more
information).
Private Fund fees are calculated by the Fund Administrator, NAV Consulting, and verified by Brave
Warrior. Management fees are assessed on a monthly basis and performance allocations are assessed
annually as outlined in each Private Fund’s governing documents.
SMA clients may request in writing that (i) upon a partial withdrawal from an account, Brave Warrior
continue to manage the account as if such amount had not been withdrawn, or (ii) Brave Warrior
manage the account based on a notional asset value that is in excess of the actual value of the
account; in each case, new investments made on behalf of the account may be made using margin
borrowing. Historically, a name utilized to describe this practice is “A-Field”. To the extent that a
SMA client has requested in writing that Brave Warrior disregard a withdrawal in managing the
account or manage the account based on a notional asset value, as described above, the fee will be
determined based upon a value of the account that disregards such withdrawal or reflects the notional
asset value of such account, as applicable.
An SMA client is able to cancel an investment advisory contract without penalty within five business
days after the date of its execution by the SMA client. Thereafter, either party is able to cancel an
advisory contract by giving 30 days' prior written notice. If Brave Warrior or the SMA client cancels
the contract, the fee for the quarter will be pro-rated over the period during which the contract was
in effect based on the value of the assets in the SMA client’s account on the date of cancellation.
Brave Warrior may invest a portion of SMA clients’ assets in registered investment companies,
including, but not limited to, mutual funds. Advisers to such funds charge a management fee in
addition to Brave Warrior’s management fee. SMA clients may incur fees from their custodian.
Further, SMA clients will incur brokerage costs; please see the Brokerage Practices section for more
information.
In addition to management fees and performance allocations, the Private Funds each bear their own
expenses including, but not limited to, accounting, auditing, legal, consulting and other professional
fees and expenses, as well as investment-related expenses including commissions, bid-ask spreads,
mark-ups, interest on margin borrowing, costs related to short sales, transfer taxes, and custodian
fees, as outlined in each Funds’ governing documents. Common expenses may be incurred on behalf
of the Private Funds or one or more other Clients. The Advisor will seek to allocate any common
expenses among the Private Funds or other Clients in a manner that is fair and reasonable over time.
Expense allocation decisions will involve potential conflicts of interest including an incentive to
favor accounts that pay higher (or any) performance fees and conflicts relating to different expense
arrangements with certain Clients. SMA Clients will not bear common expenses but will bear their
own direct expenses. The Private Fund will bear direct expenses and allocated common expenses
among the Private Funds pro rata based on relative assets under management. The Advisor may,
however, in its sole discretion, use other methods to allocate certain common expenses among the
Private Funds if it deems another method more appropriate based on the relative use of the product
or service, the nature or source of the product or service, the relative benefits derived by the Private
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