Stellus Capital Management LLC

Item 5       Fees and Compensation

All Clients may incur expenses in connection with custodial or brokerage services discussed in Item 12.
In addition, Clients bear their own operating costs and expenses relating to their organization and
operations, which may include, but are not limited to expenses incurred in identifying, assessing,
acquiring, negotiating, structuring, and disposing of investment opportunities, including any financing,
legal, accounting, management and consulting fees whether or not a Client actually invests in the
specific investment opportunity or not; administrative expenses associated with an annual audit,
financial and tax returns and tax reporting to a Client’s investors; registration and other investment
costs; interest and fees associated with any permitted borrowings; costs of any litigation, D&O insurance

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and other types of insurance, indemnification or extraordinary expense or liability; meetings of Client
investors; fees and disbursements to attorneys, consultants, accountants, fund administrators, service
providers and any other professionals relating to Client matters.

To the extent any Clients are pooled investment vehicles, investors and eligible potential investors
should consult each Client’s official governing documents for a detailed discussion of the specific fees
and expense associated with that Client.

Neither Stellus nor its supervised persons receive compensation for the sale of securities or other
investment products to investors.

SCIC
The fee for investment advisory and management services provided to SCIC consists of two
components; a base management fee of 1.75% and an incentive payment of 20%. The SCIC Annual
Report on Form 10-K contains the calculation and payment method for the investment advisory and
management services provided to SCIC. For additional information about the incentive payment, please
refer to the section entitled “Performance-Based Fees”.

Private Funds
Pursuant to the governing documents of each Private Fund, Stellus or an affiliate is paid an annual asset-
based management fee which ranges between 0.5% and 2.0% and performance based fees which range
between 10% and 20% of realized net profits calculated after non-Stellus affiliated Private Fund
investors have first received the return of their capital and a specific annual cumulative compounded
rate of return. The management fees may be reduced by any net fees paid to Stellus or its affiliates due
to certain deal fees and breakup fees received from companies in which the Private Funds have or may
invest. As discussed above, certain investors have entered into side letters whereby such investors have
been granted terms and conditions that are more favorable than other investors in the Private Funds,
including but not limited to, lower fees.

Item 7       Types of Clients

Stellus currently only provides discretionary advice to SCIC and the Private Funds. SCIC is a non-
diversified, closed-end management investment company that has elected to be regulated as a BDC
under the Investment Company Act. The Private Funds are investment vehicles that are not registered
or required to be registered under the Investment Company Act.