Penwood Real Estate Investment Management LLC

Item 5 – Fees and Compensation

A.     Compensation

For the closed-end discretionary limited partnerships, the Adviser is paid a base advisory fee
which is calculated as a percent of investor equity commitments during the investment
period, generally 36 months, and thereafter on a percent of investor equity commitments
invested in or committed to each investment (excluding any investment that has been sold
and as to which a final distribution has been made). The base fee for the non-discretionary
separate account is based on the greater of a set percent of net operating income or a set
percent of the cost of the asset. The base fee is paid quarterly in arrears, commencing on the
initial fund closing date, or in the case of the non-discretionary separate account, the asset
acquisition date and is prorated for any partial period.

The Adviser is also paid a performance-based fee which is earned after certain partnership
level limited partner, or separate account property level, returns have been realized. The fee
is paid in the form of a carried interest held by the general partner in the fund, which is an
affiliate of the Adviser. The specific manner in which fees are charged by the Adviser is
established in each investment fund’s or separate account’s written agreement with the
Adviser and is described in the applicable private placement memorandum. The
performance-based fee is earned by the Adviser from cash available for distribution by the
fund after the investor(s) have earned a pre-specified internal rate of return ("IRR") with
respect to their equity capital in the fund or, in the case of the separate account, the
investment. With the exception of the separate account, such fee is earned based on returns
for the entire fund, not on returns for individual investments. In the unlikely event that
Penwood is paid a performance fee and the IRR to the investors subsequently drops below the

pre-specified IRR, then Penwood would repay to the investors the amount of any previously-
paid performance based fees required to make the payments retained by Penwood, if any, in
accordance with the performance-based fee agreement.

Neither the base fee nor the performance-based fee is related to the interim values of the
assets held in the applicable investment fund. The Adviser provides interim valuations as
part of its fair value reporting to the investors in each fund, but it has no financial incentive
related to such valuations.

Performance based fee arrangements may create an incentive for Penwood to recommend
investments that may be riskier or more speculative than those which would be
recommended under a different fee arrangement.

Fees are set by market conditions and as such are negotiable. All investors in each
partnership will pay the same negotiated or set fee for that fund and applicable advisory
agreement.

B.     Other Fees and Expenses

In addition to the fees payable to Penwood, subject to the investment fund documents,
investors will pay or otherwise bear all fees, costs, expenses, and other liabilities arising in
connection with its operation, including (but not limited to):
• any sales or other taxes, fees, or government charges that may be assessed against the fund
or client;
• commissions, brokerage fees, and similar charges incurred in connection with the purchase
or sale of fund investments;
• costs and expenses incurred in investigating, developing, negotiating, structuring, settling,
monitoring, and holding portfolio investments (whether or not consummated), including
travel, legal, tax, and accounting expenses therewith;
• market data costs; research-related expenses;
• the costs and expenses such as travel-related expenses, of holding meetings or conferences
with fund investors (or other clients);
• costs of any investigation, administrative proceeding or regulatory matter, litigation and
threatened litigation involving a client or a fund;
• indemnification obligations and expenses;
• expenses attributable to normal and extraordinary investment banking, commercial
banking, accounting, auditing, appraisal, tax advisory, tax preparation, legal, external
consulting, custodial, and registration services provided to a fund or a client;
• fees, costs and expenses, including premiums related to risk management services and
insurance;
• costs of dissolving a fund or client’s investment vehicle and liquidating its assets;
• costs and expenses for tax and audit services to a fund or client; fees, costs, and expenses
related to the appraisal and valuation of the fund and its subsidiaries’ assets;
• organizational expenses, including costs and expenses pertaining to the offering and sale of
interests in a fund, related legal and other organizational payments and travel expenses.

Penwood may from time to time incur fees, costs, and expenses on behalf of more than one
client or fund. To the extent such fees, costs, and expenses are incurred for the benefit of more
than one fund, co-invest, or client, each such fund, co-invest, or client will bear an allocable
portion of any such fees, costs, and expenses in proportion to the size of its investment in the
activity or entity to which such expense relates (subject to the terms of each fund or client’s
governing documents). Penwood endeavors to allocate such fees, costs, and expenses on a fair
and equitable basis. Please refer to the fund level documents for complete information on the
expenses payable by advisory clients.

In accordance with fund documents, fees are deducted directly from the client accounts. The
separate account fees are billed directly to the investor/account holder.

Aside from the base management fee and the fund level or property level (in the case of the
separate account) incentive fee, there are no fees earned by the Adviser or its affiliates from
the underlying investments or other services.

The investment advisory agreement between each fund or account and the Adviser may be
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Item 7 – Types of Clients

Penwood currently provides advisory services to pooled investment vehicles. The minimum
acceptable investment amount for a limited partner in a fund is $25 million. In special

circumstances Penwood may waive the minimum acceptable investment amount, but in no
event lower than $5 million.

Penwood currently provides advisory services to a non-discretionary separate account;
however, no assets have been acquired on behalf of the account.