Torchlight Investors LLC

Item 5: Fees and Compensation

Investment Management Fees

Torchlight is compensated for advisory services by each Torchlight Fund at the fee rates specified in the
relevant Governing Agreements. The amount, timing and other terms relating to compensation are often
negotiated by Torchlight with investors in Torchlight Funds and may vary significantly among Torchlight

Funds and investors in a Torchlight Fund. Torchlight charges fixed rate management fees for its
investment management services at an annual fee of up to 1.5% of assets under management or
committed capital. Fees are payable by the Torchlight Fund on a quarterly or monthly basis in advance or
in arrears.

Torchlight (or an affiliate serving as general partner of a Torchlight Fund) also is entitled to receive
performance fees under the terms specified in the relevant Governing Agreements. Performance fees are
described in Item 6. Torchlight receives a monthly collateral management fee from the CDO at a rate of
0.0375% (0.15% per annum) of assets held by the CDO at the end of the prior month.

Special Servicing and Workout Services

Torchlight Loan Services, LLC (“TLS”), a wholly owned subsidiary of Torchlight, performs loan work-out
services, including as a “special servicer”. In its capacity as a special servicer, TLS is responsible for
resolving delinquent and defaulted commercial real estate mortgage loans which are held by trusts that
issue CMBS. In a CMBS trust, investors acquire certificates that are issued in classes or tranches that rank
from most subordinate to most senior. Losses incurred by the trust on underlying mortgage loans are
allocated to the most subordinate class outstanding (referred to as the “controlling class”). The principal
amount of the subordinate class is reduced by losses allocated to that class. If the principal amount of
the subordinate class is reduced to zero, subsequent losses are allocated to the next most subordinate
class. The holder of the controlling class is typically afforded the right under the applicable Pooling and
Servicing Agreement (“PSA”) (the contract that governs the CMBS trust) to appoint the special servicer of
the CMBS trust, since the holder of the controlling class bears the immediate risk of loss. As part of their
investment strategy, Torchlight Funds (in particular, the Debt Fund series) may acquire the subordinate
(or controlling) class of CMBS trusts. In those circumstances, Torchlight will appoint TLS as special servicer
on behalf of the Torchlight Fund. (In certain instances, the PSA does not permit the holder of the
controlling class to appoint an affiliate as special servicer, and Torchlight will appoint TLS as the “Directing
Certificateholder Servicing Consultant” to perform certain functions that are typically performed by a
special servicer). Torchlight believes that it is in the Torchlight Funds’ best interest to appoint TLS as
special servicer, as this enables Torchlight to control the workout process and thereby maximize the trust’s
(and indirectly the applicable Torchlight Fund’s) recovery on distressed loans.

Torchlight encounters various conflicts of interest as a result of appointing TLS to act as special servicer
on behalf of Torchlight Funds. Torchlight indirectly earns additional compensation when Torchlight
appoints TLS as special servicer of a trust, thereby enabling TLS to earn special servicing fees from the
trust. Consequently, Torchlight faces a conflict of interest in determining whether to acquire CMBS in
Torchlight Funds that carry the immediate right to appoint a special servicer or have the potential to
acquire such right in the future (due to losses incurred by more subordinate classes), as Torchlight has a
financial incentive to facilitate such appointments in order to earn additional fees. Torchlight faces a
similar conflict of interest in determining whether to sell such CMBS positions owned by Torchlight Funds,
as such a sale could result in termination of TLS as special servicer. Torchlight seeks to make
determinations as to whether to buy or sell such CMBS positions by taking into account the best interests
of the Torchlight Fund without regard to the potential impact upon special servicing revenues of TLS.

As special servicer, TLS is entitled to receive certain fees that are specified in the governing PSA (including
periodic fees that are a percentage of the principal amount of loans in special servicing and liquidation
fees that are earned as a percentage of the proceeds derived from the disposition of a loan or other asset
by the special servicer) as well as certain fees the amount of which can be negotiated by the special
servicer with the borrower on a case-by-case basis (such as a forbearance fee for granting a borrower

additional time to achieve a milestone specified in a loan agreement). While PSAs permit the special
servicer to negotiate fees to be paid by borrowers, PSAs do not specify how such fees are to be calculated
and, because they are payable by the borrower, they are payable without regard to priorities specified in
the PSA. More recent PSAs do require that “work-out” fees otherwise payable under the PSA be offset by
borrower-paid fees, and some PSAs cap the amount of borrower-paid fees. Torchlight faces a conflict of
interest in negotiating borrower-paid fees, since greater fees will result in greater revenue to TLS but
could, potentially, reduce the amount that would otherwise be paid by the borrower to the CMBS trust
(and, ultimately, to the Torchlight Fund). TLS endeavours to negotiate borrower-paid fees that are
consistent with prevailing market practice and within the range of prevailing market rates, as determined
by Torchlight in good faith. However, there can be no assurance the fees charged by TLS in any given
workout do not exceed fees that would be charged by another special servicer as special servicers
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Item 7: Types of Clients

Torchlight provides advisory services primarily to closed-ended, private investment funds that are exempt
from registration under the Investment Company Act of 1940 (the “1940 Act”) and the Securities Act of
1933 (the “Securities Act”). The great majority of investors in Torchlight Funds are institutional, including
public and private pension plans, insurance companies, multi-national organizations, foundations and
other charitable organizations, and business organizations. The minimum capital commitment for an
investor in a Torchlight Fund is typically $10 million (which Torchlight may waive at its discretion). In
general, an investor in a Torchlight Fund is required to be both an “accredited investor” as defined in
Regulation D under the Securities Act and a “qualified purchaser” as defined in the 1940 Act.

Historically, Torchlight also has managed separate accounts for institutional investors but does not
manage separate accounts at the present time. The minimum size for a separate account will be
negotiated on a case-by-case basis, but Torchlight typically requires a commitment from the client of $20
million to $100 million depending upon the strategy for the account. As noted above, discussions herein
regarding fees and compensation, conflicts of interest, investment strategies, risk of loss, brokerage
practices, review of accounts, and voting of client securities generally refer to Torchlight Funds but are
applicable to clients that engage Torchlight to manage separate accounts.

Torchlight provides collateral management services to a CDO.