Sandalwood Securities Inc

FEES AND COMPENSATION

Management Fees

        Under the MAs, each Fund pays to its General Partner (if a Partnership) or to Sandalwood
(in the case of the Offshore Fund) a fixed advisory fee (the “Management Fee”) based on the
Management Fee established with respect to each Series (as defined below) comprising such Fund.
The Management Fee is calculated on a Series-by-Series basis or capital account by capital account
basis, as applicable, and is payable in arrears as of the last day of each month, (prorated for partial
months). The Management Fee is generally 1-1.50% per annum of the net asset value in that Series
or capital account as of the end of such month. The Management Fee is automatically deducted
from an Investor’s capital account. Different Management Fees may be paid in respect of a
particular Series of a Fund, as set forth in the relevant offering documents for such Series. In
addition, Sandalwood or a General Partner each reserves the right, in their discretion, to reduce the
Management Fee payable by any Investor in a Fund without any obligation to obtain the consent
of or provide notice to any other Investor in such Fund.

        With respect to the Partnerships, Sandalwood receives a portion of the Management Fee
due from a Fund to its General Partner. The exact amount of the fee is determined by each General
Partner in its sole discretion based upon the services performed by Sandalwood. Sandalwood, as
the investment manager of the Partnerships in which the Offshore Fund invests, and each General
Partner have agreed to waive all fees otherwise payable to them by the Partnerships in respect of
any investment made by the Offshore Fund in any of the Partnerships. Instead, Management Fees
in the Offshore Fund, are paid to Sandalwood by the Offshore Fund.

        Sandalwood may, in certain circumstances and with respect to certain Investors or Series
in the Funds, charge a performance allocation, as discussed in the section of this Brochure entitled
“Performance-Based Fees and Side-by-Side Fee Management.” In some Series of a Fund, the
Series charges a performance allocation instead of a management fee.

Other Expenses

        Each Fund is responsible for the payment of its respective ongoing expenses related to its
operations and administration as described in the Fund’s offering documents. Expenses that, in the
reasonable determination of a Fund’s General Partner, relate to a particular Series will be allocated
solely to Investors who participate in that Series, and other expenses will be allocated among all
Series of such Fund on a pro rata basis. Expenses may vary among the Funds, and the expenses of
each Fund are subject to the costs and expenses listed in each Fund’s Governing Documents. Such
expenses may include, but are not limited to : investment related expenses (including fees incurred
in connection with an actual or proposed investment, and commissions, interest expense and other
trading costs); direct expenses (including Management Fees and other advisory fees, fees
associated with any borrowing, insurance premiums, and travel costs); its pro rata share of
expenses of each investment fund in which it invests; legal, accounting, bookkeeping, and auditing
expenses; tax preparation (including with respect to tax returns, Schedules K-1, and other financial
statements delivered to Investors); other investor reporting; development and maintenance of a
website; taxes and other governmental or regulatory expenses; expenses incurred in the collection
of monies owed to it; extraordinary expenses (including indemnification and contribution
expenses, and expenses related to any pending or threatened proceeding or Internal Revenue
Service examination); custody and fund administration expenses; marketing related costs

(including travel, hotels and other travel-related expenses in connection with Investor and
prospective investor meetings, and costs related to attendance at industry conferences and
seminars); costs incurred in connection with any consultants; and fees associated with periodic
updates to organizational and offering documents.

      Each Series invests with subadvisors and, in addition to any management fees charged for
that Series by the Fund, the subadvisors may also charge fees, including management fees,
operating expenses, etc. for the funds invested with that subadvisor.

         In addition, each Fund also reimburses Sandalwood for a pro rata portion (based on the net
asset value of each Fund to which Sandalwood provides investment advisory and management
services) of the following costs and expenses of Sandalwood: salaries, bonuses, and employee
benefit expenses (including pension expenses); all regulatory compliance costs (including, but not
limited to, consultants and other compliance support, mock SEC audits and review of operational
due diligence); rent; telephone; equipment rental and amortization of capitalized costs (including,
but not limited to, leasehold improvements, computers and furniture); information technology
services (including consulting and support services); insurance premiums; costs and expenses
associated with Sandalwood’s annual investor conference; legal fees, administrators’ fees and
bookkeeping of Sandalwood; and other similar ongoing and administrative expenses incurred by
Sandalwood; provided, that Sandalwood agrees to forego a portion of its share of the Management
Fee, and pay, absorb or waive and not seek reimbursement of such expenses for any fiscal year of
a particular Fund or Series, as applicable, to the extent that the expenses of such Fund or Series
exceed 0.70% of the average annual net asset value of such Fund or Series, based on the month-
end value of such Fund’s or Series’ net assets for each month in the relevant fiscal year (the
“Expense Rebate Limitation”). In any month, Sandalwood is entitled to reimbursement for the
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TYPES OF CLIENTS

       Sandalwood serves as investment adviser to the Funds and currently has no other clients.

       Prospective investors of a Fund must meet certain eligibility and minimum investment
requirements, as set forth in such Fund’s private placement memorandum (along with any relevant
supplements thereto, such Fund’s “PPM”). Investors are required to make various representations
and warranties to a Fund, including representations regarding their eligibility to invest in the Fund,
as a condition to the acceptance of their subscriptions. Investors who have invested in the Funds
include high net worth individuals and families, pension plans, trusts, foundations, corporations
and partnerships.

        The Funds are privately placed pooled investment vehicles. Investors in the Funds and
other recipients should be aware that while the Brochure may include information about the Funds,
as necessary or appropriate, it should not be considered to represent a complete discussion of the
features, risks or conflicts associated with any Fund. More complete information about each Fund
is included in the Fund’s PPM, which are available to current and eligible prospective investors by
Sandalwood or another authorized party.

        In no event should this Brochure be considered to be an offer of interests in a Fund
or relied upon in determining to invest. It is also not an offer of, or agreement to provide,
advisory services directly to any recipient. Rather, this Brochure is designed solely to provide
information about Sandalwood for the purpose of compliance with certain obligations under the
Advisers Act and, as such, responds to relevant regulatory requirements under the Advisers Act,
which may differ from the information provided in a PPM. To the extent that there is any conflict
between discussions herein and similar or related discussions in any PPM, the PPM shall govern.

    METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

The Funds

Investment Strategies of the Funds

        Sandalwood and its affiliates offer a range of multi-strategy Funds and utilize separate
Funds or series of Funds (each, a “Series”) to pursue a variety of investment strategies. In general,
each Fund or Series has a different investment strategy and Investors may choose the Fund or
Funds whose strategies best match the Investor’s preferences. Each Fund or Series is operated as
a fund of funds, whereby Sandalwood allocates the assets of a Fund to a group of unaffiliated
portfolio managers and hedge funds selected by Sandalwood (each, an “Underlying Manager”). In
some Series, the funds are allocated to a single underlying manager with highly specialized
experience in an area(s) that Sandalwood sees opportunities for growth or believes is currently
underserved.

        While the investment strategies vary from Fund to Fund, as a firm, Sandalwood specializes
in credit strategies and event driven strategies. The Underlying Managers invest in a wide variety
of securities and financial instruments including, but not limited to: various debt securities
including senior secured bank debt, heavily collateralized loans and securities and investment in
high-yield and distressed debt securities, convertible debt, equity of reorganized companies,
convertible and capital structure arbitrage, derivatives, bank loans, mezzanine loans, mortgage
loans and other asset backed securities, event-driven investing and long/short investing in U.S.
equities.

        Sandalwood engages in a due diligence process to review the quality of each Underlying
Manager prior to its initial investment and conducts ongoing due diligence on a periodic basis.
Sandalwood requests from each Underlying Manager the applicable offering documents and may
request such additional information as it deems necessary. The due diligence process may include
(i) performing background investigations of the principals, (ii) consulting with references, (iii)
conducting in-person or telephonic meetings with managers, (iv) requesting periodic performance
and holdings updates, (v) and reviewing such other information as Sandalwood may request.
Sandalwood generally requests that each Underlying Manager in which it invests provide (a)
monthly valuations; (b) periodic exposure reports; and (c) quarterly investor letters.

       In selecting and monitoring managers, Sandalwood will make a detailed evaluation of each
Underlying Manager’s past performance, current investment strategy, assets under management,
research capabilities, management’s experience and other factors. Although performance record
plays a key role to the selection of any Underlying Manager, prospective investors are advised
that there can be no assurances that an Underlying Manager’s future performance will be
comparable to the Underlying Manager’s past performance. Investors in a Fund could lose
money as a result of their investment.

Risks of the Funds

       Each Fund is subject to certain risks as set forth in detail in such Fund’s PPM. These risks
are summarized below.

Risks Applicable to All Funds:

Importance of Management

       The General Partner or Board of Directors of a Fund, as applicable, either directly or via
Sandalwood (such Fund’s “Management”) has complete discretion in investing a Fund’s assets
through the selection of Underlying Managers. Such Fund’s success depends, to a great extent, on
Management’s ability to select successful Underlying Managers and the manner in which the
Fund’s assets are allocated among the Underlying Managers selected. As some Series only have a
single Underlying Manager, loss of a key person at that underlying manager can have a negative
impact on the investments with that Underlying Manager.

Lack of Direct Control

        A Fund’s Management does not make trading decisions itself, but rather entrusts all trading
decisions to the Underlying Managers. In so doing, such Fund is dependent upon the integrity, skill
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