ITEM 5: FEES AND COMPENSATION
Private Fund(s)
The Private Fund pays Absolute a fixed quarterly management fee as of the beginning of each
fiscal quarter equal to 0.25% (1.00% annualized) of the Private Fund’s opening net asset value for
that quarter. Such fixed management fees payable by the Private Fund are generally not negotiable,
although in certain circumstances management fees may be waived or reduced. In addition, the
Private Fund also typically pays a performance-based fee or profit allocation of 20% of the net
realized and unrealized capital appreciation in the Private Fund. This performance-based
compensation is subject to waiver by Absolute, in its sole discretion, and is waived for certain
Limited Partners in the Private Fund. Absolute has waived the performance-based compensation
for certain affiliates of Absolute (the General Partner of the Private Fund), family members of the
Principals of the General Partner of the Private Fund, and other entities created for a family
member's benefit.) The performance-based compensation is charged only on profits in excess of
the Private Fund’s previous "high water mark."
Mutual Funds
Absolute charges an asset-based fee for investment management services to the Absolute Funds.
The fee arrangement, termination, and refund policies are described in each Absolute Fund's
prospectus and Statement of Additional Information ("SAI").
For these services, Absolute typically charges annual management fees that range from 0.85% to
1.40% of the average daily net assets of an Absolute Fund, depending on the type of assets being
managed. Fees charged with respect to Absolute Funds are subject to annual review and approval
by the Board of Trustees of each Absolute Fund. These fees and expenses are described in each
Absolute Fund's prospectus, and clients should review the fees charged by the Absolute Funds and
the fees charged by Absolute to fully understand the total amount of fees to be paid by the client.
Separately Managed Accounts
For SMA Clients, management fees are normally charged based on a percentage of assets under
management. Absolute may be paid a management fee in advance at the beginning of each calendar
quarter based on an agreed percentage of the market value of the holdings in the SMA Client
account as of the beginning of the quarter, or the SMA Client may pay the management fee based
on an agreed percentage of the market value of the holdings in the SMA Client account quarterly
in arrears based on the average of the net asset value as of the last day of each month during such
calendar quarter. Management fees are generally billed to the client, not deducted from the client’s
account. Absolute is also entitled to be paid a performance-based fee as mutually agreed between
an SMA Client and Absolute (so long as the client is a "qualified client" under the applicable
securities regulations). The performance-based fee is based on an agreed percentage of net realized
and unrealized capital appreciation on an annual basis and may be subject to a hurdle or target
performance amount that must be reached before the performance-based fee will be paid. In
addition, the performance-based fee will be subject to a “high-water” mark such that if the account
suffers a net capital loss, no performance-based fee will be charged until the account has recovered
that loss. If an SMA Client invests a portion of its assets in the Private Fund, then no separate
account management fee is paid on the portion of assets in the Private Fund, but rather, only the
management and performance-based fees of the Private Fund are charged on those assets. Fees
charged to SMA Clients are subject to negotiation and are included in a written contract between
the client and Absolute.
A minimum of $25 million of assets under management is required for separately managed
accounts, subject to Absolute’s discretion to accept more or less. This account size may be
negotiable under certain circumstances.
An SMA Client agreement generally may be canceled at any time, by either party, for any reason
upon receipt of written notice. The Investment Management Agreement between the SMA Client
and Absolute will give the specific notice period required, which is generally 30 days. As disclosed
above, certain fees are paid in advance of the services provided. Upon termination of any
separately managed account that pays management fees in advance, any prepaid, unearned fees
will be promptly refunded. In calculating a SMA Client’s reimbursement of fees, Absolute will
pro rate the reimbursement according to the number of days remaining in the billing period.
Other Fees and Expenses
In addition to our advisory fees, Client Accounts are also responsible for the fees and expenses
charged by custodians and imposed by broker-dealers, including, but not limited to, any transaction
charges imposed by a broker-dealer that effects such transactions.
Client Accounts will generally also bear all other costs and expenses related to their investments
and operations, including, without limitation, brokerage commissions and other transaction costs,
clearing and settlement charges, interest and commitment fees on debit balances or borrowings,
borrowing charges on securities sold short, stock borrowing fees, proxy solicitation expenses, costs
of liability insurance obtained on behalf of a Client Account, initial and variation margin, custodial
fees, costs of any litigation or investigation involving Client Account activities, indemnification
expenses, consulting expenses, the fees and expenses of professionals providing services to the
Client Accounts, including legal and other professional fees relating to potential and actual
investments, audit, accounting, tax and administration, regulatory costs, any issue or transfer taxes
chargeable in connection with any securities transactions, any entity level taxes, regulatory filing
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