Item 5 – Fees and Compensation
Separately Managed Accounts
Focused Investors is compensated for its investment advisory services based on a percentage of
client assets managed. Focused Investors’ standard fee schedule for separate accounts is as
follows:
Account Size Annual Fee
First $10,000,000 90 Basis Points (“bps”)
Next $10,000,000 70 bps
Next $80,000,000 50 bps
Next $100,000,000 45 bps
Next $200,000,000 40 bps
Amount in excess of $400 million 25 bps
Fees are not negotiable. They are calculated and billed quarterly in arrears. After Focused Investors
sends its quarterly bill to a client, the client decides whether to deduct the fees from the client’s
assets or pay the fees from other client sources. Focused Investors has no authority to direct the
deduction of its fees from the client’s assets.
In addition to the investment advisory fees, separately managed account clients typically pay
custodial fees to banks that provide record-keeping and safeguarding of the client’s assets. In
addition, clients are responsible for paying brokerage commissions, (including SEC fees, ADR
fees and associated taxes), related to the purchase and sale of securities for their account. Clients
may request that their custodian or another service provider perform additional analytical services
for which the client may be charged an additional fee. Focused Investors does not receive any of
the fees described above other than the investment advisory fee.
Clients with separately managed accounts generally may terminate their investment advisory
contract with Focused Investors at any time, for any reason, upon providing written notice to
Focused Investors. Focused Investors generally reserves the right to terminate their investment
advisory contract with a client at any time, for any reason, upon not less than 30 days written notice
to the client. Upon termination, Focused Investors will calculate the amount of any incurred,
unpaid fees. These fees will be billed to the client and will be payable upon receipt of the bill.
There are no closing or penalty fees for terminating a client’s investment advisory contract with
Focused Investors.
The Fund
Focused Investors receives an investment advisory fee for acting as the general partner and
investment advisor for the Fund. The Fund’s standard management fee schedule for limited
partners in the Fund is as follows: 100 bps on the first $10 million of assets under management,
80 bps on the next $10 million of assets under management, and 60 bps on all assets under
management in excess of $20 million. All limited partners in the Fund are subject to its standard
management fee schedule with two exceptions: 1) Two members of the General Partner (i.e., FI),
who are limited partners, do not pay management fees; and 2) The estate of a deceased member of
the general partner, who was a limited partner, pays one-half of the standard management fee. Fees
are calculated by the Fund’s administrator, BNY Mellon, and reviewed and approved by the
general partner. Once approved, the general partner authorizes BNY Mellon to deduct the fees
directly from each limited partner’s account and to remit the fees to the general partner.
Other than the investment advisory fees payable to the general partner, limited partners in the Fund
incur no additional expenses other than brokerage commissions, (including SEC fees, ADR fees
and associated taxes), on the purchase and sale of securities for the Fund. The general partner pays
all additional fees and expenses including, but not limited to custodial fees, plan administration
fees, legal fees, accounting fees and tax preparation fees including those incurred in preparation of
Schedule K-1 for each limited partner.
Limited partners may invest in the Fund on the first day of a calendar month at the net asset value
of the Fund computed as of the last day of the prior month. Limited partners may withdraw from
the Fund, with 30 days advance written notice to the general partner, at the net asset value of the
Fund as of the last day of the calendar month of their withdrawal. Accordingly, there would be
neither a refund nor an additional fee payable upon withdrawal.
Other
Focused Investors’ revenues from separately managed accounts and limited partners in the Fund
come solely from the investment advisory fee arrangements discussed above. Focused Investors
and its employees do not receive any commissions or other compensation for the sale of investment
products Focused Investors recommend to clients, nor does Focused Investors charge any
markups. In addition, Focused Investors does not pay commissions or any form of referral fees to
consultants or other parties for client referrals.