FEES AND COMPENSATION
Alpha Paradigm charges both asset-based “management fees” and performance-based “performance fees”
to certain of its Clients. These fees are not based on a pre-determined fee schedule, and may be set and
negotiated by Alpha Paradigm based on a variety of factors, including, but not limited to, the size,
composition and complexity of the Client’s account, length and nature of Alpha Paradigm’s relationship
with the Client, special services agreed upon with the Client or other factors deemed relevant by Alpha
Paradigm. The rate and frequency of such management fees generally will be set out in Alpha Paradigm’s
investment advisory agreement with the applicable Client or in the offering documents of the applicable
Fund. Management fees for the Client Accounts may be periodically billed to the applicable Clients, or
may be paid by deduction of such compensation from the applicable Client Account, as agreed between
Alpha Paradigm and the applicable Client. Management fees due from the Funds will generally be
deducted directly from the assets of the Fund.
Other Fees and Expenses. Alpha Paradigm’s Clients will incur other expenses in connection with Alpha
Paradigm’s advisory services. Such expenses are expected include transaction fees, brokerage
commissions, custody fees; government charges, taxes and duties; transfer fees and registration fees;
withholding taxes payable and required to be withheld by issuers or their agents; and other related costs
and expenses that will be incurred by a Client with respect to the transactions effected by Alpha Paradigm
on its behalf. Clients will also bear the investment management or other fees charged by any mutual funds
or ETFs in which Alpha Paradigm may invest on the Clients’ behalf (if applicable).
Investors in the Funds will also bear additional charges and expenses in connection with such investment.
Each Fund generally will incur legal and organizational expenses in connection with its formation and initial
offering, which generally will be borne by the applicable Fund (and, therefore, indirectly by its investors).
In addition, the Funds will also bear ongoing expenses, which may include, without limitation, legal,
bookkeeping, accounting, auditing, recordkeeping, administration, computer and clerical expenses
(including expenses incurred in preparing reports and tax information and regulatory authorities and
expenses for specialized administrative services); printing and duplication expenses; investment research
expenses, market data, newswire and data processing expenses; software and connectivity charges; bank
charges and borrowing costs; exchange, board of trade or other trading or execution facility membership or
participation expenses; offering expenses; filing fees; directors’ and officers’ liability insurance; investment
and operating expenses; and other expenses necessary to operate such Fund. Additional details regarding
the fees and expenses borne by investors in the Funds will be set forth in the offering documents for such
Funds.
PERFORMANCE BASED FEES AND SIDE-BY-SIDE MANAGEMENT
Alpha Paradigm also will charge performance-based compensation with respect to the Client Accounts
and Funds that it manages. These fees are not based on a pre-determined fee schedule, and may be set
and negotiated by Alpha Paradigm based on a variety of factors, including, but not limited to, the size,
composition and complexity of the Client’s account, length and nature of Alpha Paradigm’s relationship
with the Client, special services agreed upon with the Client or other factors deemed relevant by Alpha
Paradigm. The rate and frequency of such performance-based compensation generally will be set out in
Alpha Paradigm’s investment advisory agreement with the applicable Client or in the offering documents
of the applicable Fund. Performance-based compensation for the Client Accounts may be periodically
billed to the applicable Clients, or may be paid by deduction of such compensation from the applicable
Client Account, as agreed between Alpha Paradigm and the applicable Client. Performance-based
compensation due from the Funds will generally be deducted directly from the assets of the Fund.
Conflicts of Interest Related to Performance-Based Compensation. A significant percentage of the
appreciation (if any) which would otherwise be allocated to certain Clients and Fund Investors is paid to
Alpha Paradigm. This performance-based compensation is based upon unrealized, as well as realized,
gains, and such unrealized gains may never be recognized by the Client. However, Alpha Paradigm or its
affiliates may also manage Client Accounts or Funds that do not pay performance-based compensation to
Alpha Paradigm, but rather pay only an asset-based fee. This gives rise to a potential conflict of interest,
as Alpha Paradigm may have an incentive to favor the accounts of Clients for which it or its affiliates
receive performance-based compensation over accounts for which they do not receive such compensation,
for example, seeking to allocate more profitable investment opportunities to the accounts for which Alpha
Paradigm receives performance-based compensation. However, Alpha Paradigm has implemented
aggregation and allocation procedures to allocate the securities bought or sold between the Client
Accounts on a fair and equitable basis over time.