Item 5 – Fees and Compensation
Croft-Leominster, Inc. provides investment advisory services for separately managed
accounts for a fee based on the schedule listed below.
First $2 million………………… .80%
Next $2 million………………… .70%
Next $3 million………………… .60%
Next $2 million………………… .50%
Next $3 million………………... .45%
Next $3 million………………… .40%
Balance over $15 million….. .35%
Fees will be based on quarterly account valuations and are payable quarterly in advance.
Each separately managed account is subject to a minimum annual fee of $4,000. Fees are
negotiable. Discounts may be offered to charitable organizations. Clients may terminate
the firm's services at any time upon 15 days' prior written notice.
Croft-Leominster, Inc. provides investment supervisory services for Croft Funds
Corporation, an investment company, comprised of two funds (Croft Value Fund and Croft
Income Fund). The Management Fees on the average daily net assets of the Fund are
charged as follows: Income Fund 0.79%, Value Fund 0.94%.
Croft-Leominster, Inc. advises four limited partnerships as their General Partner and
investment adviser. The Partnerships pay the General Partner an annual maintenance fee
(listed below next to each partnership name), for each fiscal year, based on the Net Asset
Value of the Partnership as of each month-end divided by twelve. The Maintenance Fee
shall be payable at the end of each fiscal year after review by an independent accountant.
The General Partner’s Profit Sharing Account will be adjusted as of the end of each calendar
month. The Profit Sharing Account will be increased by the amounts in the table below
based on the Partnership’s positive internal return, if any, as measured over that month. If
the internal return is negative, the Profit Share percentage of the negative internal return
will be applied first to reduce the Profit Sharing Account to zero. If the Profit Share
percentage of the negative internal return exceeds the Profit Sharing Account balance, the
remaining portion of the Profit Share percentage of the negative internal return that was
not applied to reduce the Profit Sharing Account to zero will constitute the Performance
Loss Carryforward for the month. The Performance Loss Carryforward is carried forward
from month to month within a particular year but not from year to year. The internal
return for a month is calculated by subtracting the Performance Base for such month from
the Net Asset Value as of the end of the current month. The Performance Base is, with
respect to any month, the Partnership’s prior month-end Net Asset Value, reduced by any
withdrawals as of the beginning of the month and increased by (i) any contributions as of
the beginning of the current month plus (ii) the Performance Loss Carryforward, if any,
from that prior month. Dividends are counted as income on the record date. Interest on
bonds and other interest-bearing securities is accrued daily and included in the month-end
Net Asset Value. Croft-Leominster, Inc. receives its fees from these partnerships only by
the direction of an independent accounting firm to release the funds from the qualified
custodian bank.
Limited Partnership Maintenance Fee Profit Share Percentage
Leominster-Croft LP .65% 16%
Leominster Income & Growth LP .65% 11%
Croft Small Cap LP .65% 16%
Croft Concentrated LP .65% 16%
Client assets invested in our managed investment products (e.g. mutual funds or limited
partnerships) will be excluded from the total assets of the client for the purposes of fee
calculation.
From time to time, Croft-Leominster, Inc. may be engaged by another adviser to provide
sub-advisory services and those fees will be negotiable on a case-by-case basis depending
on the scope and complexity of services. These arrangements involve discretionary
accounts. Under these arrangements, the investment advisory agreement is between
Croft-Leominster, Inc. and the adviser.
The specific manner in which fees are charged by Croft-Leominster, Inc. is established in a
client’s written agreement with Croft-Leominster, Inc. The firm will generally bill its fees
on a quarterly basis based on the client assets at the end of each calendar quarter. Clients
will be billed in advance each calendar quarter. Clients may also elect to be billed directly
for fees or to authorize Croft-Leominster, Inc. to directly debit fees from clients’ custodial
accounts. Accounts initiated or terminated during a calendar quarter will be charged a
prorated fee. Upon termination of any account, any prepaid, unearned fees will be
promptly refunded, and any earned, unpaid fees will be due and payable.
Croft-Leominster’s fees are exclusive of brokerage commissions, transaction fees, and other
related costs and expenses which will be incurred by the client. Clients may incur certain
charges imposed by custodians, brokers, third-party investment advisers and other third-
parties such as fees charged by managers, custodial fees, deferred sales charges, odd-lot
differentials, transfer taxes, wire transfer and electronic fund fees, and other fees and taxes
on brokerage accounts and securities transactions. Mutual funds and exchange traded
funds also charge internal management fees, which are disclosed in a fund’s prospectus.
Such charges, fees and commissions are exclusive of and in addition to Croft-Leominster’s
fee, and Croft-Leominster, Inc. does not receive any portion of these commissions, fees, and
costs.
Item 12 further describes the factors that Croft-Leominster, Inc. considers in selecting or
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