Item 5. Fees and Compensation
Asset-Based Compensation
For discretionary client assets, including the Fund, Paladino is paid a quarterly asset-
based investment management fee in advance approximately equal to 1.00% per annum, based
on a percentage of the value of each client's net assets as of the first day of each quarter.
For non-discretionary client assets, Paladino is paid a quarterly asset-based investment
advisory fee in advance. Such advisory fees range from 0.15% to 0.75% per annum, based on a
percentage of the value of each client's net assets as of the first day of each quarter, as
negotiated in specific agreements between Paladino and its clients.
Management Services to Pooled Investment Vehicles
Paladino receives a management fee and a performance-based fee as investment
adviser to the Fund. For services provided to the Fund, Paladino receives a management fee,
payable quarterly in advance, equal to 0.25% of the Net Asset Value on the last day of the
previous quarter (1.00% per annum).
Performance-Based Compensation
In addition to asset-based compensation, Paladino may be paid performance-based
compensation for discretionary client accounts, including the Fund. This performance-based
compensation is based on a share of the capital appreciation of each client's assets under
management. The performance-based compensation may be up to 20.0% of the capital
appreciation above an agreed-upon benchmark, as negotiated in the agreements with each
specific client. The performance-based compensation will be payable annually based upon
performance versus the benchmark.
The asset-based compensation and performance-based compensation are negotiable,
based up on the agreements between Paladino and its clients, and thus may vary from the fees
noted above. Additionally, asset-based compensation and performance-based compensation
have been waived for Paladino's principals and employees.
Payment of Fees
On a quarterly basis, Paladino either debits from a client's account or separately invoices
its clients for the asset-based fees in advance based upon assets under management at the
beginning of each quarter. Payment terms may be negotiated, as provided in the agreements
between Paladino and its clients. In the event an advisory agreement is terminated at some
point other than at the end of a billing cycle, Paladino will provide a refund to its client in the
amount of the paid yet unearned asset-based fees within that billing cycle, as determined by the
number of days remaining in the billing cycle divided by the total number of days in the billing
cycle.
Performance-based fees may be either debited from a client’s account or invoiced as of
the end of the respective period. Payment terms may be negotiated, as provided in the
agreements between Paladino and its clients.
Other Fees and Expenses
As part of each client's investment strategy, Paladino may direct client assets into hedge
funds and other private funds, exchange-traded funds (“ETFs”) or registered investment
companies. In each case, each individual client will pay its pro rata share of any fees and
expenses, including performance-based fees, charged by the underlying investments.
Additionally, Paladino manages, on behalf of its clients, securities portfolios. The
portfolios incur trading and brokerage commission charges, a pro rata portion of which are
deducted from each client's respective account, as applicable. Please see the response to Item
12 for additional information about brokerage commissions. Clients also pay custodian or sub-
custodian fees associated with their account(s).
With respect to non-discretionary assets for which Paladino provides investment advisory
services, clients are responsible for all actual and reasonable costs and expenses incurred in
connection with the provision of the services provided to such clients including, but not limited
to, research costs, due diligence expenses, travel, meals and lodging expenses of Paladino
that the client requires or requests. In addition, such clients bear all operating expenses
incurred in connection with client accounts, including all legal, administrative, accounting,
brokerage and other fees relating to the creation, maintenance and operation of client
accounts.
Neither Paladino nor any of its supervised persons accepts compensation for the sale of
securities or other investment products, including asset-based sales charges or service fees from
the sale of mutual funds.