Talkot Capital LLC

Item 5.        Fees and Compensation

Monthly and Quarterly Fees. Talkot’s compensation is negotiable and varies, but typically, it
charges a quarterly fee in advance of one-fourth of 1.5% (approximately 1.5% annually) of assets
under management, which amount is payable on the first day of each calendar month based on
the net market value of each client’s account on that date. Talkot also typically is allocated from
each limited partner in an investment limited partnership a performance allocation equal to 20%
of net profits (including both realized and unrealized gains and losses) otherwise allocable to
such limited partner subject, in certain cases, to a hurdle rate,. Performance allocations and fees
are assessed in arrears on a quarterly basis, and are only applied to the portion of profits that
exceed the cumulative losses previously allocated to or incurred by clients. Performance
allocations and fees may create an incentive for Talkot to make riskier and more speculative
investments than it would otherwise make.

Talkot typically deducts management fees and performance allocations and fees directly from
client accounts.

Talkot believes that its fees are competitive with fees charged by other investment advisers for
comparable services. Comparable services may be available, however, from other sources for
lower fees.

The disclosure in this Item 5, together with the disclosure in Item 12, allow a plan that is subject
to the Employee Retirement Income Security Act of 1974 and that invests in an investment fund
managed by Talkot, to use the “alternative reporting option” to report Talkot’s compensation as
“eligible indirect compensation” on the Schedule C of the plan’s Form 5500 Annual
Return/Report of Employee Benefit Plan.

Fees Relating to Terminations and Withdrawals. Relationships with Talkot’s investment
partnership clients are terminable on expiration of the fund’s term, dissolution of the fund or on
Talkot’s withdrawal as adviser. Each investor may withdraw or redeem from a fund on the terms
particular to that fund, but with a minimum of 60 days’ prior written notice, on the last day of
any calendar quarter. Withdrawal requests may be subject to a minimum amount requested to be
withdrawn. Investors should review the specific terms and conditions of any fund in which they
invest carefully.

Except as may be otherwise negotiated in particular cases, the holder of an individually managed
account may terminate the account by giving 90 days’ prior written notice.

In all cases, expenses, the pro rata portion of the management fee, and the performance
allocation or fee through the date of termination are charged to the account. All prepaid but
unearned advisory fees are refunded on termination of a client’s account.

Expenses. Each client account is responsible for its own costs and expenses, including trading
costs and expenses (such as brokerage commissions, expenses related to short sales, and clearing
and settlement charges), ongoing legal, accounting and bookkeeping fees and expenses, and the
fees and expenses charged by any fund administrator for its accounting, bookkeeping and other
services. Talkot bears its own operating, general, administrative and overhead costs and
expenses, other than the expenses described above. Securities brokerage firms and futures
commission merchants that execute clients’ securities and commodities trades, however, may
pay all or a part of these costs and expenses, as discussed in Item 12 below.

Item 7.        Types of Clients

Talkot provides investment advice to investment funds and other accounts. Investors in the
investment funds have a minimum investment requirement that, depending on the investment
fund, is either $500,00 or $1,000,000. Talkot may waive this minimum. The firm generally
requires a minimum of $1,000,000 to open an individually managed account, but may waive this
minimum. Talkot’s separate account clients may include high-net-worth individuals, institutions,
trusts, endowments and pension plans.