Mill City Capital LP

FEES AND COMPENSATION

         In general, the Advisers receive a management fee (the “Management Fee”) and a carried
interest in connection with advisory services they provide to clients. As further described in the
Partnership Agreement for each Fund, Mill City Capital or persons affiliated with it often receive
additional compensation (e.g., monitoring fees, directors’ fees, transaction fees and break-up fees)
in connection with management and other services performed for portfolio companies (such
compensation, “Supplemental Fees”) of a Fund and such additional compensation is typically
offset in whole or in part the Management Fee otherwise payable to Mill City Capital. To the extent
a portion of Supplemental Fees are not offset against the Management Fee, Mill City Capital or
persons affiliated with it will be permitted to retain, in accordance with the applicable Partnership
Agreement, such portion of Supplemental Fees. Investors in the Funds also bear certain fund
expenses, as described below. The following is a general description of fees, compensation and
expenses of the Funds. Differences exist between the Funds, and certain Funds may not charge
certain fees, compensation or expenses that other Funds charge. For example, the Advisers expect
to provide investment advisory services to certain Funds designed to co-invest alongside certain
other Funds (each such Fund, a “Co-Invest Fund”), and investors in such Co-Invest Funds
generally are not expected to pay Management Fees or carried interest. Prospective and existing
Fund investors should review the applicable Fund’s Governing Documents for details regarding
its fees, compensation and expenses.

Management Fees

        Each of Fund I and Fund II generally pays its respective General Partner an annual
Management Fee equal to 2% of its aggregate commitments during its investment period. After
the expiration of each Fund’s respective investment period or earlier upon the occurrence of certain
events, as further specified in each Fund’s Governing Documents, a Fund generally pays its
respective General Partner an annual Management Fee equal to 2% of aggregate funded
commitments less investment write-offs and certain distributions constituting a return of capital,
as further specified in each Fund’s Governing Documents. In addition, each of Fund I and Fund
II’s Management Fee generally will be reduced by a specified percentage (generally, 80%) of each
Fund’s share of Supplemental Fees and other fees, including: (i) any directors’ fees, consulting
fees or advisory fees paid by portfolio companies to Mill City Capital; (ii) any transaction fees
paid by portfolio companies to Mill City Capital; and (iii) any break-up fees from transactions not

completed that are paid to Mill City Capital. Mill City Capital will be permitted to retain the
remaining 20% of such Supplemental Fees without offset against the Management Fee. To the
extent that a Management Fee offset credit would reduce the Management Fee for a given six-
month period below zero, the credit will be carried forward for future application against payable
Management Fees, and if a credit remains upon liquidation, a payment will be made crediting
limited partners unless a limited partner has elected to waive such amount (e.g., where an adverse
tax consequence may result).

        Each General Partner generally reserves the right to waive all or a portion of any future
installment of the Management Fee. Waived portions of the Management Fee are treated by the
Partnership Agreement as a deemed capital contribution by the relevant General Partner, which is
effectively invested in the applicable Fund on the General Partner’s behalf, and operates to reduce
the amount of capital such General Partner (and, in some cases, its affiliates) would otherwise be
required to contribute. The limited partners of the applicable Fund may be required to make pro
rata contributions according to their respective commitments to fund any contribution that would
otherwise be due from such General Partner. Waived or reduced Management Fees are not subject
to any Management Fee offset, and the amount of such waived or reduced Management Fee has
the potential to be significant. Due to waived or reduced Management Fees by the General Partner
and/or timing or receipt of any compensation received by the Advisers that is subject to a
Management Fee offset, it is possible that any Management Fee offsets will not be fully realized
by investors in an applicable Fund, resulting in a net additional benefit to the Advisers.

        The Management Fee with respect to a Fund will commence as of the effective date of such
Fund based on aggregate commitments, regardless of when a limited partner is actually admitted.
The Management Fee will be paid out of current income and disposition proceeds of the applicable
Fund and, in the respective General Partner’s discretion, from drawdowns that will reduce
unfunded commitments. The Management Fee is payable semi-annually, partially in arrears and
partially in advance. Installments of the Management Fee payable for any period other than a full
quarterly period are adjusted on pro rata basis according to the actual number of days in such
period.

Carried Interest

        Each General Partner generally is entitled to receive a carried interest with respect to the
applicable Fund equal to 20% of all realized profits subject to an 8% annually compounded
preferred return and a related General Partner catch-up provision, as more fully described in the
applicable Governing Documents. The carried interest distributed to each General Partner is
subject to a potential giveback at the end of a Fund’s life and as of any earlier dates set forth in the
Governing Documents if the respective General Partner has received excess cumulative
distributions.

        It is expected that any future Funds will have a similar fee structure.

Other Information
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TYPES OF CLIENTS

       The Advisers provide investment advice to the Funds. Funds may include investment
partnerships or other investment entities formed under domestic or foreign laws and operated as
exempt investment pools under the Investment Company Act of 1940, as amended (the
“Investment Company Act”). The investors participating in the Funds may include high net
worth individuals, institutional investors, such as banks or thrift institutions, insurance companies,
corporations, pension and profit-sharing plans, trusts or estates, charitable organizations or other
investment or business entities, or, directly or indirectly, Mill City Capital’s Principals or other
employees.

        The Funds typically have a minimum investment amount of $5 million for third-party
investors. Generally, investors are (i) “accredited investors” as defined under Regulation D of the
Securities Act of 1933, as amended, that are “qualified clients” as defined under the Advisers Act,
and (ii) for certain Funds, either “qualified purchasers” or “knowledgeable employees” as defined
under the Investment Company Act. Mill City Capital, in its sole discretion, may waive such
minimum investment amounts and qualification requirements.

             METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

Investment and Operating Strategy

       The following is a summary of the investment strategies and methods of analysis generally
employed by Mill City Capital on behalf of the Funds. More detailed descriptions of each Fund’s
investment strategies and methods of analysis are included in its Memorandum.

        Mill City Capital intends to act primarily as the lead sponsor in making equity and equity-
related control investments in lower middle market companies headquartered in the Midwestern
United States and central and western Canada. More specifically, Mill City’s investment strategy
generally includes seeking to:

       •   Source investment opportunities on competitively advantaged terms by virtue of Mill
           City Capital’s headquarters being located in its region of geographic focus, the
           investment team’s strong sourcing relationships and the investment team’s experience
           in resolving complex acquisition problems with sophisticated transactional and/or
           financing solutions;

       •   Pursue geographic (Midwestern United States and central and western Canada) and
           industry (consumer sector, including non-discretionary segments such as food
           products, niche consumer brands and personal and household products, and industrial
           sector, including global energy/power generation, mining, mechanized agriculture,
           aerospace and medical equipment) specialization in order to more effectively partner
           with portfolio company management teams and create long-term portfolio company
           growth by consolidating regional- and sector-specific expertise in value-creation across
           Mill City Capital’s investment platforms; and

       •   Support internal discipline and investment approval processes designed to minimize
           risk while also promoting the ongoing transparency of internal investment decision-

           making and encouraging the involvement and entrepreneurial energy of the investment
           team with regard to Mill City Capital’s investment decisions.

Risks of Investment

         The Funds and their investors bear the risk of loss that Mill City Capital’s investment
strategy entails. There can be no assurance that the Advisers will meet a Fund’s investment
objectives or otherwise be able to successfully carry out its investment program or that there will
be any return of capital. A prospective investor should only invest in a Fund as part of an overall
investment strategy and only if such investor is able to withstand a total loss of its investment.
Investors should not construe the performance of earlier investments by the Advisers or their
affiliates as providing any assurances regarding the future performance of a Fund. The risks
typically involved with the Advisers’ investment strategy and an investment in each Fund are
generally described below. However, investors should review the applicable Fund’s Memorandum
for information regarding risks specific to that Fund.

        Business Risks. Each Fund’s investment portfolio may consist primarily of securities issued
by privately held companies, and operating results in a specified period will be difficult to predict.
Such investments involve a high degree of business and financial risk that can result in substantial
losses.

        Future and Past Performance. The performance of the Principals’ prior investments is not
necessarily indicative of a Fund’s future results. While the Advisers intend for each Fund to make
investments that have estimated returns commensurate with the risks undertaken, there can be no
assurances that any targeted internal rate of return will be achieved. On any given investment, loss
of principal is possible.

        Investment in Junior Securities. The securities in which a Fund will invest may be among
the most junior in a portfolio company’s capital structure and, thus, subject to the greatest risk of
loss. Generally, there will be no collateral to protect a Fund’s investment once made.

        Concentration of Investments. Each Fund will participate in a limited number of
investments and may seek to make several investments in one industry or one industry segment.
As a result, a Fund’s investment portfolio could become highly concentrated, and the performance
of a few holdings or of a particular industry may substantially affect its aggregate return.
Furthermore, to the extent that the capital raised is less than the targeted amount, a Fund may invest
in fewer portfolio companies and thus be less diversified.
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