Item 5 - Fees and Compensation
A. Fee Schedule
PAM charges investment advisory fee according to the following schedule for Qualified Professional Asset
Manager ("QPAM") Accounts:
Assets Under Management Annual Fee
Less than $10,000,000 0.50% - 2.00%
With respect to private equity portfolios managed by PAM, fees will be calculated and paid according the terms
of the private placement memorandum or offering documents.
Potomac Asset Management Company, Inc. Form ADV Part 2A 09/2017 4
Potomac Asset Management Company, Inc.
The Firm may charge an hourly fee ranging from $300 to $1000 per hour or a negotiated fixed quarterly fee for
providing investment management and consulting services. Fees will vary depending on the complexity of the
engagement and the professional providing the service.
PAM may, in its sole discretion, waive or reduce fees charged to a client, or negotiate a fee to reflect the special
circumstances of a client with the result that the client may pay a higher or lower fee than other clients receiving
similar services. PAM agrees to provide clients with advance written notice of any changes to its standard fee
schedule that would result in a higher fee for clients than does the current fee schedule.
B. Fee Billing
Clients may elect to have the quarterly investment management fee debited directly by the custodian of the
account and paid directly to PAM. In such cases, PAM will send an invoice to each client showing the amount
of the fee, the formula used to calculate the fee, the value of assets the fee is based on, and the time period
covered by the fee. Additionally, the invoice will disclose that it is the client's responsibility, not the
custodian's, to verify the accuracy of the fee.
If a client elects to be billed directly by PAM, the investment management fee is due upon receipt of an invoice
from PAM and payable by check. Investment advisory fees are payable quarterly in arrears and based on the
market value of the account assets as determined on the last day of the preceding quarter. Fees for the initial
quarter are prorated from the date of account inception and adjusted to cover any additional contributions made
during that period.
The investment advisory contract may be terminated by the client or PAM by either party giving a thirty (30)
days written notice to the counterparty. Upon termination, fees will be prorated and payable in arrears at the
termination date.
C. Other Fees
Clients may incur fees imposed by custodians, broker-dealers, and other third-parties in connection with
receiving investment management services from PAM. Such fees generally include custodial fees, brokerage
transaction fees, and mutual fund expenses. These fees will generally include a management fee, other fund
expenses, and a possible distribution fee. If the fund also imposes sales charges, a client may pay an initial or
deferred sales charge. A client could invest in a mutual fund directly, without our services. Accordingly, the
client should review both the fees charged by the funds and our fees to fully understand the total amount of fees
to be paid by the client and to thereby evaluate the advisory services being provided. The client is responsible
for all third party fees. These fees are separate and distinct from the investment management fee charged by
PAM. See Item 12 (Brokerage Practices) for more details.
Potomac Asset Management Company, Inc. Form ADV Part 2A 09/2017 5
Potomac Asset Management Company, Inc.
D. Prepaid Fees
PAM's investment advisory fees are charged to clients in arrears. The Firm does not accept prepaid fees for
advisory services. PAM’s advisory services may (or may not) be available from other registered (or
unregistered) investment advisers for similar or lower fees.
E. Compensation for the Sale of Securities
PAM’s affiliated registered broker-dealer, Potomac Capital Markets, LLC, and its management company
parent, Potomac Investment Services, Inc., occasionally may receive fees for arranging financial transactions
involving the management of client accounts and providing research and advise to portfolio companies
regarding available restructuring options to portfolio companies. Neither PAM nor any of its supervised
persons receive compensation for the sale of any securities in connection with the management of client
accounts.