DRC Investment Advisors LLC

ITEM 5: FEES AND COMPENSATION

Asset Management Fees

The Asset Management Fee for separately managed accounts is generally a percentage of assets
under management as described in the investment management agreement in arrears.
Management Fees are negotiable and shall consist of a monthly or quarterly advisory fee
calculated on the invested capital as of the last business day of the previous calendar month. The
Management Fee will be netted out of monthly or quarterly principal or interest payments
otherwise to be received by the Client; provided, however, to the extent such payments do not
cover the entire Advisory Fee, the Client shall be responsible for the remaining balance.

Generally, the separately managed account clients authorize Debt Reserve to debit monthly
Management Fees directly from their custodial account. The custodian will send a statement to
the client, at least monthly, indicating all the amounts disbursed from the account including the
amount of advisory fees.

Clients are urged to review these statements carefully.

Origination Fees

Consistent with market practice for commercial mortgages, borrowers of Investments will
generally pay an origination fee in connection with the origination of their loan. The client will
receive a portion of this fee, with the balance paid to Debt Reserve. In circumstances where a
borrower does not agree to pay an origination fee, no additional fee is charged to the client.

Debt Reserve’s receipt of a portion of the origination fee implicates a potential conflict of interest
with the relevant client as Debt Reserve could be incentivized to originate loans where it receives
such compensation. Debt Reserve discloses its receipt of origination fee compensation to clients
in its investment management agreement with clients and, with respect to each transaction for
a client, provides the client with a settlement statement that sets out the total amount of
origination fees paid by the borrower, and the portion of those fees received by Debt Reserve.

Other Fees

Separately managed account clients are responsible for investment-related expenses including
organizational, operating, custodial and administration expenses as described in their Investment
Management Agreement. Debt Reserve will receive other compensation in the form of
customary fees paid by borrowers for applications and term sheets.

Extension fees paid by borrowers during the lifetime for any Investments shall be 100% payable
to the Client based on the Client’s ownership percentage of such Investments. Unless otherwise
negotiated on a deal-by-deal basis, the Client shall be entitled to receive 50% of any modification
fees earned during the life of the Investments based on the Client’s ownership percentage of
such Investments; Debt Reserve will receive the balance of the modification fee.

Neither Debt Reserve nor any of its supervised persons accepts compensation for the sale of
securities or other investment products.

ITEM 7: TYPES OF CLIENTS

Debt Reserve provides investment advice primarily to institutional investors such as insurance
companies and pension plans.

There is no specific minimum investment amount for separately managed accounts.