Prospector Partners LLC

Item 5. Fees and Compensation

Asset-Based Compensation

Management fees payable to the Adviser by institutional clients (including financial institutions that
engage the Adviser as a sub-adviser), other than the Investment Funds, and retail clients are established
with each client and generally consist of an asset-based fee that may, in certain cases, decline relative to
the amount of assets under management. The asset-based management fees are generally billed and
paid to the Adviser quarterly in arrears within 10 days after the last day of a calendar quarter based upon
the value of the client account as of the last day of the quarter.

The Adviser is paid a quarterly management fee in arrears from each of the Investment Funds equal to
1% of the value of the Investment Fund as of the end of the quarter. The management fee is pro-rated
for periods less than a full quarter.

The Adviser, as Sub-Adviser to Long Short Opportunity Fund (“LSOFX”), receives a portion of the fee
paid to its adviser, Long Short Advisors, LLC, which varies based on the total assets of the fund. LSOFX
is obligated to pay Long Short Advisors, LLC a fee computed and accrued daily and paid monthly at an
annual rate of 1.75% of the average daily net assets of LSOFX. The Adviser deducts the investment
management fee from the Investment Fund accounts by instructing the client’s custodian. Regarding
separately managed institutional accounts, the Adviser bills the clients for investment management fees
on a quarterly basis.

In addition to management fees, client accounts may also be subject to other expenses such as legal,
audit, accounting and tax return preparation expenses; organizational expenses; investment expenses

such as commissions, research fees and expenses (including publications, subscriptions and service
contracts for quotation equipment and newswires); direct fees and expenses, such as legal fees and due
diligence expenses, related to the analysis, purchase or sale of private investments whether or not the
investment is consummated; interest on margin accounts and other indebtedness; borrowing charges on
securities sold short; custodial fees; and any other expenses reasonably related to the purchase, sale or
transmittal of the clients’ assets. Certain of these costs are allocated among multiple clients pro rata
based on gross assets under management as of the beginning of the month; provided however, that the
Adviser may deviate from pro rata allocations with respect to expenses that, in the Adviser’s view,
disproportionately benefit a particular client or group of clients.

The Adviser has discretion to cap expenses such as legal, audit and tax fees, research, publications,
quoting and custodial fees, etc. at an annualized fixed percentage of net assets for certain client
accounts.

Performance-Based Compensation

The Adviser or an affiliate that is serving as the general partner receives annual performance
compensation from certain Investment Funds. This compensation ranges from 15% - 20% of net profits
and may be subject to annual minimum returns. The performance-based compensation is generally
payable to the Adviser annually and is subject to a loss carryforward provision. In the event of the
complete withdrawal or redemption by an investor at a time other than the end of a fiscal year, the
performance compensation will be payable to the Adviser or its affiliate at the time of the withdrawal or
redemption.

The management fee and performance compensation may be waived by any of the Investment Funds for
an investor that is a principal, related family member or employee of the Adviser or of its affiliates.

Item 7. Types of Clients

The Adviser’s clients consist of private investment funds, a registered investment company, insurance
companies, other corporate or institutional entities, and retail clients.

Corporate or institutional clients other than Investment Funds and the registered investment company are
generally required to establish an investment management account with the Adviser with at least
$20,000,000. Retail clients are generally required to establish an investment management account with
the Adviser with at least $250,000. With respect to any client that is an Investment Fund, any initial and
additional subscription minimums are disclosed in the offering memorandum for the Investment Fund.