ITEM 5: FEES AND COMPENSATION
Fees generally are paid as set forth in each Client’s governing documents. In general, the Firm receives a
management fee (“Management Fee”) and the General Partner, or the Firm expects to receive profit
allocations (“Performance Fee”) in connection with advisory services. A summary of the anticipated fees
and expenses for Client accounts follows, but Clients and/or Investors should review the applicable Clients
governing documents for details regarding fee structure and expenses. The information contained herein
in this Item 5 is a summary only and is qualified in its entirety by such documents.
Management and Performance Based Fees
For advisory services to the Funds, Advantage Alpha generally charges a quarterly Management Fee equal
to 0.375% of each Investor’s capital account balance (approximately 1.5% per year). The Management Fee
is paid in advance based on the net asset value of each Investor’s capital account on the first day of each
fiscal quarter. An Investor that is permitted to withdraw or is distributed capital on a date other than the
last day of a fiscal quarter is not entitled to a refund of any Management Fee paid in advance.
The General Partner is generally entitled to a Performance Fee of 20% of the annual increase, if any, of
each Fund subject to a hurdle rate or high watermark, as described in the Fund’s governing documents.
The Performance Fee is calculated based on both realized gains and losses and unrealized appreciation
and depreciation of securities held in a Fund’s portfolio. The Performance Fee is made to the General
Partner at the end of each fiscal year (and on any withdrawal by or distribution of funds to an Investor
during a fiscal year).
The Firm is authorized to deduct Management and Performance Fees from the Fund. The Firm or the
General Partner, as applicable, may, by agreement with particular Investors, reduce, waive, or modify the
Management or Performance Fee attributable to those Investors. The Firm will not charge Management
and Performance Fees with respect to any Investor that is a co-founder or employee of Advantage Alpha,
any immediate family member of any such person or entities under common control and intends to reduce
the Management and/or Performance Fee for certain early Investors. Details regarding Management and
Performance Fees are set forth in each Fund’s relevant offering and governing documents.
Advantage Alpha’s Managed Account compensation is negotiable and varies, but typically, Advantage
Alpha is entitled to receive a Management Fee and Performance Fee. Management Fee is payable based
upon the assets in the Managed Account on the first day of each calendar quarter. The Managed Account’s
Management Fee shall be payable quarterly in advance. The Management Fee shall be prorated if the
Firm commences investing the funds on day other than first day of the quarter. If the Managed Account
withdraws assets on a date other than the last day of a quarter, the Management Fee for that quarter
shall not be reduced to reflect the withdrawal, and no portion of any Management Fee previously paid
with respect to that quarter shall be refunded. Advantage Alpha is also generally entitled to a Performance
Fee of 20% of the annual increase, if any, of the Managed Account subject to a hurdle rate or high
watermark, as described in the Managed Account’s investment advisory agreement. The Performance Fee
is calculated based on both realized gains and losses and unrealized appreciation and depreciation of
securities held in the Managed Account’s portfolio. The Performance Fee is made to Advantage Alpha at
the end of each fiscal year (and on any withdrawal by or distribution of funds to the Client during a fiscal
year).
Expenses
The Firm is responsible for its operating, general, administrative and overhead costs.
Each Fund bears all costs and expenses of its organization and ongoing operation including, without
limitation, (a) all trading costs and expenses (such as, for example, brokerage commissions and charges,
expenses relating to short sales, clearing and settlement charges, option premiums and custodial and
service fees), (b) all interest and commitment fees on loans and debit balances (on margin or otherwise),
all costs and expenses of negotiating and entering into contracts and arrangements and making
investments (such as brokerage, legal, accounting, investment banking, appraisal and other professional
and consulting fees and expenses arising from particular investments and potential investments) and
similar expenses in terminating those contracts and arrangements and disposing of the Fund’s
investments, (c) all research-related fees and expenses, including but not limited to all costs and expenses
incurred in visiting companies and attending research conferences (for example, airfare, hotel
accommodations and meals), research consulting fees and subscription fees for publications, (d) service
contracts and equipment related to online research, portfolio management and quotation services (such
as Bloomberg), (e) costs and expenses associated with regulatory filings of the Fund, the Firm or its
affiliates relating to the Fund (including, but not limited to filings under Section 13 of the Securities
Exchange Act of 1934, as amended, (the “Exchange Act”) and Form PF), (f) all costs and expenses
associated with registering the Fund’s restricted securities, (g) all costs and expenses incurred in
attempting to protect or enhance the value of the Fund’s investments (including the costs and expenses
of instituting and defending lawsuits or engaging in proxy contests or tender offers), (h) all income taxes,
withholding taxes, transfer taxes and other governmental charges and duties, (i) all fees and charges of
custodians, clearing agencies and banks, (j) all administration, bookkeeping, recordkeeping, middle and
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