Palos Management Inc

Item 5 – Fees and Compensation
Asset Management Services
Fees charged for our asset management services are charged based on a percentage of assets under
management. Clients are billed quarterly in advance based on the value of the account as of the last
business day of the previous billing period. If margin is utilized, the fees will be based on the net asset value
of the account. Lastly, PMI may elect to group certain related accounts, often known as “householding” for
purposes of determining the annual fee.

Fees are prorated (based on the number of days service is provided during the initial billing period) for your
account opened at any time other than the beginning of the billing period. If asset management services
are commenced in the middle of a billing period, the prorated fee for the initial billing period is billed in
arrears at the same time as the next full billing period’s fee is billed.

For all services, clients may terminate their engagement with PMI within five (5) business days of signing
an Agreement with no obligation and without penalty. After the initial five (5) business days, the Agreement
may be terminated by PMI with thirty (30) days written notice to client and by the client at any time with
written notice to PMI. Any prepaid or unearned fees will be promptly refunded by PMI to you. Fee refunds
will be determined on a pro rata basis using the number of days services are actually provided during the
final period.
Palos Management Inc.                               Page 5            Form ADV Part 2A Disclosure Brochure

The annual management fee for asset management services will typically be between 0.75% and 1.5% of
the value of the account, and is negotiable based on certain factors, such as the complexity of the client's
situation, the composition of the client's account (i.e., equities versus mutual funds), the potential for
additional account deposits, whether the client is part of a household, and the total amount of assets under
management for the client.

Our annual investment advisory fee may be higher than that charged by other investment advisers offering
similar services/programs.

The investment advisory fees will be deducted from your account and paid directly to our Firm by the
Custodian(s) of your account. You will authorize the Custodian(s) of your account to deduct fees from your
account and pay such fees directly to our Firm.

You should review your account statements received from the Custodian(s) and verify that appropriate
investment advisory fees are being deducted. The Custodian(s) will not verify the accuracy of the
investment advisory fees deducted.

Financial Planning Services

PMI offers the option to obtain financial planning services through Stellar, a non-affiliated third-party
financial planner. A Disclosure document will be provided by PMI outlining the shared services
relationship and fees you will pay for financial planning services (“Stellar Fee”) in addition to the
management fees charged by PMI with respect to your investment account(s). The Stellar Fee, which is
calculated as a percentage of your account market value, is deducted from your account to cover the
services provided to you by Stellar and any additional expenses that may arise from time to time. Stellar
fees currently range from 0.5% to 1% of your account market value. The Stellar Fee is paid to Stellar on
an ongoing basis as long as your account remains with PMI and you remain a client of Stellar. PMI will no
longer be required to pay the Fee to Stellar if you end your relationship with either PMI or Stellar. While
PMI collects the fees for Stellar services, PMI does not receive any portion of the financial planning fees.

Additional Fees

Custodians may charge brokerage commissions, transaction fees, or other related costs on the purchase
or sales of mutual funds, equities, bonds, options, margin interest, and exchange-traded funds. Mutual
funds, money market funds, and exchange-traded funds may also charge internal management fees which
are disclosed in the fund’s prospectus. All these fees are charged in addition to the management fee you
pay to PMI. For more details on the brokerage practices, see Item 12 of this Brochure.

Prepayment of Fees

PMI does not accept pre-payment of advisory fees.

Item 7 – Types of Clients

PMI generally provides investment advice to the following types of U.S. clients:

    •   Individuals
    •   High net worth individuals

Minimum Investment Amounts Required
There are no minimum investment amounts or conditions required for establishing an account managed
by PMI. However, all clients are required to execute an agreement for services in order to establish a
client arrangement with PMI.