Rialto Capital Management LLC

Item 5: Fees and Compensation

Rialto’s revenue is derived primarily from investment management fees, carried interest allocations
and investment-level fees. Rialto and its affiliates also earn additional fees for the provision of other
services to the Clients as agreed to by each Client. While a general description of these fees is
provided below, specific terms of these arrangements are detailed in the Governing Documents and
other agreements that Rialto enters with each Client.

If and when the Adviser identifies errors in or enhancements to the calculation, allocation or
reporting of certain fees or expenses, upon identification, the Adviser promptly remedies such error
or makes such enhancement.

Investors in the Funds should review the applicable Governing Documents to fully understand all
fees and expenses borne by the relevant Fund and, indirectly, by the investors in such Fund.

Investment Management Fee

Investment management fees vary across Clients and among Clients’ investors; with respect to the
Funds, such fees generally range between 1.0% and 1.5% per annum, with lower rates in certain
Funds based on criteria such as a limited number of investors, a narrower investment strategy or a
shorter commitment period. The basis for calculation of investment management fees is in each
case defined within the applicable Governing Documents of each Client. As is generally the case
in private funds of this nature, the Governing Documents provide that a Fund’s management fees
will be calculated and charged on a basis that generally is not tied to the Fund’s then-current net
asset value. As further specified in the Governing Documents, from the commencement date of the
relevant Fund until a date specified in the Governing Documents (generally representing the end of
the Fund’s defined commitment period), management fees generally will be charged based on a
formula tied to the amount of the relevant Fund’s limited partners’ aggregate capital commitments;
after such date, management fees generally will be charged and calculated based on a formula tied
to the amount of capital invested (based on the aggregate cost of the investments made by the Fund
to the extent they have not been realized or completely written off, less investment level financings).

As a result, the amount of investment management fees generally will not correspond with
fluctuations in the Fund’s net asset value, including following the commitment period, and will not
be reduced in connection with any write downs, except in the case of investments permanently
written off. Further, management fees generally will not be reimbursed or refunded under the
Governing Documents in the event of realizations, dispositions or partial write-downs that occur
partway through the relevant calculation period. Additionally, for CMBS securities, Rialto relies
upon the statements published by the master servicer to determine whether a loss is considered
realized with respect to a bond class. Consequently, the applicable General Partner will not deem a
bond class as completely written off and will not stop charging investment management fees for
such bond class until the master servicer publishes information evidencing realized losses in excess
of the applicable Client’s position with respect to such bond class. Furthermore, bonds are deemed
liquidated at the time full principal repayment has occurred and investment management fee basis
will not be reduced for partial principal repayments on bonds.

Form ADV Part 2A Brochure – Rialto Capital Management, LLC

Rialto reserves the right to waive or reduce investment management fees for certain Client’s
investors, including employees, affiliates and others as determined at Rialto’s sole discretion.
Additionally, in certain cases, commitments in excess of certain thresholds or dependent on the
timing of the commitment are subject to a discounted fee pursuant to the Client’s Governing
Documents and/or negotiated side letter provisions. Investment management fees will not be paid
by Investors who are employees of Rialto (“Rialto Associate Investors”) and certain affiliates do
not pay fees or carry in connection with their investments and may not vote their interest, as
permitted by the terms of the applicable Fund’s respective Governing Documents. Notwithstanding
the foregoing, such Rialto Associate Investors and affiliates will pay their pro rata share of the other
fees and expenses incurred by the applicable Client, including Investment-Level Fees and other fees
described below, as applicable. For more information on the allocation of Client expenses, please
see “Other Expenses” in Item 5 below.

Investment management and other fees are generally withheld from the applicable Client’s current
income distributions. The investment management fee paid to the Adviser is generally offset by
some or all the placement agent fees paid in connection with fundraising in the Fund and by
organizational expenses above certain caps specified in the applicable Governing Documents.

As discussed further in Item 10, “Co-Investment Opportunities”, the General Partner of a Fund
reserves the right to negotiate, and has negotiated, with potential co-investors the investment
management fees applicable to such co-investors, if any, on a case-by-case basis in its respective
sole and absolute discretion. Such co-investors might not be subject to management fees or could
be subject to different or differently calculated management fees in the sole discretion of the Fund’s
General Partner for the benefit of the General Partner, the Adviser or either of their respective
affiliates, in any event, as compared to what investors are subject to under the Governing Documents
of the relevant Fund. The investment management fees borne by co-investors, if any, are described
in the Governing Documents of the relevant co-investment vehicles or accounts, as applicable.
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Item 7: Types of Clients

Rialto provides investment advisory services to pooled investment vehicles. With respect to the
Funds and Clients organized as pooled investment vehicles, Rialto provides the advisory services
to the Funds and the Clients, and not individually to the investors in the Funds or Clients. Investors
in Clients include, but are not limited to, high net worth individuals, family offices, pension plans
(corporate, state and foreign), sovereign wealth funds, endowments, foundations, banks, insurance
companies, pooled investment vehicles (e.g., funds-of-funds), trusts, estates or charitable
organizations, and corporate or business entities.

Certain Funds require minimum commitments from investors as outlined in the relevant Fund
Governing Documents; however, Rialto maintains discretion to accept less than these amounts.

An investor in the Funds must meet certain suitability qualifications, such as being an “accredited
investor” within the meaning set forth in Rule 501(a) of Regulation D under the Securities Act and
a “qualified purchaser” as defined in the Investment Company Act. Also, investors will be required
to make certain representations that they (i) are acquiring an interest for their own account, (ii)
received or had access to all information they deem relevant to evaluate the merits and risks of the
prospective investment, and (iii) have the ability to bear the economic risk of an investment in the
Fund. Details concerning applicable investor suitability criteria are set forth in the respective Fund’s
Governing Documents and subscription materials which are furnished to each investor.

Form ADV Part 2A Brochure – Rialto Capital Management, LLC