Medley Capital LLC

FEES AND COMPENSATION

A.     General

A written IMA governs the terms of compensation and the manner in which we charge fees to
each of our Clients. The following discussion provides an overview of our current fee and
compensation arrangements.

We charge our Clients a management fee and may earn performance- fees or carried interest
in the event that specified investment returns are achieved by the Client. Our management
fees, performance fees and carried interest vary by Client, and we may negotiate different
fee schedules for Clients (or Investors) based on a variety of factors, including the amount of
the investment and the nature of the proposed investments.                We may, in certain
circumstances, enter into agreements with certain Clients (or Investors) that may, in each
case, provide for investment terms that are more favorable than the terms provided to other
Clients (or Investors). Such terms may include the waiver, reduction or sharing of
management and/or incentive fees, the provision of additional information or reports, more
favorable transfer rights, and more favorable liquidity rights.

Subject to the specific terms of their IMAs or other Offering Documents, we typically directly
deduct our fees from the Funds, and typically invoice each of the Separately Managed
Accounts for payment. Depending on the Client, we typically bill our fees quarterly in arrears
or quarterly in advance. Client funds and accounts initiated or terminated during a payment
period will typically be charged a prorated base management fee and incentive fee. Upon
termination of any Fund or Separately Managed Account, we will promptly refund any
unearned, prepaid fees and any earned, unpaid fees will remain due. The Separately Managed
Account Clients are generally able to terminate the IMAs only after the Adviser completes its
disposition of all of the investments. With respect to the Funds, our IMA’s typically provide
that each of the Adviser and the Client may terminate the IMA with sixty (60) days’ written
notice to the other party. With respect to our Funds, insofar as our affiliates control the general
partner or manager of such Funds, our affiliates generally control termination of the IMA for
such Funds, subject to their fiduciary or contractual duties as general partner or manager.
However, the applicable Fund governing agreements may permit the Investors of each
respective fund to remove our affiliates as general partner or manager by a majority or, in
certain circumstances, a super majority vote. In addition, the fund governing documents may
provide for dissolution of the fund upon certain changes of control.

Each Client’s IMA or the Fund’s governing documents specify that Clients may incur certain
charges imposed by custodians, administrators, brokers, and other third parties, including
custodial fees, administration fees, wire transfer and electronic fund fees, and other fees and
taxes on brokerage accounts and securities transactions. In addition, each Client’s IMA or the
Fund’s governing documents may specify that that the Client may be responsible for
reimbursement of certain expenses advanced by the Advisers, which may include
organizational, investment related, legal, overhead, administration, and other advisory
expenses. Our management fees are exclusive of such organizational expenses, brokerage
commissions, custody fees, fund expenses, transaction fees, and other related costs and
expenses. Where expenses are allocable to multiple Funds or Clients or the Advisers,
expenses are allocated among the various Funds, Clients or the Adviser on a fair and equitable
basis, allocating such expenses to the applicable Funds or Clients or Advisers on a fair and
equitable basis consistent with the terms of each Client’s IMA or the Fund’s governing

documents. For a detailed discussion of the factors that we consider in selecting or
recommending broker-dealers for Client transactions and determining the reasonableness of
commissions and compensation for such broker-dealers, please see Item 12, “Brokerage
Practices.”

B.     Fee Structure

As investment adviser of our private funds and Separately Managed Accounts, we receive an
annual management fee and may earn incentive fees. In general, management fees are
calculated at an annual rate of 0.75% to 2.00% of the value of capital accounts or the value
of the investments held by each Investor, Fund or Separately Managed Account, as applicable.
Management fees are calculated quarterly and are paid in cash in advance or in arrears
depending on each specific fund or SMA. The management fee may be offset by an amount
ranging from 50% to 100% of certain transaction and advisory fees we receive in connection
with services we provide to any entity in which the Fund or account has invested. In addition,
we generally receive incentive fees in an amount equal to 15% to 20% of the realized cash
derived from an investment, subject to a cumulative annualized preferred return to the Client
or Investor, as applicable of 6% to 8%, which is in turn subject to a 50% to 100% catch-up
allocation to the investment adviser.

C.     Additional Compensation and Conflicts of Interest

We may from time to time receive compensation in connection with services we provide as
arranger or administrative agent in connection with loans originated by us or one of our
affiliates. Our role as originator and administrative agent on a loan generates fees and creates
duties which may conflict with the interests of our Clients. We have adopted the Conflicts
Procedures to address these types of conflicts.

TYPES OF CLIENTS

We provide investment advisory services to the Funds, whose Investors include individuals,
trusts, investment companies, government and private pension plans, unregistered pooled
investment vehicles and college endowments. Medley SMA provides investment advisory
services to the Separately Managed Accounts whose Investors are insurance companies and
their affiliates or principals. .

The minimum account size necessary to open and maintain an account with us varies by the
type of Client.

Investors in the Funds must be (i) “qualified purchasers” within the meaning of the 1940 Act
and (ii) “accredited investors” as defined in Rule 501(a) of Regulation D of the Securities Act
of 1933, as amended.

Depending on the circumstances (including fund size, investment strategy, and level of
required portfolio servicing), we may impose or waive minimum investment requirements
that might otherwise apply to a particular Fund or Client.