ITEM 5 – FEES AND COMPENSATION
The Adviser receives compensation from Clients based upon the amount of assets under management and
performance of the assets managed by the Adviser. The management and performance fee terms and
percentages for the Managed Account is separately negotiated with the Adviser and, thus, fees for the
Managed Account differs from those of the EastBay Funds, which are described below.
Management Fees
The Master Fund pays the Adviser a quarterly management fee in advance calculated at a rate that ranges
from 0.0% to 1.75% per annum (rate dependent on class of interest/class of shares) of the net asset value of
each common share as of the first business day of each calendar quarter without accrual of the incentive
allocation (described below), if any. The management fee is payable within 10 days after the first business
day of each calendar quarter. The management fee is deducted in determining the net profit or net loss of
the Master Fund. The management fee for any period that is less than a calendar quarter will be prorated.
If additional subscriptions are made to the Onshore or Offshore Funds during a calendar quarter, the
management fee will be prorated and charged at the time of such subscription. The Adviser has and may,
in its sole discretion, waive or modify the management fee in the future for shareholders that are members,
employees or affiliates of the Adviser or the general partner of the Master Fund, relatives of such persons
and for certain other investors.
Incentive Allocation (Performance-based compensation)
Except as provided below, at the end of each fiscal year, an amount that ranges from 15% to 30% of the net
profits (including realized and unrealized gains and losses and the rate is dependent on class of interest/class
of shares) allocated to each common share of the Onshore and Offshore Funds are reallocated to the
respective capital accounts in the Master Fund from the applicable capital account of the Onshore and
Offshore Funds in the Master Fund, which are the Onshore and Offshore Funds’ incentive allocations,
subject to a loss carryforward. As a result, separate sub-accounts of the Onshore and Offshore Funds’
capital accounts in the Master Fund have been established for each series of Common Shares. Under a loss
carryforward provision contained in the Onshore and Offshore Funds’ Fund Documents, if a common share
has a loss chargeable to it during any fiscal year, and during a subsequent fiscal year there is a profit
allocable to such common share, there will be no incentive allocation payable with respect to such share
until the amount of the loss previously allocated to such common share has been recouped. The Master
Fund’s general partner has and may waive or modify the incentive allocation in the future for shareholders
that are members, principals, employees or affiliates of the Adviser or the Master Fund’s general partner,
relatives of such persons, and for certain other investors. When calculating the incentive allocation, all
items of income, loss, profit and expense incurred directly by the Onshore and Offshore Fund will be taken
into account. The Master Fund’s partnership agreement provides that the Onshore and Offshore Funds will
be allocated the incentive allocations as of the end of each fiscal year and whenever common shares are
redeemed.
EastBay deducts applicable fees from each investor’s capital account. Investors do not have the ability to
choose to be billed directly for fees incurred.
Expenses
The Adviser is responsible for and pays all overhead expenses of an ordinary and recurring nature such as
rent, supplies, secretarial expenses, stationery, charges for furniture and fixtures, employee insurance,
payroll taxes and compensation of employees. The Funds bear all other expenses including fees paid to the
Adviser, fees and expenses paid to the EastBay Funds’ administrator, legal, accounting, audit and other
professional fees and expenses, organizational expenses, directors' fees and expenses, research expenses
(including research-related travel), investment expenses such as Fund compliance, commissions, custodial
fees, bank service fees and other expenses related to the purchase, sale or transmittal of fund assets. Each
of the EastBay Funds amortize their organizational expenses over a period of up to 60 months from the date
each EastBay Fund commenced operations.
The Onshore and Offshore Funds invest all their assets in the Master Fund. Each investment entity that
invests in the Master Fund indirectly bears the expenses of the Master Fund pro rata based on its interest in
the Master Fund.
From time to time, the EastBay Clients may invest in securities of investment companies that are not
managed by the Adviser, such as closed-end funds, open-end funds and exchange-traded funds (“ETFs”)
as part of hedging, trading and investment strategies. To the extent that the EastBay Clients invest in such
securities, the EastBay Clients incur layered fees; that is, they not only pay fees directly to the Adviser, but
also pay fees charged by the entities that manage the investment companies’ securities. Such fees may
include custodial fees, management fees, early termination fees and other fees and expenses assessed by
the sponsor, custodian, transfer agent or other service providers to an investment company.
The EastBay Clients are charged brokerage commissions and other transaction costs and expenses in
connection with their trading and investment activities. Please refer to Item 12 of this Brochure for a
description of EastBay’s brokerage practices.
It should also be noted that if a trade error occurs, EastBay will not be responsible for gains or losses
resulting from the trade error and the EastBay Funds will bear the respective gain or loss, except where
such trade error is the result of EastBay’s gross negligence, willful misconduct or fraud.
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