Arc70 Advisers LP

Item 5 – Fees and Compensation

       Fees

        The specific manner in which Arc70 is compensated and the amount of such compensation
is established in the offering memorandum and/or the operating agreement of each Fund. The
Flagship Funds pay their fees in arrears. The Flagship Funds’ administrator calculates the fees
owed by the Flagship Funds subject to the approval of Arc70. Arc70 calculates and deducts all
Opportunities Funds’ fees owed to Arc70. Opportunities Funds’ annual asset management fees
are paid in advance. If an Opportunities Fund investor redeems prior to the end of an annual asset
management fee billing period, the investor will receive a pro rata refund of the annual asset
management fee based on the number of days of the billing period that the investor was invested
in the Opportunities Fund.

       Expenses

        In addition to the Fees paid to Arc70, each Fund will bear costs and expenses incurred in
connection with its organization and operations as described below. An expense cap is applicable
for the Flagship Funds each fiscal year and any expenses in excess of the expense cap may cause
the management fee to be reduced, provided some expenses shall not be included for the purpose
of calculating the expense cap including, but not limited to, management fees paid to the Adviser
and the expenses of any Arc-Managed Securitized Products (each, regardless of whether an Arc70-
Managed Securitized Product is actually established).

       Flagship Funds

        Each Flagship Fund will bear all costs and expenses incurred in connection with its
organization (or any series or class thereof) and the organization of the Flagship Fund’s general
partner, Arc70 Capital LLC (the “General Partner” or “Arc70 Capital”), and the continuing
offering of its interests (including, without limitation, the preparation of the Flagship Fund’s
offering memorandum and the entry into certain of the contracts to which the Flagship Fund is a
party). These expenses include, without limitation, legal and accounting fees, printing costs, travel
and out-of-pocket expenses (“Organizational Expenses”).

         In addition to Organizational Expenses, each Flagship Fund will all of pay all of its ordinary
and extraordinary expenses (including those incurred through any investment vehicle created to
facilitate the Flagship Funds’ investments), including (i) costs and expenses incurred in connection
with investment activities of the Flagship Fund including, without limitation, evaluating Multi-
Family Mortgage Bonds, Additional Permitted Investments and other assets, evaluating and

implementing financing options (including the Bond Financing Transactions), filing fees, legal,
bookkeeping, accounting, auditing, recordkeeping, administration, computer and clerical expenses
(including expenses incurred in preparing reports and tax information to the limited partners and
expenses for specialized administrative services); (ii) regulatory compliance costs; (iii) costs and
expenses incurred in connection with establishing the Arc-Managed Securitized Products and the
issuance of any equity and/or debt securities thereby; (iv) costs of evaluating and contracting with
a servicer to any securitization, and fees payable to any such servicer or other agent of the
securitization; (v) costs and expenses of any third party valuation agent; (vi) printing and
duplication expenses; (vii) investment-related travel expenses; (viii) investment research; (ix)
investment research-related travel expenses; (x) costs incurred with entering into and maintaining
compliance with side letters; (xi) costs incurred with amending or amending and restating the
Flagship Fund’s operating agreement; (xii) costs incurred in connection with a wind down of the
Flagship Fund or any other investment vehicle through which the Flagship Fund invests; (xiii)
consulting and/or statistical services expenses; (xiv) market data, newswire and data processing
expenses (including those associated with investigating potential investments or maximizing
return on existing investments); (xv) software and connectivity charges; (xvi) brokerage
commissions, bank charges, custody fees and borrowing costs and expenses related therewith;
(xvii) the cost of maintaining the Flagship Fund’s legal existence and expenses; (xviii) liability
insurance (including errors & omissions insurance) costs; (xix) investment and operating expenses;
(xx) the Flagship Fund’s pro-rata portion of the regulatory and compliance costs of Arc70 arising
out of its management of the Flagship Fund, such as legal, administrative, and filing costs and
expenses relating to the Investment Adviser’s SEC Form ADV and Form PF, if applicable; (xxi)
such other expenses necessary to perform the operation of the Flagship Fund as determined by the
Flagship Fund’s General Partner; and (xxii) extraordinary expenses, which may include, without
limitation, taxes, indemnification costs, litigation costs, costs incurred in connection with a
reorganization or restructuring of a Flagship Fund, trade errors or damages (collectively, the
“Flagship Fund Expenses”).

        As noted above, the Flagship Funds bear a significant portion of the costs and expenses
incurred in connection with the organization of the Arc-Managed Securitized Products, which
expenses would not be borne by the Flagship Funds if Arc70 had determined to invest the Flagship
Funds’ assets in instruments other than SP Subordinated Equity. However, Arc70 believes that
investing the Flagship Fund’s assets in the SP Subordinated Equity is in the best interests of the
Flagship Funds despite the expenses that the Flagship Funds bear for the organization of the Arc-
Managed Securitized Products.

       Opportunities Funds

        The Opportunities Funds shall bear and be charged with all costs and expenses of their
operations, including, without limitation the following: (i) all costs and expenses incurred in
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Item 7– Types of Clients

        Arc70 provides investment advisory services to four Delaware organized Funds. The
Funds offer and sell their respective interests and shares solely to accredited investors that are
qualified clients and qualified purchasers or are certain employees of Arc70 and its affiliates. The
minimum initial capital commitment for investors in the Funds is $5 million which may be waived
by the Funds’ general partner or manager. Arc70 has entered into side letters and written
agreements with certain individual investors which provide different terms; differing terms are
typically available only to investors who negotiate for such terms.