Capital Returns Management LLC

Item 5 - Fees and Compensation

A. Fees and Compensation

   Below is a discussion of how the Adviser is compensated in connection with providing advisory
   services to its Clients. The Adviser may enter into different fee arrangements on a Client by
   Client basis and each Client’s offering document and/or investment management agreement
   (“IMA”), as applicable, sets forth the specific fee structure (including how and when fees are
   calculated, charged and paid). Investors in the Segregated Fund may pay additional fees or
   expenses for custodial or other services that those Investors pay out of their own accounts.

   Management Fees. Adviser asset-based compensation takes the form of a quarterly
   management fee calculated at an annual rate of 1.50% of the value of each Investor’s
   investment capital. With respect to the Funds, the management fee is paid quarterly in advance,
   based on the value of each Fund Investor’s capital account/shares, as applicable. The
   management fee will be adjusted for contributions and withdrawals/redemptions made during
   the quarter. Additional terms related to the management fee applicable to the Segregated Fund
   are described in its IMA with the Adviser.

   Performance-based allocation and fees. With respect to the Funds, the Adviser’s performance-
   based compensation takes the form of an annual performance-based allocation or fee equal to
   20% of the net profits achieved by the Fund Investor’s investment. The performance-based
   allocation or fee is subject to a “high watermark” that requires the Adviser to recoup cumulative
   losses from prior calculation periods before performance-based allocation are made and fees
   are due. Performance-based allocations or fees are generally calculated and paid annually and
   at the time of redemption, with respect to the amount redeemed. Additional terms related to
   the performance-based fee applicable to the Segregated Fund are described in its IMA with the
   Adviser.

   In addition, Fund Investors are subject to an additional fee in the event a Fund Investor
   withdraws/redeems any portion of a contribution prior to the one-year anniversary of that
   contribution. The additional fee is approximately equal to the management fee that would have
   been payable with respect to the withdrawal/redemption amount for the time period until the
   one-year anniversary of the applicable contribution.

   The management and performance-based allocations or fees may be waived or reduced at the
   discretion of the Adviser. Adviser employees currently do not pay management or

Item 7 - Types of Clients

The Adviser provides investment advisory services to private funds comprised of “qualified
purchasers” under the Investment Company Act of 1940 (the “1940 Act”) and “accredited
investors” as defined in Regulation D under the Securities Act of 1933, as amended. The Clients
are exempt from registration as investment companies in reliance on Section 3(c)7 of the 1940 Act.