Item 5 Fees and Compensation
Our fees are payable quarterly in advance, based on assets under management at the end of
the previous quarter. Clients will typically authorize us to instruct their broker/custodian
to deduct the fee from the Client’s account upon submission of an appropriate invoice to
the broker/custodian, with a copy to the Client, and have the broker/custodian pay the fee
to us directly. Generally, our fee schedule is not negotiable, but we reserve the right to
negotiate a fee at our sole discretion for any reason we deem appropriate. As a result,
similarly situated clients may pay different fees for substantially similar services, which
presents a conflict of interest. We seek to address this conflict by applying our fee
arrangements in a manner we believe is fair and appropriate based on the circumstances.
In certain cases, we may agree to invoice a fee directly to the client rather than deducting
the fee from the client’s account.
For non-mutual fund clients, (other than Private Fund clients) we charge an annual fee as
follows:
First $5 million 1.25% of AUM*
From $5 – $25 million 1.125% of AUM* retroactive to the first dollar
Over $25 million 1.1% of AUM* retroactive to the first dollar
*assets under management
For the GoodHaven Fund, we have agreed to charge a management fee of 0.90% of assets
under management and a support services fee of 0.20% of assets under management. In
addition, we have agreed to be responsible for the payment of all normal day-to-day
operating expenses of the Fund so that under normal circumstances, the Fund will pay us
total annual fees at a rate of no more than 1.10% of assets under management, calculated
daily and invoiced monthly. Different accounts may be charged different fees because they
require different services, such as greater reporting services, more frequent consultations,
individualized restrictions, or because they require us to follow regulatory or other
limitations.
For the GH Opportunity Fund, the Management Fee in respect of any Capital Account of
a Class A Interest or a Class B Interest for any calendar quarter shall be an amount equal
to one-quarter percent (0.25%) per quarter (one percent (1%) per annum of the beginning
balance of such Capital Account for such quarter. The management fee is prorated for any
period that is less than a full calendar quarter and will be adjusted for subscriptions and
withdrawals occurring during the quarter. The General Partner to the GH Opportunity Fund
will also be paid performance-based compensation, or “incentive allocation”, which is
compensation that is based on a share of capital gains on or capital appreciation of the
assets of a Client. The performance fee is 15% and is paid on an annual basis as described
in the Fund’s Offering Documents. Class A Interests are subject to a hurdle rate of 6%.
After calculating the management fees and the incentive allocation/fee, and confirming
such amounts with the Adviser, the Private Fund’s administrator deducts the management
fee and/or incentive fee/allocation from the Fund. The Investment Manager will be
responsible for and will pay, or cause to be paid, all ordinary office overhead expenses,
which include rent and supplies, secretarial expenses, stationery, charges for furniture and
fixtures, employee insurance, employee benefits, payroll taxes and compensation of
analysts and other personnel.
With respect to the GH Opportunity Fund, the Investment Manager may elect, in its sole
discretion, to reduce, waive or calculate differently, the Management Fee in respect of any
Limited Partner, without offering the same opportunity to other Limited Partners. .
Notwithstanding the foregoing, if an account we manage also owns shares of the
GoodHaven Fund or the GH Opportunity Fund, we will not charge our Client a
management fee on that holding beyond the pro rata advisory fee paid by that fund directly
to us.
Separate Accounts
Clients whose assets are managed in our Separate Accounts are charged an annual
management fee, payable quarterly in advance, based on a percentage of assets under
management. The minimum account sizes for GSAP and ISAP are $1 million and $25
million, respectively, but we may lower this amount at our discretion. The first quarterly
fee is due upon execution of the Investment Management Agreement (unless otherwise set
forth in the Agreement) and the fee will be assessed pro-rata if the Agreement is signed at
any time other than the beginning of a calendar quarter. Separate Account clients will
normally be billed quarterly in advance based on the value of supervised assets in their
account on the last day of the preceding calendar quarter.
Accounts not domiciled at our primary broker/custodian, pooled vehicles, investment
companies, or certain institutional accounts may pay advisory or management fees on a
different schedule, and such accounts, along with all ISAP accounts, will generally be
responsible for their own transaction and custody costs. For such accounts, the timing and
payment of management fees may differ from GSAP Clients.
Unless explicitly covered in a Client’s written Agreement, fees do not include brokerage
commissions, transaction fees, and other related costs and expenses which the Client may
incur. Our Clients may also incur charges imposed by custodians, brokers, and other third
parties, including but not limited to, fees charged by managers, custodial fees, deferred
sales charges, odd-lot differential charges, transfer taxes, wire transfer and electronic fund
fees, and other fees and taxes on brokerage accounts and securities transactions. To the
extent we invest in a professionally managed vehicle, you will be responsible for other
expenses charged by that vehicle. For example, other investment advisors charge fees to
manage the assets of mutual funds and exchange traded funds, which are disclosed in the
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