Capra Credit Management LLC

Item 5: Fees and Compensation

CCM has three Authorized Officers.

The SMAs pay for a fixed fee based on a periodic portfolio calculation to CCM.

The other corporate entities to whom CCM provides non-discretionary advice pay a fixed fee
based on the purchase of the assets under advisement. The contracts with these Clients allow
a performance fee to CCM (subject to the performance of the entire deal structure) at the
end of the respective contracts.

Item 7: Types of Clients

The Firm manages a number of SMAs and provides investment consultation services on behalf
of corporate Clients.

Item 8: Methods of Investment Analysis, Strategies and Risk of Loss

Methods of Analysis and Investment Strategy

The Firm’s investment activity focuses on Client strategies in CLO debt and equity tranches
accumulated primarily from the secondary market. For SMAs focusing on CLO equity and
CLO mezzanine activity, the trading team’s inherent interested is in deals with high quality
loan collateral, strong NAV coverage, higher over-collateralization cushions, and low tail risk.
Additionally, the team seeks out deals with long reinvestment periods, as they offer the
investor increased optionality. The team aims to encourage debt re-financings and
restructurings in order to improve CLO equity returns. The team may invest in other parts
of the CLO capital structure, subject to the investment objectives, strategies, restrictions,
and guidelines of its Clients. At times, the team uses hedges to mitigate market risks.

Risk of Loss Factors

All investments involve the risk of loss, which Clients should be prepared to bear, including
(among other things) loss of principal, a reduction in earnings (including interest, dividends,
and other distributions) and the loss of future earnings. Although we strive to manage risk in
accordance with our investment strategies, we can provide no guarantee that our efforts will
be successful. Set forth below is a non-exhaustive list of such risk factors.

Nature of Investments

Investments will primarily consist of investments in fixed income securities and other financial
instruments, including, without limitation, asset and mortgage backed securities, consumer and
commercial loans and receivables, high yield investments and related synthetic instruments,
and credit linked notes that may be affected, among other things, by business, financial market
or legal uncertainties. There can be no assurance that we will correctly evaluate the nature
and magnitude of the various factors that could affect the value of and return on investments.
Prices of investments may be volatile, and a variety of factors that are inherently difficult to
predict, such as domestic or international economic and political developments, may
significantly affect the results of the Clients’ activities and the value of their investments.

Collateralized Loan Obligations

Our investments are primarily positions in senior, subordinated, and equity securities issued
by issuers of collateralized loan obligations (“CLOs”). CLOs are subject to credit, liquidity,
and interest rate risks. A holder of CLO equity will typically have limited remedies available
upon the default of the CLO. CLOs often invest in concentrated portfolios of assets. The
concentration of an underlying portfolio in any one obligor would subject the related CLO
securities to a greater degree of risk with respect to defaults by such obligor, and the
concentration of a portfolio in any one industry would subject the related CLOs to a greater

Capra Credit Management, LLC                                                 Form ADV Part 2A

degree of risk with respect to economic downturns relating to such industry. The value of the
CLO securities owned by a Client will generally fluctuate with, among other things, the
financial condition of the obligors or issuers of the underlying portfolio of assets of the related
CLO (“CLO Collateral”), general economic conditions, the condition of certain financial
markets, political events, developments or trends in any particular industry, and changes in
prevailing interest rates. If distributions on and/or the realization of the CLO Collateral are
insufficient to make payments on the CLO securities, no other assets will be available for
payment of the deficiency and following realization of the CLO securities, the obligations of
such issuer to pay such deficiency generally will be extinguished. CLO Collateral will generally
consist primarily of senior secured corporate loans and, to a lesser extent, second lien
corporate loans and subordinated corporate loans. U.S. CLOs issued before January 2014 also
typically hold high-yield bonds in their portfolios. The equity securities issued by a CLO
typically are under-secured. The lower ratings of high yield securities and below investment
grade loans reflect a greater possibility that adverse changes in the financial condition of an
issuer or in general economic conditions or both may impair the ability of the related issuer
or obligor to make payments of principal or interest.

Options

A Client may utilize options contracts and so-called “synthetic” options, or other derivatives
written by broker-dealers or other permissible financial intermediaries. Options transactions
may be affected on securities exchanges or in the over-the-counter market. When options
are purchased over-the-counter, the investment portfolio bears the risk that the counterparty
that wrote the option will be unable or unwilling to perform its obligations under the option
contract. Options may also be illiquid and in such cases, the Client may have difficulty closing
out its position.

Long-Term Investments

A Client may require longer-term holding periods for its positions in order to be successful
and positions may experience considerable price volatility over such holding periods and
therefore, may not be appropriate for investors requiring short-term liquidity or stable
returns.

Illiquid Portfolio Investments

CCM may suggest investments in securities or loans that either lack a readily assessable market
value or should be held until the resolution of a special event or circumstance. However, a
Client may not be able to readily dispose of such investments and, in some cases, may be
contractually prohibited from disposing of such investments for a specified period of time.

Non-Diversification
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