Freestone Capital Management LLC

Item 5. Fees and Compensation

A. Advisory Client Accounts
In general, we charge an annual management fee based on the amount of the advisory client’s
assets that we manage or advise, this includes assets for which we have discretionary and non-
discretionary authority. We assess management fees quarterly. Depending on the terms of the
investment management agreement we have entered into with the advisory client, we typically
calculate quarterly management fees based on the value of the advisory client’s accounts on the
last day of a quarter. Management fees are payable either in advance or in arrears. In either
case, we typically deduct the management fee directly from the advisory client’s accounts. If an
advisory client, who pays management fees in advance, terminates our relationship at any time
other than the end of a calendar quarter, then we will refund that advisory client a portion of the
pre-paid fees, calculated on a pro-rata basis to reflect the number of days remaining in the
quarter. We will typically apply the refund to the advisory client’s custodial account. Fee amounts
and payment provisions are included in the investment management agreement we enter into
with our advisory clients.

The amount of our management fee is negotiable and varies among advisory clients, but will not
exceed 1.50% of the value of the advisory client’s assets that we manage or advise, subject
to the minimum fee described below. In many cases, we will charge new advisory clients
referred to us by Charles Schwab & Co., Inc. (“Charles Schwab” or “Schwab”) a lower annual
management fee than other advisory clients of similar size and complexity.

In general, we charge new advisory clients who are not referred to us by Schwab a minimum
annual management fee of $6,000 per year. Our minimum annual management fee will not apply
to the calendar year in which the new advisory client becomes an advisory client. Scwhab-referred
advisory clients are subject to a lower minimum annual management fee of $4,000, which is
waived in the client’s first calendar year. Many existing advisory clients are subject to a different
minimum fee amount or no minimum fee amount. We waive our minimum annual management
fee from time to time, in our sole discretion.

We engage third-party sub-advisers not affiliated with us to manage or otherwise provide advisory
services or investment advice for certain strategies and model portfolios. Generally, advisory
clients bear the additional costs, fees and expenses associated with investments in these
portfolios, including fees of the third-party sub-advisers. The amount of the costs, fees and
expenses associated with such sub-advised strategies or model portfolios will fluctuate, but our
management fee percentage will remain the same. The third-party sub-adviser will debit their
advisory fees directly from the advisory client’s account. We disclose the existence of the
additional costs, fees and expenses in the investment management agreement we enter into with
the advisory client and in ancillary documents or communications with the advisory client.

Factors that influence the amount of management fees we charge advisory clients include client
type, account size and anticipated increases in account size, pre-existing relationship and other
factors. In addition, from time to time, we will agree to pay or reimburse certain costs and
expenses of a client who engages us to manage their accounts (e.g., fees of the client’s CPA
or other professional advisors). We typically combine certain related advisory client accounts for
purposes of calculating a client’s aggregate household size and/or management fee.
Management fees are waived for all current employees. Former employees and their family

Freestone

members could be charged lower or no management fees at our sole discretion.

In all cases, advisory clients are responsible for all fees and expenses incurred by or arising in
connection with an account, including custodial fees, brokerage commissions, fees and expenses
charged by mutual funds and exchange-traded funds, trade-away fees, clearing fees, interest
and taxes incurred in connection with trading. Advisory clients pay these fees and expenses in
addition to the management fee we charge and the management fees charged by third-party sub-
advisers. We discuss brokerage and other transaction costs incurred by advisory client accounts
in more detail in Item 12 (Brokerage Practices).

Occasionally, we recommend that an advisory client invest in a private fund or account not
managed or controlled by our affiliates or us. In that case, in addition to our management fee,
the advisory client will be responsible for all fees, allocations and other costs and expenses
charged by or payable to the unaffiliated third-party manager and/or private fund.

In the event an advisory client elects to invest in a private fund managed or controlled by our
affiliates or us, the advisory client will not pay the above-described management fee to us in
respect of the assets invested in the private fund. Instead, the advisory client will pay the fees
associated with the private fund, as described in the private fund’s offering documents, to us and
our affiliates, which are discussed below.

B. Private Funds
Fees associated with the private funds generally include an annual management fee of 1%, as well
as a performance-based fee or allocation. In addition, many of the private funds carry an
additional asset-based services fee of 0.10% to 0.25%. In most cases, Freestone or our affiliates
deduct those fees and/or allocations directly from the private funds. In addition, each private
fund pays all operating expenses and other costs of the fund, including fund formation costs,
due diligence costs and expenses, custodial fees, brokerage commissions, fees and expenses
charged by mutual funds and exchange-traded funds (if any), clearing fees, interest and taxes
...

Item 7. Types of Clients

We provide investment advisory services primarily to high net worth families and individuals.
However, from time to time our advisory clients also include pension and profit-sharing plans,
financial institutions (including funds of funds), trusts, endowments, charitable organizations,
corporations or other business entities and third-party managers.

We also serve as investment manager to the private funds. Any minimum investment amount or
other qualification requirements related to an investment in the private funds are set forth in the
applicable private fund’s offering documents.

We do not require a minimum account size, though in general we seek advisory clients that desire
to establish a discretionary investment management relationship with us over time involving
at least $1,000,000, or $2,000,000 for advisory clients referred to us through the Schwab Advisor
Network referral service. See Item 14 (Client Referrals and Other Compensation) for information
regarding the Schwab Advisor Network referral service. For information regarding fees and
compensation that we receive, see Item 5 (Fees and Compensation).

Freestone