BHR Capital LLC

Fees and Compensation

Clients and investors in the BHR Funds are typically charged an annual management fee equal
to a percentage of net assets, payable each quarter in advance, and an annual performance fee
or allocation equal to a percentage of the amount by which the net value of each account as of
the end of each calendar year exceeds the net value of the account as of the beginning of the
year.

The management fee is usually deducted directly from the assets of each account as such fees
become payable, which is generally quarterly in advance. The performance allocation is
payable annually in arrears, or upon termination of a client account or withdrawal of capital
from any BHR Fund.

The clients of BHR are responsible for all costs and expenses incurred in connection with the
investments in their accounts, including brokerage commissions; clearing fees; fees, interest and
other costs in connection with margin accounts or other borrowings; borrowing charges on

securities sold short; custodial fees; bank service fees; costs of any outside appraisers,
accountants, attorneys or other experts or consultants engaged by BHR in connection with
specific investments (including transactions that fail to close); costs of research and data services;
and any legal fees and costs arising in connection with any litigation or regulatory investigation
instituted against BHR or any client. The BHR Funds also pay all of their operating costs,
including administration, legal, accounting, auditing and insurance costs and expenses, as
described in greater detail in the offering materials for each BHR Fund. For additional
information about brokerage expenses, see “Brokerage Practices” below.

Performance-Based Fees and Side-By-Side Management

BHR, through an affiliate, ordinarily receives a performance-based fee or a special allocation of
profits from each of its clients as described above under “Fees and Compensation.” Different
client accounts may be subject to different performance-based compensation arrangements. If
BHR is entitled to receive a higher percentage of the net profits of the account of one client
than the percentage that BHR receives from another client, then BHR may have an incentive to
favor, or to allocate certain riskier or more speculative investments to, the client that is subject
to the higher percentage.

BHR will, as a policy, allocate all investment opportunities among its clients in a manner that it
considers fair and equitable to all clients, considering all factors potentially applicable to each
client. Among the factors that may be considered by BHR in allocating trades among client
accounts are: investment policies, guidelines or restrictions applicable to each specific client; tax
considerations; actual and targeted cash availability; liquidity requirements for payment of
redemptions or other purposes; risk tolerances; restrictions under ERISA or other applicable laws
or regulations; available credit lines; counterparty arrangements; account size; benchmark sector
weightings; industry and security weightings; and hedging objectives and activity.

Types of Clients

BHR provides advice to the BHR Funds and may provide advice to separate account clients. See
“Advisory Business” above. BHR generally requires a minimum commitment of $250,000,000
for individually managed accounts. The BHR Funds also have minimum investment amounts, as
described in the offering materials for each BHR Fund, subject to waiver or modification at the
discretion of BHR or the board of directors of the relevant BHR Fund. In particular, each
investor in each of the BHR Funds generally must be an “accredited investor” as defined in
Regulation D under the Securities Act of 1933, as amended (the “Securities Act”), and a
“qualified purchaser” as defined in Section 2(a)(51) of the Investment Company Act of 1940, as
amended (the “Investment Company Act”) .

Methods of Analysis, Investment Strategies and Risk of Loss

BHR is a value-oriented investment manager seeking to provide high absolute and risk-adjusted
investment returns with relatively low correlations to the broader U.S. credit and equity

markets. BHR further seeks to protect against capital losses through rigorous research
combined with active hedging techniques. BHR invests primarily in U.S. publicly traded debt
and equity securities and focuses on special situations where it identifies one or more catalysts
to create value. The majority of BHR’s investments are passive, although in certain cases BHR
may become actively involved in order to maximize value for its investors; however, BHR will
not ordinarily seek to take controlling interests in the companies in which it invests.

Although event-driven and special situation investments may result in significant returns to the
clients of BHR, they also involve a substantial degree of risk. Investors in the BHR Funds should
refer to the Governing Documents of the applicable BHR Fund for more complete information
on investment strategies employed by the BHR Fund and the corresponding risks associated
with such investment strategies. BHR generally accepts only clients that are able to bear the
financial risk of the investment strategy for an indefinite period of time and are able to sustain
the loss of all or a significant part of their investment.

The investment strategy employed by BHR on behalf of its clients involves significant risks. The
following summary of certain risks does not purport to be complete, but includes some of the
potential risks generally associated with the BHR investment strategy:

High Risk Investments. BHR may invest on behalf of its clients in debt and equity securities,
loans and other financial instruments and obligations of highly leveraged and financially
troubled companies, including companies involved in bankruptcy, reorganization and
liquidation proceedings. Although such investments may result in significant returns to
investors, they involve a substantial degree of risk. Any one or all of the issuers of the securities
or other instruments in which a BHR client may invest may be unsuccessful or not show any
return for a considerable period of time. It may be difficult to obtain information as to the true
financial condition of entities experiencing significant financial or business difficulties.
Investments in distressed companies also may be adversely affected by state and federal laws
relating to fraudulent conveyances, voidable preferences, lender liability and the bankruptcy
courts’ discretionary power to disallow, subordinate or disenfranchise particular claims. The
market prices of instruments issued by distressed companies may be subject to abrupt and
erratic market movements and above average price volatility, and the spread between the bid
and ask prices of such instruments may be greater than normally expected. It may take a
number of years for the market prices of such securities to reflect their intrinsic values. Some
securities may not be widely traded, and a BHR client’s positions in such securities may be
substantial in relation to the market for such securities. Funding a plan of reorganization
involves additional risks, including risks associated with equity ownership in the reorganized
entity. Investments in distressed securities made in connection with an attempt to influence a
restructuring proposal or plan of reorganization in a bankruptcy case may involve substantial
litigation.

Use of Leverage. BHR may cause its clients to borrow money from banks and other entities,
including borrowing money through margin facilities at one or more broker/dealers. To the
extent that a BHR client uses leverage, any decrease or increase in the value of a portfolio will

tend to be at a greater rate than if borrowed money was not used. Changes in the general level
of interest rates may also adversely affect investment results.

Concentration of Investments. BHR may concentrate investments on behalf of its clients in a
relatively small number of securities positions. As a result, a loss in any one position could have
a materially adverse effect on an entire portfolio and, consequently, a client’s investment.

Long Positions. The success of long positions depends in large part on BHR’s ability to
accurately assess the fundamental value of those positions. An accurate assessment of
fundamental value depends on a complex analysis of a number of financial and legal factors.
No assurance can be given that BHR will be able to assess the nature and magnitude of all
material factors having a bearing on the value of long positions, or that BHR will accurately
assess the impact of all factors of which it is aware.

Short Selling. BHR may sell securities short on behalf of its clients. Selling short involves the
sale of borrowed securities. In order to sell a security short, the investor must borrow the
security from a securities lender and deliver it to the buyer. The investor is then obligated to
return the security to the lender at its request. BHR will ordinarily fulfill the obligation of a
...