Menlo Advisors LLC

Item 5         FEES AND COMPENSATION

ADVISORY FEES FOR INDIVIDUALLY MANAGED CLIENT ACCOUNTS
Menlo charges a blended fee based on a percentage of assets under management. Fees
are payable quarterly, in advance. On the opening of an account, Menlo charges a fee
based on the value of assets placed in an account, prorated for the remaining portion of
the calendar quarter. At the end of each calendar quarter, the annual fee is calculated
based on total assets at the end of the quarter, divided by four, and billed to the client for
the upcoming quarter. Menlo may charge a fixed minimum annual fee of $10,000 to
maintain an account.

Menlo’s fee schedule is as follows:

  Value of the Assets Under Management                         Annual Fee as a % of Assets

  On the value up to $2,000,000                                1.00%, plus

  On the value between $2,000,001 - $10,000,000                0.75%, plus

  On the value between $10,000,001 - $30,000,000               0.50%

  For account totals over $30,000,000                          negotiable

Under certain circumstances, Menlo’s fees are negotiable. Affiliated accounts are
aggregated when calculating the fee schedule. Limited financial planning services are
included in the foregoing fee.

Menlo typically recommends including the margin feature when setting up the portfolio
account with the custodian, even though the Firm does not employ margin in its investment
strategy. To the extent that a client authorizes the use of margin, and margin is thereafter
employed by our portfolio managers in the management of the client’s portfolio, the market
value of the client’s account and corresponding fee payable by the client to Menlo may
be increased. As a result, in addition to understanding and assuming the additional
principal risks associated with the use of margin, clients authorizing margin are advised of
the potential conflict of interest whereby the client’s decision to employ margin may
correspondingly increase the management fee payable to the Firm. Accordingly, the
decision as to whether to employ margin is left to the sole discretion of client.

ADVISORY FEES FOR SKYLINE PARTNERS, LP
All fees paid by investors in the Fund are more fully described in the private placement
memorandum and subscription agreement, provided to Fund investors at the time of the
investment.      As its investment manager, Menlo Advisors charges an investment
management fee to each limited partner equal either to one and three quarters percent
(1.75%) of the limited partner’s Fund account assets or one percent (1%) plus, if the limited
partner’s net capital appreciation exceeds a “hurdle rate” of three percent (3%) for the
year, an additional fee called a performance allocation of ten percent (10%) of the entire
net capital appreciation of that limited partner’s Fund account assets, subject to offset by
any prior period’s net capital depreciation (the “high water mark” if any, established for the
investor’s Fund account).

Such fees are calculated and paid quarterly in advance based on the net asset value of
the assets as of the end of the preceding quarter. Menlo Advisors in its sole discretion, may
waive or reduce the management fee with respect to any Fund investor for any period of
time, or agree to apply a different fee for that investor.

The quarterly Management Fee charged on capital contributed on a day other than the
first day of the quarter will be adjusted pro rata for the number of days remaining in the
quarter. No portion of a Management Fee paid or payable for a quarter will be refundable
if all or a portion of the Limited Partner's Capital Account is voluntarily withdrawn during the
quarter, but a pro rata portion of such Management Fee will be refunded if an involuntary
withdrawal occurs during the quarter. The Fund generally pays directly or reimburses Menlo
Advisors for certain operating expenses.

The Firm’s individually managed account clients that are also investors in the Fund are not
billed separately for investment management fees by the Firm for the portion of their assets
represented by their investment in the Fund, but rather pay only the Fund management fees
on those assets. However, as disclosed below under Third Party Fund Disclosures, the Fund
will pay fees to third party fund managers for investment management and administrative
services to the extent that Fund assets are invested in such third-party investment vehicles,
and investors in the Fund will therefore indirectly bear such third party fees and expenses in
addition to the Fund management fees.

FINANCIAL CONSULTING FEES
Upon client request, Menlo may provide financial consulting services for either a fixed
fee or for an hourly rate of $300 per hour. Such fees would be billed monthly as services
are rendered.

GENERAL FEE DISCLOSURES
The client’s fee is determined in accordance with the above fee structure, with exceptions
negotiated on a case-by-case basis at Menlo’s discretion. Any deviations from the fee
structure are based upon a number of factors including the amount of work involved, the
amount of assets placed under management and the attention needed to manage the
account.

We believe our investment management fees are competitive with the fees charged by
other investment advisors in the San Francisco Bay area for comparable services. However,
comparable services may be available from other sources for lower fees than those
charged by Menlo.

Menlo receives no commissions on investment products purchased or sold for client
accounts.

We do not provide clients advice as to the tax deductibility of our advisory fees. Clients are
directed to consult a tax professional to determine the potential tax deductibility of the
payment of advisory fees.

CUSTODIAN AND BROKERAGE FEES
Clients incur certain charges imposed by their custodians and other third parties such as
custodial fees, deferred sales charges, odd-lot differentials, transfer taxes, wire transfer and
...

Item 7         TYPES OF CLIENTS

Our clients include individuals and high net worth individuals and their trusts and estates and
the Fund. As a result of our minimum annual management fee requirement, Menlo Advisors’
services may not be appropriate for everyone. Particularly for smaller accounts, other
investment advisors may provide somewhat similar services for lower compensation,
although still others may charge more for similar services.