Paloma Partners Management Company: investment adviser

Investors in the Paloma Fund cannot obtain services tailored to their specific needs. Paloma Management does not participate in wrap fee programs. As of December 31, 2025, Paloma Management advised $1,125,040,821 in net asset value on a discretionary basis. Neither PPMC nor Paloma Advisors manage assets on a non-discretionary basis.

THE PALOMA FUND

The “Paloma Fund” or the “Fund” is a multi-strategy hedge fund with a master–feeder structure including three feeder funds, Paloma Partners L.L.C. (a Delaware entity), Paloma International Limited (a Cayman Islands entity) and Paloma Offshore Limited (a Cayman Islands entity), which invest their investable assets in either the master fund or one or more Cayman Islands exempted limited partnership, as described below. The Paloma Fund seeks to achieve attractive long-term riskadjusted returns through dynamic capital allocation among a changing set of investment strategies and Portfolio Managers (defined below). The investment program of the Paloma Fund is exclusively carried out through the master fund, Paloma International L.P., and other entities through which the master fund makes investments or enters into transactions (collectively, the “Master Fund”) and potentially SPV Master Funds (as defined herein). The feeder funds may invest in the Master Fund or one or more Cayman Islands exempted limited partnership (each, an “SPV Master Fund”) directly or indirectly through an intermediate vehicle. There are no diversification requirements or material limitations on the strategies, investments, instruments, leverage, markets or countries in which the Paloma Fund may invest. Paloma Management has ultimate discretion and control over the Paloma Fund and its investments. Investment advice is provided to the Paloma Fund pursuant to the terms of each feeder fund’s confidential private offering memorandum and other organizational and governing documents (collectively, “Fund Documentation”). Paloma Management’s responsibilities to the Paloma Fund

include: the selection of Portfolio Managers and strategies, managing the Master Fund’s allocations and exposures across strategies and among Portfolio Managers, providing investment and credit risk management advice, and hedging the Master Fund’s risk as deemed necessary. Portfolio Managers is the collective term used for Trading Teams (defined below), managers of Portfolio Funds (defined below) and managers of other direct investments in public or private companies. Trading Teams are investment teams that pursue investment strategies in the Master Fund. Trading Teams are either engaged as independent contractors or are employed by PPMC. Independent contractors are responsible for their own operations (e.g., compliance and registration(s), supervision of employees, hiring of personnel and information technology) but are subject to Paloma Management’s portfolio and risk management oversight. Descriptions of Trading Teams and their activities in this Brochure generally apply to all Trading Teams (regardless of whether or not a Trading Team is an independent contractor (“External Trading Team”) or PPMC employee (“Employee Trading Team”), unless otherwise noted. The Paloma Fund also makes direct investments in public or private companies and Portfolio Funds. Portfolio Funds are standalone funds or other investment vehicles into which the Master Fund invests capital. Additional information about the Paloma Fund’s entities is included in Section 7.B of Schedule D in PPMC’s Form ADV Part 1A.

DISCLAIMER No guarantee or representation is made that the Paloma Fund’s investment program, including, without limitation, its investment objectives, diversification, strategies or risk monitoring processes, will be successful. The risk management process includes an effort to monitor and manage risk, but does not imply low risk. There may be risks which are not monitored or controlled and risks that may be greater than forecasted, especially in unusual market conditions. Nothing herein is intended to imply that the Paloma Fund’s investment strategy is “conservative”, “safe”, “risk free”, or “risk averse”. There can be no assurance that the Paloma Fund’s investment objective will be achieved or that its portfolio design and risk monitoring strategies will be successful. Investors may lose all or substantially all of their capital.

The Fund assesses expenses on a “pass through” basis, which means that each feeder fund (and therefore its investors) is not only responsible for its direct fees and expenses and a pro rata share of the Master Fund’s (and any SPV Master Fund’s) expenses, but also for all or substantially all of the expenses incurred by its management entities as described below. Expenses are deducted periodically in advance or in arrears. Currency hedge share classes will also bear expenses related to the execution of the currency hedge. PPMC does not have a fee schedule and does not currently receive asset-based or performance-based compensation. All or substantially all of PPMC’s expenses are passed through to and paid by the Paloma Fund and therefore the investors. PPMC’s expenses include expenses incurred by PPMC on behalf of the Paloma Fund, for the benefit of the Paloma Fund or for the benefit of Paloma Management. PPMC’s expenses are treated as Paloma Fund expenses regardless of whether or not they are directly related to the Paloma Fund’s investment activities. Additional information about PPMC’s expenses is provided below and in the Paloma Fund’s most recent DDQ, Fund Documentation and financial statements. Generally, Paloma Advisors receives either a Management Fee payable monthly in arrears of 1/12 of 1.5% with respect to the capital account or net asset value of shares owned by investors in the Paloma Fund’s A, B and E classes or an annual Incentive Fee (or Incentive Allocation) of 20% of the net realized and unrealized capital appreciation attributable to each capital account or series of shares owned by investors in the Paloma Fund’s C and D classes. The Paloma Fund’s administrator calculates the amount of the applicable Management Fee or Incentive Fee (or Incentive Allocation). The Management Fee or the Incentive Fee (or Incentive Allocation) for certain investors are (and may in the future be) subject to a waiver, reduction or rebate, or used (in part) to compensate a placement agent (to the extent applicable). Fees and compensation paid or allocated to Paloma Advisors are generally deducted from the assets of the Paloma Fund.

FUND EXPENSES

Each feeder fund will bear its own expenses and its proportionate share of the Master Fund’s expenses. These will include, without limitation, (i) on a direct basis, any fees payable by the feeder fund, organizational expenses of the feeder fund and operating expenses of the feeder fund, and (ii) on an indirect basis, similar fees and expenses incurred at the Master Fund (and any SPV Master Fund) as well as investment-related expenses of the Master Fund (and any SPV Master Fund) (but only to the extent the feeder fund participates in such investment), including, but not limited to: (a) the Management Fee, (b) the Incentive Fee, (c) expenses relating to the research, due diligence and monitoring of actual and prospective trades and investments (whether or not consummated) and the clearance, settlement and consummation of trades and investments, (d) organizational and operating expenses (including, without limitation, third-party professional fees) relating to the creation, establishment, qualification, ongoing maintenance, reorganization, dissolution, winding-up or termination of a feeder fund or any other entity through, or in which, the feeder fund or Master Fund (or any SPV Master Fund) invests, (e) operational expenses (including taxes) and (f) any expenses related to a particular expense item listed above. The following is a more detailed description of these Fund Expenses:

Expenses relating to the research, due diligence and monitoring of actual and prospective trades and investments (whether or not consummated) and the clearance, settlement and consummation of trades and investments, including, without limitation, the following: o investment sourcing fees; o fees and expenses related to research and market data (including, without limitation, information technology hardware, software or other technology used in obtaining or utilizing such research and market data, investment and industry research related expenses including subscription fees and expenses (e.g., Bloomberg and other data and research services), industry news, journals and other publications), which compensation may be performance-based; o expenses related to obtaining, processing and analyzing “big data” or “alternative data”; o costs related to security and custody of digital assets (including third-party wallet providers) and fees and expenses relating to technology hardware, software or other technology to acquire digital assets; o due diligence expenses, including, without limitation, consulting and appraisal fees; o investment and research-related travel expenses; o brokerage, prime brokerage and futures commission merchant fees, commissions and expenses (as explained further in Item 12); o expenses relating to reorganizations, restructurings and workouts; o expenses relating to short sales and securities borrowing;

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clearing and settlement charges, including exchange fees and ticket charges; custodial fees and expenses; bank service fees; interest expenses and fees related to financings or refinancings; expenses relating to investment-related litigation; fees and expenses of proxy research and voting services; management fees and expenses associated with the Master Fund's (or any SPV Master Fund’s) investments in certain securities (e.g. investments in shares issued by Exchange Traded Funds (ETFs), money market funds or mutual funds), as applicable; fees and expenses of third-party professionals, including, without limitation, consultants, investment bankers, attorneys and accountants; expenses relating to due diligence, enhanced reporting and/or compliance in respect of the feeder fund or the Master Fund’s (or any SPV Master Fund’s) environmental, social and governance considerations; expenses related to identifying and recruiting Portfolio Managers (including finders’ fees), as well as management and performance-based compensation payable to Trading Teams and in respect of the Master Fund’s (or any SPV Master Fund’s) investments in Portfolio Funds (see “Trading Team Compensation” below); and other fees or compensation, expenses, advances, draws or start-up expenses that may be negotiated with Portfolio Managers in connection with the Master Fund’s (or any SPV Master Fund’s) investments in Portfolio Funds (including expenses charged on a passthrough basis).

Organizational, professional services fees and operating expenses relating to the creation, establishment, qualification, ongoing maintenance, reorganization, dissolution, winding-up or termination of a feeder fund or any other entity through, or in which, the feeder fund or Master Fund (or any SPV Master Fund) invests.

Operational expenses, including, without limitation, the following: o legal, tax, regulatory (e.g., filing fees), administrative (e.g., administrator fees and expenses), and audit fees and expenses; o costs associated with the preparation and distribution of investor reports and other communications; o expenses incurred in connection with the offering and sale of shares or interests (including regulatory filings, travel and entertainment expenses and fees payable to any placement agent) and other similar expenses related to the Paloma Fund; o taxes;

o expenses incurred in connection with negotiating and complying with the provisions of any side letter; o extraordinary expenses, including, without limitation, indemnification expenses and expenses relating to insurance (including directors’ and officers’ insurance and errors and omissions insurance, and coverage for each member of the advisory committee); o fees and expenses of the feeder fund’s (and Master Fund’s or any SPV Master Fund’s) directors or officers (including AML officers or advisory committee members (if applicable), including all travel, hotel and other expenses incurred in attending board and shareholder meetings; o fees and expenses incurred in connection with any tax audit by any relevant authority, including, without limitation, any related administrative settlement and judicial review; and o fees and expenses incurred in connection with all other inquiries, investigations, audits, subpoenas, enforcement actions and private litigation relating to the feeder fund, Master Fund, an SPV Master Fund or any trading subsidiary (e.g., SEC, DOJ, FCA and stock and futures exchanges) incurred by PPMC and/or any Trading Team. Fund Expenses also include any expenses related to a particular expense item listed above (including periodic fees and charges, taxes, surcharges, penalties, assessments, costs or fees (including late fees), consulting fees, repair, replacement and maintenance costs, delivery charges, costs of physical and electronic security, and warranty expenses.

PASS-THROUGH EXPENSES – GENERAL

In addition to Fund Expenses (described above), a feeder fund (and therefore its investors) will be responsible for its proportionate share of all or substantially all of the expenses of PPMC, including overhead and employee compensation, organizational expenses and operating expenses (all of which are, and are expected to continue to be, considerable). This expense pass through arrangement with PPMC differs from that of most other private fund structures (where the adviser typically receives a management fee in lieu of reimbursement for its overhead and similar expenses). In this instance, Paloma Advisors (or its designees) receives the Management Fee or the Incentive Fee (or Incentive Allocation), as applicable, and PPMC receives a reimbursement of all or substantially all of its operating and other expenses (note that PPMC is not entitled to receive a management fee or any incentive compensation from the Paloma Fund).

This arrangement presents the potential for certain conflicts of interest including:

This expense pass through arrangement may not provide an adequate incentive for PPMC to reduce, manage or limit its expenses (including compensation expenses of employees and third-party consultants or vendors). This could result in investors in the Paloma Fund indirectly paying a greater amount in expenses than would be the case if all or some of its expenses were not passed through to investors but rather had to be covered by a “fixed” fee with respect to the services provided.

Many categories of PPMC Expenses (discussed below), which are borne by the Paloma Fund, are determined by Paloma Management without an “arm’s length” negotiation with any third party, and there is no limitation on the amount of PPMC Expenses that may be charged to the Paloma Fund. PPMC Expenses are not subject to approval by investors, or by independent third parties.

Prospective investors should consider the advantages and disadvantages of this expense pass through arrangement and should assess the potentially significant financial impact of it. PPMC Expenses. All or substantially all PPMC Expenses are passed through to investors. “PPMC Expenses” include, but are not limited to: o employee related expenses, including all direct and indirect base compensation, salaries, bonuses, (including sign-on, launch, deferred compensation (which may be paid in year(s) following the year of grant), make whole, retention, guaranteed and formulaic bonuses of any kind), wages, payroll taxes and processing, unemployment insurance, severance, overtime, benefits (e.g., medical, health insurance, life insurance, disability income insurance, flexible spending/dependent care plan and other benefits), retirement plan (including 401k matching), on-site fitness center (including equipment purchase, repair and maintenance), reimbursement for professional and workplace training and education expenses (including travel and meal expenses), temporary help, placement fees, recruitment expenses (including finders’ and placement agent fees), “buyout” or breakage expenses, relocation expenses, background checks, visa and green card expenses (e.g., including recruitment-related travel, lodging, meals and entertainment costs, retainers and commissions paid to recruiters and legal expenses incurred in connection with the hiring or termination of any personnel), and all other employment compensation payable to Employee Trading Teams (including performance-based compensation) (see “Trading Team Compensation” below); o licensing and industry associations/professional organization membership fees and expenses;

o professional services expenses, including engagement of consultants (including consultants who are employees of affiliated entities of Paloma Management) and other external advisors and service providers (e.g., legal, tax, compliance, audit, accounting, corporate administration, programming, information technology, cyber-security, trade surveillance, facilities, marketing and media relations) for the benefit of PPMC or Paloma Advisors; o disaster recovery expenses; o facilities and overhead expenses, including rent (and security deposits if applicable) and other costs associated with providing credit support for office space for PPMC and any subsidiaries or branch offices (which includes ancillary space and facilities such as storage, pantries, lounge and meeting spaces, fitness centers, etc.), utilities, insurance premiums and any indemnification obligations (including directors’ and officers’ insurance and errors and omissions insurance), office cleaning (including maintenance staff and supplies), office design, office improvements and repairs, construction, moving expenses, back-up power, office furniture, fixtures and equipment, office supplies, mail and delivery fees and expenses (e.g., overnight delivery, messengers, postage), offsite storage fees and expenses and any supplies, maintenance fees/expenses and taxes (e.g., property taxes and sales and use taxes) related to PPMC’s operations, facilities or overhead, and costs related to any loan, note or other financing or borrowing transaction related thereto; o expenses related to information technology, such as hardware, software, supplies and services, including computers, trading screens, servers, peripheral devices, data storage, data management, scanners, printers, projectors, networking hardware and accessories, data center equipment (e.g., racks and cabling) capacity and services, tutorials, licenses and maintenance and upgrades, recovery services, software/website development and support, installation and configuration, custom development, managed services (e.g., computer, telecom, network equipment and systems), information security and cybersecurity, publications (e.g., research subscriptions, books and training), computer repair, maintenance and help desk, including fees paid to service providers providing any such services; o expenses related to trading, portfolio management, order management, risk management and similar systems and any related hardware, software, data, supplies and services; o expenses related to software to support treasury functions; o communications expenses, including telephone/internet equipment, lines, cable TV equipment and services, cellular equipment (i.e., smartphones), and any service plans, associated repairs, parts and maintenance; o investor relations, marketing and offering expenses, including travel expenses (described below), meals, development, printing and distribution costs of marketing and investor relations materials and marketing event fees;

o travel and entertainment expenses and related costs including, without limitation, any type or class of transportation (including costs associated with rail or air tickets, luggage handling, travel agents, rental cars, car services and taxis, tips, gas, mileage, parking and tolls), hotel costs, conference registration fees and costs associated with speaking engagements (as applicable), travel visas, entertainment and regular and extraordinary meals (in each case, including, without limitation, in connection with firm-sponsored offsite activities, off-site team building activities, continuing education, business meetings, industry meetings or seminars, recruiting, due diligence, marketing or investor relations purposes). o all expenses and costs (including those related to third-party services) associated with preparing and making regulatory and compliance filings on behalf of PPMC, Paloma Advisors, the feeder funds or the Master Fund (including, without limitation, Forms 13D, 13F, 13G and 13H, Form CPO-PQR, Form PF, Form ADV, Annex IV and other AIFMD-related filings, MiFID II and any other regulatory filings in the U.S. and/or governmental non-U.S. jurisdictions which may arise); o any other fees and expenses incurred in connection with any transactions, engagements or potential engagements (including initial technological or operational buildout and related expenses in connection with the engagement of a Trading Team or other personnel of PPMC or PPA, whether or not such engagement is ultimately consummated), or other agreements (including financing arrangements) entered into by PPMC on behalf of Paloma Management, the feeder funds or Master Fund including, among other things, Employee Trading Teams; o operational and organizational expenses of PPMC (including, without limitation, thirdparty professional fees) relating to its creation, establishment, qualification and reorganization; o business entertainment expenses; o food and beverage-related expenses (e.g., costs associated with office pantry, catering for business meetings, food, supplies and related equipment and regular and extraordinary meals); o any expenses related to a particular expense item listed above (including periodic fees and charges, taxes, surcharges, penalties, assessments, costs or fees (including late fees), consulting fees, cost of repair, replacement and maintenance costs, delivery charges, costs of physical and electronic security, and warranty expenses); and o fees and expenses related to regulatory compliance obligations related to or incurred by PPMC or any of its clients, including, without limitation, software, services and similar applications, reviews and evaluations, services from information and data providers, systems integration and similar services.

Allocations of PPMC Expenses. Paloma Management generally will seek to allocate PPMC Expenses (including Employee Trading Team compensation, and the compensation, salary and bonuses of any PPMC employee who dedicates significant time to any non-Fund business) fairly and equitably among the Paloma Fund and any other clients (or among the feeder funds that invest in the Master Fund) based upon certain estimates and assumptions that Paloma Management believes are reasonable and appropriate, but which may be imprecise and may result in the Paloma Fund (or a particular feeder fund) bearing a larger portion of such expenses than if they were calculated in a different manner. (Currently, the Paloma Fund generally bears substantially all costs and expenses of PPMC.) In determining the allocation of expenses in connection with the activities of PPMC, the need to allocate common expenses may present a conflict. Paloma Management will attempt to mitigate such conflicts by making allocations and other judgments on a basis that it believes to be fair and equitable under the circumstances, although it may not be possible to fully or partially mitigate each such conflict, and such conflicts will not necessarily be resolved in favor of the Paloma Fund (and therefore its investors). Reimbursement of Expenses. To the extent that expenses to be borne by the Paloma Fund are paid by Paloma Management, Paloma Management will generally seek reimbursement for such expenses from the relevant Paloma Fund entity. A decision by Paloma Management to not seek reimbursement for such expenses in one instance will not preclude Paloma Management from seeking reimbursement from the Paloma Fund for such expenses in another instance or from the Paloma Fund bearing such expenses in the future. For purposes of this section the words “include” or “including” shall mean “include, without limitation” or “including, without limitation,” as appropriate. The foregoing expenses may be revised by Paloma Management from time to time in its sole discretion. Further, the foregoing expenses are in addition to fees and expenses specifically described elsewhere in the Fund Documentation.

TRADING TEAM COMPENSATION

External Trading Teams. Each External Trading Team generally receives asset-based or fixed compensation (a “Trading Team Fee”), which is generally negotiated annually by Paloma Management with such External Trading Team,”) and performance-based compensation. Compensation terms for External Trading Teams may also include, among other terms, advances and sign-on bonuses (or equivalent concepts) and will depend on what Paloma Management believes is necessary to engage and retain an External Trading Team. Performance-based compensation payable to an External Trading Team is usually adjusted for a hurdle rate of return and/or a high water mark (either of which may be waived or modified by Paloma Management if it believes it is necessary to engage or retain an External Trading Team). In addition,

the Trading Team Fee and performance-based compensation payable to an External Trading Team may be guaranteed for a specific period and may be modified or renegotiated in the discretion of Paloma Management. Any increase to the Trading Team Fee or performance-based compensation may be effected through one-time additional payments. Alternatively, changes to the Trading Team Fee or performance-based compensation may be effected through an amendment to the Trading Team’s agreement. Performance-based compensation is generally calculated by the Paloma Fund’s administrator based on the negotiated percentage of the External Trading Team’s net profits. While such percentage is not usually expected to exceed 20%, it may be greater for some External Trading Teams (and could be significantly greater) and often exceeds 20% in the case of algorithmic strategies. In certain cases, the Trading Team Fee negotiated for an External Trading Team may be calculated by reference to the portion of the net asset value of such External Trading Team’s portfolio. Employee Trading Teams. Employee Trading Teams generally receive a salary and a bonus, which may be guaranteed for a specific period, and may be modified or renegotiated in the discretion of Paloma Management. The bonus is generally calculated on the basis of performance, but may be discretionary. Employee Trading Teams also receive other compensation (such as employee benefits and retirement plan contributions), as described above in “PPMC Expenses”. Trading Team Compensation Generally. Performance-based compensation paid to a Trading Team (or any sub-team thereof) generally is expected to be based solely on that Trading Team’s (or subteam’s) performance (in the event that a Trading Team (or sub-team) advises more than one portfolio, performance-based compensation will generally be calculated by portfolio). Therefore, the Master Fund may (and likely will) pay bonuses (to an Employee Trading Team) and/or performancebased compensation (to an External Trading Team) for positive performance that is measured at a sub-account level even if the Master Fund’s overall performance is negative. Accordingly, prospective investors should be aware that the fact that losses attributable to one Trading Team (or sub-team thereof) generally will not offset positive performance of another Trading Team (or another sub-team of such Trading Team), and can result in higher overall bonuses (to an Employee Trading Team) and/or performance-based compensation (to an External Trading Team) being paid to Trading Teams (or any sub-team thereof) than had bonuses and/or performance-based compensation been based on the Master Fund’s overall performance. Performance-based compensation payable to a Trading Team will typically be reduced or offset by the Trading Team Fee or other compensation or expenses (or a portion of those amounts) incurred on behalf of, advanced to, or otherwise allocated to such Trading Team (including draws or start-up expenses) (collectively, the "Offset Expenses"). For the avoidance of doubt, not all expenses are Offset Expenses. If a Trading Team does not generate sufficient bonuses or performance-based compensation to cover the amount of any such Offset Expenses, the Master Fund will not be able to recoup or offset those Offset Expenses in part or in full.

As described above, all direct and indirect amounts owed to or incurred on behalf of Trading Teams (which includes External Trading Teams as well as Employee Trading Teams) are borne, indirectly, by the Paloma Fund (and therefore investors), except for the Offset Expenses, based on the terms negotiated in such Trading Team’s agreement, which terms may vary in respect of each Trading Team. Administrative service expenses do not generally offset profits when computing Trading Team performance-based compensation. This means that all or substantially all of the PPMC administrative service expenses/PPMC general expenses are borne directly by the Paloma Fund’s investors as such expenses do not reduce the compensation payable to any Trading Team. Administrative service expenses include compensation (salary, benefits & discretionary bonus) for Paloma Management’s non-investment staff and certain operating expenses attributed to non-investment staff (including, but not limited to, occupancy, office expenses, computer supplies, software and maintenance, insurance, investment research and quotation services for non-investment staff). Timing of PPMC Expenses; Prepayment of Certain PPMC Expenses. Paloma Management will determine the timing of charging PPMC Expenses to the Paloma Fund, including whether to cause the Fund to pay Paloma Management for certain estimated PPMC expenses before Paloma Management has paid such expenses. Paloma Management’s determinations will be based on a methodology that Paloma Management, in its sole discretion, believes to be fair and equitable after considering the nature of the expense and related accounting conventions. The Paloma Fund will generally only pre-pay estimated PPMC expenses for the upcoming fiscal month. If Paloma Management causes the Fund to pay for such estimated expenses prior to Paloma Management’s paying such expenses, Paloma Management generally will pay such expenses promptly when due. To the extent Paloma Management charges PPMC expenses to the Fund for anticipated expense items that are cancelled, Paloma Management will reallocate such amounts to offset other PPMC expenses as soon as practicable. The timing of when PPMC expenses are accrued or charged to the Fund may result in the Fund’s net asset value diverging from the net asset value of the Fund as it would be calculated and reported in accordance with GAAP. The timing of accruals or charges with respect to certain PPMC expenses, including Employee Trading Team compensation, and the compensation, salary and bonuses of any PPMC employee, may affect the Net Asset Value of each investor’s interest/shares differently based on the timing of each such investor’s investment in, or redemption from, the Fund. Accrued PPMC expenses will reduce the amount of proceeds payable to a shareholder upon its redemption from the Fund (even if such expenses are subsequently reversed, such reversals inuring to the benefit of all current investors).

PORTFOLIO FUND MANAGER COMPENSATION GENERALLY

The Master Fund’s investment in a Portfolio Fund is subject to that Portfolio Fund’s asset-based and performance-based compensation, as well as a share of that Portfolio Fund’s expenses (which in certain cases may include other fees or compensation, expenses, advances, draws or start-up expenses that may be negotiated with a Portfolio Manager in connection with the Master Fund’s (or any SPV Master Fund’s) investments in a Portfolio Fund) A Portfolio Fund’s expenses may be charged on a pass-through basis.

LOSSES

Performance-based compensation is payable to each Portfolio Manager based solely on its own performance. A Portfolio Manager with positive performance is entitled to receive performancebased compensation even if the overall performance of the Paloma Fund is negative. If a Portfolio Manager suffers net losses during the year, the losses are generally carried forward and past losses generally must be made up before performance-based compensation becomes payable in subsequent years (unless subject to a modified structure as determined by Paloma Management). There is generally no “carry back” or “claw back” of losses to permit recouping of performance-based compensation from prior years.

PALOMA ADVISORS – MANAGEMENT FEE

Management Fee. (for Class A, Class B, and Class E investors): Generally, each feeder fund pays a management fee (the “Management Fee”) to Paloma Advisors (or its designees) at an annualized rate of 1.5% with respect to the capital account or net asset value of shares owned by each Class A investor, Class B investor and Class E investor (unless otherwise waived or reduced pursuant to certain exceptions described below). The Management Fee is paid monthly in arrears following the month for which it was earned. Incentive Fee. (for Class C and Class D investors): Generally, at the end of each calendar year, an amount equal to 20% of the net realized and unrealized capital appreciation attributable to each capital account or series of shares owned by Class C investors or Class D investors (the “Incentive Fee”) will be paid to Paloma Advisors (or its designees), subject to a “Loss Recovery Account” (i.e., a “high water mark”) and other adjustments, all of which are more fully described in the Fund Documentation. If an investor withdraws all or any portion of the balance of its capital account related to a Class C interest or Class D interest or its Class C shares or Class D shares other than at calendar year-end, an Incentive Fee will be determined as of the Withdrawal Date with respect to the withdrawn amount (as if it were the last day of the calendar year), and paid to Paloma Advisors (or its designees). In certain limited circumstances more fully described in the Fund Documentation, a Class C investor or a Class D investor may be subject to an incentive allocation (the “Incentive

Allocation”) in lieu of an Incentive Fee with respect to particular investments.

ADDITIONAL EXPENSES RELATED TO PALOMA FUND CLASS B and D INVESTORS

Class B and Class D investors in the Paloma Fund are subject to a Liquidity Capital Account Reduction 1 at an annualized rate (depending on the value of the capital account balance) of either 0.25% or 0.50% of the relevant capital account balance. The Liquidity Capital Account Reduction will be credited on a pro rata basis to the capital account balances of investors electing an annual withdrawal cycle up to the amount of expenses borne by such investors. Any excess Liquidity Capital Account Reduction is payable to Paloma Advisors. The Liquidity Capital Account Reduction is applied monthly in arrears.

ADDITIONAL EXPENSES RELATED TO THE HEDGE CURRENCY SHARE CLASSES

Investors in non-US dollar share classes will bear the costs incurred in connection with hedging the applicable currency risk exposure including, without limitation, potential lost opportunity costs related to collateral or other requirements necessary to engage in the hedging activity (which may effectively reduce the amount of capital utilized by the relevant feeder fund for its investment program). Trade errors in respect of hedge currency share classes are allocated only to the subclasses of the investors participating in the related currency hedging activity.

COMPENSATION RECEIVED FROM AFFILIATED PORTFOLIO FUNDS

The Paloma Fund currently invests, and may in the future invest, in affiliated Portfolio Funds (such as the China Funds (as described below). While the Master Fund pays all fees and expenses (including management and performance-based compensation) charged by New China Capital Management Corp. (the “China Managers”) pertaining to investments in the China Funds, to address the conflict of interest related to the receipt of compensation from both the Paloma Fund and the China Funds for the same capital (i.e., double fees), Paloma Advisors waives the Management Fee and the Incentive Fee in respect of the Paloma Fund’s investments in the China Funds. Please see additional disclosures related to investments in affiliated Portfolio Funds included in ITEM 10 and in Fund Documentation.

Investors in the offshore feeder funds are subject to a Liquidity NAV Reduction, which reduces the net asset value of the shareholders’ shares with a quarterly redemption cycle at the same rate as the Liquidity Capital Account Reduction reduces onshore investors’ capital account balances.

FEE WAIVERS/REDUCTIONS

Paloma Advisor’s may elect to negotiate Fund fees and reduce, waive, calculate differently, or provide rebates on: (i)

Paloma Advisors’ Management Fee or the Incentive Fee (or any applicable Incentive Allocation) with respect to certain investors, including, without limitation, investors that are partners, affiliates, or current and former employees of Paloma Management, members of the immediate families of those persons and trusts or other entities for their benefit, strategic or large investors, or in connection with solicitation arrangements with placement agents and asset aggregators.

(ii)

The Liquidity Capital Account Reduction with respect to certain investors, including, without limitation, strategic or large investors, or in connection with solicitation arrangements with placement agents and asset aggregators (but not investors that are partners, affiliates or employees of Paloma Management, members of the immediate families of those persons and trusts or other entities for their benefit).

Paloma Management may (but currently does not) provide investment advice to other clients, including other private funds or separately managed accounts. The minimum initial investment in the Paloma Fund is generally $5,000,000 for Classes A, B, C and D and $300,000,000 for Class E, which may be waived at the discretion of Paloma Management for the onshore feeder fund or the Board of Directors for the offshore feeder funds, as applicable.

The Paloma Fund may employ additional strategies, or variations of these strategies without advance notice to investors. Additional strategies and variations of strategies may involve higher levels of risk.

Depending upon the investment strategies employed and market conditions, the Paloma Fund may be adversely affected by unforeseen events involving such matters as changes in interest rates, liquidity (ability to transact), the credit status of an issuer, forced withdrawals of securities, break-up of planned mergers, unexpected changes in relative value, short squeezes, an inability to short stock, changes in tax treatment or market disruptions, among others. All strategies carry a risk of loss. Certain risks are inherent, or more likely to impact a particular strategy or transaction, while other risks are related to the markets in which the Paloma Fund trades or the instruments are traded. Market risk is inherent in all securities investments to varying degrees, and there can be no assurance that the investment objective of the Paloma Fund will be achieved. Certain investment practices may increase the risk profile of the Paloma Fund. The Fund’s activities could result in substantial losses (including the complete loss of capital) under certain circumstances. While Paloma Management currently expects that Portfolio Funds as well as the Paloma Fund will primarily engage in these types of strategies, the Paloma Fund and Portfolio Funds may engage in investment strategies and trade in financial instruments that are not described in this Brochure. These descriptions do not in any way limit the Fund’s or Portfolio Funds’ investment activities. Credit Relative Value Investment Strategies are designed to identify attractive long and short opportunities in corporate, asset backed and mortgage backed securities (including senior and subordinated claims as well as bank debt and other outstanding debt obligations). Portfolio Managers may seek to take advantage of idiosyncratic opportunities on both the long and short sides. Strategies may also have exposure to government, sovereign, equity, convertible or other obligations. Portfolio Managers may employ fundamental credit analyses focused on valuation, asset coverage and quality of collateral. In most (but not all) cases portfolio exposures are concentrated in publicly traded instruments, albeit with varying degrees of liquidity. Algorithmic Strategies use quantitative methods and statistical models which seek to identify mispricings among securities and futures based on various metrics such as deviations from equilibria, momentum, pattern recognition, volume, or flow-driven momentum and factors underlying security price variations. The frequency of trading varies by model, but may be high. These portfolios may have directional exposure but generally seek to generate returns with minimal correlation to directional moves in major markets. Fundamental and Directional Strategies measure the intrinsic value of a security by looking at economic and financial factors (including the overall economy, industry conditions, and the financial condition, prospects and management of a company itself) to determine if a company is underpriced (indicating it may be a good time to buy) or overpriced (indicating it may be time to sell).

Commodities Strategies trade commodities, futures, options, or derivatives on agricultural and energy products, metals and minerals, among others, based on technical and fundamental analysis of relevant markets. Investments can also include the equity of companies that produce, process, convert, transport and service commodities. Volatility and Correlation Strategies trade derivatives (typically derivatives in which optionality plays a role) that are linked to the realized or implied volatility of an asset or basket of assets, or to the correlation of one or more assets. Fixed Income Strategies typically include long and short credit positions based on quantitative or qualitative analysis of various fixed income securities to capture inefficiencies in the relative pricing of similar instruments. Instruments traded typically include bonds (including fixed, floating rate and zero coupon bonds), sovereign debt, interest rate swaps, futures contracts, forward contracts, government sponsored agency debt, mortgage backed securities, asset backed securities or related derivatives. These strategies may have significant directional exposure to take advantage of market dislocations. High Yield Strategies trade and invest in credit derivatives, bank debt, senior and subordinated bonds, equity or other securities of unrated or below investment grade issuers based on an assessment of fundamental values. Capital Structure Strategies seek to exploit pricing inefficiencies and informational asymmetries through a diversified portfolio of offsetting long and short positions within companies’ capital structures. Investments can include bank debt, convertible and non-convertible senior and subordinated debt, and preferred and common stock of one or more companies. Convertible Securities Strategies seek to exploit price differentials (spreads) between convertible securities and the underlying security. Instruments traded typically include bonds, preferred and common stock, and derivatives. Long/Short Strategies seek to generate alpha and mitigate correlation to major market directional movements by establishing long and short positions in securities, indices, ETFs or baskets of securities. These strategies can either be market neutral or have some directional exposure. Distressed Strategies generally invest in the securities and other assets of issuers in weak financial condition (perhaps having a negative net worth), experiencing poor operating results, needing substantial capital investment, facing special competitive or product obsolescence problems, or involved in various stages of bankruptcy or reorganization proceedings.

Event Driven, Special Situation and Merger Arbitrage Strategies involve investments in opportunities created by certain current or expected events or special situations and may involve a long or a short view with respect to an issuer depending on the anticipated outcome of particular events or transactions. The strategies trade in the securities of publicly traded companies in announced or prospective mergers, acquisitions, cash tender-offers, exchange offers, corporate recapitalizations or other corporate actions, including the anticipation of such events occurring in the future. These strategies may also trade in sovereign securities. Activist Strategies seek to make investments for the purpose of influencing the management of a company (which may take a cooperative or hostile approach) to realize value through, for example, going private transactions, management changes, divestitures or acquisitions. These strategies typically involve acquiring a substantial ownership stake in an issuer either alone, or in conjunction with others. Investments in Private Equity/Private Placements are medium to long-term investments in private companies that are not publicly traded securities. In addition to purchasing a company’s equity, investments may be in mezzanine debt or other types of financing. Exit transactions from these investments typically involve, but are not limited to, initial public offerings (after which time, the Fund’s interests may be subject to transfer restrictions for periods of time) or private sales of the Paloma Fund’s investment. Investments in Initial Public Offerings Investments in initial public offerings (or shortly thereafter) may involve higher risks than investments issued in secondary public offerings or purchases on a secondary market due to a variety of factors, including the limited number of shares available for trading, unseasoned trading, lack of investor knowledge of the issuer and limited operating history of the issuer. In addition, some companies in initial public offerings are involved in relatively new industries or lines of business, which may not be widely understood by investors. Some of these companies may be undercapitalized or regarded as developmental stage companies, without revenues or operating income, or the near-term prospects of achieving them. These factors may contribute to substantial price volatility for such securities and, thus, for the value of an investment in the Paloma Fund. Investments in “new issues” may subject the Paloma Fund to Rule 105 of Regulation M promulgated under the Exchange Act (“Rule 105”). Absent an exemption and subject to certain limited exceptions, Rule 105 prohibits the Paloma Fund from purchasing securities in any firm commitment, underwritten follow-on or secondary offering of equity (or equity-linked) securities for cash when an account of the Paloma Fund has effected short sales in such securities within a “restricted period” prior to the pricing of the offering. If the Paloma Fund cannot meet an exemption to Rule 105, this will result in restrictions in the Paloma Fund’s trading activity, and may adversely impact the results of the Paloma

Fund. Certain Members may not share or may be limited in their participation in profits and losses attributable to “new issues”. Under applicable FINRA rules, certain persons (including persons associated with a broker-dealer, portfolio managers, executive officers and directors of public companies and certain family members of such persons) may be “restricted” with respect to their participation in new issues. Paloma Management reserves the right to vary its policy with respect to the allocation of profits and losses attributable to new issues as it deems appropriate for the Master Fund (or any SPV Master Fund) as a whole, in light of, among other things, existing interpretations of, and amendments to, the applicable FINRA rules and practical considerations, including administrative burdens and principles of fairness and equity. Investments in Real Assets are typically opportunistic investments in physical, tangible assets which may include: commodities, equipment, natural resources or property. These investments may be longer-term investments. Macro-Economic Strategies seek to profit by capturing market movements across a global universe of investment opportunities, such as equity, currency, commodity and fixed-income markets, based on a broader economic analysis than would be used for the purchase or sale of specific securities. These strategies may be directional and seek to exploit mispricings across markets and geographies. Fund-Level Hedging Strategies seek to limit the exposure of the Paloma Fund to rapid, adverse changes in the market environment and to “tail risks.” However, Paloma Management is not obligated to hedge any specific risk and may elect not to hedge against certain risks or to alter the extent to which the Paloma Fund is hedged from time to time. Foreign Exchange Strategies seek to capitalize on opportunities present in the global currency market by capturing relative valuation of different currencies or benefiting from opportunities arising from foreign exchange volatility. Investments in Developing or Emerging Markets or Asian Markets may utilize any or all of the strategies described herein. Investments in Virtual Currency Spot Transactions and Virtual Currency Derivatives are typically investments in in Bitcoin, Ethereum and similar digital assets and cryptocurrencies (collectively, “Digital Assets”), and futures or options on futures on a Digital Asset.

DISCLAIMER The following is a summary of certain risks associated with the types of securities that Paloma Management and/or Portfolio Managers primarily recommend to the Paloma Fund (or the Portfolio Funds in which the Paloma Fund invests). The information included below does not include every potential risk associated with every investment strategy or security. Investors and prospective investors in the Paloma Fund are urged to ask questions regarding risk factors applicable to a particular investment strategy or security, read all product-specific risk disclosures (for example, the Fund Documentation) and determine whether a particular strategy or type of security is suitable for their account in light of their circumstances, investment objectives and financial situation. Investing in securities involves risk of loss, possibly a total loss of invested capital that investors should be prepared to bear. Investors and prospective investors should also read Fund Documentation for additional risks, including but not limited to, market and operational risks which are not included below. There is no guarantee that the Paloma Fund’s investment program, including, without limitation, its investment objectives, strategies, or risk monitoring goals will be successful. Investment results may vary substantially, including on a monthly, quarterly and annual basis. Investments in the Paloma Fund are speculative and involve a high degree of risk. There may be risks which cannot be monitored or controlled, and risks that may be greater than forecasted, especially in unusual market conditions. Paloma Management cannot guarantee that any assumptions relied on herein will be true for all future events or that all assumptions have been considered or stated.

CERTAIN RISKS RELATED TO INVESTMENT STRATEGIES, INVESTMENTS, AND TRADING

No Fixed Strategy, Instruments, Markets, Sectors or Issuer Weightings: The Paloma Fund will opportunistically implement whatever strategies or discretionary approaches Paloma Management believes from time to time may be suited to prevailing market conditions. The risks associated with such strategies may be different from those described herein. There can be no assurance that Paloma Management will be successful in selecting any such strategy or discretionary approach and that losses will be avoided. Although the diversification of the Paloma Fund’s investments among a variety of strategies is intended to reduce the Paloma Fund’s exposure to adverse events associated with specific companies, industries, asset types, strategies or markets, the amount of that diversification may be limited. As a result, the Paloma Fund’s assets may become highly concentrated within a particular company, industry, asset type, strategy or market at any given time, and the Paloma Fund will therefore be more susceptible to fluctuations in value resulting from adverse economic conditions affecting the performance of a particular company, industry, asset type, strategy or market than would be the case for a less concentrated portfolio.

Discretion of Paloma Management; New Strategies and Techniques: Paloma Management has complete discretion in the types of financial instruments that the Paloma Fund may trade and has the right to modify, and will modify, the trading strategies or hedging techniques of the Paloma Fund without notifying investors or seeking their consent. Any of these new trading techniques may not be thoroughly tested in the market before being employed and may have operational or theoretical shortcomings that could result in unsuccessful trades and, ultimately, losses to the Paloma Fund. In addition, any new investment strategy or hedging technique utilized by the Paloma Fund may be more speculative than earlier techniques and may increase the risk of an investment in the Fund. Testing of New Strategies: To the extent Paloma Management uses a new strategy or method in respect of the Paloma Fund, Paloma Management cannot necessarily predict how such new strategy or method will perform, and, as a result, the Paloma Fund (and the Members’ investments in the Fund) may suffer losses, which could be significant, by pursuing it. In addition, a newly-engaged Trading Team may use the Paloma Fund’s assets to test any such new strategies or methods during the onboarding of such Trading Team (and prior to Paloma Management’s allocation of capital to such Trading Team). Competition: There is currently, and will likely be, competition for investment opportunities with others having investment objectives and strategies like those of the Paloma Fund. The Paloma Fund also competes for investment professionals having expertise in those investment opportunities. If competition prevents or hinders the Paloma Fund’s ability to participate in certain investment opportunities or obtain the best investment professionals, the Paloma Fund’s performance may suffer. Algorithmic Strategies: These strategies are typically predicated on models designed around historical and anticipated price behavior and portfolio construction. As such, these strategies may not be successful if the models do not perform as anticipated or the market does not behave as expected. Perceived mispricings and predicted volatilities may fail to materialize as expected. Markets for certain investments traded in these strategies may be inefficient or illiquid and calculations within the models may involve significant uncertainties. There may be significant directional exposure to the volatility of one or more assets or the correlation of two or more assets. These strategies also typically employ significant leverage which magnifies gains and losses. Model-Based Trading: The Paloma Fund may use an investment strategy that is determined principally by the concepts included in a model and the recommendations generated by the model. The Paloma Fund is unlikely to be successful unless both the underlying assumptions of the model and the concepts utilized by the model are reliable. If such assumptions and concepts are unreliable, it is likely that the model will not generate profitable investment recommendations. The model may be more effective with certain investments than with others, and not all factors driving prices can be identified, much less quantified by the Portfolio Managers. Although the Portfolio Managers retain

all discretion with respect to the manner in which a trading system’s output is interpreted and applied, there can be no assurance that such Portfolio Managers’ trading systems and its interpretation and application of the trading systems’ output will take into account all relevant factors. Technical trading systems can also be ineffective when fundamental factors drive the prices of securities. Quantitative models may be ineffective or may contain human or electronic errors (in coding, inputs or otherwise) that are either not discovered, or if discovered not disclosed to Paloma Management. Reliance on Data Availability and Accuracy: Quantitative models rely on historical and current market and other data provided by third parties. Any interruption in the flow of data, or an inability to appropriately process, clean or analyze such data is likely to disrupt the Portfolio Manager’s ability to trade effectively. In addition, no assurance can be provided that the data supplied by third parties is accurate. There may be inaccuracies in such data and errors may be made in incorporating such data into models and analyses used. Investment decisions (including hedging decisions) made, or programming code, on the basis of inaccurate or incomplete information could have a material adverse impact on the Portfolio Manager’s ability to trade and may cause positions to be unintentionally liquidated and/or cause the Portfolio Manager to accumulate positions it would not have sought to accumulate with accurate data. It is not expected that investors will be notified when such issues occur. Furthermore, it is not possible for Portfolio Managers to integrate all relevant data into the quantitative models that are developed. Subjective decisions may be made regarding what data to integrate into its models. In making such determinations, Portfolio Managers may consider various factors, including the cost of obtaining such data, the technology cost of incorporating such data into the Portfolio Manager’s research and trading infrastructure, and the reliability of the third party providing such data. The acquisition and/or processing of data from third parties are significant components of the modelling utilized by Portfolio Managers and inaccuracies in such data could have a negative impact on a Portfolio Manager’s trading performance and, as such, a negative impact on the operating results of the Paloma Fund. Dependence on Technology: The Paloma Fund’s investment strategies rely heavily on automation and technology, including proprietary and third-party hardware and software. Portfolio Managers and Paloma Management use such hardware and software to provide investment advice to the Paloma Fund, including research, valuation, trade identification and construction, trade execution, clearing, risk management, back office functions and reporting. The performance of a Portfolio Manager and/or Paloma Management, and, therefore, the performance of the Paloma Fund, could be severely compromised by coding errors (including design and implementation errors), computer viruses, telecommunications failures, natural disasters, security breaches, software related “system crashes,” disruption or deterioration of services of third-party providers, terrorist attacks and similar events.

Such events might even cause computerized trading programs to generate trades or to execute trades many times the magnitude of, as well in the opposite market direction to, the transactions which were intended. Any event that interrupts the computer and telecommunications operations of the Paloma Fund’s Portfolio Managers or Paloma Management could result in, among other things, the inability of a Portfolio Manager or Paloma Management to establish, modify, liquidate, hedge or monitor the Paloma Fund’s investments and therefore could have a material adverse effect on the operating results of the Paloma Fund. Obsolescence Risk: The Paloma Fund’s systematic trading strategies are unlikely to be successful unless the assumptions underlying the Portfolio Manager’s and/or Paloma Management’s models used to implement those strategies are realistic and either remain realistic and relevant in the future or are adjusted to account for changes in the overall market environment. If such assumptions are inaccurate or become inaccurate and are not promptly adjusted, it is likely that profitable trading signals will not be generated. If and to the extent that the models do not reflect certain factors, and the Portfolio Managers and/or Paloma Management do not successfully address such omission through its testing and evaluation and modify the models accordingly, major losses may result. Models employed by the Portfolio Managers and/or Paloma Management in connection with its systematic trading strategies cannot fully match the complexity of the financial markets; accordingly, unanticipated changes in underlying market conditions can significantly impact such strategies’ performance. As market dynamics shift over time, a previously highly successful strategy may become outdated. Even without becoming completely outdated, a given strategy’s effectiveness may decay in an unpredictable fashion as other market participants adopt similar strategies or market dynamics shift. The Portfolio Manager’s and/or Paloma Management will continue to test, evaluate and add new models, as a result of which the existing models may be modified from time to time. There can be no assurance as to the effects (positive or negative) of any modification on the Paloma Fund’s performance. Strategy Exceptions and Hardware Failures: The development of trading systems is complex and involves financial, economic, econometric and statistical theories, research, and modelling, which are then translated into computer code. The Paloma Fund’s investment strategies may involve the development and/or use by Portfolio Managers or Paloma Management of software that is prone to risk of errors of implementation (e.g., “bugs” and classic coding errors), errors of design, errors resulting from the unexpected interaction of various code modules or systems, or other coding errors that may result in the execution of many unwanted trades (or, alternatively, the failure to place intended trades). These kinds of problems are collectively termed “Strategy Exceptions”. While there are methods to mitigate the incidence and impact of software errors, such as testing, changing management procedures, monitoring and automated risk checks, the decision as to when to utilize new software involves balancing the expected benefits of any change (which would call for

turning over the change quickly) with the risks that the software will contain errors (which would call for exhaustive testing). As such, there is risk that a Portfolio Manager or Paloma Management may turn over new software too quickly or too slowly, which could negatively impact the Paloma Fund. Paloma Management and/or Trading Teams generally test and evaluate new trading models prior to final production and implementation. Notwithstanding testing, there is always the chance that production models may contain code bugs or incorrect design, which could result in losses for the Paloma Fund. Coding errors and systemic risks from quantitative and algorithmic trading are inherent to certain of Paloma Management’s and/or certain Trading Teams’ strategies. From time to time, Portfolio Managers and/or Paloma Management may deploy new code with errors that could have been detected with more exhaustive or independent testing, although in such cases the Portfolio Manager and/or Paloma Management may nevertheless continue to believe that turning over the new code was the right decision given the risk-reward trade-off associated with the change. In addition, where a Portfolio Manager and/or Paloma Management believes that the benefit of rolling out a change outweighs the risk of not addressing (or even diagnosing the precise cause of) a known weakness, such Portfolio Manager and/or Paloma Management may deploy new code with known weaknesses. In such cases, it is possible that the Portfolio Manager’s and/or Paloma Management’s decision to deploy the change without addressing the known weakness will prove wrong in hindsight, and the Paloma Fund could be negatively impacted. Given the difficulty of detecting coding errors, some errors will go undetected for long periods of time and some will never be detected. Moreover, some coding errors will be detected but not fixed by the Portfolio Manager or Paloma Management immediately, or, possibly, at all, due to competing priorities and/or the perception that the impact of the error is not material. Although the Portfolio Manager and Paloma Management will generally make judgments about the perceived impact of discovered errors so as to appropriately prioritize the remediation of the errors with other business demands, the Portfolio Manager and Paloma Management may not perform a quantitative impact analysis on discovered coding errors. The Portfolio Manager’s or Paloma Management’s judgment could prove to be wrong, and a software error that such Portfolio Manager or Paloma Management chooses not to fix immediately, or chooses to fix at different times for different clients, could have a material impact on the Paloma Fund. In addition, as a mathematical model can be expressed in computer code in multiple ways, the choice of code ultimately used may not result in the best representation of the model. Similarly, with regard to trading, communication, development, programming, and other systems or equipment that a Portfolio Manager or Paloma Management operates, utilizes or relies upon, any or all of the following events may occur, even where Paloma Management, acting as a fiduciary, takes steps to select secure and satisfactory equipment and service providers: (i) failures of such systems or equipment, (ii) interruptions in access to or the operations of such systems or equipment; (iii) loss of functionality of such systems or equipment; (iv) degradation or corruption of such systems or

equipment; (v) compromises in the security or integrity of such systems or equipment; (vi) loss of power to such systems or equipment; and (vii) other situations that adversely affect such systems or equipment, however caused or occurring. These sorts of problems can result in losses for the Paloma Fund and are collectively termed “Hardware Failures”. The occurrence of Strategy Exceptions and Hardware Failures is inevitable given the Paloma Fund’s sophisticated and highly complex trading processes, and neither Strategy Exceptions nor Hardware Failures are deemed to be Trade Errors. As a result of the exculpation and indemnification provided by the Paloma Fund to Paloma Management, the Paloma Fund (and not Paloma Management) will be responsible for any losses (including additional trading costs) resulting from Strategy Exceptions or Hardware Failures, absent a violation of applicable standard of care. Investors should understand that they are assuming the risks (including any losses) associated with these errors when investing in the Fund if this is one of the Paloma Fund’s investment strategies. Paloma Management does not expect to disclose discovered coding errors to investors, and losses arising from coding errors will be borne by the Paloma Fund (and therefore investors). Relative Value Investments: The Paloma Fund has historically been active in relative value strategies. While Paloma Management believes relative value strategies add value to the Paloma Fund’s absolute returns, such strategies can have substantial exposure to certain market factors and there is no guarantee about how they will perform in various market environments. Fundamental or Directional Investments: The identification of investment opportunities in undervalued or overvalued securities is a difficult task, and there are no assurances that such opportunities will be successfully recognized. While these investments offer the opportunity for above-average capital appreciation, they also involve a high degree of financial risk and can result in substantial losses. There is a risk that the price of a security can move up or down along with the overall market regardless of the company’s economic and financial condition. Macro-Economic: Macro-economic based strategies depend on the ability to successfully exploit larger economic themes in highly liquid markets such as equity indices, bond futures, currencies, and commodities. These markets have the potential to adjust extremely quickly to new information and the Paloma Fund may not be able to exit a losing position until such adjustments have fully occurred, thus incurring a substantial loss. These strategies also typically employ significant leverage which has the potential to magnify gains and losses. Futures markets are also subject to regulations and limited trading which may prevent a position from being closed out when desired. Long/Short: The Paloma Fund will have both long and short positions in its portfolio, and the success of such positions will depend upon a Portfolio Manager’s or Paloma Management’s ability to identify and purchase securities that are relatively undervalued and identify and sell short securities that are relatively overvalued. The identification of long and short investment opportunities is a difficult task,

and there are no assurances that such opportunities will be successfully recognized or acquired. The failure of any perceived opportunities underlying the Paloma Fund’s positions to converge toward, or to diverge further from, values expected by a Portfolio Manager or Paloma Management could have a material adverse effect on the performance of the Paloma Fund. In the event of market disruptions, the performance of the Paloma Fund could be materially adversely affected which may force a Portfolio Manager or Paloma Management to close out one or more of the Paloma Fund’s positions. Furthermore, the valuation models used to determine whether a long or short position presents an attractive opportunity may become outdated and inaccurate as market conditions change. Short Selling: General Risk The success of the Paloma Fund’s short selling investment strategy depends upon Paloma Management’s ability to identify and sell short securities that are overvalued. A short sale creates the risk of a theoretically unlimited loss, in that the price of the underlying security could theoretically increase without limit, thus increasing the cost to the Paloma Fund of buying those securities to cover the short position. Borrowing and Counterparty Risk There can be no assurance that the Paloma Fund will be able to maintain the ability to borrow securities sold short. In such cases, the Paloma Fund can be “bought in” (i.e., forced to repurchase securities in the open market to return to the lender). There also can be no assurance that the securities necessary to cover a short position will be available for purchase, at or near prices quoted in the market. Purchasing securities to close out a short position can itself cause the price of the securities to rise further, thereby exacerbating the loss. Even though the Paloma Fund secures a “good borrow” of the security sold short at the time of execution, the lending institution may recall the lent security at any time, thereby forcing the Paloma Fund to purchase the security at the then-prevailing market price, which may be higher than the price at which such security was originally sold short by the Paloma Fund. In addition, the Paloma Fund may be required to provide additional margin to its counterparties, including its prime brokers, on short notice if the price of a security underlying a short position suddenly rises. If the Paloma Fund is unable to deliver the additional margin required, the Paloma Fund may need to prematurely close out the short position at unattractive prices, thereby resulting in a substantial loss. Depending on the timing and magnitude of a price increase in respect of an open short position, the Paloma Fund may be

required to liquidate long positions to meet margin requirements, thereby further increasing the losses (or decreasing the gains) of the Paloma Fund. Further, fees charged to the Paloma Fund for borrowing securities may be substantial, and will decrease any gains (or increase losses) associated with a short position. Short strategies can also be implemented synthetically through various instruments and be used with respect to indices or in the OTC market and with respect to futures and other instruments. In some cases of synthetic short sales, there is no floating supply of an underlying instrument with which to cover or close out a short position and the Paloma Fund may be entirely dependent on the willingness of OTC market makers to quote prices at which the synthetic short position may be unwound. There can be no assurance that such market makers will be willing to make such quotes. Short strategies can also be implemented on a leveraged basis. Short-Squeeze Risk A so-called “short squeeze” can occur when the price of securities in which the Paloma Fund has an open short position rise sharply in a short time frame. The rapid rise may be a result of (i) multiple short sellers seeking to cover their short positions in the same time frame by purchasing the security, resulting a rapid price increase; (ii) market participants collectively purchasing a significant amount of shares, thereby causing a substantial increase the price of such securities; or (iii) one or more lenders of a security that was used to facilitate a short position suddenly demanding the return of the security that has been loaned. A “short squeeze” may result in the Paloma Fund having to prematurely close out a short position at relatively unattractive high prices, resulting in a substantial loss. Further, the risk of a “short squeeze” likely will increase if other short sellers, market participants and/or lenders become aware of the Paloma Fund’s short positions, including, without limitation, as a result of legallyrequired reporting with respect to the Paloma Fund’s ownership of options to purchase the underlying security being shorted. Legal Restrictions and Reporting-Related Risk Certain jurisdictions have enacted restrictions on short selling (including wholesale bans, at times) as well as public disclosure requirements. If additional short selling restrictions and disclosure requirements are enacted, the prices of the instruments in which the Paloma Fund invests may be materially affected and the ability of the Investment Manager to take advantage of opportunities for short selling may be significantly reduced. For instance, FINRA rule 4560 requires that FINRA members (generally, U.S. broker-dealers) report to FINRA settled short positions in U.S. equity securities held by the member firm twice each month,

including short positions held by the FINRA member on behalf of its customers (e.g., on behalf of PPLLC). This information is made publicly available by FINRA, on an aggregated basis, approximately one (1) to two (2) weeks after reporting by FINRA members. While neither PPLLC nor Paloma Management is directly subject to this reporting regime, information reported by FINRA-member broker-dealers that custody the PPLLC’s positions in U.S. equity securities would include information regarding PPLLC’s settled short positions in such securities. Specifically, on October 13, 2023, the SEC adopted new rule 13f-2 (“Rule 13f-2”) of the Exchange Act. Rule 13f-2 requires institutional investment managers to report equity security short positions to the SEC on new Form SHO. While the Form SHO information that Paloma Management will file with the SEC (if any) is treated as confidential, the SEC plans to publish aggregated data derived from Form SHO submissions within a month of the end of each reporting period. This information published by the SEC will be the aggregated gross short position for each class of equity security and the aggregate of the net activity reported by all reporting managers for each equity security. In addition, each month the SEC also plans to publish similar aggregated Form SHO data for the prior 12 months that reflect updated information that accounts for any changes that result from amendments and restatements to Form SHO filings. Rule 13f-2 went into effect on January 2, 2024. However, compliance with the Rule 13f-2 reporting requirements was not originally required until January 2025, with the SEC commencing the publication of aggregated short position data collected under Rule 13f-2 three months later. The SEC has postponed Rule 13f-2 several times, the most recent announcement on December 3, 2025 postponed filing to January 2, 2028. While the short position information provided by Paloma Management to the SEC will be confidential and not available to the public, the aggregated disclosure that will be published by the SEC pursuant to Rule 13f-2 increases the risk that a “short squeeze” could occur in one or more short positions maintained by the Paloma Fund. As noted above, non-U.S. jurisdictions may have similar short interest disclosure requirements and may otherwise restrict short selling activity. Event Driven, Special Situations and Merger Arbitrage: These strategies rely on a Portfolio Manager’s ability to make predictions about (i) the likelihood that an event will occur and (ii) the impact such event will have on the value of a company’s securities. If the event fails to occur or it does not have the anticipated effect, losses can result. For example, the adoption of new business strategies or completion of asset dispositions or debt reduction programs by a company may not be valued as highly by the market as anticipated, resulting in losses. In addition, a company may announce a plan of restructuring which promises to enhance value and fail to implement it, resulting in losses to the Paloma Fund. In liquidations and other forms of corporate reorganization, the reorganization may

be unsuccessful, may be delayed or may result in a distribution of cash or a new security, the value of which may be less than the purchase price to the Paloma Fund of the security in respect of which such distribution was made. The consummation of mergers and tender and exchange offers can be prevented or delayed by a variety of factors, including, but not limited to: (i) opposition of the management or stockholders of the target company, which will often result in litigation to enjoin the proposed transaction; (ii) intervention of a federal or state regulatory agency; (iii) efforts by the target company to pursue a “defensive” strategy, including a merger with, or a friendly tender offer by, a company other than the offeror; (iv) in the case of a merger, failure to obtain the necessary stockholder approvals; (v) market conditions resulting in material changes in securities prices; (vi) compliance with any applicable federal or state securities laws; and (vii) inability to obtain adequate financing. Because of the inherently speculative nature of event driven investing, the results of the Paloma Fund’s operations can be expected to fluctuate from period to period. Similar risks apply to event driven positions in sovereign securities. Activist Strategies: Activist strategies are highly specialized, require devotion of substantial resources and usually involve relatively long investment horizons. The activist investing market is competitive and some of the going-private and leveraged buyout opportunities that the Paloma Fund may explore may be pursued by larger or better known investors, including private equity firms, LBO firms and other investment funds. There can be no assurance that the Paloma Fund will be able to identify or successfully pursue such opportunities in this environment. The Paloma Fund competes with many firms that may have substantially greater financial resources, more favorable financing arrangements and larger research staffs than are available to the Paloma Fund. The Paloma Fund, acting either alone or in conjunction with others, may acquire a “control” position in an issuer’s securities. This may subject the Paloma Fund to additional risks of liability for environmental damage, product defects, failure to supervise management, violation of governmental regulations and other types of liability in which the limited liability characteristic of business operations may be ignored. Some of the activist tactics that may be used involve litigation, which may be at the expense of the Paloma Fund. The Paloma Fund could be a party to lawsuits either initiated by it, or by a company in which the Paloma Fund invests, or by other investors, or state or federal government bodies. There can be no assurance that any such litigation would be resolved in favor of the Paloma Fund. Board Participation: From time to time, Trading Teams or the Paloma Fund may be able to place representatives on boards of certain companies in connection with Paloma Fund investments. While such representation may result in enhanced sale values of the investments, it may also prevent the Paloma Fund from freely disposing of its investments and may subject the Paloma Fund to additional liability. The Paloma Fund may indemnify any person for any claims arising from such board representation. Paloma Management or the applicable Portfolio Manager will attempt to balance

the advantages and disadvantages of such representation when deciding whether and how to exercise the Paloma Fund’s rights with respect to such companies, but the exercise of such rights could produce adverse consequences. Insider Status; Regulatory Requirements: From time to time Paloma Management or a Portfolio Manager, employees or members of Paloma Management or members of a group of investors or managers with which Paloma Management or a Portfolio Manager is acting, may work with the management team of a company in which the Paloma Fund has invested or proposes to invest and/or may be appointed to such company’s management team or board of directors in connection with an investment by the Paloma Fund, other clients of Paloma Management or personal investments of the employees and/or members of Paloma Management. In the course of such activities, Paloma Management (or its employees or members) or a Portfolio Manager may come into possession of material, non-public information concerning such company, and the possession of such information may limit the ability of the Paloma Fund to buy or sell the securities issued by such company or to pursue other investment opportunities related to such issuer. In addition, “position limits” may be imposed by various regulators that may limit the Paloma Fund’s ability to effect desired trades. Position limits are the maximum amounts of gross, net long or net short positions that any one person or entity may own or control in a particular issuer’s securities. All positions owned or controlled by the same person or entity, even if in different accounts, may be aggregated for purposes of determining whether the applicable position limits have been exceeded. To the extent that the Paloma Fund’s position limits were aggregated with an affiliate’s position limits (including the position limits applicable to a Portfolio Manager and/or employees or members of Paloma Management), the effect on the Paloma Fund and resulting restriction on its investment activities may be significant. If at any time positions managed by Trading Teams were to exceed applicable position limits, positions would need to be liquidated, which might include positions of the Paloma Fund, to the extent necessary to come within those limits. Further, to avoid exceeding any position limits, the Paloma Fund might have to forego or modify certain of its contemplated trades. In addition, if the Paloma Fund, acting alone or as part of a group, acquires beneficial ownership of more than 10% of a certain class of securities of a public company or places a director on the board of directors of such a company or member of such company’s management team, under Section 16 of the Exchange Act, the Paloma Fund may be subject to certain additional reporting requirements and may be required to disgorge certain short-swing profits arising from purchases and sales of such securities. Furthermore, in such circumstances the Paloma Fund will be prohibited from entering into a short position in such issuer’s securities, and therefore limited in its ability to hedge such investments or implement a strategy or investment by another Trading Team. Other considerations and regulatory requirements may apply to substantial acquisitions of securities in non-U.S. jurisdictions.

As noted herein, the Paloma Fund, acting either alone or as part of a group, may acquire a “control” position in an issuer’s securities. This may subject the Paloma Fund to additional risks of liability for environmental damage, product defects, failure to supervise management, violation of governmental regulations and other types of liability in which the limited liability generally characteristic of business operations may be ignored. Hedging Transactions: The success of the Paloma Fund’s hedging strategy will depend, in part, upon the ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the portfolio investments being hedged. Since the characteristics of many securities change as markets change or time passes, the success of the hedging strategy will also be subject to the ability to continually recalculate, readjust and execute hedges in an efficient and timely manner. While hedging transactions may be entered into with the intent to reduce risk, such transactions may result in poorer overall performance for the Paloma Fund than if such hedging transactions were not entered into. For a variety of reasons, Paloma Management or a Portfolio Manager may not seek to establish a perfect correlation between the hedging instruments utilized and the portfolio holdings being hedged. Such an imperfect correlation may prevent the Paloma Fund from achieving the intended hedge or expose the Paloma Fund to risk of loss. Negative Interest Rate: Periods of very low or negative interest rates may lead to lower total returns for the Paloma Fund in the future. Very low or negative interest rates may magnify interest rate risk. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, may result in heightened market volatility and may detract from Paloma Fund performance to the extent the Paloma Fund is exposed to such interest rates. To the extent the Paloma Fund is obligated to pledge cash collateral to secure its obligations under prime brokerage, currency hedging (and other) arrangements, if interest rates are negative, the Paloma Fund may be required to pay interest to the secured party at a rate equal to the absolute value of the negative interest rate. Banks may impose a negative interest rate and/or a balance sheet utilization fee on certain deposits from certain institutional customers. Negative interest rates and/or fees of this type could have an adverse effect on alternative investment funds, such as the Paloma Fund. Further, if interest rates are negative during the period beginning when an investor funds its subscription and ending on the effective date of its subscription, the investor may be forced to bear such costs, effectively losing money on the cash deposit, and the investor’s subscription amount may be decreased as a result of the negative interest paid on such amounts. Highly Volatile Markets: The prices of securities can be highly volatile. Price movements of forward and other derivative contracts in which the Paloma Fund’s assets may be invested are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political

and economic events and policies. Although market volatility can create trading opportunities, too much volatility may create additional risks that affect the ability of managers to put on and maintain effective hedges. It can cause the correlation between long positions and hedges to diverge, with the hedge having the opposite effect of that intended. “Widening” Risk: For reasons not necessarily attributable to any of the risks enumerated herein (for example, supply/demand imbalances or other market forces), the prices of the securities in which the Paloma Fund invests may decline substantially. In particular, purchasing assets at what may appear to be “undervalued” levels is no guarantee that these assets will not be trading at even more “undervalued” levels at a time of valuation or at the time of sale. It may not be possible to predict, or to hedge against, such “spread widening” risk. Equity Securities Generally: The value of equity securities of public and private, listed and unlisted companies and equity derivatives generally varies with the performance of the issuer and movements in the equity markets. As a result, the Paloma Fund may suffer losses if it invests in equity instruments of issuers whose performance diverges from a Portfolio Manager’s or Paloma Management’s expectations or if equity markets generally move in a single direction and the Paloma Fund has not hedged against such a general move. The Paloma Fund also may be exposed to risks that issuers will not fulfill contractual obligations such as, in the case of convertible securities or private placements, delivering marketable common stock upon conversions of convertible securities and registering restricted securities for public resale. Securities of Non-U.S. Companies: Investments in securities of non-U.S. issuers have a range of other risks which may include expropriation, confiscatory taxation, imposition of withholding or other taxes on dividends, interest, capital gains, other income or gross sale or disposition proceeds, political or social instability, illiquidity, price volatility and market manipulation. In addition, less information may be available regarding securities of non-U.S. issuers, and non-U.S. issuers may not be subject to accounting, auditing and financial reporting standards and requirements comparable to, or as uniform as, those of U.S. issuers. There may also be less government supervision and regulation of exchanges, brokers and issuers than there is in the United States, and the Paloma Fund may have greater difficulty taking appropriate legal action in non-U.S. courts. Non-U.S. markets also have different clearance and settlement procedures which in some markets have at times failed to keep pace with the volume of transactions, thereby creating substantial delays and settlement failures that could adversely affect the Paloma Fund’s performance. Transaction costs of investing in non-U.S. securities markets are generally higher than in the United States, and securities denominated or whose prices are quoted in non-U.S. currencies also pose currency exchange risks (including blockage, devaluation and non-exchangeability).

Developing or Emerging Markets: Any of the Paloma Fund’s investment strategies may be executed in developing or emerging markets. In addition to the risks for securities of non-U.S. companies, developing or emerging markets may be more likely than developed markets to experience periods of illiquidity, market disruptions, political instability, economic distress, social instability, rules changes, restrictions on capital movement, etc. Access to Markets: Some emerging markets have securities markets to which foreign investors have only limited direct or indirect access, or which may require approvals or consents. In addition, there is in some countries a higher possibility of nationalization, expropriation or confiscatory taxation, political changes, government regulation, social instability or diplomatic developments (including war) or terrorism which could adversely affect the economies of such countries or the Paloma Fund’s investments in those countries. These limitations and events may interfere with and/or delay the pricing or trading of securities in emerging market countries for significant periods of time. Currency Risk: The economies, the currencies and the financial markets of a number of the emerging markets to which the Paloma Fund may be exposed have historically experienced extreme volatility, exposing investments in the markets of those countries to greater than usual risk. Trading Volume; Transparency: Trading volumes on the securities exchanges of emerging markets can be substantially less than in the developed world, so that executing trades may be slow and cumbersome, and may result in transactions at unfavorable prices. There may be no approved settlement procedure, and trades may be settled by a free delivery of stock with payment of cash in an uncollateralized manner, potentially exposing the Paloma Fund to counterparty credit risk. In general there may be an increased risk of defaults and delays in settlement compared to the markets in more developed economies. Volatility of prices can be greater than in the developed world. Emerging Markets Banking and Financial Systems; Inflation: The banking and other financial systems of many emerging markets are not all well developed or well regulated. Bank transfer delays, liquidity crises and other problems may arise as a result of the undercapitalization of the banking sector as a whole. Some emerging markets countries in which the Paloma Fund may invest have experienced substantial rates of inflation in recent years. Inflation and rapid fluctuations in inflation rates have had, and may in the future have, negative effects on the economies and securities markets of certain emerging economies. Legal and Tax Systems: The legal and tax systems of many emerging markets are less predictable than most legal systems in countries with fully developed capital markets. Currently, the tax rules and regulations prevailing in many emerging markets are, as a general

matter, either new or under varying stages of review and revision, and there is considerable uncertainty as to whether new tax laws will be enacted and, if enacted, the scope and content of such laws. Reliance on oral administrative guidance from regulators and procedural inefficiencies hinder legal remedies in many areas, including bankruptcy and the enforcement of creditor’s rights. There can be no assurance that current taxes will not be increased or that additional sources of revenue or income, or other activities, will not be subject to new taxes, charges or similar fees in the future. In addition, changes to tax treaties (or their interpretation) with countries in which the Paloma Fund invests may have significant adverse effects on the Paloma Fund’s ability to efficiently realize income or capital gains. With respect to certain countries, there is a possibility of expropriation, confiscatory taxation, imposition of withholding or other taxes on dividends, interest, capital gains, other income or gross sale or disposition proceeds, limitations on the removal of funds or other assets of the Paloma Fund, and political or social instability or diplomatic developments that could affect investments in those countries. Convertible Securities: Convertible securities are exposed to changes in the price of the security into which they are convertible, changes in the creditworthiness of the issuer, changes in interest rates, and changes in overall fixed-income risk premiums. There is a risk that pricing inefficiencies may not materialize or that the securities have no relationship to each other. Fixed Income Securities and Loans: The Paloma Fund may invest in debt securities, bonds or other fixed income securities and loan instruments of U.S. and non-U.S. sovereign and corporate issuers that pay fixed, variable or floating rates of interest. The value of fixed income securities and loans in which the Paloma Fund may invest may change in response to fluctuations in interest rates and/or to perceptions of creditworthiness, political stability or soundness of economic policies. These fluctuations may be more acute with respect to high yield and distressed issuers. The value of fixed income securities can also be impacted by dealer and market liquidity, particularly in periods of significant financial market stress. Certain fixed income securities purchased for the Paloma Fund will be non-performing and possibly in default. Furthermore, the obligor or relevant guarantor may also be in bankruptcy or liquidation. Evaluating credit risk for debt securities involves uncertainty because credit rating agencies throughout the world have different standards, making comparisons across countries difficult. Also, the market for credit spreads is often inefficient and illiquid, making it difficult to accurately calculate discounting spreads for valuing financial instruments. It is likely that a major economic recession could disrupt severely the market for such securities and may have an adverse impact on the value of such securities. In addition, it is likely that any such economic downturn could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default for such securities.

ABS and MBS: The investment characteristics of ABS and MBS differ from traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that the principal may be prepaid at any time because the underlying loans or other assets generally may be prepaid at any time. Generally, mortgage obligors tend to prepay their mortgage loans when prevailing mortgage rates fall below the interest rates on their mortgage loans. Particular investments may experience outright losses, as in the case of an interest only security in an environment of faster actual or anticipated prepayments. Most commercial mortgage loans underlying MBS are effectively nonrecourse obligations of the borrower, meaning that there is no recourse against the borrower’s assets other than the collateral. ABS present certain risks that are not presented by MBS. Primarily, these securities do not have the benefit of the same security interest in the related collateral. There is a possibility that recoveries on repossessed collateral may not, in some cases, be available to support payments on these securities. The risk of investing in ABS is ultimately dependent upon payment of consumer loans by the debtor. The value of an ABS is affected by changes in the market’s perception of the asset backing the security and the creditworthiness of the servicing agent for the loan pool, the originator of the loans or the financial institution providing any credit enhancement, as well as by the expiration or removal of any credit enhancement. Distressed and High Yield Securities: The Paloma Fund may invest in “below investment grade” securities and obligations of issuers in weak financial condition, experiencing poor operating results, having substantial capital needs or negative net worth, facing special competitive or product obsolescence problems, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Among the risks inherent in investments in troubled companies is the fact that it may be difficult to obtain information as to the true condition of such issuers. Such investments may also be adversely affected by laws relating to, among other things, fraudulent transfers and other voidable transfers or payments, lender liability and the bankruptcy court’s power to disallow, reduce, subordinate or disenfranchise particular claims. Such companies’ securities may be considered speculative, and the ability of such companies to pay their debts on schedule could be affected by adverse interest rate movements, changes in the general economic climate, economic factors affecting a particular industry or specific developments within such companies. There is no assurance that a Portfolio Manager will correctly evaluate the value of the assets collateralizing the loans or the prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to a company in which the Paloma Fund invests, the Paloma Fund may lose its entire investment, may be required to accept cash or securities with a value less than the Paloma Fund’s original investment and/or may be required to accept payment over an extended period of time. In addition, the Paloma Fund may invest in bonds of issuers, often troubled issuers, that do not have publicly traded equity securities, making it more difficult to hedge the risks associated with such

investments. Further, debt securities of troubled companies may not pay interest or dividends, whether inherently or by reason of default, whereas healthier issuers typically will pay interest or dividends on their debt securities. Bankruptcy Claims: The Paloma Fund may invest in bankruptcy claims, which are amounts owed to creditors of companies in financial difficulty. Bankruptcy claims typically are illiquid and generally do not pay interest, and there can be no guarantee that the debtor will ever be able to satisfy the obligation on the bankruptcy claim. The markets in bankruptcy claims are not generally regulated by Federal securities laws or the U.S. Securities and Exchange Commission. Because bankruptcy claims are frequently unsecured, holders of such claims may have a lower priority in terms of payment than certain other creditors in a bankruptcy proceeding. In addition, under certain circumstances, payments and distributions may be reclaimed if any such payment is later determined to have been a fraudulent conveyance or a preferential payment. Derivative Instruments: Certain swaps, options and other derivative instruments may be subject to various types of risks, including market risk, liquidity risk, credit risk, legal risk and operations risk. The regulatory and tax environment for derivative instruments in which the Paloma Fund may participate is evolving, and changes in the regulation or taxation of such instruments may have a material adverse effect on the Paloma Fund. Regulation in the Derivatives Industry: There are many rules related to derivatives that may negatively impact the Paloma Fund, such as requirements related to recordkeeping, reporting, portfolio reconciliation, central clearing, minimum margin for uncleared OTC instruments and mandatory trading on electronic facilities, and other transaction-level obligations. Parties that act as dealers in swaps, are also subject to extensive business conduct standards, additional “know your counterparty” obligations, documentation standards and capital requirements. All of these requirements add costs to the legal, operational and compliance obligations of Paloma Management and the Paloma Fund, and increase the amount of time that Paloma Management spends on noninvestment-related activities. Requirements such as these also raise the costs of entering into derivative transactions, and these increased costs will likely be passed on to the Paloma Fund. These rules are operationally and technologically burdensome for Paloma Management and the Paloma Fund. These compliance obligations require employee training and use of technology, and there are operational risks borne by the Paloma Fund in implementing procedures to comply with many of these additional obligations. These regulations may also result in the Paloma Fund forgoing the use of certain trading counterparties (such as broker-dealers and FCMs), as the use of other parties may be more efficient for the Paloma Fund from a regulatory perspective. This could limit the Paloma Fund’s trading

activities, create losses, preclude the Paloma Fund from engaging in certain transactions or prevent the Paloma Fund from trading at optimal rates and terms. Many of these requirements were implemented under legislation intended to reform the U.S. financial regulatory system, the EU Regulation on OTC Derivatives, Central Counterparties and Trade Repositories (known as EMIR), and similar regulations globally. In the United States, regulatory responsibility for derivatives is divided between the SEC and the CFTC, a distinction that does not exist in any other jurisdiction. The SEC has regulatory authority over “security-based swaps” and the CFTC has regulatory authority over “swaps”. EMIR is being implemented in phases through the adoption of delegated acts by the European Commission. As a result of the SEC and CFTC bifurcation and the different pace at which the SEC, the CFTC, the European Commission and other international regulators have promulgated necessary regulations, different transactions are subject to different levels of regulation. Though many rules and regulations have been finalized, there are others, particularly SEC regulations with respect to security-based swaps, that are still in the proposal stage or are expected to be introduced in the future. These new regulations could affect a variety of derivative-related activity, including (without limitation): reporting, central clearing, swap execution facilities, and margin requirements for noncleared swaps. Commodities, Futures and Certain Derivative Investments: The prices of commodities contracts and derivative instruments, including futures and options, are highly volatile. Payments made pursuant to swap agreements may also be highly volatile. Price movements of commodities, futures and options contracts and payments pursuant to swap agreements are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies. The value of futures, options and swap agreements also depends upon the price of the commodities underlying them. In addition, the Paloma Fund’s assets are also subject to the risk of the failure of any of the exchanges on which its positions trade or of its clearinghouses or counterparties. Swaps and certain options and other custom instruments are subject to the risk of non-performance by the swap counterparty, including risks relating to the creditworthiness of the swap counterparty, market risk, liquidity risk and operations risk. If a counterparty defaults under a swap agreement, the value of the swap transactions with such counterparty can be expected to decline, perhaps to zero, potentially resulting in losses by the Paloma Fund. Paloma Management may take into account its view on the likelihood of default by a counterparty when determining the fair market value of transactions underlying swap agreements with that counterparty. Credit Default Swaps: CDS are credit derivative contracts where one party (the buyer of protection) pays a premium to another party (the seller of protection) until the earlier of an agreed maturity or the date of a credit event. If a credit event occurs, the seller of protection is obligated to remit to the

buyer of protection a certain payout. Credit events may include a failure by the reference company to pay principal or interest with respect to the reference obligation, a restructuring of the final maturity date of the reference obligation, an acceleration of the reference obligation so that it is due prior to its stated maturity date, a ratings downgrade of the reference obligation below certain specified ratings levels or a writedown (including an implied writedown) of the reference obligation. If a counterparty defaults under a swap agreement, the value of the swap transactions with such counterparty can be expected to decline, perhaps to zero. The settlement mechanism for the credit default swap market is comparatively new and may not operate efficiently at times of market stress which could result in significant losses to the Paloma Fund. Interest Rate Swaps: The Paloma Fund may also enter into interest rate swaps. An interest rate swap is a derivative where the parties exchange interest payments on a specific principal amount per payment period, typically exchanging a fixed amount for a floating amount (an amount equal to a variable interest rate (such as SOFR) multiplied by the principal amount). In the event that the Paloma Fund enters into an interest rate swap and is paying a fixed amount, the Paloma Fund risks that the variable interest rate will decrease and therefore it is paying more than it is receiving. Alternatively, in the event that the Paloma Fund is paying a floating amount, it risks that the variable interest rate will increase and therefore it is paying more than it is receiving. Call and Put Options: The Paloma Fund may incur risks associated with the sale and purchase of call options and put options. Under a conventional cash-settled option, the purchaser of the option pays a premium in exchange for the right to receive upon exercise of the option (i) in the case of a call option, the excess, if any, of the reference price or value of the underlier (as determined pursuant to the terms of the option) above the option’s strike price or (ii) in the case of a put option, the excess, if any, of the option’s strike price above the reference price or value of the underlier (as so determined). Under a conventional physically settled option structure, the purchaser of a call option has the right to purchase a specified quantity of the underlier at the strike price, and the purchaser of a put option has the right to sell a specified quantity of the underlier at the strike price. A purchaser of an option may suffer a total loss of premium (plus transaction costs) if that option expires without being exercised. An option’s time value (i.e., the component of the option’s value that exceeds the in-the-money amount) tends to diminish over time. Even though an option may be in-the-money to the purchaser at various times prior to its expiration date, the purchaser’s ability to realize the value of an option depends on when and how the option may be exercised. For example, the terms of the transaction may provide for the option to be exercised automatically if it is in-themoney on the expiration date. Conversely, the terms may require timely delivery of a notice of exercise, and exercise may be subject to other conditions (such as the occurrence or non-occurrence of certain events, such as knock-in, knock-out or other barrier events) and timing requirements, including the “style” of the option.

Uncovered option writing (i.e., selling an option when the seller does not own a like quantity of an offsetting position in the underlier) exposes the seller to potentially significant loss. The potential loss of uncovered call writing is unlimited. The seller of an uncovered call may incur large losses if the reference price or value of the underlier increases above the exercise price by more than the amount of any premiums earned. As with writing uncovered calls, the risk of writing uncovered put options is substantial. The seller of an uncovered put option bears a risk of loss if the reference price or value of the underlier declines below the exercise price by more than the amount of any premiums earned. Such loss could be substantial if there is a significant decline in the value of the underlier. Futures Contracts: The Paloma Fund may trade futures contracts that reference a wide variety of equity indices, government bonds, commodities and other underlying instruments and indices on futures exchanges regulated by the CFTC and other regulatory organizations. Futures contracts are levered because of the limited margin typically required for futures traded on an exchange. Futures positions can be volatile and may become illiquid. Certain futures exchanges limit fluctuations in certain futures contract prices during a single day by regulations referred to as “daily limits.” Under these daily limits, during a single trading day no trades may be executed at prices beyond the daily limits, which may result in futures positions becoming illiquid, reducing the Paloma Fund’s ability to liquidate unfavorable positions. It also is possible that an exchange or the CFTC may suspend trading in a particular contract, order immediate liquidation and settlement of a particular contract, or order that trading in a particular contract be conducted for liquidation purposes only. The prices of futures are highly volatile. Forward Contracts: The Paloma Fund may enter into forward contracts and options thereon, including non-deliverable forwards. The principals who deal in the forward markets are not required to continue to make markets in the currencies or commodities they trade and these markets can experience periods of illiquidity, sometimes of significant duration. There have been periods during which certain participants in these markets have refused to quote prices for certain currencies or commodities or have quoted prices with an unusually widespread between the price at which they were prepared to buy and that at which they were prepared to sell. The imposition of credit controls or price risk limitations by governmental authorities may limit such forward trading to less than that which Paloma Management would otherwise recommend, to the possible detriment of the Paloma Fund. In its forward trading, the Paloma Fund will be subject to the risk of the failure of, or the inability or refusal to perform with respect to its forward contracts by, the principals with which the Paloma Fund trades. Paloma Fund assets on deposit with such principals will also generally not be protected by the same segregation requirements imposed on certain regulated brokers in respect of customer funds on deposit with them. Paloma Management may order trades for the Paloma Fund in such markets through agents. Accordingly, the insolvency or bankruptcy of such parties could also subject the Paloma Fund to the risk of loss.

Non-U.S. Futures Transactions: Foreign futures transactions involve executing and clearing trades on a foreign exchange. This is the case even if the foreign exchange is formally “linked” to a domestic exchange, whereby a trade executed on one exchange liquidates or establishes a position on the other exchange. No domestic organization regulates the activities of a foreign exchange, including the execution, delivery, and clearing of transactions on such an exchange, and no domestic regulator has the power to compel enforcement of the rules of the foreign exchange or the laws of the foreign country. Moreover, such laws or regulations will vary depending on the foreign country in which the transaction occurs. For these reasons, the Paloma Fund may not be afforded certain of the protections which apply to domestic transactions, including the right to use domestic alternative dispute resolution procedures. In particular, funds received from customers to margin foreign futures transactions may not be provided the same protections as funds received to margin futures transactions on domestic exchanges. In addition, the price of any foreign futures or option contract and, therefore, the potential profit and loss resulting therefrom, may be affected by any fluctuation in the foreign exchange rate between the time the order is placed and the time the foreign futures contract is liquidated or the time the foreign option contract is liquidated or exercised. Currency Hedging and Forex Trading: The Paloma Fund may be exposed to foreign exchange risk, and may seek to mitigate this risk through the use of a variety of strategies and products, including, but not limited to, Forex forwards, currency futures and currency swaps. There is no guarantee that any of these currency hedging strategies will reduce or prevent losses to the Paloma Fund. As part of its currency hedging strategy, the Paloma Fund may enter into currency transactions that are not traded on an exchange, and the funds the Paloma Fund invests in those transactions may not receive the same protections as funds used to margin or guarantee exchange-traded futures and options contracts. If the counterparty to an over-the-counter Forex transaction becomes insolvent and the Paloma Fund has a claim for amounts deposited or profits earned on transactions with the counterparty, the Paloma Fund’s claim may not receive a priority. Without a priority, the Paloma Fund is a general creditor and its claim will be paid, along with the claims of other general creditors, from any monies still available after priority claims are paid. Even the Paloma Fund’s funds that the counterparty keeps separate from its own operating funds may not be safe from the claims of other general and priority creditors. Forex trading can quickly lead to large losses as well as gains. Such trading losses can sharply reduce the net asset value of the Paloma Fund. Exchange Rate Fluctuations; Currency Considerations: While the Paloma Fund will operate in U.S. dollars, the Paloma Fund’s assets may often be invested in non-U.S. securities and any income or capital received will be denominated in the local currency of investment. Accordingly, changes in currency exchange rates (to the extent unhedged) will affect the value of the Paloma Fund’s portfolio and the unrealized appreciation or depreciation of investments.

Investments in Private Companies: The Paloma Fund may invest in private companies, including earlystage investments in the infrastructure, technology, corporate formation, operation and overhead of, or relating to, private start-up companies, which involves a high degree of business and financial risk. Such companies with little or no operating history may require substantial additional capital to support expansion or to achieve or maintain a competitive position, may produce substantial variations in operating results from period to period or may operate at a loss. Such companies may face intense competition, including competition from companies with greater financial resources, more extensive development, better marketing and service capabilities and a larger number of qualified management and technical personnel. Such companies may also have substantial variations in operating results from period to period and experience failures or substantial declines in value at any stage. The percentage of such companies acquired at an early-stage of development that survive and prosper can be small. Such risks may adversely affect the performance of such investments and result in substantial losses. Some of the companies that the Paloma Fund invests in may have substantial debt, which in turn will increase the exposure of such companies to adverse economic factors such as downturns in the economy or deterioration in the conditions of such companies or their respective industries. In the event any such company cannot generate adequate cash flow to meet debt service, the Paloma Fund may suffer a partial or total loss of capital invested in the company. Illiquid Portfolio Instruments: The sale of restricted and/or illiquid securities often requires more time and may result in higher brokerage charges than does the sale of more liquid securities. The limited liquidity of these investments may subject them to more extensive fluctuations in value and may impair the ability of the Paloma Fund to exit such investments. Companies whose securities are not publicly traded generally will not be subject to public disclosure and other investor protection requirements applicable to publicly traded securities. Illiquid positions also may be difficult to value and such valuation may require the exercise of substantial discretion by Paloma Management. Investments in Portfolio Funds: Investments in Portfolio Funds may be illiquid, offering limited opportunities to withdraw. Withdrawals of capital from such funds typically require providing a notice of withdrawal several months in advance, and may have other significant limitations on the ability to withdraw, such as “lock-up” provisions (limiting the ability to withdraw for a certain period of time), “gate” provisions (limiting the amount that may be withdrawn at any one time) or the ability to “side pocket” all or a portion of the Paloma Fund’s investment (which cannot be withdrawn until the applicable fund removes the withdrawal restriction). The Portfolio Managers of Portfolio Funds act independently and Paloma Management has no rights other than those provided to the Paloma Fund as an investor in the fund. In addition, Paloma Management may have limited or no information about the assets held by a Portfolio Fund at any given time. A Portfolio Fund may use investment strategies that differ from its past practices and are

not fully disclosed and that involve risks that are not anticipated by Paloma Management. The Portfolio Funds may have a limited operating history and Portfolio Managers may have limited experience in managing assets. ETFs, Mutual Funds, MLPs, and Similar Financial Instruments: Investments in securities and other financial instruments (such as, among others, ETFs, mutual funds and MLPs) expose the Paloma Fund to risks associated with such securities and financial instruments, as well as risks associated with securities or instruments that underlie the financial instruments in which the fund is directly invested. Such underlying securities and instruments may include, ETFs, mutual funds, MLPs and/or other instruments (including, without limitation, distressed and high yield securities, asset backed and mortgage backed securities, loans, convertible securities, bankruptcy claims, and any other type of security or financial instrument). Risks Relating to Digital Assets and Digital Assets Derivatives Trading: The Paloma Fund may invest directly or indirectly in Digital Assets and Digital Asset derivatives, although Paloma Management expects that any such investment is likely to constitute only a small proportion of the Paloma Fund’s portfolio. Digital Assets are relatively new, evolving products based upon new and evolving technologies. An investment in any Digital Asset is subject to a variety of risks, including technological, security and regulatory risks as well as associated uncertainties over the future existence, support and development of such Digital Asset. Digital Assets may also experience unusual volatility. Any such investment is highly speculative and subject to the risk that the entirety or a material portion of such investment or its value may be lost. Digital Asset derivatives, such as futures or options on futures on a Digital Asset, are also a relatively new asset class, and trading in these instruments, like trading in the Digital Assets themselves, carries a high level of risk. Investments in Digital Assets derivatives, like direct investments in Digital Assets, should be considered substantially more speculative and significantly more likely to result in a total loss of capital than many other investments. Risks associated with Digital Assets are numerous. The Paloma Fund’s offering documents contain a complete overview of such risks. Trade Errors: Given the volume of transactions executed on behalf of the Paloma Fund, investors should assume that Trade Errors and other errors will occur and that the Paloma Fund will both benefit from any resulting gains and be responsible for any resulting losses. Trade Errors might include, for example, the purchase or sale of a security or derivatives contract in the wrong amount or the purchase or sale of the wrong security or derivatives contract. Paloma Management has established policies and procedures for the handling of Trade Errors that require that such errors be corrected as soon as practicable after discovery. Paloma Management will determine in good faith whether or not the applicable Trading Team or Paloma Management entity will be required to reimburse the Paloma Fund for a Trade Error’s resulting loss pursuant to the standard of care stated in the applicable agreement that governs the Trading Team’s or Paloma Management entities’

activities on behalf of the Paloma Fund. In making this determination, Paloma Management will have a conflict of interest in determining whether a Trade Error should be attributed to the account of the Paloma Fund or to a Paloma Management entity, and will attempt to resolve such conflict by an objective determination of the status of such Trade Error under the applicable standard. The Paloma Management entities’ agreements, including their exculpation and indemnification provisions, are described in more detail under “Management and Administration,” but generally, Paloma Management will be free from liability for its actions, except in the case of fraud, gross negligence or intentional misconduct. Generally, in determining whether gross negligence was involved in a Trade Error, Paloma Management will evaluate and consider the adequacy of the supervisory procedures in place to prevent such errors from recurring with any frequency. Leverage and Financing Risk: The Paloma Fund may leverage its capital to seek to achieve a higher rate of return and may pledge its securities in order to borrow additional funds for investment purposes. The Paloma Fund may also leverage its investment return with options, short sales, swaps, forwards and other derivative instruments. The amount of borrowings which the Paloma Fund may have outstanding at any time may be substantial in relation to its capital. While leverage presents opportunities for increasing the Paloma Fund’s total return, it has the effect of potentially increasing losses as well. Further, if the securities pledged to brokers to secure the Paloma Fund’s margin accounts decline in value, the Paloma Fund could be subject to a “margin call,” pursuant to which the Paloma Fund must either deposit additional funds or securities with the brokers, or suffer mandatory liquidation of the pledged securities to compensate for the decline in value. In the event of a sudden drop in the value of the Paloma Fund’s assets, the Paloma Fund might not be able to liquidate assets quickly enough to satisfy their margin requirements. The forced liquidation of all or a portion of the Paloma Fund’s portfolio at distressed prices could result in significant losses to the Paloma Fund. Change in Margin Terms: In the absence of specific agreements, securities margin arrangements are generally subject to change or revocation by the lender upon very limited notice and for any or no reason. The lender may demand an increase in the collateral, including requiring collateral equal to the full amount of the borrowings, and, if the Paloma Fund is unable to provide additional collateral, the lender could liquidate assets held by the lender to satisfy the Paloma Fund’s obligations. Liquidation in that manner could have extremely adverse consequences, which may be exacerbated in the event that these changes or revocations are imposed suddenly or by multiple lenders. Loss or Insufficiency of Margin on Derivatives: The Paloma Fund engages in derivative transactions pursuant to ISDAs with counterparties that are usually major banks or their affiliates. Under the Paloma Fund’s ISDAs, counterparties may require the Paloma Fund to post initial margin at the time of entry into a derivatives transaction, and the initial margin represents an uncollateralized credit risk to the counterparty. Also, the ISDAs provide for two-way variation margin pursuant to which the Paloma Fund and the Paloma Fund’s counterparty post margin to one another to reflect fluctuations

in the market value of the derivative. Generally, the dealer bank is responsible for calculating the daily change in margin requirements to be paid by either party due to changes in market prices. However, the dealer bank’s calculation, due to error or lack of timely data, may not accurately reflect such market price changes. Although the Paloma Fund would likely have the right to dispute the dealer bank’s calculation, there can be no guarantee that these dispute mechanisms would work effectively leaving the Paloma Fund materially under-collateralized. Further, since the variation margin amount is calculated on the day preceding any dealer default, it is unlikely to reflect fully the cost to the Paloma Fund of entering into a replacement transaction on the date of the default, particularly because any default by a dealer bank can have a significant effect on the markets and value of such transactions. As a result, any margin held by the Paloma Fund will likely prove insufficient in the case of a major dealer default. Net Asset Value Triggers: The trading agreements, such as ISDAs, to which the Paloma Fund is a party, typically include NAV Triggers. While a decline in the Paloma Fund’s net asset value may be the result of a number of factors, including market conditions, withdrawals and/or diminishing performance, NAV Triggers provide a mechanism for the Paloma Fund’s counterparties and prime brokers to take protective measures to limit exposure to the Paloma Fund during a period of decline or volatility. Such protective measures may include requesting additional collateral, imposing other limitations on the Paloma Fund’s ability to effect trades, closing out the Paloma Fund’s positions under the relevant agreement on the counterparty’s side of the market and at prices determined by the counterparty, setting off other amounts owed by the counterparty or terminating the relevant trading agreement(s). Further, a termination of an ISDA or a declaration of default by a counterparty also may permit other counterparties to exercise similar rights against the Paloma Fund under the crossdefault and/or cross-acceleration provisions of other ISDAs and financing agreements. Any of these events could result in substantial losses to the Paloma Fund or have an adverse effect on the Paloma Fund’s ability to trade and carry out its investment strategy. Repurchase Agreements: The use of repurchase and reverse repurchase agreements by the Paloma Fund involves certain risks. For example, if the buyer of securities from the Paloma Fund under a repurchase agreement defaults on its obligation to sell back the underlying securities to the Paloma Fund, as a result of its bankruptcy or otherwise, the Paloma Fund will seek to obtain such securities elsewhere, which could involve costs or delays, and the price of the underlying securities may be greater than the repurchase price agreed to by the defaulting buyer. Similarly, if the seller of securities to the Paloma Fund under a reverse repurchase agreement defaults on its obligation to repurchase the underlying securities, as a result of its bankruptcy or otherwise, the Paloma Fund will seek to dispose of such securities, which action could involve costs or delays. If the buyer of securities from the Paloma Fund under a repurchase agreement, or the seller of securities to the Paloma Fund under a reverse repurchase agreement, becomes insolvent and subject to liquidation or reorganization under applicable bankruptcy or other laws, the Paloma Fund’s ability to obtain (or

dispose of, as applicable) the underlying securities may be restricted. It is possible, in a bankruptcy or liquidation scenario, that the Paloma Fund may not be able to substantiate its interest in the underlying securities. Finally, if a seller of securities to the Paloma Fund under a reverse repurchase agreement defaults on its obligation to repurchase securities under a reverse repurchase agreement, the Paloma Fund may suffer a loss to the extent that it is forced to liquidate its position in the market, and proceeds from the sale of the underlying securities are less than the repurchase price agreed to by the defaulting seller. Similar elements of risk arise in the event of the bankruptcy or insolvency of the buyer. Commodities Futures and Options Margin: Because of the limited initial margin required for, and substantial volatility associated with, the purchase or sale of most listed commodity futures contracts or commodity options, the Paloma Fund may be required to deposit a substantial amount of additional variation margin, on short notice, in order to maintain their positions. If it fails to do so, its positions may be liquidated at a loss, making the Paloma Fund liable for any resulting deficit. Under the U.S. Commodity Exchange Act, as amended, futures commission merchants are required to maintain customers’ assets in a segregated account, but the Paloma Fund will nevertheless be subject to a risk of loss if a futures commission merchant fails to do so and becomes bankrupt. Margin in Periods of Stress: In periods of market stress, and particularly in periods of stress specific to the Paloma Fund, lenders or counterparties may attempt to increase margin levels. Additionally, a simultaneous, broad-based increase in margin among hedge funds generally would likely adversely impact the investments held by the Paloma Fund by decreasing demand and increasing supply of those or similar investments. Cash Deposit Risk; Cash and Other Investments: In order to limit credit risk to prime brokers and other custodians and to manage liquidity, the Paloma Fund currently maintains cash deposits with major banks. As these are large deposits, any failure of a deposit bank will have a material adverse effect on the Paloma Fund. The Paloma Fund may use money market funds as part of its cash management. The Paloma Fund therefore may be exposed to the risk that money market funds fail to return fully the principal invested. In addition, the Paloma Fund may invest a substantial portion of its assets in cash or cash items for various purposes, including, without limitation, for investment purposes (pending other investments), as provision for margin or to maintain liquid assets away from financing counterparties. These cash items could include, in addition to money market funds, investments in repurchase agreements, U.S. Treasury bills and notes and related futures, and similar investments in the sovereign debt of other countries, and any other investment deemed appropriate by Paloma Management. While investments in cash items are intended to be relatively liquid and to involve relatively low credit risk, any such investments may, at times of market stress and under other

circumstances, become illiquid or incur losses, which could be substantial. For example, in 2008, money market funds and other cash items became substantially illiquid and suffered losses.

The China Funds are private equity funds that generally invest in private companies operating in or affected by economic activity in China and securities reasonably related to such investments. The China Funds are managed by the China Managers (an affiliated Portfolio Manager). Mr. Sussman effectively owns 50% of the China Managers. Additional information about the China Managers is provided in Section 7.A of Schedule D in PPMC’s ADV Part 1A. The Paloma Fund currently invests, and may in the future invest, in affiliated Portfolio Funds (including the China Funds). Given that the Paloma Fund pays all fees and expenses (including management and performance-based compensation) charged by the China Managers pertaining to investments in the China Funds, Paloma Advisors waives the Management Fee and the Incentive Fee in respect of the Paloma Fund’s investments in the China Funds in order to avoid receiving compensation from both the Paloma Fund and the China Funds on the same capital and the same return (i.e., to avoid collecting double fees). Investment decisions with respect to the Paloma Fund’s investments in Portfolio Funds will be based on such criteria as Paloma Management may determine to be appropriate at the time. It is possible that the Paloma Fund may pay affiliated Portfolio Funds higher fees and expenses than would be the case if an investment were made in a comparable, non-affiliated collective investment fund or vehicle. Paloma Management has no obligation to determine whether an investment in a comparable, non-affiliated collective investment fund or vehicle would subject the Paloma Fund to lower fees and expenses.

SERVICE PROVIDERS AND CONSULTANTS IN WHICH THE PALOMA FUND, PPMC OR ITS AFFILIATES HOLD AN INTEREST

External Trading Teams and/or managers of Portfolio Funds have engaged, and could in the future engage, service providers in which the Paloma Fund, PPMC or PPMC’s affiliates, employees or officers hold an interest, based on such External Trading Teams’ and/or managers of Portfolio Funds’ independent assessment of such service providers, and the Paloma Fund will indirectly bear the fees and expenses associated with the engagement of such service providers. For example, the Paloma Fund has made an investment in a service provider in which an officer of PPMC owns a controlling interest. As a result, the Paloma Fund and such PPMC officer will benefit from revenues earned by such service provider in proportion to their respective investments in the service provider, though the Paloma Fund will still indirectly bear the fees and expenses associated with any services received by the External Trading Teams or Portfolio Funds in connection with management of Paloma Fund assets. Services provided by the service provider include, but are not limited to, middle and back office services for the External Trading Teams and/or managers of Portfolio Funds. Additionally, PPMC has engaged, and could in the future engage, such service providers for projects or other ongoing work to be performed for the Paloma Fund and/or PPMC. Certain employees (including officers) of PPMC that are affiliated with such service providers will earn compensation or other financial benefits resulting from ownership interests in such service providers, through the costs and expenses paid to the service providers. Any relationship among the Paloma Fund, PPMC or PPMC’s affiliates, employees or officers and a service provider could create an incentive for PPMC, an External Trading Team or the manager of a Portfolio Fund to use the service provider even where other service providers may provide comparable or better services for the same or a lower cost. The costs and expenses indirectly borne by the Paloma Fund in relation to the engagement of the service providers may be higher than the costs and expenses that would otherwise be charged by comparable unaffiliated service providers. No management fee or expense offset is applied for the costs and expenses of the service providers. Paloma Management has engaged, and may in the future engage, consultants that are associated with Mr. Sussman and/or other employees of Paloma Management to provide services to Paloma Management and/or the Paloma Fund, and the Paloma Fund will bear the costs and expenses associated with such consultants. The costs and expenses borne by the Paloma Fund in relation to the engagement of such associated consultants may be higher than the costs and expenses that would be charged by comparable consultants. No management fee or expense offset is applied for the costs and expenses of such associated consultants.

OTHER INVESTMENT ACTIVITIES

Paloma Management’s relationship with a Portfolio Manager is not always exclusive. Certain Portfolio Managers also manage the assets of other clients, the Portfolio Manager’s own accounts, accounts of family members and accounts of affiliates. The terms upon which such other parties have invested in a fund or account managed by such Portfolio Manager may differ from the terms on which the Paloma Fund has invested in such fund or account. This poses a conflict of interest for such Portfolio Manager as such Portfolio Manager may be incentivized to direct the best investment ideas to, or to allocate or sequence trades in favor of, clients with economic terms that are more favorable for such Portfolio Manager than those applicable to the Master Fund’s investment. While the terms of the agreements with a Portfolio Manager may contain certain protections for the Master Fund, Paloma Management may not have sufficient transparency to ensure that such is the case. For example, External Trading Teams and managers of Portfolio Funds may give advice and take action in the performance of their duties to one client which may differ from the timing and nature of action taken with respect to the Paloma Fund or Portfolio Fund. These other activities may also affect the prices and availability of the securities and other financial instruments in which the Paloma Fund or Portfolio Fund invests. Paloma Management seeks to mitigate these conflicts of interest with respect to External Trading Teams and Portfolio Funds, through due diligence reviews and, where appropriate, through contractual representations or obligations. Paloma Management may enter into arrangements with certain External Trading Teams whereby an External Trading Team may develop new business initiatives and investment strategies for the Paloma Fund while managing assets for the Paloma Fund and their other clients. Certain tools developed or enhanced as part of such arrangements may be shared across the Paloma Fund and such External Trading Team’s other clients. External Trading Teams have established, and may in the future establish, one or more funds which may or may not also be Portfolio Funds (meaning the Paloma Fund may also make a passive investment in such funds). In certain circumstances, the Paloma Fund may invest in securities or other instruments of the same issuer (or affiliated group of issuers) having a different seniority in the issuer’s capital structure. If the issuer becomes insolvent, restructures or suffers financial distress, there may be a conflict, insofar as the issuer may be unable (or in the case of a restructuring prior to bankruptcy may be expected to be unable) to satisfy the claims of all classes of its creditors and security holders.

BOARD MEMBERSHIPS

Portfolio Managers may serve on the board of directors of other investment vehicles, including at the request of Paloma Management. There may be an apparent conflict of interest between the fiduciary duties of such Portfolio Managers, in their capacity as a director of such other investment vehicle, and their duties as a Portfolio Manager. Portfolio Managers are not required to devote their full time and attention to the business of the Paloma Fund and may serve as directors of other investment vehicles. Accordingly, to the extent that the interests of the Paloma Fund and such other investment vehicles are inconsistent, such Portfolio Managers would have a conflict of interest. Further, certain Portfolio Managers may elect to serve, including at the request of Paloma Management, on creditors’ committees (official or unofficial), equityholders’ committees or other groups of a portfolio investment of the Paloma Fund to ensure preservation or enhancement of the Paloma Fund’s positions as a creditor or equityholder. A member of any such committee or group may owe a fiduciary duty and be subject to certain obligations to all members the committee represents and/or to other similarly situated parties. Any such Portfolio Manager may resign from that committee or group for any reason, including, for example, if such Portfolio Manager concludes that its obligations owed to the other parties as a committee or group member conflict with its duties owed to the Paloma Fund. In such case, the Paloma Fund may not realize the benefits, if any, of participation on the committee or group. In addition, if the Paloma Fund is represented on a committee or group, it may be restricted or prohibited under applicable law from disposing of or increasing its investments in such company while it continues to be represented on such committee or group. Board members may receive compensation for their service on a board; such compensation may or may not be passed on to the feeder fund(s) invested in the relevant issuer. In addition, certain employees and officers of PPMC currently, and in the future may, serve as members of strategic advisory boards or similar bodies of unaffiliated third parties, including other investment advisers, and receive compensation for their service. For example, an officer of PPMC currently serves on a strategic advisory board of an unaffiliated investment adviser and receives compensation. PPMC does not recommend clients or investors to or otherwise invest with the adviser. Any relationship between PPMC or its affiliates, officers or employees and a third party could create an incentive for PPMC to recommend the services of or otherwise invest in such third party. To mitigate this risk, PPMC has established controls to oversee all outside business activities engaged in by employees and officers.

LETTERS OF UNDERSTANDING A/K/A “SIDE LETTERS”

The Fund has entered, and may in the future enter, into side letters granting certain investors different rights, including, but not limited to, rights relating to transparency, and reporting. In general, the Fund will not be required to notify other investors of any such side letters or any of the rights and/or terms or provisions thereof, nor will the Fund be required to offer such additional and/or different rights and/or terms to other investors. However, while Paloma Management cannot guarantee it will be successful in its efforts, Paloma Management endeavors to provide all investors with any transparency or reporting rights granted to any one investor. The reports provided to investors described under “REPORTS; NOTICE OF CERTAIN EVENTS” are a large part of those efforts. To the extent other investors do not exercise these rights, they may be at a disadvantage to those investors that do exercise these rights. Please see ITEM 11 below and Fund Documentation for further discussion of certain conflicts of interest.

Paloma Management and its employees may trade securities and derivative instruments for their own accounts of the type held by or considered for investment by the Paloma Fund and may from time to time take positions in their personal accounts that are opposite the positions taken for or held by the Paloma Fund at the same time. The Code requires preclearance approval for personal investment activities, including investments in private placements. Trading in certain securities, e.g., publicly traded ETFs and mutual funds, is permitted without preclearance approval. Supervised persons are generally prohibited from initiating new positions in initial public offerings, futures, commodities or debt securities (except municipal bonds and U.S. Government securities). Additionally, supervised persons are prohibited from executing transactions in issuers included on PPMC’s Restricted List.

Supervised persons are subject to certain reporting requirements including the provision of initial and annual holdings reports (excluding accounts holding certain exempt securities or managed accounts) and quarterly transactions reports. The Chief Compliance Officer reviews violations of the Code to determine appropriate actions or sanctions. Investors and prospective investors may obtain a complete copy of the Code of Ethics free of charge by submitting a written request to the Chief Compliance Officer, David Friedman, at Two American Lane, Greenwich, CT 06836-2571 or by phone at (203) 862-8000.

INVESTMENT IN THE PALOMA FUND AND PORTFOLIO FUNDS

Paloma Management and certain of its employees are invested in, and may, in the future, invest in investment vehicles managed by Paloma Management, by Portfolio Managers and by their respective affiliates, and do or may pay lesser (or no) fees than other investors may pay. As part of the personal trading preclearance process for private placements, conflicts of interest such as reduced fees are evaluated prior to granting approval. Paloma Advisors has waived the Management Fee and, while currently not applicable, will waive any future Incentive Fee (or Incentive Allocation), in each case, for current or former employees invested in the Paloma Fund. As discussed in ITEM 10, the Paloma Fund is invested in affiliated Portfolio Funds. Please see disclosure above related to the China Funds.

PALOMA ACTING IN MULTIPLE CAPACITIES

Paloma Management employees have acted, and in the future may act, in multiple capacities, and have effected or participated (and in the future may effect or participate) directly or indirectly in transactions with or for an account in instances in which Paloma Management employees may have multiple interests. This includes, for example, acting as principal or agent in addition to advising a client and having interests in underlying portfolio companies. For example, the Paloma Fund has made an investment in a service provider in which an officer of PPMC owns a controlling interest.

CROSS TRADES

Cross trades give rise to conflicts of interest between clients. For example, one client could be advantaged to the detriment of another in the event that the securities being exchanged are not priced in a manner that reflects their fair value. In addition, an investment adviser could use its investment authority to transfer unappealing securities from one client to another. Paloma Management could direct, from time to time and subject to applicable client investment guidelines and restrictions, one client to sell securities to another client (or with other funds) through a cross trade. Cross trades will be executed if Paloma Management believes it is in the best interest

of both clients involved in the trade and is consistent with its duty to seek best execution. Cross trades may be executed with the assistance of a broker-dealer or as an “internal cross” where the client’s custodian is instructed to book the transaction at a price determined in accordance with Paloma Management’s valuation policies. No fees will be charged by Paloma Management to its clients in connection with the completion of a cross trade. Cross trades contemplated between Paloma Management clients are submitted to the Advisory Committee for review and approval.

PRINCIPAL TRADES

Paloma Management does not generally engage in principal transactions. However, if Paloma Management were to consider a principal transaction for any of the feeder funds, Paloma Management has a formal review and approval process in place before a related party transaction can occur which includes review and approval by the Advisory Committee.

In selecting brokers and dealers to effect portfolio transactions, we may consider the full range of quality of the broker’s services to meet best execution obligations and may not pay the lowest

commission rates or prices available. The following are some factors that contribute to efficient execution, although we are not required to weigh these factors equally:

price quotes the size of the transaction and ability to find liquidity the broker-dealer’s promptness of execution the nature of the market for the financial instrument the timing of the transaction the difficulty of execution the broker-dealer’s expertise in the specific financial instrument or sector in which the trader seeks to trade the extent to which the broker-dealer makes a market in the financial instrument involved or has access to such markets the broker-dealer’s skill in positioning the financial instruments involved the quality and usefulness of brokerage and research services and investment ideas presented by the broker-dealer or third parties the broker-dealer’s ability to accommodate any special execution or order handling requirements that may surround the particular transaction

SOFT DOLLARS AND COMMISSION SHARING ARRANGEMENTS

Soft dollar arrangements generally arise when an investment adviser obtains products and services, other than securities execution, from a broker-dealer (or from a third party to whom the investment adviser directs payments from the broker-dealer) in return for commissions paid in connection with directing client securities transactions to the broker-dealer. Soft dollar arrangements may pose a conflict of interest for the investment adviser in such arrangements since it allows the adviser to pay with brokerage commissions, expenses that would otherwise be borne by the investment adviser, rather than receiving most favorable execution. Paloma Management intends to enter into soft dollar arrangements and/or commission sharing arrangements. While Paloma Management is obligated to seek best execution for each client, the fact that Paloma Management can obtain or receive such products or services creates an incentive for Paloma Management to select or recommend a broker-dealer based on Paloma Management’s interests, including where Paloma Management decides not to engage another broker-dealer that offers business terms that are also favorable to the Paloma Fund. Paloma Management enters into securities transactions with broker-dealers that provide, as part of their bundled services, access to research and research-related services. Paloma Management may

have an incentive to select a broker based on our interest in receiving research or services offered by such broker. Paloma Management also enters into commission sharing arrangements whereby Trading Teams place orders with brokers on behalf of the Paloma Fund at negotiated commission rates and a portion of the negotiated commission, on permissible transactions, generates soft dollar credits which are used to provide/pay for eligible brokerage and research services. When the Paloma Fund’s commissions (or markups or markdowns with respect to certain types of riskless principal transactions) are used to acquire products and services through the use of “soft dollars,” products and services received will be of the type contemplated by the Safe Harbor provided in Section 28(e) of the U.S. Securities Exchange Act of 1934 (that is, “research” and “brokerage”), although transactions may or may not otherwise comply with the provisions of Section 28(e) (e.g., may relate to transactions in instruments other than securities such as futures). Products and services constituting “research” may be in any form (e.g., written, oral or on-line) and can include, without limitation:

Traditional research reports analyzing the performance of a particular company or stock, market, company and financial data Market, economic, political and financial information (including studies and forecasts) Statistical information including market analysis Data on the pricing and availability of securities Seminars and conferences relating to the investment in securities or containing analyses of issuers, industries, securities, economic factors and trends and portfolio strategy

Products and services constituting “brokerage” can include, without limitation:

Execution algorithms Order management systems Post-trade reporting and analysis Clearance services Settlement services Custody services

Soft dollar products and services may be provided directly by broker-dealers, by third parties at the direction of broker-dealers or purchased on behalf of the Paloma Fund with soft dollar credits or rebates provided by broker-dealers. Additionally, from time to time Paloma Management may ask a broker-dealer who is executing a transaction to “step out” a portion of the transaction in favor of a broker-dealer who is willing to provide products or services for soft dollars.

When a product or service obtained with soft dollars provides both research and non-research assistance to Paloma Management (“mixed use” product or service), a good faith allocation will be made of the cost that may be paid with soft dollars. Trading Teams do not have an obligation to obtain the lowest available commission cost. Accordingly, if a Trading Team determines in good faith that the commissions charged by a broker or the transaction costs charged by a dealer are consistent with their obligation to seek best execution and are reasonable in relation to the value of the products or services provided by the broker or dealer, the Paloma Fund may pay commissions to the broker or transaction costs to the dealer in an amount greater than another might charge to execute the same transaction. External Trading Teams may enter into soft dollar and commission sharing arrangements independently to acquire products and services for their firm. In the event an External Trading Team with clients in addition to the Paloma Fund enters into a soft dollar arrangement, it is possible that another client will benefit (which benefit may be disproportionate relative to its contribution to the expenditure that generated them) from soft dollar services paid for by the Paloma Fund.

CONFLICTS OF INTEREST

Through “capital introduction” events sponsored by the Master Fund’s prime brokers, Paloma Management and the Paloma Fund will be introduced to potential investors. Investors in the Paloma Fund may be referred by a prime broker (or an affiliate of a prime broker), and include fund-of-funds affiliated with brokers and brokerage firms themselves. Additionally, prime brokers may provide certain consulting services to Paloma Management. Neither Paloma Management nor any Fund compensates any prime broker for organizing the events, for investments in the Paloma Fund ultimately made by prospective investors attending the events or otherwise referred by such prime broker or for any such consulting services. Paloma Management’s participation at these prime broker sponsored events and receipt of other services (including, without limitation, capital introduction services) from a prime broker creates the appearance that Paloma Management’s decision to select prime brokers and to determine the extent to which a prime broker will be used is influenced by the prime broker’s invitation to the events and provision of these services. However, Paloma Management does not require any Trading Team to execute transactions through a specific brokerdealer or use a specific prime broker or other counterparty to compensate anyone for client referrals. Paloma Management does not cause the Paloma Fund to pay higher commissions or other transactions costs in connection with any capital introduction program; however, Paloma Management (and consequently the Paloma Fund) pays directly, not using commissions, to attend certain conferences, seminars and other events that are attended by prospective investors, but not in exchange for solicitation activities.

In addition, certain prime brokers or counterparties do have platforms, some for which a fee is paid (which is offset by a reduction in the fee amount earned by Paloma Advisors) and through which their clients and customers invest in our Funds directly or through a feeder fund established by the platform. However, participation on such a platform does not drive decisions regarding selection or use of a prime broker or other broker-dealer. Prime brokers also introduce Paloma Management to potential Trading Teams. This creates the appearance of a conflict of interest that such prime brokers may be indirectly compensated (e.g., via commissions) for such referrals. However, neither Paloma Management nor the Paloma Fund compensates prime brokers for Trading Team referrals or introductions. In some cases a referral may be the result of an existing relationship with the Trading Team and while the Trading Team may indicate a preference for using the referring prime broker, Paloma Management’s approval to use the prime broker will be based on the selection criteria described above. Investors cannot direct brokerage or require the use of specific brokers. Aggregation of Trade Orders: In the case that Paloma Management executes trades on behalf of multiple clients, and if portfolio decisions are made contemporaneously for multiple clients in the same instrument, Paloma Management may, if consistent with market conditions, client characteristics, and applicable law, bunch or aggregate client orders for execution. These bunched or aggregated orders might facilitate execution and may reduce brokerage and other costs. Paloma Management, however, is not required to bunch or aggregate orders if portfolio management decisions are not made contemporaneously, if Paloma Management determines that it would be consistent with its investment management duties or the interests of its clients not to do so, or if bunching or aggregating is not practical operationally or otherwise. Although it is anticipated that any bunching or aggregation of orders will benefit each client overall, aggregating orders may disadvantage clients, including by resulting in shared allocations of orders or higher execution prices for clients. Alternatively, not aggregating orders may disadvantage clients, including by resulting in higher costs (including higher execution prices) for client orders. Trade Errors: From time to time, errors will occur with respect to trades executed on behalf of the Paloma Fund. Paloma Management has adopted policies and procedures reasonably designed to identify and resolve trade errors in a timely and appropriate manner. The Paloma Fund (and not Paloma Management or Trading Teams) will bear the cost of any losses (and reap the benefits of any gains) resulting from trading errors and similar human errors, absent gross negligence or intentional misconduct. Trade errors might include, for example, keystroke errors that occur when entering trades into an electronic trading system, the purchase or sale of a security or derivatives contract in the wrong amount or the purchase or sale of the wrong security or derivatives contract. Given the volume of transactions executed on behalf of the Paloma Fund, investors should assume that trading

errors (and similar errors) will occur and that the Paloma Fund will both benefit from any resulting gains and be responsible for any resulting losses. Paloma Management generally will not notify investors that a trade error (or similar error) has occurred. Certain investment strategies may involve the development and/or use of models and software which are prone to coding errors (including design and implementation errors). Coding errors will not constitute trade errors. The Paloma Fund does not expect to disclose discovered coding errors to investors and losses arising from coding errors will be borne by the Paloma Fund. Trade errors in respect of hedge currency share classes are allocated only to the subclasses of the investors participating in the related currency hedging activity.

Any compensated placement agent arrangements are entered into consistent with applicable regulatory requirements. Paloma Management is not paid a sales charge in connection with the sale of interests or shares in the Paloma Fund.

Investors in each feeder fund receive annual financial statements audited by an independent public accountant that is registered with, and subject to regular inspection by, the Public Company Accounting Oversight Board for the feeder fund in which they have invested within the required period under the Custody Rule. Investors are urged to carefully review such statements.

To the extent the execution of a particular strategy involves voting proxies, Paloma Management will consult with relevant Trading Team(s) to ensure that votes are cast in a manner that Paloma Management believes is consistent with its fiduciary duty. A Trading Team may override any, or all, of our standing instructions it deems not to be in the best interest of clients. Trading Team overrides to the standing instructions are documented, reviewed, and approved by the Chief Compliance Officer or his designee.

Paloma Management requires the reporting of any potential or actual conflicts of interest regarding a proxy voting decision and these conflicts are evaluated by the Chief Compliance Officer. Any conflicts, including where two or more Trading Teams direct us to vote a proxy but have differing views concerning how the proxy should be voted, will be reviewed and resolved by the Chief Compliance Officer in consultation with the Chief Operating Officer/Deputy Chief Investment Officer. Investors in the Paloma Fund may obtain a complete copy of our Proxy Voting Policy and Procedures or information on how proxies were voted for the Paloma Fund free of charge by submitting a written request to the Chief Compliance Officer, David Friedman, at 2 American Lane, Greenwich CT 068362571 or by phone at (203) 862-8000.