Calydon Capital LLC

Item 5. Fees and Compensation
CC offers its services on a fee basis, which may include fixed fees, as well as fees based upon assets under
management and in certain situations performance-based compensation. Performance based fees are only
charged to clients that meet the definition of a ‘Qualified Client’ under Rule 205-3 of the Investment
Advisers Act of 1940.

Investment Management Fees

CC provides investment management services for an annual fee based upon a percentage of assets under
management. This fee also applies to sub-advisory services that Calydon Capital provides. CC’s annual fee is
exclusive of brokerage commissions, transaction fees, and other related costs and expenses which are
incurred by the client. CC does not receive any portion of standard brokerage commissions charged by
custodians for executing client transactions.

Unless otherwise agreed in writing, CC’s annual fee is prorated and charged quarterly, either in advance or
arrears. The fee valuation is based upon the average account value for the last day of each of the previous
three months or the average daily balance for the previous three months. This average is taken from the
billing quarter for accounts billed in arrears and from the previous quarter for accounts billed in advance.

The annual fee varies between 10 and 150 basis points (i.e., 0.10% and 1.50%) depending upon the market
value of the assets under management and the type of investment or management services to be rendered.
CC may negotiate to charge a lesser management fee based upon certain criteria (i.e., anticipated future
earning capacity, anticipated future additional assets, dollar amount of assets to be managed, related
accounts, account composition, pre- existing client, account retention, pro bono activities, etc.).

Additionally, CC or its related persons may be paid performance-based compensation, which is
compensated based on a share of capital gains or capital appreciation of the assets of a client. Performance-
based compensation creates an incentive for CC to make investments that are riskier or more speculative

than would be the case in the absence of such compensation. Additional information regarding these
conflicts is described in Item 11.

Bridge Loan Fees

In connection with certain bridge loan or bond investments sourced in the past, CC or its related persons
may have received a one-time Bondholder Representative or structuring fee paid by the issuer at the
inception of the investment. CC does not currently receive ongoing issuer compensation related to these
legacy investments and does not receive additional fees from clients for monitoring such positions beyond
the advisory fees described above.

Although the bridge loan program is no longer offered, certain clients continue to hold these investments.
The historical receipt of issuer-paid compensation creates a conflict of interest because CC had an incentive
to recommend investments that generated additional compensation. CC addresses these conflicts through
its fiduciary obligations and compliance policies.

All CC clients were given the option to opt out of the Bridge Loan program and/or any investments that
included a Bondholder Representative Fee.

Fees Charged by Financial Institutions

As further discussed in response to Item 12, CC generally recommends that clients utilize the brokerage
and clearing services of Charles Schwab & Co., Inc. (“Schwab”) and/or Fidelity Institutional Wealth Services
(“Fidelity”) for investment management accounts. Clients are not required to use a particular Financial
Institution, subject to CC’s ability to effectively implement its investment strategy.

CC will only implement its investment management recommendations after the client has arranged for and
furnished CC with all information and authorization regarding accounts with an approved financial
institution. Approved financial institutions include, but are not limited to, Schwab, Fidelity, any other
broker-dealer recommended by CC, broker-dealer directed by the client, trust companies, banks etc.
(collectively referred to herein as the “Financial Institutions”).

Clients may incur certain charges imposed by the Financial Institutions, such as custodial fees, charges
imposed directly by a mutual fund in the account, which are disclosed in the fund’s prospectus (e.g., fund
management fees and other fund expenses), deferred sales charges, odd-lot differentials, transfer taxes,
wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts and securities
transactions. Additionally, clients may incur brokerage commissions and transaction fees. Such charges,
fees and commissions are exclusive of and in addition to CC’s investment management fees.

Fee Debit

CC’s Agreement, and the separate agreement with any Financial Institution, may authorize CC to debit the
client’s account for the amount of CC’s investment management fee and to directly remit that management
fee to CC as appropriate. Custodians typically send statements directly to the client, at least quarterly,
indicating all amounts disbursed from the client’s account including the amount of investment management
fees paid directly to Calydon Capital. Alternatively, clients can elect to have CC send an invoice to the client
for payment.

Fees for Management During Partial Periods of Service

For the initial period of investment management services, the fees are calculated on a pro rata basis. The
Agreement between CC and the client will continue in effect until terminated by either party pursuant to the
terms of the Agreement. CC’s fees are calculated on a prorated basis through the date of termination and
any unearned fees will be refunded to the client, as appropriate.

Clients can make additions to and withdrawals from their account at any time, subject to CC’s right to
terminate an account. Additions can be in cash or securities provided that CC reserves the right to liquidate
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Item 7. Types of Clients

CC may provide its services to individuals, banks, thrift institutions, profit-sharing plans, trusts, estates,
charitable organizations, corporations, business entities, sub-advisory relationships, and pooled
investment vehicles.
Minimum Account Size

CC does not impose a mandatory minimum portfolio size, however depending on the investment strategy,
accounts may be required to meet a minimum size in order to be properly allocated to individual underlying
investments. Current SMA strategies have stated minimums starting at $100,000. The minimum account
size may be waived at CC’s sole discretion.

Item 8. Method of Analysis, Investment Strategies and Risk of Loss
Methods of Analysis and Investment Strategies

Equities

CC utilizes a proprietary screening and factor model to identify companies with very high quality and liquid
balance sheets, durable cash flows, sensible dividend policy, dividend growth potential and that are trading
at attractive relative valuations. This screening process identifies companies within a universe that qualify
for investment consideration. A qualitative overlay is then applied to select the final portfolio.

Debt Securities

High Yield Municipal strategies utilize a credit underwriting policy on unrated project revenue tax exempt
bonds. CC focuses on sectors they believe present the best relative value and greatest upside potential while
considering risk management and capital preservation.

Previously, Calydon Capital had the option to invest a portion of its client assets in a series of short-term taxable
bridge loans (the “Loans”). This program is no longer offered, and CC does not act as Bondholder
Representative or otherwise control such investments. Certain existing clients continue to hold legacy
bridge loan investments, which may present conflicts of interest associated with historical compensation
or monitoring. CC monitors these investments only as part of ongoing portfolio management. Fixed income
investing involves many risks. See the “Risk of Loss” section below for more information.

Risks of Loss

Stock Market Risk

CC invests in domestic equities. Equity prices can be influenced by many variables including individual
company risk, sector risk, market risk, domestic and global economic risk. Equity values can be volatile, and
investors can experience partial or total loss of capital. Declines in market value can be unpredictable and
persist for meaningful periods of time. If shares are redeemed during such times, investors can experience
permanent loss of capital.

Municipal Securities Risk

The municipal market is volatile and can be significantly affected by adverse tax, legislative or political
changes and the financial condition of the issuers of municipal securities. Changes in a municipality’s
financial health may make it difficult for the municipality to make interest and principal payments when

due. Municipal obligations may be more susceptible to downgrades or defaults during recessions or similar
periods of economic stress. Municipal securities structured as revenue bonds are generally not backed by
the taxing power of the issuing municipality but rather the revenue from the particular project or entity for
which the bonds were issued. If the Internal Revenue Service determines that an issuer of a municipal
security has not complied with applicable tax requirements, interest from the security could be treated as
taxable, which could result in a decline in the security’s value. In addition, there could be changes in
applicable tax laws or tax treatments that reduce or eliminate the current federal income tax exemption on
municipal securities or otherwise adversely affect the current federal or state tax status of municipal
securities.

A number of municipalities have had significant financial problems recently, and these and other
municipalities could, potentially, continue to experience significant financial problems resulting from lower
tax revenues and/or decreased aid from state and local governments in the event of an economic downturn.
This could decrease the income or hurt the ability to preserve capital and liquidity. Under some
circumstances, municipal securities might not pay interest unless the state legislature or municipality
authorizes money for that purpose. Some securities, including municipal lease obligations, carry additional
risks. For example, they may be difficult to trade, or interest payments may be tied only to a specific stream
of revenue.

Since some municipal securities may be secured or guaranteed by banks and other institutions, the risk
could increase if the banking or financial sector suffers an economic downturn and/or if the credit ratings of
the institutions issuing the guarantee are downgraded or at risk of being downgraded by a national rating
organization. If such events were to occur, the value of the security could decrease or the value could be lost
entirely, and it may be difficult or impossible to sell the security at the time and the price that normally
prevails in the market. Interest on municipal obligations, while generally exempt from federal income tax,
may not be exempt from federal alternative minimum tax.

With any issue, there is the possibility of default, as is true with all bonds. Controlling a majority of, or the
entire class of, debt securities may result in additional challenges in determining the perceived market
value of the security. Such challenges may occur due to the unique characteristics of the issuer, lack of
trading of the specific security, and/or lack of other market participants willing to purchase the security.
As a result, certain securities purchased by CC are substantially illiquid.

The municipal bonds that the High Income and Distressed Municipal strategies invest in are generally non-
rated, high-yield securities. These types of bonds typically pay a higher rate of interest than rated bonds.
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