Pacific Specialty Investment Group LLC

Item 5: Fees and Compensation
Fee Schedule

Asset-Based Fees for Portfolio Management
PSIG charges advisory fees for investment management services. Fees are charged based on a
percentage of the client’s total assets under management, per the following schedule:

                        Total Assets Under Management           Annual Fee

                                  $0 - $249,999                   2.00%

                              $250,000 - $499,999                 1.70%

                              $500,000 - $999,999                 1.50%

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                        Total Assets Under Management          Annual Fee

                            $1,000,000 - $2,999,999              1.30%

                               $3,000,000 and up                 1.00%

Once a client’s portfolio reaches a breakpoint, all account assets are billed at the corresponding
rate. Our standard fee schedule is generally negotiable based on a number of factors, which
include but are not limited to “grandfathered” accounts, related accounts, and other structures
that we may consider in special situations. PSIG aggregates client accounts within the same
household for purposes of calculating the advisory fee rate applicable to each client. Some
accounts are under different fee schedules honoring prior agreements. We also manage some
family and related accounts without charge.

We believe that our fees are reasonable based upon our experience and expertise; however, lower
fees for comparable services may be available from other sources.

Performance-Based Fees for Portfolio Management
A qualified client can choose to pay a performance-based fee in lieu of an asset-based fee for our
investment management services. Such qualified clients will pay a 20.00% performance fee based
on the net investment gain in the account, although performance-based fees are negotiable at our
discretion. Net investment gain for a quarter consists of the realized and unrealized appreciation
and depreciation in the account, plus dividends and interest earned during the quarter. Client
contributions to and withdrawals from the account are not included in that calculation, so no
performance fee is charged on assets a client deposits. Net investment gain is then reduced by the
cumulative net loss, if any, carried forward from prior quarters (the “high water mark”). If an
account has no net investment gain for a quarter, or the gain does not exceed the loss carried
forward, no performance fee is charged, and the remaining loss carries forward to subsequent
quarters until it is recovered. If a client’s total withdrawals during a quarter equal 20% or more
of the value of the account as of the first day of that quarter, the loss then carried forward is
reduced in the same proportion as those total withdrawals. Total withdrawals of less than 20%
do not reduce the amount carried forward.

Billing Method

Asset-Based Portfolio Management Fees
Asset-based portfolio management fees are collected monthly in advance based on the account
balance as of the last calendar day of the prior month and withdrawn directly from the client’s
custodial accounts. The formula used for the calculation is as follows: (Annual Rate) x (Total
Assets Under Management as of the Last Calendar Day of the Prior Month) x (Number of Days
in Billing Period / 365). A day is any calendar day including weekends and holidays. We
generally pro-rate the first month’s fee for new accounts based on the number of days remaining
in the month following the account funding date.

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PSIG clients that invest in hedge funds managed by an entity affiliated with PSIG pay fees
associated with the hedge fund(s) only and do not also pay PSIG’s asset-based portfolio
management fee or performance-based fee for that portion of their PSIG account allocated to the
hedge fund(s).

Performance-Based Portfolio Management Fees
Performance-based portfolio management fees are collected in arrears and withdrawn directly
from the client’s custodial accounts on a quarterly basis. Performance fees are calculated based
on a rate of 20% of the net investment gain in the account during the previous quarter, as
described under Fee Schedule in this item, above. We do not bill accounts for quarters in which
there is no net investment gain, or in which the net investment gain does not exceed the
cumulative loss carried forward from prior quarters. A withdrawal from an account during a
quarter does not itself result in a performance fee.

Payment of Fees
We require authorization to deduct our fees directly from our clients’ investment accounts. Please
note the following important information about the deduction of management fees:

    •   With client authorization, we will instruct the custodian to automatically withdraw our
        advisory fee from the client’s account(s). Clients receive brokerage statements from the
        custodian no less frequently than quarterly, which show the deduction of our advisory
        fee.
    •   Clients receive a statement from the custodian, which shows holdings and transactions
        for the reporting period.
    •   Clients are responsible for reviewing the accuracy of the fees being billed, as the custodian
        will not do so.

Client Responsibility For Third Party Fees
Clients are responsible for the payment of all third party fees, which can include but are not
limited to custodian fees, brokerage fees, mutual fund management fees and expenses, and
transaction fees. Those fees are separate and distinct from the fees charged by PSIG. Additional
information about brokerage costs and services is provided in Item 12 - Brokerage Practices.

Termination
Either party may terminate the Investment Management Agreement upon 30 days’ written notice
to the other party.
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Item 7: Types of Clients
PSIG generally provides advisory services to individuals, high-net-worth individuals, and
pension and profit sharing plans and their participants. We generally require a minimum
portfolio size of $500,000, which we may waive or reduce at our discretion.