Rose Grove Capital Management LLC

Fees and Compensation
Fees charged to SMAs are negotiated and are paid in accordance with the provisions outlined in the
specific agreement with the client. Fees are generally based on the value of the account(s) at the
close of the applicable billing period. Fees may include a combination of management and incentive
fees. Rose Grove invoices SMAs directly for services rendered. Rose Grove’s services may be
terminated by either party upon written notification in accordance with the applicable contractual
notice of termination. Upon termination, the fees charged for advisory services will be pro-rated
and a refund for any unearned fees will be issued. SMAs are responsible to pay for services rendered
until the termination of the agreement. In addition to the Company’s investment management fees,
SMAs bear trading costs and custodial fees. For more information on brokerage transactions and
costs, please see Brokerage Practices. In addition, to the extent that SMAs accounts are invested in
mutual funds including money market funds, these funds pay a separate layer of management,
trading, and administrative expenses.

Management fees charged to investors in the Funds are based on a percentage of assets under
management and performance-based amounts. Detailed information regarding the fees charged to
the Funds is provided in the Funds’ offering documents and other governing documents. Fees are
deducted from an investor’s capital account(s) in the applicable Fund. Rose Grove or the general
partner of the relevant Fund may, in its sole discretion, waive or reduce all or any portion of the
above stated fees with respect to an investor.

In addition to the fees charged by Rose Grove, investors will bear indirectly other fees and expenses
incurred by the Funds including, but not limited to, the following: brokerage and other transaction
costs, legal fees; accounting fees; audit fees; custodian fees; costs of insurance; organizational and
registration expenses; fund administration fees; taxes and certain offering costs. In addition,
investors in the offshore funds will also pay directors’ fees.

Expenses jointly incurred (e.g., on behalf of multiple Funds or the Funds and the SMAs) will be
allocated in a fair and equitable manner in accordance with Rose Grove’s policies and procedures.
With respect to allocating expenses among Fund(s) and Rose Grove, to the extent not addressed in
the organizational documents of a Fund, Rose Grove will make any such allocation determination
in a fair and reasonable manner using its good faith judgment at the time such expenses were
incurred. Rose Grove will make any corrective allocations and take any mitigating steps if it
determines such corrections are necessary or advisable. Notwithstanding the foregoing, the portion
of an expense allocated to a Fund for a particular service may not reflect the relative benefit derived
by such Fund from that service in any particular instance.

For more information on brokerage transactions and costs, please see Brokerage Practices.
Investors should review all fees charged by Rose Grove and the expenses charged to the Funds to

fully understand the total amount of fees to be paid by the Fund. Investors’ ability to redeem from
the Funds is subject to early redemption fees, formal notice requirements, and other restrictions.
The Funds’ offering documents provide a summary of the expenses charged to the Fund, and the
terms investors are subject to when redeeming all or a portion of their investment.

Performance Based Fees and Side-by-Side Management
Performance based or incentive fees are fees based on a share of capital gains on or capital
appreciation of the assets of a client. An adviser charging performance fees to some accounts faces
a variety of conflicts because the adviser can potentially receive greater fees from its accounts
having a performance-based compensation structure versus those accounts it charges a fee unrelated
to performance (e.g., an asset-based fee). As a result, the adviser may have an incentive to direct
the best investment ideas to, or to allocate or sequence trades in favor of, the account that pays a
performance fee.

Rose Grove charges performance based fees to all Clients but may, in its sole discretion, waive or
reduce all or any portion of the performance fees with respect to an investor. The presence of a
performance fee may create an incentive to favor Funds and accounts paying performance based
fees over accounts that do not. In addition, the fact that Rose Grove is compensated based on the
trading profits may create an incentive for Rose Grove to make investments on behalf of its Clients
that are riskier or more speculative than would be the case in the absence of such compensation. In
addition, the performance based fees received by Rose Grove and/or its affiliates are based primarily
on realized and unrealized gains and losses. As a result, the performance based fee earned could be
based on unrealized gains that clients may never realize.

Types of Clients
Rose Grove provides advisory services to the Funds and SMAs, as described under “Advisory
Business” above. The minimum capital required to open an SMA is $50 million, but lower amounts
may be accepted at Rose Grove’s discretion. Each Fund operates as a pooled investment vehicle,
and the minimum capital commitment for an investor in the Fund is outlined in such Fund’s offering
documents and governing documents.

In addition, the governing documents for the Funds grant Rose Grove or the general partner of the
onshore funds and the directors of the offshore funds, exclusive and absolute discretion and
authority in managing and controlling the business and affairs of each Fund, subject only to specific
and express limitations in the governing documents. Rose Grove, the general partner, or the
directors of the relevant fund may exercise this discretion and authority conditionally or
unconditionally, arbitrarily, or inconsistently in varying or similar circumstances, without
accountability to the Fund or any investor. Rose Grove, the general partner, and the directors of the
funds provide certain investors more frequent or more detailed reports on portfolio holdings or
performance, special fee and allocation arrangements and special withdrawal rights that it does not
provide to other investors. Under certain circumstances, these agreements create preferences or
priorities for such investors with respect to other investors.

Onshore fund interests are only available to be purchased by U.S. taxable investors that are an
"accredited investor" as defined in Regulation D under the Securities Act, and a "qualified
purchaser" as defined in Section 2(a)(51) of the Investment Company Act. Offshore fund interests
are only available to be purchased by persons that are not U.S. persons, or U.S. persons that are an
"accredited investor" as defined in Regulation D under the Securities Act, and a "qualified
purchaser" as defined in Section 2(a)(51) of the Investment Company Act. Certain funds, but not
all funds are available to be purchased by a "knowledgeable employee" of Rose Grove as such term
is defined in Rule 3c-5 under the Investment Company Act.

Methods of Analysis, Investment Strategies and Risk of Loss
Rose Grove seeks to achieve its investment objectives by pursuing the preferred equities strategy.
In addition, the SMAs may pursue a variation of the strategy outlined above but will employ
substantially similar methods of analysis and investment strategies.

Market inefficiencies exist due to the distinct goals of, and restrictions on, the population of issuers
and investors active in preferred securities. The preferred equities strategy entails identifying and
investing in opportunities within the preferred stock arena, in addition to exploiting pricing
discrepancies that may exist between equity, preferred and debt securities. Many of the investments
in this strategy will consist of the preferred stock of publicly traded companies in the U.S., Europe
and Asia.

Preferred investments take a variety of forms, including perpetual, dated, fixed rate, floating rate
(off numerous indices), callable and non-callable securities, and convertibles. Many institutional
investors are precluded, either by charter or by inexperience, from participating in at least some of
the investment opportunities described above. In addition to preferred, debt and equity securities,
in carrying out the preferred equities strategy, Rose Grove may trade in contractual agreements,
such as default and interest rate swaps, structured notes, such as credit linked securities and
collateralized debt obligations (“CDOs”), as well as other types of derivative instruments. Rose
Grove will determine which particular trades will best capture the potential investment returns while
controlling for risk. Potential trades may involve one or more investments (both long and short) in
the preferred stock, common stock, convertible bonds and other debt of a single issuer.

The strategy followed by Rose Grove is not generally subject to particular investment restrictions.
However, Rose Grove may from time to time implement certain guidelines for the management of
Client assets, subject to its discretion to modify or suspend the application of such guidelines if
deemed appropriate. Examples of portfolio guidelines used for the Funds include but are not limited
to:

   •   Leverage is limited to 2.5x;
   •   It is expected that a substantial portion of each Fund’s preferred stock and debt investments
       carries investment grade debt ratings at the time of investment;
   •   No more than 15% of the net asset value of a Fund is lent to or invested in the securities of
       any one issuer;

   •   Each Fund will not acquire beneficial ownership of 10% or more of any class of securities
       of an issuer;
   •   Each Fund’s investments in any single position of common stock will not exceed 10 days
       average daily trading volume during the 90 days prior to the acquisition;
   •   Position sizes are dictated by conviction of trade, but also by the liquidity the secondary
       market has to offer; and
   •   Each Fund will not seek to take legal or management control of any issuer

Certain Funds permit Rose Grove to employ leverage through traditional means (such as by
borrowing money through margin accounts, lines of credit with financial institutions, or other
lending arrangements on a secured or unsecured basis) for any purpose. However, Rose Grove does
not generally intend to borrow money for purposes of leveraging its investments in an aggregate
amount for these Funds that would exceed 250% of the account’s value.

Investing in any securities involves risk of loss that investors should be prepared to bear. A
description of the material risks that relate to the investment strategy are described in this section,
but the following is not intended to be all encompassing. The Funds’ offering documents provide a
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