Item 5 – Fees and Compensation
Investment advisory fees are calculated based on a percentage of the client’s assets under
management. Such percentage may vary based on the size of the account, the number of a
client’s portfolios under management, the type of securities in which an account is invested,
and other factors deemed significant by the Firm. All fees are subject to negotiation.
Annual fees for separately managed accounts generally range between 0.75%-1.50%
depending on the factors described above. For equities (i.e., assets not treated as fixed-
income investments), the quarterly fee is typically one-quarter of 1.50% of the first $500,000
of market value, 1.25% of the next $2,000,000 of market value, 1.00% of the next $2,500,000
of market value, and 0.75% of the balance of market value in the account. For accounts with
fixed-income investments in addition to equities, the fixed-income portion accrues fees at a
different quarterly rate, typically one-quarter of 0.40% of the market value of such securities
in the account. The Firm requires a minimum account size of $1,000,000, although that
minimum may be waived based on various factors, such as the relationship of the account to
other present or potential accounts, or other factors deemed significant to the Firm. The Firm
aggregates family and related accounts for fee calculation purposes. Adalta shall price its
services based upon various objective and subjective factors. As a result, Adalta’s clients
could pay diverse fees based upon the market value of their assets, the complexity of the
engagement, and the level and scope of the asset management services to be rendered. The
services to be provided by Adalta to any particular client could be available from other
advisers at a higher or lower fee. All clients and prospective clients should be guided
accordingly.
The specific manner in which fees for separately managed accounts are charged by Adalta is
established in a client’s written agreement with the Firm. Advisory fees for separately
managed accounts are payable on a quarterly basis in advance of each calendar quarter and
are based on the aggregate market value of the client's account as of the close of business on
the last business day of the prior quarter. Clients may elect to authorize Adalta to directly
debit fees from client accounts or to be billed directly for fees. If an account is established on
any day other than the first day of a calendar quarter, the initial quarterly fee will be based
upon the value of the account at the date of opening, adjusted pro rata based upon the
remaining days in the billing quarter. If assets are added to an account during a calendar
quarter, no advisory fee is payable with respect to the added assets until the start of the next
quarter. If assets are withdrawn from an account during a calendar quarter, no refund is
made with respect to any advisory fees paid in advance for that quarter. However, if an
account is terminated during a quarter, a pro rata refund of fees paid in advance is made for
that quarter.
A client or prospective client leaving an employer typically has four options regarding an
existing retirement plan (and may engage in a combination of these options): (i) leave the
money in the former employer’s plan, if permitted, (ii) roll over the assets to the new
employer’s plan, if one is available and rollovers are permitted, (iii) roll over to an Individual
Retirement Account (“IRA”), or (iv) cash out the account value (which could, depending upon
the client’s age, result in adverse tax consequences). If Adalta recommends that a client roll
over their retirement plan assets into an account to be managed by Adalta, such a
recommendation creates a conflict of interest if Adalta will earn a new (or increase its
current) advisory fee as a result of the rolled over assets. No client is under any obligation to
roll over retirement plan assets to an account managed by Adalta. Adalta’s Chief Compliance
Officer remains available to address any questions that a client or prospective client may
have regarding the potential for conflict of interest presented by such rollover
recommendation.
Adalta’s fees are exclusive of brokerage commissions, transaction fees, and other related
costs and expenses which shall be incurred by a client. Clients may incur certain charges
imposed by custodians, brokers, third party investments 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 Adalta’s fee, and Adalta shall not receive any
portion of these commissions, fees, and costs.
Relative to its investment management services, when beneficial to the client, individual
securities transactions may be effected through broker-dealers other than the account
custodian, in which event, the client generally will incur both the fee (commission, mark-
up/mark-down) charged by the executing broker-dealer and a separate “tradeaway” fee
charged by the account custodian.
Item 12 further describes the factors that Adalta considers in selecting or recommending
broker-dealers for client transactions and determining the reasonableness of their
compensation (e.g., commissions).