Performance results shown include all accounts managed by Kevin O’Grady or Palo Capital with a capital appreci- ation objective (over 90% of all assets) since January 1, 2000, including accounts managed prior to Palo Capital's inception in 2005. Results and benchmarks are shown on a total return basis which includes all dividends, interest, transactions costs, and realized and unrealized gains and losses, and are presented net of investment advisory fees. Returns for non-fee paying accounts (e.g., accounts owned by firm principals) have been reduced by the amount of fees that would be charged under the fee schedule shown in Palo Capital's Form ADV. Additional details concerning performance measurement methods are available upon request. Past performance is no guarantee of future results.

Methodology. Returns shown are time-weighted rates of return, with annual returns calculated by linking returns for the year’s sub-periods (the method specified by the Global Investment Performance Standards). Accounts were valued quarterly until December 31, 2004, and monthly since that date. Time-weighted rates of return allow calcu- lation of the dollar growth of an investment in a particular period, assuming reinvestment of dividends and interest. Within each sub-period, returns are calculated on an asset-weighted basis.

Investment Strategies. The accounts whose performance is shown were managed on a basis comparable to how Palo Capital manages Capital Appreciation Accounts. This approach allows the manager wide flexibility as to specific investment strategies which have varied significantly over time based on market conditions. For most taxable accounts included in the historical results, short-selling was permitted. Short-selling had a significant impact on results for the 2000-2001 period, with minimal impact since 2001.

Benchmark comparison. Comparison to the S&P 500 is included because: (i) this index is the most widely used equities benchmark; (ii) investment strategies used by Palo Capital/Kevin O'Grady have invested almost exclusively in equities; and (iii) these strategies have varied significantly over time, thus making a choice of a single benchmark problematic. Use of the S&P 500 is not meant to suggest that the investments whose performance is shown here were comparable to the S&P 500's components. In most periods, portfolios differed significantly from the S&P 500 in terms of market capitalization, sector distribution, volatility, and/or country.

Performance variability among accounts. During 2000-2009, an average of 50 Capital Appreciation accounts were managed per year, with 137 such accounts managed in 2009. Results have varied significantly among accounts due to differences in investment timing, risk tolerance, use of short-selling, tax considerations, and stock selection.