Spring Lake Asset Management Inc

Item 5.         Fees and Compensation

As compensation for investment advisory services rendered to the Funds, Adviser receives an annual
management fee (“Management Fee”) equal to 1.50% of the Funds’ assets. The Management Fee is
deducted directly from the Funds’ assets as of the last day of each calendar quarter. Adviser may, in
its discretion, waive all or a portion of the Management Fee in respect of any investor in the Funds.

In addition to the Management Fee, the Funds bear their own offering and operating expenses,
including annual audit expenses, fees and expenses of the Funds’ third-party administrator, tax
preparation expenses, ongoing legal expenses, portfolio brokerage expenses, including fees and
expenses of the Funds’ prime broker, commissions and dealer spreads, settlement costs, and
borrowing costs (such as interest). Please see Item 12, below, for addition information regarding
brokerage practices. The Funds also pay all of their taxes, the costs associated with perfecting an
interest in a security held by the Funds or the assertion of creditors’ rights, the costs of disputes with
dealers, the costs of litigation (or defending threats of litigation) involving the Funds,
indemnification, and other extraordinary expenses.

Additionally, please see Item 6, below, regarding performance-based compensation that the Funds
may pay to Adviser.

 6379016.3

Item 7.        Types of Clients and Minimum Requirements

Adviser currently provides investment services to the Funds. Investment advice is provided directly
to the Funds and not individually to the Funds’ investors.

The Funds’ interests are currently offered solely to investors who are “accredited investors” within
the meaning of Regulation D under the 1933 Act and who are “qualified clients” within the meaning
of Rule 205-3 under the Advisers Act.

The current minimum initial investment in the Funds is $1,000,000. However, Adviser may, in its
sole discretion, permit investments that are less than this minimum.

Item 8.        Method of Analysis, Investment Strategies and Risk of Loss

Methods of Analysis and Principal Investment Strategies

Adviser employs a value-oriented, “bottom-up” investment approach to identify attractive
investments among the full range of taxable and tax-exempt municipal bonds. In selecting municipal
bonds for the Funds, Adviser uses its skills to determine credit quality, analyze structural features,
and evaluate current pricing and trading opportunities. The Funds invest in municipal securities that
Adviser believes are inefficiently priced and possess attractive total return potential relative to their
credit risk. Adviser may also employ a “top-down” approach designed to exploit market price
anomalies that may be caused by temporary variables such as significant changes in new issue supply
or market sentiment. Adviser seeks to diversify the Funds’ portfolio across the municipal markets

by investing in varied municipal sectors and by investing in municipal securities across the spectrum
of credit quality, ranging from high grade to below investment grade securities. Adviser relies on its
portfolio management team’s extensive experience analyzing high yield and special situation
municipal bonds to evaluate opportunities. Although the percentage that Adviser allocates to non-
investment grade securities varies depending on the supply of non-investment grade municipal bonds
and the credit spread between investment grade securities and non-investment grade securities, the
Funds will not invest more than 40% of its total assets, measured at the time of purchase, in non-
investment grade securities, which are commonly known as “junk bonds.”

       As a hedge against interest rate risk and market exposure, the Funds may, but are not required
to, engage in hedging strategies, such as short sales of U.S. Treasuries or U.S. Treasury futures
contracts. These hedging strategies will increase the Funds’ exposure to the underlying security
disproportionately to the amount of premium, margin or other amount of the Funds’ assets actually
invested therein, which may be considered leverage. The Funds may also purchase and sell
Municipal Market Data Rate Locks (“MMD Rate Locks”), generally as a hedge or for duration or
risk management purposes. In addition, the Funds may enter into credit default swaps (“CDSs”) to
hedge credit risk.

        The Funds may borrow funds from brokerage firms in order to increase the amount of capital
available for investment (i.e., invest on margin). The amount of these borrowings the Funds may
have outstanding at any time will be a function of market opportunities, though is expected to be
less than 300% of the value of the Funds’ net assets.

        The Funds invest primarily in municipal securities and engages in active trading of these
securities. Municipal securities generally are bonds issued by states and local governments and their
agencies, authorities and other instrumentalities. The types of municipal bonds that the Funds may
invest in include, without limitation, general obligation bonds, special revenue bonds, private
activity bonds, tax increment financing (TIF) bonds, and municipal leases. Municipal bonds are
subject to risks generally associated with fixed income securities (e.g., interest rate risk, credit risk,
change in rating risk, etc.). The Funds may also invest in other fixed income securities including
obligations issued or guaranteed by the U.S. Government, its agencies, or instrumentalities;
corporate bonds; Rule 144A securities; exchange-traded funds (“ETFs”) and open- or closed-end
funds that primarily are fixed income oriented; debt obligations of for-profit corporations and non-
profit entities; and money market instruments. The Funds’ securities may have all types of interest
rate payments and reset terms, including fixed, variable, floating or adjustable rates, zero coupons,
and contingent, deferred or put features. The Funds expect to invest at least 80% of their assets in
municipal securities and securities focused on municipal investments, excluding any assets used for
hedging purposes.

         The Funds will not purchase restricted securities that are subject to legal or contractual
restrictions on resale or that cannot be disposed of in the ordinary course of business. Rule 144A
securities, nonrated securities and other securities determined to be liquid by the Adviser are not
included in this limitation.

Adviser’s Philosophy.

       Adviser bases its investment philosophy on the belief that careful security selection and
active portfolio risk management provide superior results over the long term. Adviser seeks to
construct the Funds’ portfolio using a disciplined investment approach to select what Adviser

believes are attractive securities primarily from the municipal fixed income universe. Adviser
focuses on bottom-up security selection with credit, structure, liquidity and price as the foundation
of analysis.

        Adviser believes that numerous inefficiencies exist in the municipal bond market. These
inefficiencies are created by a variety of factors, including the large number of municipalities issuing
bonds, the varied sectors, the high level of retail participation, strong seasonal tendencies, erratic
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