Arrowhead Investment Management LLC

Item 5.        Fees and Compensation

In addition, Arrowhead and its affiliates may perform management, advisory, and other services
(“Related Services”) for, and receive fees from, actual or prospective portfolio companies or other
investment vehicles of the Funds. Specifically, it is expected that when some investments close,
there will be a closing fee paid by the portfolio company to Arrowhead. These fees may be
substantial. Although these fees are in addition to the Advisory Fees, Arrowhead will in some
circumstances reduce the amount of Advisory Fees paid by the applicable Fund in connection with
the receipt of such fees to the extent attributable to a Fund’s investment in a portfolio company.
The amount and manner of such reduction is set forth in the Advisory Agreement and/or
organizational documents of the applicable Fund. As some Funds do not pay Advisory Fees, any
such reduction will not benefit such Funds. Additionally, a portfolio company may reimburse
Arrowhead for expenses (including without limitation travel expenses, which may include
expenses for chartered or first-class travel) incurred by Arrowhead in connection with its
performance of services for such portfolio company, and such reimbursements are not subject to
the sharing arrangements described above.

Fund III pays an annual management fee (the “Fund III Management Fee”) payable quarterly in
advance equal to 1.25% of invested capital.

Arrowhead and its affiliates may also engage and retain senior advisors, advisers, consultants, and
other similar professionals who are not employees or affiliates of Arrowhead and who may, from
time to time, receive payments from, or allocations with respect to, portfolio companies and/or
other entities. In such circumstances, such amounts will not be deemed paid to or received by
Arrowhead and its affiliates and such amounts will not be subject to the sharing arrangements
described above. Arrowhead has established a network of outside advisors with significant
operational expertise to support Fund III and portfolio company management teams. These outside
advisors consist of the Advisory Board and the Executive Network. Arrowhead coordinates the
delivery of services by this network and typically negotiates all forms of compensation payable to
these resources on behalf of Fund III and the portfolio companies, including any equity
compensation paid to such persons (which compensation can be significant in amount). The precise
amount of, and the manner and calculation of, the Management Fees for each Fund are established
by Arrowhead, as modified by negotiations with investors in the applicable Fund, and are set forth
in such Fund’s agreement with Arrowhead, organizational documents, and/or other documentation
received by each investor prior to investment in such Fund. The Management Fees and other fees
and distributions described above are generally subject to waiver or reduction by Arrowhead in its
sole discretion, both voluntarily and on a negotiated basis with selected investors. The fee
structures described above may be modified from time to time. Fees may differ from one Fund to
another, as well as among investors in the same Fund. Upon termination of an investment
management agreement, Advisory Fees that have been prepaid are generally returned on a prorated
basis. To the extent provided in the advisory agreements and the partnership agreements and other
organizational documents of the Funds, Arrowhead will pay certain operating expenses, including

expenses on account of rent, utilities, office supplies, office equipment, travel, entertainment,
compensation of its Partners and employees (other than Carried Interest described in Item 6 below)
and other routine administrative expenses relating to the services and facilities provided by
Arrowhead to the Funds. Consistent with the partnership agreements or other organizational
documents of the Funds, each Fund will bear all other expenses relating to it to the extent not borne
by its portfolio companies, including legal, accounting, audit, investment banking, consulting,
research, brokerage, finders’ fees, custody, transfer, registration, advisory board, directors’ and
officers’ insurance, interest, taxes, and extraordinary expenses, such Fund’s allocable share of
expenses and fees generated in the course of evaluating potential investments, including
investments which are not consummated, such Fund’s allocable share of expenses and fees
incurred in the course of making investments, and other similar fees and expenses, as well as any
other fees or expenses incurred by Arrowhead or such Fund in connection with such Fund’s
operations that are not specifically set forth above as being paid by Arrowhead. For the avoidance
of doubt, unless Arrowhead determines otherwise, the Funds will be responsible for all broken-
deal expenses related to an unconsummated transaction, notwithstanding the potential participation
of one or more co-investors in such transaction (other than with respect to a dedicated vehicle
formed for the purpose of co-investment in Fund III, if any).

Additionally, please see Item 6 below regarding “Carried Interest” that Funds may pay.

Although Arrowhead does not generally utilize the services of broker-dealers to effect portfolio
transactions for the Funds, in the event that it chooses to use a broker-dealer for limited purposes
relating to a particular Fund, such Fund will incur brokerage and other transaction costs. For
additional information regarding brokerage practices, please see Item 12 below.

Finally, Arrowhead and its affiliates may also engage and retain senior advisors, consultants,
operating partners and other similar professionals who are not employees or affiliates of
Arrowhead and who will, from time to time, receive payments from, or allocations with respect to,
portfolio companies. The nature of the relationship with each of the senior advisors, consultants,
...

Item 7.        Types of Clients

Arrowhead currently provides investment supervisory services to the Funds (other than certain Co-
Investment Vehicles). Investment advice is provided directly to the Funds (subject to the direction
and control of the General Partner of each such Fund, if applicable) and not individually to
investors in such Fund.