ITEM 5 FEES AND COMPENSATION
ChoateIA does not charge a separate fee where a trust pays trustee fees to CHS and ChoateIA
advises the trustee. Where ChoateIA does charge a fee, ChoateIA’s compensation is calculated
as a percentage of the value of a client’s account at quarter-end after giving effect to additions or
withdrawals on that date.
Where we provide discretionary and non-discretionary asset management services, we typically
charge an annual fee ranging up to 1.25% of the value of your assets under our management. In
certain cases, accounts may be billed differently. Flat fees may be negotiated in limited
circumstances. At our discretion, we may combine the account values of family members to
determine the applicable advisory fee, which may result in a lower advisory fee being charged
than if such account values were not combined. Per our agreement with clients, we deduct fees
from client accounts on either a quarterly or monthly basis, as determined by the agreement,
either in arrears or in advance. We do not require pre-payment of fees.
Current and former ChoateIA employees and CHS Partners receive a discount on the standard
fee schedule. This discount may also be extended to family members at ChoateIA’s discretion.
This fee schedule is not applicable to our parent company, CHS, for which we provide investment
advisory services in respect of its trust clients. Please see Item 10 for additional information
about our relationship with CHS, and payments made by CHS to ChoateIA in connection with
ChoateIA’s provision of advisory services.
Mutual Fund and ETF fees and Expenses – ChoateIA invests a large portion of its clients’ assets
in mutual funds and Exchange Traded Funds (“ETFs”). Mutual funds and ETFs charge
management fees and other fees and expenses that are paid pro rata by their respective
shareholders. These fees and expenses, which are in addition to ChoateIA’s management fees,
will reduce the performance of a client’s account.
Fixed Fees, Hourly Fees, and Related Expenses.
ChoateIA may provide services in addition to the services covered by the fee arrangements
described above based on the market value of the client’s account. These additional services may
include advisory services on assets managed outside of ChoateIA, tax advisory services, financial
planning services, and overall portfolio construction. These services are negotiated and billed at a
fixed rate between $1,000 - $2,500. To the extent that legal work is necessary, then the client may
engage CHS under a separate arrangement. Fees for such legal services generally range from $525
- $1750 per hour.
Private Fund Fees and Expenses.
ChoateIA does not receive a separate advisory or performance fee for managing the Private
Funds. However, the value of a client’s investment in a Private Fund is included in the value of
that client’s account on which ChoateIA’s advisory fee is based. Assets of each Private Funds
may be difficult to value. ChoateIA values each Private Fund’s interests based upon valuations
provided by the managers of the underlying funds in which they invest.
Expenses incurred by ChoateIA for the operation and management of the Private Funds are passed
through to the Private Funds (and ratably to their investors). The Private Funds (and therefore their
investors) pay all general costs and expenses for the Private Funds including legal, auditing,
consulting, financing, accounting and custodian fees and expenses; expenses associated with
administration, and preparation of financial statements, tax returns and Schedule K-1s; banking
fees; technology platform fees; out-of-pocket expenses incurred in connection with due diligence
related to a portfolio fund investments or transactions (including those not consummated);
expenses for travel to portfolio funds’ annual meetings; other expenses associated with the
acquisition, holding and disposition of its investments, including extraordinary expenses (such as
litigation, if any); third-party consulting fees and any taxes, fees (including filing fees) or other
governmental charges levied against the Private Funds.
Each Private Fund is considered a fund of funds meaning investments are made in other funds that
are managed by selected third-party managers. Third-party managers typically charge their
investors fees based on a percentage of the capital commitments to their fund and a carried interest
incentive fee based on the profits of that fund. The Private Funds are charged their pro rata share
of the fees owed by each investor to the third-party manager and their pro rata share of other fees
and expenses incurred by the third-party manager.
Custody Services.
ChoateIA does not currently maintain direct custody or possession of client funds or securities,
except as described below. ChoateIA primarily works with CHS to engage SEI Private Trust
Company (“SEI”) to maintain possession of clients’ cash and securities and provide reporting
services. ChoateIA and CHS negotiate all custodial costs and fees with SEI, and ChoateIA pays
amounts due to SEI on behalf of clients. Neither SEI nor ChoateIA charges any custodial costs or
fees directly to clients.
Since affiliates of ChoateIA serve as general partner to the Private Funds, and due to the fact that
certain related persons may serve as trustee to client trust accounts, ChoateIA is deemed to have
custody of client assets. Accordingly, we are required under the Investment Advisors Act of 1940,
to retain a PCAOB registered accounting firm to perform a surprise independent audit of ChoateIA.
Once performed, the results of the surprise audit are available on the SEC’s public disclosure
website at www.adviserinfo.sec.gov. In addition, ChoateIA has entered into a written agreement
with an independent public accountant to provide audited financial statements to Private Fund
investors within 180 days following each Private Fund’s fiscal year end.
...