Bayswater Management Company LP

Item 5 – Fees and Compensation

Management Fees
In consideration for its services, the Adviser typically receives a management fee from each of the
Funds, which is generally equal to a percentage of the total capital commitments to such Fund. The
fee percentage and/or the base upon which the fee is calculated may vary with the size of the Fund
and may also vary over the life of the Fund, as negotiated and determined at the time the Fund is
established and as set forth in its Governing Documents. The percentage of the management fee is
calculated based on each Investor’s aggregate capital commitment in such Fund. Upon occurrence
of certain events that are fully described in the Governing Documents of each Fund (“Adjustment
Date”), the management fee generally accrues at an annual rate based on a percentage of the
aggregate capital contributions of all Investors used to make investments in portfolio companies that
have not been sold or written off.

In addition, the Adviser typically receives certain allocations and distributions calculated and charged
based on a share of capital gains on or capital appreciation of the assets of such Funds, as
negotiated and determined at the time such Funds are established and as set forth in its Governing
Documents. These allocations and distributions are commonly known as “carried interest.” The
Adviser and its affiliates generally do not receive carried interest until all Investors have received
aggregate distributions equal to the sum of their capital contributions to the Funds.

The management fees and carried interest distributions generally are not negotiable. However, the
Adviser and/or the general partner of the Funds have discretion to reduce or waive management
fees and/or carried interest distributions. Employees of the Adviser generally are not subject to
management fees or carried interest. Certain Investors may negotiate different management fees
or carried interest provisions in side letter or other agreements with the Adviser.

Management fees are typically funded or withheld from proceeds and/or revenues from investments
but may also be funded with capital contributions paid quarterly, in advance. Carried interest
distributions generally will be distributed to the Adviser’s affiliates from time to time upon the
disposition of investments by a Fund and are distributed to such affiliate in accordance with the
terms of the applicable Governing Documents.

As stated above, the Adviser charges management fees quarterly, in advance. The Adviser will
refund any pre-paid management fee by a Fund if the advisory contract with such Fund is terminated
before the end of the billing period. Management fee refunds are calculated on a pro-rata basis for
partial periods.

Expenses
Expenses are incurred and/or paid by the Adviser or an affiliate in connection with managing the
Funds and the underlying investments in each Fund. In addition, expenses are incurred by an
affiliate in connection with acting as the “operator” of certain oil and gas investments. The Adviser
attempts to allocate all expenses fairly and equitably to the party(ies) that benefit from such
expenses, consistent with Fund Governing Documents and consistent with the Council of Petroleum
Accountants Societies, Inc. (“COPAS”) accounting procedures. In general, expenses are allocated
between 1) the Adviser or an affiliate; 2) the Funds; 3) Bayswater Resources; and 4) the investment
properties and/or all working interest owners of such investment properties.

Subject to certain limitations, the Funds will bear all costs and expenses incurred in connection with
the organization of the Funds and any other entity pertaining to the Funds, as well as the offering of
interests, including any third party legal and accounting fees, printing costs, reasonable travel and
administration expenses, and out-of-pocket expenses ("Organizational Expenses").

The Funds are responsible for all expenses relating to its own operations ("Fund Expenses"),
including fees, costs and expenses directly related to the purchase and sale of the portfolio
investments (including its pro rata share of expenses associated with the operations of natural gas
and oil properties acquired as prescribed under industry standard joint operating agreements such
as well-based operator fees), expenses of custodians, counsel and accountants, any insurance,
indemnity or litigation expenses, all costs of the Funds’ administration and preparation of its financial
statements and reports to Investors, costs of the valuation agent's services and expenses, costs of
holding any meetings of the Investors or the advisory committee, and any taxes, fees or other
governmental charges levied against the Funds, and any other expenses that are customary in the
oil and gas industry. In addition, the Funds shall be responsible for all out-of-pocket costs of the
Adviser and the affiliates, and all fees and expenses due any third party legal, financial, accounting,
consulting, or other advisors or any lenders, investment banks, and other financing sources in
connection with transactions which are not consummated. The Funds will share in any expenses
incurred by the Adviser or an affiliate as a result of contributions to political action committees
(“PACs”) or other organizations organized to challenge legislation or regulations related to oil and
gas exploration and production that are counter to the Funds’ economic interest.

All expenses of the Funds generally are allocated to the Investors pro rata in proportion to the
respective interests of such Investors in the Funds; provided, however that the Adviser may, in its
sole discretion, allocate to each Investor investment expenses which are solely allocable to such
Investor. Expenses that benefit more than one Fund are or will be allocated across Funds in a
reasonable and equitable manner, and certain expenses are and will be reallocated to a subsequent
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Item 7 – Types of Clients

The Adviser currently manages the assets of U.S. privately offered pooled investment vehicles for
which its affiliates act as general partner or sponsor. The Funds’ structures most resemble that
of a “private equity fund” and would be considered “private funds” for purposes of the Investment
Company Act of 1940.

Generally, the Adviser enters into arrangements solely with Fund Investors that are: (a) “accredited
investors” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities
Act of 1933, as amended; (b) and “qualified purchasers” as defined in Section 2(a)(51)(A) of the
Investment Company Act of 1940. The minimum commitment that is and will be accepted from a
prospective Investor is $5 million, subject to the discretion of the general partner of the Funds to
accept lesser amounts. Investment opportunities in Bayswater Resources have been offered to
certain employees and key contractors of the Adviser who are not required to meet the same
Investor criteria as Fund Investors.