Philadelphia Financial Management of San Francisco LLC

FEES AND COMPENSATION

Compensation to Philadelphia Financial. Each Fund pays us a “management fee” at the beginning
of each calendar quarter equal to 0.375% (1.5% per annum) of the value of investors’ holdings in the
Fund (limited partner interests or shares). Each non-U.S. Fund also pays us, as an “incentive fee,” 20%
of the increase in value of the outstanding Fund shares to the extent those increases exceed previous
decreases in value (a “high water mark”). As general partner of each partnership Fund, we are
specially allocated as an “incentive allocation” 20% of the increases in the limited partners’ capital
account balances to the extent those increases exceed a similar “high water mark.” The Funds pay
incentive fees and make incentive allocations at the end of each calendar year and at other times
when Fund investors withdraw capital or, in the case of non-U.S. Funds, redeem shares, but then only
in relation to the amount of capital withdrawn or shares redeemed. For each period and for each
Fund, the foregoing fees and allocations are the aggregate of amounts calculated separately for each
investor or group of investors in each Fund. They are not generally negotiable, but our agreements

with the Funds give us the authority to vary them for particular investors or in some cases to waive
certain fees.

The Funds pay our fees directly from their assets that we manage. Incentive allocations from
partnership Funds take the form of increases in the value of our general partner interest in those
Funds.

Other Fees and Expenses. Each Fund pays all the expenses of its administration and operation,
including those for:

    •   brokerage commissions and other transaction-related services (see “Brokerage Practices”
        below);
    •   research;
    •   legal and auditing;
    •   accounting;
    •   administration;
    •   price validation;
    •   risk monitoring;
    •   investment related consultants and other service providers;
    •   preparation, duplication and distribution to investors and prospective investors of offering
        documents, annual reports and other financial information; and
    •   similar ongoing operational expenses.

The general partner and any affiliates retained by it will be reimbursed certain out-of-pocket
expenses incurred on behalf of the Funds. Such reimbursable expenses shall not include any expense
attributable to its provision of office personnel and space required for the performance of its services.

The Funds do not currently pay custodial fees directly. Their assets are held by “prime brokers” as
custodians. The Funds may be considered to pay for custodial services indirectly through: payments
to the prime brokers of commissions and other transaction costs; payments of financing charges
related to margin borrowings and stock loans; and the prime brokers’ ability to earn money on
certain balances the Funds maintain with them (subject to laws and regulations governing their
activities).

Each Fund bears certain costs in connection with its organization and the initial offering and sale of
ownership interests in it and continues to bear the costs of its ongoing offering of those ownership
interests.

Prepayment of Fees. The Funds pay management fees quarterly in advance. If we were to terminate
our status as general partner of a partnership Fund or as investment manager of a non-U.S. Fund
otherwise than as of the end of a quarter, we would refund to the Fund a portion of the management
fee that was paid at the beginning of the termination quarter, pro rata for the portion of the quarter
during which we were not the general partner or investment manager. Fund investors are generally
allowed to withdraw capital or redeem shares as of the end of a calendar quarter, at which time there
generally will be no prepaid fees. However, if an investor were allowed to withdraw or redeem at a
time other than a calendar quarter-end, we would refund a portion of the management fee pro rata
for the portion of the quarter after the effective time of the withdrawal or redemption.

Other Compensation. We do not and our personnel do not accept compensation for the sale of
securities or other investment products.

Please note that the information we provide in Item 5 is intended to be a general summary of fees
charged and other general business practices of Philadelphia Financial in connection with the
advisory services it provides. The description of fees and expenses provided in Item 5 are for
summary purposes only and are supplemented and superseded in their entirety by the applicable
offering documents for each fund.

                PERFORMANCE-BASED FEES AND SIDE-BY-SIDE MANAGEMENT

Each non-U.S. Fund pays us a performance-based “incentive fee” and each partnership Fund allocates
to us a portion of the increase in value of investors’ investments, as described above in “Fees and
Compensation.” We do not manage any Funds that do not provide for performance-based profit
participation. While we have the right to waive incentive fees or incentive allocations as to particular
investors in a Fund, we manage each Fund’s assets as an undivided pool, so any such waiver would
not give rise to incentives to favor any particular Fund over another. Our potential to receive
incentive fees or allocations, and the fact that we will not have to refund any such fees or allocations
if the Funds later experience losses, may create an incentive for us to make investments that are
riskier or more speculative than would otherwise be the case.

We manage pooled investment vehicles in which our related persons represent a significant portion
of invested capital. Capital associated with out related persons is not charged any advisory fees, we
are incentivized to realize gains in this account. The treatment of this account may create a conflict
of interest to incentive gains in this account over the Funds. Please see Code of Ethics, Participation
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TYPES OF CLIENTS

We provide investment advice only to the Funds. They are privately-offered investment funds that
are not regulated pursuant to Sections 3(c)(1) or 3(c)(7) of the U.S. Investment Company Act of 1940,
as amended (the “Investment Company Act”). Each Fund imposes minimum investor qualification
standards and minimum investment requirements.

            METHODS OF ANALYSIS, INVESTMENT STRATEGIES AND RISK OF LOSS

Investment Objectives and Strategies

We seek to achieve the Funds’ investment objective of maximizing total returns by investing
primarily in the financial service industry. We invest predominantly (but not exclusively) in U.S. and
Canadian publicly-traded securities of finance companies including: banks, thrifts, brokers, asset
managers, insurance, mortgage, specialty finance, REITs, homebuilders, financial technology, and
other financial intermediaries. Although the predominant emphasis is on the financial sector, we may
invest a portion of the Fund’s assets in other sectors in which we have investment experience, such
as the automotive sector.

We take long positions primarily in undervalued small to medium sized companies we believe offer
attractive investment opportunities while shorting those with what we consider deteriorating
fundamentals, questionable accounting practices, or flawed business models.

Although we have long-term views, when appropriate, we may cause the Funds to trade on a short-
term basis. Funds use leverage and stock options strategically in attempts to hedge positions and
enhance returns. We occasionally invest in other diverse instruments, including private equity,
distressed debt or securities of financial service companies.

We maintain internal parameters that serve as risk guidelines for a variety of portfolio characteristics
including levels of: investment in the financial services sector (a high level); investment in non-U.S.,
non-Canadian, non-London Stock Exchange listed, non-Euronext securities; investment in private
placements; investment in nonconvertible debt securities; gross long and gross short exposure;
concentration of investment in any particular company; overall number of positions; and options
exposure.

Investing in securities involves a risk of loss that investors should be prepared to bear.

Material Risks of Our Strategy

The following is a summary of some of the material risks associated with our investment activities.
It does not attempt to describe all of the risks associated with those activities. The confidential
offering memoranda by which the Funds offer ownership interests contain more complete
descriptions of those risks, as well as some risks that arise out of the Funds’ particular attributes, but
no such description can fully describe all risks of investing.

Reliance on Key Personnel. Our investment advice depends on the judgment and analysis of our
investment professionals, and in particular, Jordan Hymowitz. Should he terminate his relationship
with us, die, or become otherwise incapacitated for any period of time, the Funds’ investments could
suffer.

Economic and Business Conditions. General economic and business conditions may affect the
Funds’ activities. Interest rates, the prices of securities, and participation by other investors in the
financial markets may affect the value of securities purchased by a Fund. Unexpected volatility or
liquidity in the markets in which a Fund directly or indirectly holds positions could impair a Fund’s
ability to carry out its business and could cause it to incur losses.

Lack of Sector Diversification. Since a large portion of each Fund’s portfolio will be concentrated
in the financial services industry and its portfolio will not be widely diversified, the investment
portfolio of a Fund may be subject to more rapid change in value than would be the case if the Fund
were required to maintain a wide diversification among companies or industry groups.

Regulatory Oversight. Financial services companies are subject to extensive regulation,
supervision, and examination by various federal and state authorities, including the Board of
Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Office of
Thrift Supervision, the Federal Deposit Insurance Corporation, State banking commissions, State
Insurance Commissioners, the SEC, etc. Generally, each institution must file regular reports with its
regulators with respect to its activities and financial condition, and it must obtain regulatory
approvals prior to entering into certain transactions that may be subject to certain minimum capital
requirements, and may be subject to periodic examination to assess compliance with various
regulatory requirements. Adverse action by regulatory agencies, or any change in the laws,
regulations, or policies applicable to financial institutions, whether by Congress, the states or federal
or state regulators, could have a material adverse impact on the industry or on institutions in which
a Fund may have an investment.

Other Factors Affecting Financial Services Industry. The profitability of most financial institutions
is dependent to a large extent upon the interest rates that can be earned on and charged for financial
products. Accordingly, an institution’s business, results of operation and financial condition may be
significantly impacted by changes in the interest rate environment and the institution’s ability to
manage its assets and liabilities in response to such movements. Results of operations may also be

materially affected by national and local economic conditions and real estate cycles, particularly with
respect to the type and volume of business that an institution does and the institution’s exposure to
credit losses, and the monetary and fiscal policies of the federal government.

Geopolitical Risks and Force Majeure. An unstable geopolitical climate and continued threats of
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