Stonehill Capital Management LLC

Item 5         Fees and Compensation

        SCM receives fees or allocations based upon the value of the Funds’ and Seafield’s
respective net assets under management, as well as allocations based on the respective
performance of the Funds and Seafield. Applicable fees and allocations are set forth and
described in detail in the Funds’ and Seafield’s respective offering documents. Investors
should refer to the relevant offering documents for a complete understanding of how SCM
is compensated for its advisory services, the terms of which vary in certain respects for
each Fund and for Seafield. A brief summary of certain aspects of the fees and expenses
paid by clients is set forth below. All clients are “qualified purchasers” (as defined in
section 2(a)(51)(A) of the Investment Company Act of 1940).

         A. Fees and Allocations Borne by the Funds

        Offshore and Institutional pay monthly management fees to SCM and Institutional
makes a monthly priority reallocation to Stonehill GP, in each case calculated and paid
monthly in arrears based upon the value of the Funds’ respective net assets at the beginning
of each month. The priority reallocation made by Institutional will accrue but not be made
at the end of any month with respect to any limited partner in Institutional to the extent that
such limited partner has not earned sufficient cumulative profits for the current year to
cover the priority reallocation. Any priority reallocation accrued but not made during a
year in which a limited partner did not earn sufficient profits to cover the priority
reallocation (a “loss year”) will be carried forward (a “priority loss carryforward”) and not
made until the limited partner earns sufficient cumulative profits in a subsequent year(s) to
cover the priority reallocation for both the current year and the loss year. If a limited
partner withdraws capital subject to a priority loss carryforward within six years after the
priority loss carryforward arises, the amount of the priority loss carryforward will be
reallocated to Stonehill GP.

        Stonehill GP receives performance-based allocations from the Funds on an annual
basis in arrears and upon withdrawals/redemptions by investors in the Funds. Fees and
allocations are deducted directly from client accounts. Performance-based compensation
is generally charged at fiscal year-end but also is charged during a fiscal year upon an
investor’s withdrawal or redemption from a Fund. Although it has not historically done so
(other than with respect to certain investments by SCM’s affiliates, present and former
partners and employees and related persons), SCM may waive, modify or calculate
differently management fees and reallocations and/or performance-based fees or
reallocations paid by any investor in any Fund on a case-by-case basis.

       B. Fees Borne by Seafield

        Seafield is structured as a closed-end “draw-down” fund with a defined investment
period and capital commitments made by each investor. Each investor’s capital
commitment will be drawn on a pro-rata basis in installments over time. Sub-Series A
Interests in Seafield, if any are issued, will pay an annual management fee to SCM quarterly
in advance. Sub-Series B Interests do not pay a management fee but instead pay a lower
annual administrative fee to SCM quarterly in advance. During Seafield’s initial
investment period each of the management fee and administrative fee are calculated based
on the capital commitment of each investor and thereafter are based on the investor’s pro
rata share of “Net Invested Capital” (as defined in Seafield’s offering memorandum) if
lower than the investor’s capital commitment.

       C. Expenses Borne by the Funds and Seafield

        The Funds bear their own operating expenses, including all expenses reasonably
determined by SCM to be related to the investment of each Fund’s assets, other than those
expressly required to be borne by SCM according to each Fund’s governing documents.
General categories of expenses borne by the Funds are summarized below, together with
specific examples of such expenses, which list is not exhaustive:

•   Expenses related to investments and prospective investments (including transactions
    that fail to close):
       o   brokerage commissions;
       o   interest on margin accounts and other indebtedness;
       o   borrowing charges on securities sold short;
       o   custodial fees;
       o   bank service fees;
       o   withholding, transfer and other taxes;
       o   costs of any outside valuation services and appraisers;
       o   costs of research, news and quotation services;
       o   legal fees and costs arising in connection with operation of the Funds and their
           investment activities, including, for example, review and negotiation of
           transactional documents, legal research and advice, costs in connection with
           bankruptcies and reorganizations of portfolio companies, and costs of litigation
           or other actions taken to enforce rights with respect to investments;
       o   costs of preparing regulatory filings such as Schedules 13D and 13G and Forms
           3,4 and 5;
       o   other professional fees such as consulting or outside expert or advisory services;
       o   fees and expenses of entities in which the Funds have investments, including
           special purpose vehicles, entities in which the Funds are a control investor,
           investment funds, and joint ventures;
       o   costs in connection with the actual or potential purchase, sale or transmittal of
           investments, whether or not consummated, including settling trades and other
           transaction-related closing costs, (including an allocated portion of

           compensation paid to internal accounting/operations personnel incurred in
           connection with such activities);
         o travel expenses of SCM personnel incurred in connection with Fund
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Item 7         Types of Clients

        As discussed above, SCM provides investment management and other services to
the Funds and Seafield. Investors in the Funds and Seafield may include corporations,
endowments (including pooled endowments), foundations, individuals, pension plans,
pooled investment vehicles, and trusts. Interests in the Funds and Seafield are offered
exclusively to persons that are accredited investors and qualified purchasers pursuant to
Section 3(c)(7) of the Investment Company Act of 1940 (as amended, the “Company Act”).
The current minimum investment in a Fund and in Seafield generally is $5 million, subject
to the discretion of the Funds to accept lesser amounts or require larger amounts.