Advisory Research Inc

Item 5         Fees and Compensation

Investment Management Fees (based on percentage of assets under management)

Our advisory fees are generally based on a percentage of assets under management or
administration and exclude costs that may be imposed by your custodian, broker-dealer, and other
third-party managers. Investment management fees are set forth in our investment management
agreement executed with each new client. Our management fee is typically billed and payable
quarterly or monthly basis in arrears of services rendered, based on a calendar quarter or month,
unless the client directs otherwise. For accounts opened during a quarter or month, the initial fee
will be pro-rated. A client may terminate the investment management agreement with ARI at any
time without penalty by giving written notice, in which case fees will be pro-rated according to the
number of days services are provided during the applicable billing period.

ARI reserves the right to negotiate the fee with all its clients and charge a higher or lower fee than
the fee described below. ARI has waived or reduced and may, in the future, waive or reduce the
management fee and/or performance fee with respect to any client, or with respect to any
individual investor in a Private Fund, including but not limited to our employees and/or their family
members. Some of the factors relevant to charging different fees to those fees stated here are:
account size, the investment strategy, and the nature of the relationship between the potential
client and ARI. When requested, related client accounts and/or Private Fund investments may
be aggregated in order to determine fee breakpoints for client separate accounts.

The value of the client’s account, as calculated by our client accounting system, is used to
compute advisory fees unless specified otherwise within the advisory agreement. The accounting
system calculates security valuations based upon information that is received from third party
pricing vendors. Your custodian or consultant may use a different third-party pricing vendor to
value your account. Due to some disparities among third party pricing vendor security prices,
account values as reported by us, your custodian and/or your consultant may vary. In most cases
ARI will generate an invoice quarterly or monthly in arrears and submit that invoice either to the

client or a client’s designated agent for payment. In some cases, clients elect to permit ARI to
deduct management fees from custodial accounts electronically. In the event that ARI is
permitted to deduct management fees electronically, ARI will also deliver an informational copy
of the invoice to the client or his/her designated agent. Accounts managed by ARI are held in
custody by a third-party bank or brokerage of client’s choosing. Clients’ custodians will deliver a
periodic (at least quarterly) account statement directly to clients. The statements will include all
transactions that took place in the account during the period covered and reflect any fees
deducted and paid to ARI.

Separately Managed Accounts Fee

ARI is paid an annual management fee for separately managed accounts that generally ranges
up to 1.00%.

In addition to an asset-based fee, we also charge a performance-based fee on some accounts.
The performance-based fee is on an annual basis and is a percentage of the amount by which
the total returns for the account outperform the benchmark index, up to a defined maximum.
(ARI’s performance-based fees are discussed further in Item 6.)

Wrap Program Fee

Fees for the wrap fee programs are calculated by the program sponsor. ARI will not provide an
invoice to the clients invested in a wrap fee program. It is the program sponsor’s responsibility to
handle collection of client fees. ARI is compensated directly by the program sponsor based upon
the assets managed within these relationships. ARI’s advisory fee is imbedded in the total wrap
fees which range from 2%-3% of assets under management. Clients participating in these
programs should refer to the program sponsor’s program brochure and agreements for
information regarding additional fees and expenses. Although ARI does not bill its fees in
advance, sponsors of wrap fee programs for which ARI serves as a manager may do so. In the
case of a wrap fee program in which fees are billed in advance, and in the event a client’s advisory
contract is terminated before the end of the billing period, clients are refunded any prepaid fees
from the wrap fee program’s sponsor.

Model Program Fee

ARI is paid an annual fee from each model program sponsor, which is negotiable and varies
depending on the model and services provided. In most cases, the fee will be paid to us quarterly
in arrears and will be based on the aggregate fair market value of all of the model program clients’
assets that are invested in accordance with the model portfolios. The model program sponsor
calculates the fee and pays ARI accordingly.

Fund Fees

The fees for investments in the Private Funds and Registered Mutual Fund are outlined in their
respective offering documents, which should be reviewed carefully prior to investing.

When we invest on behalf of a client account in shares of a Registered Mutual Fund we sub-
advise, we do not charge a separate account investment management fee. Instead, we exclude
those mutual fund assets when we calculate the investment management fees charged to you.

With respect to non-affiliated mutual funds, exchange traded funds, and other collective
investment vehicles in separately managed accounts, ARI’s fees are in addition to advisory fees
which may be charged by such mutual funds and collective investment vehicles as per the fund’s
prospectus.

Additionally, ARI has entered into arrangements or agreements with certain Private Fund
investors (“Side Letters”) granting them preferential management fee terms, preferential incentive
...

Item 7         Types of Clients

ARI provides portfolio management services to individuals, high net worth individuals, corporate
pension and profit-sharing plans, charitable institutions, foundations, registered mutual funds,
private investment funds, trust programs, and other U.S. and international institutions. As
previously noted, ARI also acts as a sub-advisor in wrap fee and model programs.

We generally do not have absolute minimum requirements regarding the amount of assets
needed to open or maintain an account. We do have preferred minimum account sizes of
$1,000,000 which may be waived or lowered in our discretion based on the character of the
account. These minimums will generally not apply to wrap or other wire house consulting accounts
which tend to have lower thresholds. Each Private Fund has a minimum for initial and subsequent
investments, which is fully described in each Fund’s Offering Memorandum. Registered mutual
funds outline their minimum investment levels in their respective prospectus.

Retirement Accounts

If a client’s account is a pension or other employee benefit plan governed by the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), ARI acknowledges that we are
a fiduciary to the plan under Section 3(38) of ERISA. In providing our investment management
services, the sole standard of care imposed upon us is to act with the care, skill, prudence, and
diligence under the circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like character and with
like aims. ARI will provide certain required disclosures to the “responsible plan fiduciary” (as such
term is defined in ERISA) in accordance with Section 408(b)(2), regarding the services we provide
and the direct and indirect compensation we’ve received by such clients. Generally, these
disclosures are contained in this Form ADV Part 2A, the client agreement and in separate ERISA
disclosure documents, and are designed to enable the ERISA plan’s fiduciary to: (1) determine

the reasonableness of all compensation received by ARI; (2) identify any potential conflicts of
interests; and (3) satisfy reporting and disclosure requirements to plan participants.

Guidance from the US Department of Labor (DOL) under Title I of the Employee Retirement
Income Security Act (ERISA) and/or the Internal Revenue Code (Code), requires ARI to inform
you that when we provide investment advice (including recommendations of our products to you
regarding your ERISA retirement plan or participant account or individual retirement account
(which are all referred to as “retirement accounts”), that we and our financial professionals are
fiduciaries within the meaning of Title I of the Employee Retirement Income Security Act and/or
the Internal Revenue Code as applicable, which are laws governing retirement accounts. The way
we make money creates some conflicts with your interests, so for retirement accounts we operate
under a special rule that requires us to act in your best interest and not put our interest ahead of
yours.

Under this special rule's provisions, we must:

   •   Meet a professional standard of care when making investment recommendations (give
       prudent advice);
   •   Never put our financial interests ahead of yours when making recommendations (give
       loyal advice);
   •   Avoid misleading statements about conflicts of interest, fees, and investments;
   •   Follow policies and procedures designed to ensure that we give advice that is in your best
       interest;
   •   Charge no more than is reasonable for our services; and
   •   Give you basic information about conflicts of interest.

We benefit financially from the rollover of your assets from a retirement account to an account
that we manage or provide investment advice, because the assets increase our assets under
management and, in turn, our advisory fees. As a fiduciary, we only recommend a rollover when
we believe it is in your best interest.