Redwood Asset Management Inc

Item 5: Fees and Compensation

Compensation
RAM receives management fees and, at times, may receive performance or carried
interest fees. The manner of calculation and application of performance or carried
interest fees are disclosed in the offering documents for the particular investment
vehicle. Performance or carried interest fees are subject to regulation under Rule 205-3
of the Advisors Act. Therefore, RAM will seek to ensure that any clients or investors in
an investment vehicle that are directly or indirectly assessed performance or carried
interest fees satisfy the qualifications of SEC Rule 205-3 and have been advised of
such fees and their risks.

Investment Funds.
Redwood Trust, its affiliates and certain of their respective employee professionals may
invest in Redwood Trust-sponsored investment vehicles. Fees assessed on such
investments for these affiliated investors may be substantially reduced or waived
altogether. If Redwood Trust, its affiliates, and certain of their respective professionals
are making investments in a Redwood Trust-sponsored investment vehicle, the
investment and any actual or potential fee waiver or reduction are disclosed to potential
investors in the offering documents for the particular investment vehicle and in the
financial statements for the particular investment vehicle.

Pursuant to the management agreement between RAM and each investment vehicle, if
RAM is terminated from its advisory role, it will refund fees it is not contractually entitled
to retain and RAM may also be entitled to liquidated damages in the event of early
termination of its advisory services. More detailed descriptions of these terms and the
other material provisions of the management agreement pursuant to which RAM
provides services to each client are included in a summary of that management
agreement in the offering documents for that investment vehicle.

With respect to newly formed investment vehicles, RAM may negotiate fees depending
on various factors, including: amount of capital, nature of investment strategy, multi-
product relationships, and date of establishment. As a result, clients may have lower or
higher fees than other clients.

Structured Finance Vehicles - Acacia CDOs. RAM receives collateral management
fees quarterly in arrears (ranging from 0.1% to 0.15% of the net outstanding collateral
balance) for the services it provides to the Acacia CDOs, although fees are generally
negotiated at the time the vehicle is formed. In some cases, RAM’s right to receive a
portion of these fees may be subordinate to other obligations of the Acacia CDOs or
subject to satisfaction of other conditions. The manner of calculation and application of

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fees are disclosed in the offering documents for the particular investment vehicle (but,
generally speaking, they are deducted from the assets of the vehicle by the third-party
10 trustee of the vehicle and then paid to RAM by that trustee).

Calculation and Payment
The specific manner in which fees are charged by RAM is established in a client’s
written agreement with RAM. When negotiating such a written agreement, clients may
request to be invoiced directly for fees or to authorize RAM to directly debit fees from
client accounts.

Other Expenses
RAM’s fees are generally exclusive of brokerage commissions, transaction fees, and
other related costs and expenses which shall be incurred by the client. Clients may
incur certain charges imposed by custodians, brokers, third party investment and other
third parties such as fees charged by auditors, managers, custodial fees, deferred sales
charges, odd-lot differentials, transfer taxes, wire transfer and electronic fund fees, and
other fees and taxes on brokerage accounts and securities transactions. Such charges,
fees and commissions are exclusive of and in addition to Redwood Asset Management,
Inc.’s fee, and RAM shall not receive any portion of these commissions, fees, and costs.

Other Matters
Neither RAM nor any of its supervised persons (employees) accept compensation for
the sale of securities or other investment products. See “Brokerage Practices – ‘Soft
Dollar’ Arrangements” below for a description of research and other services RAM
receives from brokers and dealers that it transacts business with.

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Types of Clients
As described in the “Our Advisory Business” section above, RAM‘s clients include
structured finance vehicles.

Conditions for Managing Accounts
New investment fund clients of RAM would typically have at least $100 million in
investment or capital commitments, subject to the discretion of RAM. The minimum
investment for a limited partnership investment in funds advised by RAM is typically
targeted to be more than $10 million, although RAM does not maintain a specific
minimum dollar amount and specific minimum requirements would be set forth in the
fund offering documents. Investors who seek investment advice for a separate account
or other individually structured vehicles would typically be expected to invest $20 million
or more, although minimum investment amounts may be waived by RAM. Depending
on the structure of the investment fund or vehicle and the manner in which interests in
that fund or vehicle are marketed, investors may be required to be “accredited
investors” and “qualified purchasers”, in each case as defined under federal securities
laws.

Types of Investments
Structured Finance Vehicles – Acacia CDOs. RAM's Acacia CDO clients invest in debt
securities (including MBS, debt securities issued by REITs or a special purpose
securitization vehicle for which the underlying collateral consists of securities issued by
REITs, and preferred stock issued by a REIT), equity securities, and U.S. agency-
issued securities. RAM's Acacia CDO clients may also enter into privately negotiated
investment instruments and invest in synthetic securities, including credit default swaps,
total return swaps, credit linked notes, derivative instruments, structured note or trust
certificates acquired with or from a synthetic security counterparty, and other privately
negotiated investment instruments, including hedge agreements.

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