ESL Investments Inc

Fees and Compensation
ESL is compensated for providing services to the Funds as set forth in the respective governing
documents of the Funds. The compensation includes both management fees, which are payable
quarterly in advance, and performance-based fees, which are generally paid/allocated on an annual
basis. Management fees payable by an Investor in any particular fiscal year are generally
calculated based on the balance of such Investor’s capital account at the start of such year;
management fees for an Investor who joins a Fund during a particular fiscal year are generally
calculated (for such fiscal year) based on the amount of such Investor’s capital contribution and
prorated for the year based on the date of such Investor’s capital contribution; certain Investors
may pay reduced management fees for investments above specified dollar amounts.

The performance-based fees are generally dependent on ESL recouping cumulative net losses on
each Investor’s interest in the applicable Fund. Investors are required to pay the management and
performance-based fees specified in the governing agreement of the applicable Fund until an
Investor redeems in full.

In addition to ESL’s management and performance-based fees, Investors will also bear their pro-
rata share of organizational and offering expenses (including placement fees) and operating
expenses, including for legal, auditing, accounting and tax services, regulatory filings, including
Form PF, independent valuations service fees, brokerage commissions and other charges for
transactions in securities and other instruments, custodial, administration and prime broker fees
and expenses, reporting expenses, interest expense, litigation and other extraordinary expenses and
taxes, if any (collectively, the “Other Fund Expenses”).

Related persons and family of ESL and current and former employees do not pay management
and/or performance-based fees based on their investment in the Funds. Notwithstanding, such
investors pay their pro-rata share of Other Fund Expenses. Additionally, certain accounts managed
by ESL, as further described in the Types of Clients section below, are not assessed management
or performance-based fees.

Prospective and existing Investors in the Funds are encouraged to review the applicable Fund’s
governing agreement and confidential private placement memorandum for a more extensive
description of the fees and expenses associated with an investment in the Funds.

While receiving management and performance-based fees from Investors, ESL and/or certain ESL
employees may also receive remuneration and reimbursement for out-of-pocket expenses, based
on providing the following services, on behalf of the Funds, to portfolio companies:

      serving as a Director on a portfolio company’s Board of Directors;
      providing consulting services to a portfolio company; and
      serving as an Officer or employee of a portfolio company.

A conflict would arise if ESL’s investment recommendations would be influenced by the receipt
of these and similar fees from portfolio companies.

Types of Clients
As stated in the Advisory Business section above, ESL’s clients are limited partnerships and
limited liability companies formed in U.S. and foreign jurisdictions. The Investors in the Funds
are generally comprised of ultra-high-net-worth individuals and family offices, but also include
private and public pension plans, financial institutions, and other institutional investors. Although
the Funds’ minimum subscription amount is $25 million, the minimum may be waived at ESL’s
discretion in accordance with any applicable provisions in the Funds’ governing agreements.

ESL may also from time to time form co-investment vehicles through which certain persons may
invest alongside the Funds in particular investment opportunities. ESL’s compensation, if any,
from a co-investment vehicle is negotiated on a case by case basis consistent with the governing
agreements of the Funds. Generally, if a co-investment vehicle is established for an ESL affiliate
to participate in a particular transaction, that co-investment vehicle will be contractually required
to invest on the same economic terms as the Funds.

ESL may also from time to time form investment vehicles for one or more Investors to invest on
a parallel basis with the Funds. The Funds and/or ESL may from time to time enter into “side
letter” agreements with Investors that supplement the applicable Fund’s governing agreements in
respect of such Investors.

Methods of Analysis, Investment Strategies, and Risk of Loss
Investment Strategy. ESL’s overall investment philosophy is value-driven and based on
disciplined, extensive fundamental analysis and field research. ESL generally looks for good
companies, with strong fundamentals, selling at attractive prices. ESL primarily invests with a
bottom-up perspective, focusing on the individual company business model rather than making a
sector or industry bet. ESL generally does not invest with a macroeconomic focus or in industries
it does not believe it fully understands. Most investments have historically been made through
U.S. financial markets in U.S.-based companies.

ESL typically invests only in a limited number of companies where its assessment of intrinsic
value is substantially above the investment price. When it finds such opportunities, ESL often
invests a substantial portion of its assets, generally resulting in a highly concentrated undiversified
portfolio.

ESL generally looks to invest in companies with management teams that have demonstrated
business skills, and who are focused on delivering shareholder value. ESL’s investment may in
some cases be entirely passive. In other instances, ESL may engage with management and
directors to increase value, especially with respect to capital allocation. In those situations where
it engages with management, ESL strongly prefers working constructively with management and
is not accustomed to publicly airing differences with management; at the same time, ESL strongly
supports the principle of shareholder ownership and may oppose actions that do not enhance long
term value for shareholders. Mr. Lampert has served on the board of directors of certain portfolio
companies and, with certain companies, has participated in the management of those companies.
ESL may, from time to time, have its employees serve on boards of portfolio companies.

With its long-term capital and investment perspective, ESL has less of a focus on short-term
market-driven price performance and has the ability to support strategies that increase the value of
company shares over a longer time horizon. This long-term approach allows ESL to pursue those
companies that may temporarily fall out of favor with the broad investor universe but where long-
term value can be realized.

ESL’s investment strategy is not intended to generate absolute returns but is instead intended to
exceed the performance of the broad U.S. stock market over a minimum five-year horizon. ESL
seeks, and believes it is best suited for, Investors with a similar investment horizon.

Investment Process. ESL performs a thorough bottom-up analysis of investment opportunities
and, as part of the investment process, ESL may engage outside service providers to provide
research and analyses. Mr. Lampert makes all investment decisions. Following the initial
investment, ESL continues to analyze, review, and monitor the investment as part of its ongoing
due diligence and risk-management process.

Investment and Fund Risks. An investment in the Funds entails a significant degree of risk and
therefore should be undertaken only by investors capable of evaluating the risks of the Funds and
bearing the risk they represent. Set forth below is a non-exhaustive list of such risks, however,
prospective and existing investors are encouraged to review the applicable Fund’s confidential
private placement memorandum for a more extensive description of the risks of investing in the
Funds:

      Receipt of material, non-public information by ESL from portfolio companies and the
       designation of certain ESL investment personnel as company insiders. Both factors limit
       ESL’s ability to freely transact in such public companies. As company insiders, ESL may
       be limited in its communications with Investors about non-public aspects of such
       companies.
      The inability of Investors to sell interests in the Funds.
      Dependence on Mr. Lampert for portfolio management, investment analyses and trading.

      Outside service providers provide research and analysis, provide consulting services to
       portfolio companies and serve on board of portfolio companies.
      Nature of investments in distressed companies experiencing financial or operating
       difficulties.
      Concentration of a limited number of investments held by the Funds.
      Limited liquidity with respect to some investments held by the Funds.
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