Item 5 – Fees and Compensation
A. Fee Schedule
The fees and compensation payable to Freedom Financial are negotiable and may vary
among the Fund’s respective investors. The following sections provide a general overview of
Freedom Financial’s fee structure, which includes a Management Fee, Service Fee, and
Incentive Allocation.
1. Management Fee
As a result of the wind down, Series B currently pays to Freedom Financial at the end of each
quarter a Management Fee calculated at the Management Fee Rate of 0.75% per annum.
The rate is applied to the “Management Fee Base,” of each limited liability company member
interest in Series B (each an “Interest”). An Interest’s “Management Fee Base” at any date as
of which the Management Fee is calculated is (i) the sum of the Interest’s Month-End
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Freedom Financial Asset Management, LLC Brochure
Applicable Balances (defined below) for each of the months in the period for which the
Management Fee is being calculated divided by (ii) the number of such month-ends in the
calculation period.
An Interest’s “Month-End Applicable Balance” for any month is that Interest’s Participation
Percentage (defined below) as of the beginning of that month multiplied by the sum of (i)
unpaid principal balances of all Series B investments as of the end of that month excluding
any Series B investments that, as of the date the Management Fee is being calculated, have
unpaid principal balances that are 60+ days delinquent or have been charged off; (ii) the
Fund’s Residual Percentage1 of the sum of unpaid principal balances of all Series B
investments owned by Sponsored ABS Issuers2 as of the end that month excluding any
non-performing receivables; and (iii) the sum of all other investments held by Series B.
An Interest’s “Participation Percentage” at any given time is the working sub-account for that
Interest divided by the sum of all working sub-accounts for Interests in Series B. If, in any
month, one or more Interests has made a capital contribution as of a date other than the first
day of that month, the Participation Percentage used in determining the Month-End
Applicable Balance for each Interest will be prorated based on that Interest’s Participation
Percentage as of the beginning of each accounting period during the month, weighted by the
number of days in the month for which that Participation Percentage was in effect.
The calculation described above is conducted for each Interest in Series B which is Freedom
Financial’s sole client at the time of this writing. The sum of the Management Fee
attributable to each Interest is the Management Fee that Series B pays to Freedom Financial.
The Management Fee is charged on the last day of each calendar quarter. The share of the
Management Fee attributable to each Interest is then debited from the working sub-account
for the capital account established for that Interest.
2. Servicing Fee
The Fund, special purpose vehicles holding consumer installment loans and/or consumer
mortgage loans for the Fund, and/or securitization vehicles will pay (i) Freedom Financial, in
its capacity as servicer of consumer installment loans, a monthly Servicing Fee at 1.00% of
the sum of unpaid principal balance of Achieve Personal Loans and Achieve Acceleration
Loans (collectively, “Achieve Installment Loans”), as such on the first and last day of the
relevant month – divided by two, excluding certain “severely delinquent” Achieve Installment
Loans (generally, Achieve Installment Loans that are delinquent by 90 days or more or whose
borrowers are subject to specified types of insolvency proceedings); and (ii) Achieve Home
Loans, in its capacity as servicer of Achieve HELOCs, 1.25% of the unpaid principal balance of
all Achieve HELOCs as of the opening of business on the first day of the relevant month
The Fund’s “Residual Percentage” of a Sponsored ABS Issuer is the percentage of the profits and distributions attributable to
residual or equity equivalent interests of the Sponsored ABS Issuer that the Fund received (including indirectly through one or
more subsidiaries or Special Purpose Vehicles) in consideration of the Fund’s sale or contribution of consumer receivables to
the Sponsored ABS Issuer.
A “Sponsored ABS Issuer” is any issuer of securities that are collateralized by consumer receivables and for which the Fund
acts as sponsor or in a similar capacity.
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Freedom Financial Asset Management, LLC Brochure
regardless of whether or not those Achieve HELOCs are delinquent. Each servicing fee is paid
at an annual rate (as listed above and multiplied by one-twelfth on a monthly basis) of the
arithmetic average of the unpaid principal balances of all loans held by the Fund on each day
of the relevant month and may be amended by agreement between the parties.
3. Incentive Allocation
Freedom Financial will be entitled to a periodic special profit allocation as to each Interest’s
investment in the Fund (an “Incentive Allocation”) generally equal to 15% of the cumulative
profit allocated to that Interest’s capital account (including realized and unrealized gains and
losses). The Incentive Allocation is subject to an Interest’s Capital Account achieving (at
minimum) an 8% per annum internal rate of return after accounting for the Incentive
Allocation, meaning that if payment of the Incentive Allocation would reduce an Interest’s
internal rate of return to less than 8%, the Incentive Allocation is reduced to the extent
necessary to maintain an internal rate or return of no less than 8%.
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