Foundation Energy Management LLC

Item 5: Fees and Compensation

DESCRIPTION OF COMPENSATION AND FEE SCHEDULE
In consideration of our services, we generally receive management fees, and we and/or certain of our affiliates are
entitled to receive carried interest distributions, with respect to the Funds. While such fees and carried interest
distributions are described in detail in the applicable governing and offering documents, a general summary of our
basic fee schedule is set forth below.
Management Fees
With respect to each Fund, we generally are entitled to receive an annual management fee, payable with respect to
each calendar quarter in advance, as follows:
         (i) during the investment period, the management fee is equal to 0.5% (2% per annum) of the aggregate
             commitments of investors; and
         (ii) after the end of the investment period, the management fee is reduced on an annual basis and is calculated
              as set forth in the applicable governing documents of each Fund.
Carried Interest Distributions
Following a return of capital to investors and after each investor has received distributions sufficient to provide it with
a preferred rate of return on its capital contribution(s), we or certain of our affiliates generally are entitled to receive
carried interest distributions equal to a percentage (ranging from 19% to 27.5%) of distributable cash of each Fund.
Upon liquidation of a Fund, we or our affiliates generally are required to return to the Fund (for distribution to each
investor) any amount by which the cumulative distributions to all investors (on an aggregate basis) has not caused
each investor to receive an amount equal to the aggregate capital contributions made by such investor plus the
preferred rate of return on such investor’s capital contributions (subject to certain limitations).
Net Profits Interest
With respect to certain of the Funds, an affiliate will convey a 96% net profits interest to such Funds in exchange for
the payment of funds totaling 98% of the purchase price and related expenses of the working interests. We use the
additional 2% paid by the Funds to cover various contingent expenses incurred with respect to such oil and natural
gas properties related to our affiliate’s status as a working interest owner.
Our advisory fees with respect to the Funds generally are not negotiable. We and/or our affiliates have entered and
may enter into side agreements with certain investors that provide such investors with preferential terms or rights,
including reduced fees.
Operating Fees
We or an affiliate generally act as the operator of each Fund’s oil and gas properties in accordance with the governing
documents for each Fund and pursuant to Joint Operating Agreements. Under such agreements, we may charge certain
fees and expenses to the funds for (i) use of FEM personnel in connection with operation of a fund’s assets based on
hourly charges calculated upon the annual salary and burden payable to such personnel; (ii) headquarter travel costs
of FEM personnel while performing due diligence related to an acquisition of a fund asset; (iii) while performing due
diligence on and following acquisition of an asset, time actually spent on an acquisition or management of fund assets
by the Vice President of Engineering and the Vice President of Marketing of FEM, where the charges are based upon
an hourly charge calculated upon the annual salary and burden payable to each of these officers. As operator, FEM
charges COPAS fees with respect to the operations of assets owned by the funds and other working interest owners.
Any fees earned from non-fund working interest owners are credited to the funds through the reimbursement and
allocation process. In addition, any COPAS fees charged to the funds that are higher than the actual amounts paid are
credited to the funds.
PAYMENT OF FEES
Management fees are payable by investors quarterly, in advance, as of the first day of each calendar quarter. We or
our affiliate have the discretion to pay management fees from capital contributions drawn for such purpose, proceeds
received in respect of any investments or any other funds or other assets determined by us or our affiliates to be

available. In the event that a Fund is dissolved or our advisory services are terminated prior to the end of any calendar
quarter, then a proportionate amount of any unearned management fees will be refunded to the applicable investor(s).
Carried interest distributions are distributed from the distributable cash and/or proceeds of the Fund to certain investors
and us or our affiliate at least quarterly (following a return of capital and a preferred rate of return to investors).
OTHER FEES AND EXPENSES
In addition to management fees and carried interest distributions, we will be reimbursed at cost for organizational
costs of each Fund, and the general and administrative expenses associated with managing the oil and gas properties
and funds are allocated equitably among all of the Funds we manage. In addition, each Fund generally will bear all
costs and expenses reasonably incurred by or arising out of the operation and activities of the Fund. To the extent
applicable, the Funds generally are responsible for and pay any applicable brokerage and/or custodial fees and
expenses. See Item 12 below.
COMPENSATION FOR THE SALE OF SECURITIES OR OTHER INVESTMENT PRODUCTS
Neither we nor any of our supervised persons accept compensation for the sale of securities or other investment
products.

Item 7: Types of Clients

DESCRIPTION
We provide investment management services only with respect to our affiliated private pooled investment vehicles,
our sole advisory clients. We do not provide investment management services to any other types of clients.
ACCOUNT REQUIREMENTS
The minimum initial capital commitment generally required for an investor in a Fund is $3 million. Nevertheless,
capital commitments of lesser amounts may be accepted in our discretion.
Investors in the Funds generally are required to be “accredited investors,” as such term is defined in Rule 501 of
Regulation D under the Securities Act of 1933, as amended, and “qualified purchasers” as such term is defined in
Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended, and the rules promulgated thereunder.