Palladium Heritage Management LLC

ITEM 5 – FEES AND COMPENSATION
       Heritage’s specific compensation terms are set forth in the Governing Documents. The
Registrant expects that generally all Fund investors will be “qualified purchasers” (as defined in
Section 2(a)(51) of the Company Act) or “knowledgeable employees” (as defined in Rule 3c-5
under the Company Act), or in the case of the Parallel Fund, accredited investors.

   A. Management Fees

        Heritage typically receives a management fee (the “Management Fee,” as defined and
described in the Governing Documents) as compensation, which is generally paid quarterly in
advance. Management Fees for the Fund are expected to be two percent (2%) per annum of third
party investors’ committed capital during the Fund’s investment period. After the active
investment period ends, Management Fees are expected to be two percent (2%) per annum of
third party investors’ capital, pursuant to the terms of the Governing Documents.

        From time to time, the Management Fee will be modified, reduced, waived or rebated at
Heritage’s discretion, both voluntarily and on a negotiated basis with selected investors via side
letter and other arrangements, which will typically not be disclosed to all other investors in the
Fund. Fees differ among investors in the Fund. In certain cases, the rate of Management Fees
payable by certain investors in the Fund will be lower than other investors if such investors have
a personal, professional and/or strategic relationship with Heritage, if the size of their investment
in the Fund is larger than such other investors, if such investors subscribed to the Fund prior to a
designated date or for other reasons determined in Heritage’s discretion. In the event that
Heritage does not provide services for the full quarterly period, the Management Fee is expected
to be required to be returned on a pro rata basis to the investors in the Fund. In general, the
amount of fees returned is calculated based on the number of days remaining in the applicable
period.

        The Management Fee is paid by either Fund investors making capital contributions, or by
the Firm withholding the fee amount from investment proceeds that would otherwise be
distributable to Fund investors. When such investment proceeds are withheld, Heritage provides
written notice to affected Fund investors explaining the withholding. The notice provides
information about the amount withheld for the Management Fee and also the aggregate amount
of investment proceeds.

   B. Carried Interest

        In addition to the Management Fee, Heritage is expected to receive certain performance-
based distributions referred to as “Carried Interest.” Carried Interest is discussed in detail at Item

ITEM 7 – TYPES OF CLIENTS

        Heritage provides investment advisory services to pooled investment vehicles that are
exempt from registration under the Company Act and whose securities are exempt from
registration under the Securities Act. Investment advice is provided directly to the Fund and not
individually to investors in the Fund. In general, the minimum initial investment in the Fund is
$5 million, although lesser amounts are accepted from time to time at the discretion of the
General Partner.

       Fund investors are “qualified purchasers” as defined in the Company Act and include,
among others, some or all of the following: public and private corporate pension plans, charitable
organizations, endowments, high net worth individuals, banks, profit sharing plans, trusts,
estates, corporations, limited partnerships, limited liability companies and other entities, or in
the case of the Parallel Fund, accredited investors.