Falcons I LLC

Item 5 – Fees and Compensation

Falcons I is entitled to a base management fee equal to 1.5% per annum of AOMR’s Equity,
calculated and payable quarterly in arrears. For purposes of calculating the base management fee,
AOMR’s “Equity” is defined in the Client’s management agreement. In the event of removal of
Falcons I as investment manager of AOMR, fees will be prorated based on the effective date of
the termination and the total number of days in the billing period. Any fees paid but unearned will
be promptly refunded to the Client.

Falcons I is entitled to an incentive fee, paid in arrears, equal to 15% of AOMR’s Distributable
Earnings in excess of 8% over a period of four rolling fiscal quarters. No incentive fee has been
paid by AOMR to Falcons I as of the date of this Form ADV, Part 2A.

In addition to the management fee and incentive fee, the Client is responsible for its trading costs
and all operating expenses including payroll, legal, regulatory, registration, accounting, auditing,
printing, mailing, administration, taxes, extraordinary expenses, and miscellaneous fees and
expenses. See additional information below under Item 12 – Brokerage Practices. Falcons I does
not receive any portion of these costs.

Financial statements, including the amount of any management fees and incentive fees, are
reported publicly to the SEC on an annual and quarterly basis on Forms 10-K and 10-Q,
respectively. Payment of management fees (or incentive fees, should they be earned) due to

                                                                                      Falcons I, LLC
                                                                                  Form ADV, Part 2A

Falcons I are deducted from the Client directly. The Client’s auditor and HR Compensation
Committee review the accuracy of these calculations and billings.

Revenue Sharing Agreements

Falcons I has entered into one or more revenue sharing agreements pursuant to which Falcons I
will share portion of the fees earned by Falcons I from AOMR. The specific terms of each revenue
sharing agreement, including percentage of fees paid and whether such percentage includes the
management and/or performance fees are outlined in each revenue sharing agreement. Such a
revenue sharing agreement can create conflicts of interest, to the extent that the recipient of the
revenue share serves as an investment adviser or otherwise influences the decision of current or
potential shareholders to purchase shares of AOMR. Parties to the revenue sharing agreement are
incentivized to encourage investors to purchase shares of AOMR which may conflict with the
interests of the investor. It is the responsibility of the investor’s investment adviser to disclose any
such conflicts of interest to any such investors.

Compensation Related to Affiliated Transactions

AOMR engages in the below affiliated transactions where Falcons I or an affiliate receives
compensation for the transaction in addition to the fees outlined above:

 1. Whole Loan Purchases and Origination: When AOMR purchases whole loans from an
    affiliate of Falcons I or originates whole loans, Falcons I affiliates are compensated for the
    transaction. These affiliated transactions are approved pursuant to the Adviser’s Affiliated
    Transactions Policy and Procedures.

 2. Servicing Administration Fee: When AOMR owns residential mortgage whole loans directly
    or through a wholly owned subsidiary, AOMR pays a servicing administration fee to an
    affiliate of the Adviser, AO Servicing Manager, LLC, the servicing administrator (“Servicing
    Administrator”). In addition, securitization transactions issued by AOMT in which AOMR
    may participate, pay a servicing administration fee to the Servicing Administrator. The
    Servicing Administrator additionally shares in a portion of ancillary income due to and
    collected by the servicer (Select Portfolio Servicing, Inc., NewRez LLC d/b/a Shellpoint
    Mortgage Servicing, or others) to include late fees and interest paid on any principal and
    interest sweep account for the time funds are held before being wired out of the accounts
    through the monthly remittance process. This affiliated transaction is or has been approved
    pursuant to Falcons I’s Affiliated Transactions Policy and Procedures. This fee or lack thereof
    may vary among payers.

 3. Loan Origination Sourcing Fee: A loan origination sourcing fee is paid to AOCA by AOMR
    when AOMR purchases residential mortgage whole loans (“Loans”) from non-affiliated
    third-party originators. This fee or lack thereof may vary among payers. The fee compensates
    AOCA for the sourcing of Loan opportunities and for the overhead established to review the
    underwriting of each sourced Loan. This affiliated transaction is approved pursuant to the
    Adviser’s Affiliated Transactions Policy and Procedures. Given this fee may vary among
    AOCA’s clients, AOCA may be incentivized to allocate more Loans and/or higher balance

                                                                                      Falcons I, LLC
                                                                                  Form ADV, Part 2A

     Loans to clients who pay a higher fee. Falcons I ensures this risk is mitigated via allocation
     policies that require all clients of AOCA and Falcons I to be treated fairly regardless of
     discrepancies in fee amounts or other factors.

Falcons I may have a conflict of interest when engaging in affiliated transactions because AOMR
compensates Falcons I or an affiliate for the transaction, leading to increased revenue for Falcons
I and its affiliates, and Falcons I may be incentivized to maximize revenue for itself or its affiliates.
Falcons I mitigates this conflict of interest in the following ways:

    1. Affiliated transactions are permitted only when the transaction is in accordance with
...

Item 7 – Types of Clients

Falcons I currently provides services only to AOMR but could in the future serve as the investment
adviser to other Clients that employ trading and investment strategies similar to those of AOMR.

                                                                                   Falcons I, LLC
                                                                               Form ADV, Part 2A