Canyon CLO Advisors LP

Fees and Compensation
Clients are typically charged senior and subordinated asset-based collateral management fees as well as
performance based fees. The senior and subordinated asset-based collateral management fees are generally
payable quarterly in arrears and are subject to the provisions set out in the governing documents (e.g.,
collateral management agreement, indenture) of each respective Client. Prepayment of fees is generally
not required and is not expected. Such fees will be used to cover the Adviser’s ordinary operating expenses,
including employee compensation.

Clients will also bear direct and indirect costs, fees and expenses incurred by or on behalf of such Clients
including, among others, (i) expenses and costs of legal advisers, consultants and other professionals
retained by the Client or by the Adviser, on behalf of the Client, in connection with the services provided
by the Adviser under the collateral management agreement (including without limitation those expenses
and costs relating to advice rendered by such professionals in connection with the disposition, potential
disposition, preservation and/or maintenance of any investment), (ii) reasonable travel expenses (airfare,
meals, lodging and other transportation) incurred by the Adviser as are reasonably necessary in connection
with the initial placement of any of the notes issued by the Client and the default or restructuring, or
potential default or restructuring, of any collateral, (iii) all third party out-of-pocket expenses reasonably
incurred in connection with actual and potential investments of the Client, including, without limitation,
brokerage commissions, research expenses, travel costs, all fees and expenses relating to the registration
and qualification for sale of such securities and all transfer taxes, (iv) all reasonable fees and disbursements
of counsel employed by the Adviser to perform legal due diligence and documentation in connection with
the acquisition, or proposed acquisition, of any investment, (v) reasonable out-of-pocket expenses and costs
incurred by the Adviser in connection with obtaining those consents or approvals from any noteholder, the
trustee or the rating agencies that are required by the offering circular, the indenture or collateral
management agreement, (vi) any and all costs and expenses incurred in connection with the carrying or
management of the investments and (vii) fees or expenses of the Client, the Adviser or its affiliates
reasonably incurred in connection with the cost of software acquisition from Virtus Partners or a similar
software vendor for collateralized loan obligations or collateralized debt obligations, plus maintenance costs
of such software. To the extent any such expenses or costs are incurred for the benefit of the Client and
other entities affiliated with or advised by the Adviser, the Adviser will make a good faith allocation of
such expenses or costs among all such entities and the Client.

In order to take advantage of diversification and new investment strategies and concepts, the Adviser, from
time to time, may place a portion of a Fund’s investable assets in accounts managed by or co-managed with
other investment advisors (including affiliated and non-affiliated investment advisers), in which case such
Fund may be subject to additional fees payable to such other investment advisor as well as its proportionate
share of costs and expenses. The Adviser also may place a portion of a Fund’s investable assets in other
affiliate Funds, in which case such Fund shall not be subject to any additional management or incentive
fees but will bear its proportionate share of costs and expenses. The amounts which may be invested into
other managed accounts or in affiliated investment funds are not expected to be significant.

Please see Brokerage Practices for more discussion on expenses incurred in connection with brokerage
commissions.

Investors should refer to the governing documents (e.g., collateral management agreement, indenture) of
the respective Client for additional/supplemental on the fees and expenses.

Performance-Based Fees and Side-by-Side Management
As noted above, CLO Advisors (and certain of its affiliates) earns a performance allocation or fee. Because
the actual performance allocation or fee charged to a specific Client may vary in the event that CLO
Advisors charges a performance fee to some of its Clients, there may be an incentive for CLO Advisors to
make investments that are riskier or more speculative than would be the case in the absence of such a
compensation framework or to favor those Clients with higher performance allocations or fees over Clients
with lower performance allocations or fees. CLO Advisors seeks to mitigate this risk by, among other
things, seeking to allocate investments in a fair and equitable manner over time among its Clients. For
more information on CLO Advisors’ allocation procedure, please see Brokerage Practices – Allocation of
Investment Opportunities.

Types of Clients
CLO Advisors acts as collateral manager, sponsor and originator to CLOs. Investors must meet the investor
qualifications associated with each CLO.

Methods of Analysis, Investment Strategies and Risk of Loss
As a general matter, CLO Advisors is not obligated to pursue any particular investment strategy or
opportunity with respect to the collateral of each of its Clients and has no obligation to perform any other
duties, other than as specified in the applicable collateral management agreement. Such collateral
management agreement may, however, place significant restrictions on CLO Advisors’ ability to buy and
sell collateral obligations. Accordingly, during certain periods or in certain specified circumstances, CLO
Advisors may be unable to buy or sell assets or to take other actions which it might otherwise consider in
the best interests of the Client and the holders of the notes or other interests issued by the Client.

The collateral obligations are expected to consist primarily of non-investment grade loans or interests in
non-investment grade loans which are subject to liquidity, market value, credit, interest rate, reinvestment
and other risks. In addition, there can be no assurance that CLO Advisors will correctly evaluate the nature
and magnitude of the various factors that could affect the value of and return on collateral obligations and
purchase collateral obligations that will not default and will generate high returns for the Clients. It is
anticipated that such assets generally will be subject to greater risks than investment grade corporate
obligations. These risks could be exacerbated to the extent that the Client portfolio is concentrated in one

or more particular types of collateral obligations.

Prices of collateral obligations may be volatile and will generally fluctuate due to a variety of factors that
are inherently difficult to predict, including, but not limited to, changes in interest rates, prevailing credit
spreads, general economic conditions, financial market conditions, including the condition of the leveraged
loan market, domestic and international economic or political events, developments or trends in any
particular industry, and the financial condition of the obligors of the collateral obligations. Loans and
interests in loans have significant liquidity and market value risks since they are not generally traded in
organized exchange markets but are traded by banks and other institutional investors engaged in loan
syndications. Because loans are privately syndicated and loan agreements are privately negotiated and
customized, loans are not purchased or sold as easily as publicly traded securities. In addition, historically
the trading volume in the loan market has been small relative to the non-investment grade bond market.

A non-investment grade loan or an interest in a non-investment grade loan is generally considered
speculative in nature and may become a defaulted obligation for a variety of reasons. A defaulted obligation
may become subject to either substantial workout negotiations or restructuring, which may entail, among
other things, a substantial reduction in the interest rate, a substantial write-down of principal, and a
substantial change in the terms, conditions and covenants with respect to such defaulted obligation. In
addition, such negotiations or restructuring may be quite extensive and protracted over time, and therefore
may result in substantial uncertainty with respect to the ultimate recovery on such defaulted obligation.
The liquidity for defaulted obligations may be limited, and to the extent that defaulted obligations are sold,
it is highly unlikely that the proceeds from such sale will be equal to the amount of unpaid principal and
interest thereon. In addition, the Clients may incur additional expenses to the extent it is required to seek
recovery upon a default on a collateral obligation or participate in the restructuring of such collateral
obligation. Moreover, there can be no assurance on the timing of any recoveries.

Unsecured loans are unsecured obligations of the applicable obligor, may be subordinated to other
obligations of the obligor and generally have greater credit, insolvency and liquidity risk than is typically
associated with investment grade obligations and secured obligations. Unsecured obligations will generally
have lower rates of recovery than secured obligations following a default. Also, in the event of the
insolvency of an obligor of an unsecured obligation, the holders of such unsecured obligation will be
considered general, unsecured creditors of the obligor, will have fewer rights than secured creditors of the
obligor and will be subordinate to the secured creditors with respect to the related collateral.

In certain circumstances, the Clients’ respective portfolios may include loans that are not first lien secured
loans, including second lien loans. Such loans are subordinate in right of payment with respect to
liquidation to one or more senior secured loans of the related borrower and therefore are subject to
additional risks that the cash flows of the related borrower and the property securing a second lien loan may
be insufficient to make the scheduled payments after giving effect to any senior secured loans of the related
obligor. The subordination of second lien loans is also expected to cause second lien loans to be more
illiquid investments than senior secured loans.

General Risks of the Fund
Possibility of Losses
An investment in the Fund is speculative. The amounts ultimately realized from an investment in Interests
will depend upon the performance of the Subordinated Securities of Underlying Majority-Owned Canyon
CLOs held by CLO Advisors, Direct Investments by the Fund (or any SPVs) and a multitude of related
factors, including local, regional, national and global economic conditions. CLO Advisors may not be able
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