Invictus Capital Management LP

Item 5 Fees and Compensation

Invictus receives management fees and/or carried interest, a performance allocation or
similar profit allocations from the Funds. Management fees are generally billed to clients
via capital calls issued by Invictus to investors; carried interest, performance allocations or
similar profit allocations, as applicable, are typically deducted from an investor’s capital
account. The Funds will also indirectly incur or generate other fees payable to Invictus,
depending on the nature of their portfolio activities. Certain fees generally will reduce
management fees otherwise payable to Invictus as described below.

The Funds will also bear certain out-of-pocket expenses incurred by Invictus in connection
with the services provided. The following sections discuss the most common fees and

expenses, which are described in more detail in the relevant Offering Materials for the
Funds.

Common Types of Fees

Management Fees

The Funds generally pay a quarterly flat rate management fee, in advance, at a negotiated
rate documented in their advisory agreement. General rates for the Funds are set forth in
the Offering Materials. Additionally, Invictus has waived or reduced management fees for
certain investors, and such waiver or reduction is typically memorialized in a side letter
with the applicable investors. Invictus reserves the right to waive or reduce management
fees for future investors. When fees are paid in advance, and the Client or investor
relationship is terminated prior to the end of the period for which such fees relate, Invictus
will, within a reasonable time following such termination, refund a prorated portion of the
management fee.

Performance-Based Arrangements

Invictus’s compensation in connection with each Fund includes a performance-based
component. Invictus expects that performance-based arrangements will vary as to the rate,
manner of calculation and conditions precedent to receipt (e.g., hurdles). Performance-
based arrangements for each of the Funds are described in the relevant Offering Materials
for that account. All performance fees are subject to modification (e.g., higher hurdle
rates), waiver or reduction, and such waiver or reduction is typically memorialized in a
side letter with the applicable investors. As discussed in more detail in Item 6, below,
performance-based compensation arrangements are appropriate only for sophisticated
Clients and investors as they could create certain risks and conflicts of interest.

Performance allocations for the Funds generally represent a share of distributions or
dispositions made by a Client in excess of the relevant investors’ invested capital, its
allocable share of fees and expenses and a preferred return hurdle.

Performance fees or carried interest profit allocations are subject to regulation under
Section 205 of the Investment Advisers Act of 1940 (“Advisers Act”) and Rule 205-3
thereunder. Therefore, Invictus seeks to ensure that any Client or investors in a Client that
are directly or indirectly assessed performance fees or are subject to carried interest profit
allocations satisfy the qualifications of Rule 205-3 under the Advisers Act and have been
advised of such fees or allocations and their risks.

For any Client, performance fees, including carried interest allocations or receipt of
disposition fees, generally do not exceed 20% of profits, and could be subject to certain
preferred return hurdles, catch-up allocations and clawback provisions. The manner of
calculation and application of performance fees or carried interest profit allocations are
disclosed in the Offering Materials for, and detailed in the governing agreements of, each
Client. As described in the governing documents, under certain circumstances where
termination occurs on a date other than the end date for a performance measurement period,
performance fees will be calculated and assessed through the date of termination.

Other Fees

Unless otherwise disclosed in the Offering Materials, to the extent Invictus is entitled to
receive transaction fees directly or indirectly from a Client, 100% of such fees paid to
Invictus reduces the management fees otherwise payable to Invictus by each of the Funds
except IACF (as disclosed in the Offering Materials of IACF). The governing agreement
of each Client sets forth the basis on which such fees reduce management fees.
Management fees payable to Invictus by a Fund will not be reduced by the Loan Service
Fee, Trust Administrator Fee, Commercial Loan Administration Fee and Commercial Loan
Workout Fee, each as defined below, paid by such Fund.

On March 29, 2019, Invictus acquired, from Invictus Opportunity Fund, L.P., Invictus
Opportunity Offshore Fund, L.P. and Managed Account-P (collectively, “Fund I”), 100%
ownership of Verus Residential Loanco, LLC d/b/a/ Verus Mortgage Capital (“Verus
Residential”), a company that provides certain proprietary mortgage loan sourcing
(including sourcing via origination), processing, trust administration (which includes
servicing oversight duties), and settlement services, and through an affiliate (Verus Season
Co, LLC, a vehicle that is controlled by the same principals that control Verus Residential,
“Season Co”) Invictus provides seasoning services, and collectively such services are
needed to effectively participate in the market for acquiring mortgage loans. After March
29, 2019, and going forward, investors in the Funds will indirectly incur an expense for
fees paid to Verus (as defined below) in Verus’s capacity as trust administrator of
securitization trusts that acquire loans from the Funds. Invictus Opportunity Fund II, L.P.
and Invictus Opportunity Offshore Fund II, L.P. (“Fund II”), Invictus Opportunity Fund
III, L.P., Invictus Opportunity Offshore Fund III, L.P. and Invictus Opportunity Fund III-
R, L.P. (“Fund III”), Invictus Opportunity Fund IV, L.P., Invictus Opportunity Offshore
...

Item 7 Types of Clients

Currently Invictus provides investment advice to the Funds and will accept as investors in
the Funds, in its discretion, institutional accredited investors, trusts, pension funds,
investment pools, insurance companies and qualified high net worth individuals.

The Funds are privately placed pooled investment vehicles excepted from the definition of
“investment company” under the Investment Company Act of 1940 by Section 3(c)(7) of
that Act. Investors generally are limited to persons who are qualified purchasers and such
investors could include proprietary investment by Invictus or its affiliates, current or former
personnel who are “knowledgeable employees” or otherwise meet the relevant Fund’s
investment criteria, funds of funds, high net worth individuals and related entities,
sovereign entities, pension funds, general corporate or business entities, financial
institutions, endowments and foundations. Investors in Managed Account-P could also
include institutions such as banks, financial institutions, investment banks and asset
management firms.

Invictus generally imposes an initial investment minimum to establish a Client relationship
or to invest in the Funds, but reserves the right to waive or change any such minimums in
its discretion. Investors or Clients could also be subject to additional qualifications based
on, among other things, legal or regulatory requirements associated with the vehicle or
investment strategy. Account opening and maintenance requirements are described in
more detail in the relevant Offering Materials.