Caltius Capital Management LP

“Fees and Compensation.”

In borrowing on behalf of a Fund, the Adviser is subject to conflicts of interest between repaying
its obligations and retaining such borrowed amounts for the benefit of the Fund, and in
circumstances where interest accrues on any such outstanding borrowings at a rate lower than the
relevant Fund’s preferred return, is expected to have incentives to cause the Fund to borrow in this
manner rather than drawing down capital commitments. Where a preferred return begins to accrue
after capital contributions are due (regardless of when the Fund borrows, makes the relevant
investment or pays expenses) and ceases to accrue upon return of these capital contributions, the
use of borrowing to shorten the period between calling and returning capital limits the amount of
time the preferred return will accrue. In circumstances where there is not a preferred return on

funds borrowed in advance or in lieu of calling capital, Fund-level borrowing typically will reduce
the amount of preferred return to which the limited partners would otherwise be entitled had the
General Partner called capital and thus could result in the relevant General Partner receiving
carried interest sooner than it would without borrowing. In addition, when the management fee is
calculated as a percentage of invested capital, a limited partner may pay management fees on
borrowed amounts used to fund investments that have not yet been realized even though such
amounts would not accrue preferred return as described above. It is expected that the costs relating
to the establishment and/or maintenance of a subscription line of credit will be significant, and
there can be no assurance that the benefits to limited partners will be commensurate with such
costs.

TYPES OF CLIENTS

Caltius Management provides investment advice solely to its Fund clients, and references
throughout this Brochure to “clients” and to Caltius’ related duties to and practices on behalf of its
clients and/or investors should be construed accordingly. Such Funds generally include investment
partnerships or other investment entities formed under domestic or foreign laws and operated as
exempt investment pools under the Investment Company Act of 1940, as amended, and the rules
and regulations promulgated thereunder. The investors participating in the Funds generally include
individuals, banks or thrift institutions, other investment entities, university endowments,
sovereign wealth funds, family offices, pension and profit-sharing plans, trusts, estates or
charitable organizations or other corporations or business entities and from time to time include,
directly or indirectly, principals or other employees of Caltius Management and its affiliates and
members of their families, Executive Network (as defined below) members or other service
providers retained by the Adviser, as well as executives of portfolio companies.

The relevant General Partner also generally is permitted from time to time to establish Funds that
are alternative investment vehicles in order to permit certain investors to participate in one or more
particular investment opportunities in a manner desirable for tax, regulatory or other reasons.
Alternative investment vehicle sponsors generally have limited discretion to invest the assets of
these vehicles independent of limitations or other procedures set forth in the organizational
documents of such vehicles and the related Fund.

The Funds generally have minimum investment amounts ranging from $100,000 to $5,000,000 for
third-party investors (which minimum investment amounts may be waived by the General Partners
of such Funds). Fund interests are generally offered and sold either solely to qualified purchasers
(or qualified knowledgeable Caltius personnel) or solely to accredited investors who may also be
qualified clients (or qualified knowledgeable Caltius personnel).

                METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

                                               Caltius Equity Funds

General

The Caltius Equity Funds seek to invest primarily in control transactions, growth financings and
recapitalizations of Micro Market 2 companies. The Caltius Equity Funds intend to make primarily
equity and equity-related investments within a targeted range of $10 million to $30 million
principally based in the United States and Canada, with a regional emphasis on companies in
California and the Western United States. The members of the investment committees for the
Caltius Equity Funds are James Upchurch, President and Chief Executive Officer of Caltius;
Garrick Ahn, Managing Director; Michael Morgan, Managing Director; and, with respect to
Caltius Equity III, Caltius Equity IV, and Caltius Equity V, Jeffrey Holdsberg, Managing Director
(collectively, the “Equity Principals”).

The Caltius Equity Funds have been providing equity capital and operational guidance to Micro
Market companies since 1999. The Caltius Equity Funds seek to apply the operational knowledge
of the Equity Principals and, where applicable, rely on the broad skill sets of the members of their
executive network (the “Executive Network”) with relevant experience to build company
infrastructure in preparation for future growth. As a portfolio company begins to leverage newly
established systems, protocols and personnel investments to demonstrate the potential for growth,
Caltius monitors industry and market conditions in an effort to optimize exit timing and valuation.

Investment and Operating Strategy

The key elements of the investment process for the Caltius Equity Funds are:

      (i) Target Selection – seek to make discerning target company and industry selections;
      (ii) Platform Development – seek to develop portfolio company infrastructure and strategy;
           and
      (iii)Strategic Exit Timeline and Process – seek to execute a well-managed and timely exit
           process.

2As used herein, the term “Micro Market” is defined as companies with revenues between $10M and $50M. While the focus of
the Caltius Equity Funds is on investments in companies in the Micro Market, the Caltius Equity Funds also may investments in
companies that are larger or smaller than Micro Market companies.

Target Selection

Sourcing

Among their transaction sources, the Caltius Equity Funds maintain two distinctive sourcing
relationships:

Executive Network. The Executive Network has historically been a significant source of
transaction flow. The Executive Network includes current and former senior level operating
executives, many of whom are current or past executives of Caltius Equity Fund or Caltius
Structured Capital Fund portfolio companies.

Caltius Structured Capital Funds. The Caltius Structured Capital Funds employ their own
investment professionals and augment transaction flow for the Caltius Equity Funds directly
through referrals of opportunities generally not appropriate for its investment focus or indirectly
through co-marketing with the Caltius Equity Funds to companies and intermediaries throughout
the United States. 3

Micro Market Company Characteristics

In the experience of the Caltius Equity Funds, Micro Market companies often possess addressable
weaknesses that limit their ability to independently maximize operating potential and to develop
and exploit growth opportunities. These characteristics often include:

    •    Limited depth, skills sets and breadth of management
    •    Unsophisticated financial and management reporting infrastructure, protocols and systems
    •    Lack of operational strategy design
    •    Lack of access to capital to fund capital equipment or to fund organic and acquisition-
         driven growth initiatives
...