Flaherty & Crumrine Incorporated

Item 5 – Fees and Compensation
Fees and Agreements for Institutional Accounts

Fees for “investment supervisory services” of our institutional accounts are generally based upon the
market value of the assets managed and may be billed monthly or quarterly. The market value of
the assets is determined by the firm’s valuation policies, which are available to clients upon request.

Although variations in fees may occasionally be negotiated to reflect such factors as legal or tax
constraints on investment action, significant differences in service requirements and historical
agreements, it is our general policy to charge fees in accordance with the schedules set forth below
for the several categories of accounts (which presume that the securities will be held in the custody
of a bank or trust company):

Annual Fee Rates:

    •   $0 - $50 million on assets under management:                     0.45%
    •   $50 - $250 million:                                              0.40%
    •   Greater than $250m:                                              0.35%

Flaherty & Crumrine Incorporated Form ADV Brochure                                                       1

There is a minimum fee of $150,000. Fees may be negotiated depending on the size of the account
and the investment services being provided. Comparable services may be available from other
sources at lower fees.

We are registered as an investment adviser, not as a broker-dealer, and do not charge any fees
based upon client transactions.

We enter into written investment management agreements with each of our institutional accounts.
These contracts generally provide that the relationship is terminable at any time by either party. In
the event of such a termination, investment advisory fees are prorated to the date of termination,
and fees paid, but not yet earned, are refunded.

Fees for investment companies and other pooled investment vehicles

Each of PFD and PFO have agreed to pay an advisory fee monthly at an annual rate of 0.625% of its
average monthly total net assets up to $100 million and 0.50% of its average monthly total net
assets of $100 million or more.

FFC has agreed to pay an advisory fee monthly at an annual rate of 0.525% of its average monthly
total net assets up to $200 million, 0.45% of its average monthly total net assets from $200 million to
$500 million and 0.40% of its average monthly total net assets of $500 million or more.

FLC has agreed to pay an advisory fee monthly at an annual rate of 0.575% of its average monthly
total net assets up to $200 million, 0.50% of its average monthly total net assets from $200 million to
$500 million and 0.45% of its average monthly total net assets of $500 million or more.

DFP has agreed to pay an advisory fee monthly at an annual rate of 0.575% of its average monthly
total net assets up to $200 million and 0.50% of its average monthly total net assets of $200 million
or more.

We sub-advise the portfolio of DPI. Pursuant to an investment sub-advisory agreement, the adviser
has agreed to pay us an annualized fee equal to 50% of the advisory fee paid to it for its services to
the fund (net of any waivers, reimbursement payments, supermarket fees and alliance fees waived,
reimbursed or paid by the adviser with respect to the Fund). The fund has agreed to pay the adviser
a monthly fee in an annual amount equal to 0.75% of the fund’s daily net assets.

We also sub-advise the portfolio of BPRF pursuant to a portfolio management agreement with the
fund and Brompton Funds Management Limited, which provides an annual advisory fee of 50% of
the advisory fee paid to Brompton by BPRF for its services to the fund (net of any waivers,
reimbursement payments or fees waived, reimbursed or paid by Brompton in respect of the fund).

We also sub-advise the portfolio of BEPR pursuant to a portfolio management agreement with the
fund and Brompton Funds Management Limited, which provides an annual advisory fee of 50% of
the advisory fee paid to Brompton by BPRF for its services to the fund (net of any waivers,
reimbursement payments or fees waived, reimbursed or paid by Brompton in respect of the fund).
BEPR invests all its assets in BPRF.

We periodically provide portfolio consulting services to Guggenheim Funds Distributors, LLC as the
sponsor of unit investment trusts. Our services consist of advising Guggenheim in the selection of
securities to place into each unit investment trust. In consideration of our advice in connection with

Flaherty & Crumrine Incorporated Form ADV Brochure                                                       2

any particular trust, we receive a portfolio consulting fee equal to 0.18% of the aggregate daily
liquidation value of transactional sales of the trust. We separately receive a 0.07% licensing fee from
Guggenheim for the use of our name in the sale of such trust.

Other information about our fees

Our fees are exclusive of brokerage commissions, transaction fees, and other related costs and
expenses which are incurred by the client. Clients may incur certain charges imposed by custodians,
brokers and other third parties such as fees charged by managers, custodial fees, transfer taxes,
wire transfer and electronic fund fees, and other fees and taxes on brokerage accounts and
securities transactions. Such charges, fees and commissions are exclusive of and in addition to our
fee, and we shall not receive any portion of these commissions, fees, and costs.

Item 12 further describes the factors that we consider in selecting or recommending broker-dealers
for client transactions and determining the reasonableness of their compensation (e.g.,
commissions).

Item 7 – Types of Clients
We offer investment supervisory services to corporations and other business entities, charitable
organizations, closed-end funds, mutual funds and similar pooled investment vehicles and
individuals. Please see Item 4 for greater detail on our current types of clients.