P&A Capital Advisors Inc

Fees and Compensation
GENERAL INFORMATION ON OUR FEES

As general partner and investment manager of the Funds, we receive management fees and in the case of
certain Funds, an incentive allocation of net profits in each applicable Fund. We also receive fees from
the separately managed accounts.

MANAGEMENT FEES FOR FUNDS

Unless otherwise noted, fees are calculated monthly and paid quarterly in arrears based upon the net asset
value of each Investor’s capital account as of the end of each quarter in each Fund and such fees are
deducted from Client assets.

        Fund                             Management Fee
        DMF                              1.00%
        MSF Class A                      1.00%
        MSF Class B                      1.50%
        BAL                              1.75% (less than $2,000,000)
                                         1.50% (greater than or equal to $2,000,000 but less than
                                         $4,000,000)
                                         1.25% (equal to or greater than $4,000,000)
        AGL                              1.75%

OTHER INFORMATION ON FEES AND EXPENSES OF FUNDS

We may organize other funds in the future that have higher or lower fees than described above or that
have a different fee structure altogether. We reserve the right to reduce or waive our fees with respect to
any Investor without any obligation to provide notice to or obtain the consent of any other Investor.

The Portfolio Managers also charge fees and expenses. Each Fund must bear a pro-rata share of these
fees and expenses. In general, these fees are a 1.5% - 2.0% per annum management fee and a 15% to 20%
incentive fee or allocation. Even if a Fund may not be profitable as a whole, it still may have to pay
incentive fees or allocations to a Portfolio Manager with which it invests. This layering of fees reduces
the rate of return Clients (and indirectly, Investors) derive from an investment in a Fund and the fees paid
may be higher than other investment alternatives.

To the extent AGL invests in any of the Funds, it pays a pro-rata share of the expenses of each Fund.
However, in this scenario, we waive any management fees and/or performance allocations/fees payable
regarding assets of AGL invested in such other Funds.

Each Fund bears additional expenses related to its ongoing operations and sale of interests or shares.
These costs include the costs for the periodic updating of the memorandum and other offering documents,
legal and accounting fees, tax preparation and audit fees, fees to each Fund’s administrator, expenses of
printing and mailing and costs of regulatory compliance. We also provide each Fund, at no charge, office
space and staff. Each Fund also bears its own investment and business-related expenses, including
management fees and their pro-rata share of all expenses incurred by Underlying Funds. Such expenses
include management fees and performance fees or allocations, interest expenses, brokerage commissions,

custodial fees, taxes, legal and accounting expenses, and other similar expenses. Brokerage commissions
are further discussed below under “Brokerage Practices”.

FEES FOR SEPARATELY MANAGED ACCOUNTS

We charge our AGL separately managed account a management fee of 1.75% per annum based on assets
under management. We allocate 0.50% of this fee to AIG American General Life Insurance to offset
administration and other fees. We may provide non-discretionary advisory services to Non-Discretionary
Accounts in the future. Fees associated with such Non-Discretionary Accounts may be asset based or a
flat fee negotiated with the client on a case-by-case basis.

            Performance-Based Fees and Side-By-Side
                         Management
We receive performance-based compensation (also known as the “Incentive Allocation”) calculated as a
share of the capital appreciation of some of the Funds noted below. We only receive performance-based
compensation that complies with Rule 205-3 of the Investment Advisers Act of 1940, as amended
(“Advisers Act”). We do not charge performance-based compensation on our separately managed
accounts. Performance-based compensation is calculated and accrued monthly, but paid annually.

        Fund                             Incentive Allocation
        DMF                              2.50%
        MSF Class A                      10.00%

Performance-based compensation, in a given year, for Investors holding Class A interests of MSF is
subject to a ten percent (10%) priority return to Investors and to a high-water mark. Consequently, the
Incentive Allocation for MSF (Class A) shown above applies only to returns in excess of the 10% priority
return. A high-water mark means the Incentive Allocation only applies to returns above the highest peak
in value of investment returns for the investment.

As noted above, the Portfolio Managers also charge incentive fees or allocations, which are generally
around 15% to 20%.

The payment of performance-based compensation creates a conflict of interest since it creates an
incentive for us and the Portfolio Managers to make investments that are more speculative than might be
the case in the absence of such fee arrangements.

In addition, we serve as the investment manager and general partner of several different Funds and as the
investment manager of the separately managed accounts as set forth above and may serve as general
partner or investment manager of other funds organized in the future. Although the investment strategies
of these Clients differ from each other, there may be significant overlap in their investments in
Underlying Funds and we may face a conflict in determining which Client will invest in a particular
Underlying Fund. This conflict will be especially acute where an Underlying Fund has limited capacity,
for regulatory or other reasons, to accept additional investors. Because each of the Clients has a different
...

Types of Clients
Our only clients are the Funds and the separately managed accounts. Interests or shares in the Funds are
appropriate only for Investors who are “accredited investors,” as defined under Regulation D of the
Securities Act of 1933, as amended (“Securities Act”), and “qualified clients,” as defined in Rule 205-3
under the Advisers Act.

A purchase of an interest or shares in a Fund does not constitute a complete investment program and is
only intended for those Investors that fully understand and are willing to assume the risks involved in the
investment program of a Fund.

The Funds offer interests or shares subject to our right to reject, in our sole discretion, any subscription to
purchase, in whole or in part. The minimum investment amount in any of our Funds is $500,000, subject
to our discretion to accept contributions of lesser amounts.

Generally, we offer interests or shares in the Funds to high net worth individuals and families, including
family estate planning vehicles, as well as endowments, trusts, foundations, pension plans and insurance
companies.

  Methods of Analysis, Investment Strategies and Risk
                        of Loss
We identify, evaluate and monitor the Portfolio Managers and Underlying Funds in which the Funds
invest, and we approve investments in and withdrawals from such Portfolio Managers and Underlying
Funds. We identify Portfolio Managers through referrals, word of mouth, review of industry publications,
conferences and similar sources. We conduct detailed due diligence on each Portfolio Manager and the
Underlying Fund(s) that they manage, including an in-depth review of a Portfolio Manager’s performance
results, infrastructure, research capabilities, money under management, investment strategy, operations
and similar factors. The Portfolio Managers with whom the Funds may invest employ a variety of
strategies (including, but not limited to, long/short trading of U.S. equities, credit, short term trading,
growth and value investing, convertible securities and macro funds) which focus on a variety of industries
(including, but not limited to, technology and healthcare).

Any investment or investment strategy involves some risk of loss that Clients (and indirectly, Investors)
should be prepared to bear. Examples of risks Clients (and indirectly, Investors) could face are:

    •   Investing in the Underlying Funds: The investments of the Funds are concentrated in the
        Underlying Funds, and a Fund’s investment performance is directly related to the investment
        performance of the Underlying Funds it holds. The ability of a Fund to meet its investment
        objective is directly related to the ability of the Portfolio Managers of the Underlying Funds to
        meet their objectives as well as to the allocation among Underlying Funds by our firm. Because
        the Funds invest in Underlying Funds, Investors will be affected by the investment policies and

    practices of the Portfolio Managers of those Underlying Funds and subject to the risks of the
    Underlying Funds in direct proportion to the amount of assets the Funds allocate to those
    Underlying Funds.
•   Issuer Risk: The value of a security may decline for a reason directly related to the issuer, such as
    management performance, changes in financial condition or credit rating, financial leverage,
    reputation or reduced demand for the issuer’s goods or services.
•   Interest-rate Risk: Fluctuations in interest rates may cause investment prices to fluctuate. For
    example, market values of bonds decline when interest rates rise because the rising rate makes the
    existing bond yields less attractive. When interest rates fall, issuers tend to pre-pay their
    outstanding debts and issue new debt paying lower interest rates. An Underlying Fund holding
    such debt would be forced to re-invest the principal received from the issuer, including,
    potentially, in lower yielding debt securities.
•   Market Risk: External factors independent of a security’s particular underlying circumstances
    may impact its price. The economies and financial markets throughout the world are becoming
    increasingly interconnected, which increases the likelihood that events or conditions in one
    country or region will adversely impact markets or securities of issuers in other countries or
    regions. The price of a security may drop in reaction to tangible and intangible events and
    conditions, such as the occurrence of a political or social event or an economic condition,
    including, without limitation, war, terrorism, environmental or natural disasters or events, country
    or regional instability, and infectious disease epidemics or pandemics.
•   Inflation/Deflation Risk: Inflation means a dollar today will not buy as much as a dollar in the
    future. When any type of inflation is present purchasing power decreases at the rate of inflation.
    Deflation risk is the risk that prices throughout the economy decline over time. Inflation or
    deflation may have an adverse effect on the creditworthiness of issuers and may make issuer
    default more likely, which may result in a decline in the value of an Underlying Fund’s assets.
•   Currency Risk: Overseas investments are subject to fluctuations in the value of the dollar against
    the currency of the investment’s originating country. This is also known as exchange rate risk.
•   Reinvestment Risk: The risk that future proceeds from investments may be reinvested at a
    potentially lower rate of return is reinvestment risk. This risk primarily relates to fixed income
    securities.
•   Liquidity Risk: Liquidity means the ability to readily convert an investment into cash. For
    example, Treasury Bills are highly liquid, while real estate properties are not. Withdrawal of any
    amount of an Investor’s interest in a Fund is restricted as described in each Fund’s offering
...