Silver Hill Energy Partners LP

Item 5. - Fees and Compensation
Silver Hill and its affiliates receive compensation from fees based on a percentage of assets under
management, carried interest allocations and expense reimbursements. Investors should review
all fees charged by Silver Hill and its affiliates to fully understand the total amount of fees to be
paid by the Funds and, indirectly, the Investors.
Below is a discussion of how the Adviser is compensated in connection with providing advisory
and management services to the Funds. The following information is a summary only and is
qualified in its entirety by the Clients’ Governing Fund Documents:
Management Fee. For certain management services that the Adviser provides to the Fund as
described in more detail under the Management Agreement, the Adviser is entitled to an annual
management fee (the “Management Fee”) payable by the Funds. The Management Fee is equal
to a fixed percentage (per annum) of each Investor’s contractually committed capital. The
amount of Management Fees payable by the Clients is subject to reduction after the occurrence
of certain events such as the expiration of the investment period. Management Fees accrue and
shall be payable by the Funds quarterly in advance. The General Partners may call capital from
the Investors to pay the Management Fees, or Management Fees may be paid by reducing the
amount of distributions payable to the Investors by the amount of such accrued Management Fees.
The Management Fee obligation of the Funds, and the Investors, may only be terminated or
modified as provided by the Governing Fund Documents and the Management Agreement. The
Management Fee is calculated on an annual basis and is prorated for partial periods.
Performance-Based Fees. In addition to the Management Fee, the Funds will pay the General
Partners a performance-based or capital appreciation-based fee based upon a percentage of the
distributions made to each Investor in the form of carried interest (the “Carried Interest”). The
manner of calculation of the Carried Interest payable to the General Partners is disclosed in the
Governing Fund Documents. Generally, however, a certain percentage of the investment profits
of the Funds are allocated as a Carried Interest to the General Partners after payment of all of the
capital contributions made by an Investor to fund Investment costs and to pay Fund fees (including
Management Fees) and expenses, plus a preferred return on such capital contribution amounts.
Operating Expenses. As mentioned above, the Funds anticipate investing a substantial portion
of the aggregate Investor capital commitments in SHEP III, SHEP IV, and SHEP V respectively.
SHEP III and other direct or indirect subsidiaries of the Funds will, in turn, (i) acquire oil and
gas assets, (ii) operate and develop the acquired oil and gas assets, (iii) employ and pay all
compensation and employee benefits to its field, operating and administrative personnel and (iv)
pay its allocable portion of office rent and equipment to the extent its office space and equipment
is shared with Silver Hill and/or other affiliates of Silver Hill. Although the Principals will serve
as officers of SHEP III, SHEP IV and SHEP V, SHEP III, SHEP IV, and SHEP V will not bear
any salaries or other compensation of, and costs of providing any employee benefits to, the
Principals. The salaries and other compensation of, and costs of providing employee benefits to,
the Principals and fund-level support staff (currently consisting of twelve (12) full-time
employees) will be borne by the Adviser. In addition, the Adviser will bear the salaries and other
compensation of, and costs to provide employee benefits to, two (2) employees dedicated to
evaluating the desirability of potential acquisitions for SHEP III, SHEP IV, and SHEP V in
accordance with the Funds’ investment objective (the “Evaluation Professionals”) until such
time as Silver Hill reasonably determines that the Evaluation Professionals should dedicate

substantially all of their working time to the operations of SHEP III, SHEP IV, or SHEP V.
Promptly following such determination, Silver Hill will transfer the Evaluation Professionals’
employment to SHEP III, SHEP IV, and SHEP V (or a subsidiary thereof) and the cost of the
Evaluation Professionals’ compensation and benefits shall be borne directly by SHEP III, SHEP
IV, and SHEP V. The compensation paid by SHEP III, SHEP IV, or SHEP V to its employees,
including the Evaluation Professionals at such time as their employment is transferred to SHEP
III, SHEP IV, and SHEP V are not offset against the Management Fees or any performance-based
fees paid by the Fund to Silver Hill and/or its affiliates.
Organizational Expenses. The Fund will bear or will reimburse Silver Hill, the General Partners
and/or their affiliates for actual expenses incurred in organizing and raising capital for the
Partnership, except for placement agent fees. Organizational expenses in excess of a certain
amount and any placement agent fees will be borne exclusively by the Adviser.
Other Fund Expenses. The Funds will bear or will reimburse Silver Hill, the General Partners
and/or their respective affiliates (to the extent not otherwise paid or reimbursed by SHEP III,
SHEP IV or SHEP V as described above under “Operating Expenses” or a third-party) for all
expenses attributable to the Funds’ activities, including but not limited to (a) legal, auditing,
consulting, accounting, valuation, regulatory compliance and data provider services (including
management systems and software), (b) the preparation of the Funds’ financial statements,
regulatory filings such as Form PF, and the reports and other information made available to
Investors under the Governing Fund Documents, tax returns and Schedules K-1, printing, filing
and delivery expenses, (c) bank or custodial accounts and services, (d) costs of insurance,
...

Item 7. - Types of Clients
As described in Item 4, the Adviser provides investment advisory services to Clients, which as of
the date of this Brochure are the Partnerships. The Partnerships are structured as limited
partnerships. Investment advisory services are provided directly to the Partnerships and not to
the Investors who are limited partners in the Partnerships. Generally, each Investor must be a
“qualified purchaser” for Investment Company Act purposes and satisfy other eligibility criteria
and investment minimums, some of which are subject to waiver by the Adviser. Investors include
pension funds, endowments, foundations, pooled investment vehicles (e.g., funds-of-funds),
trusts, estates or charitable organizations, high net worth individuals, and corporate and business
entities.
Investors may participate in SHEP III, SHEP IV, SHEP V and other Partnership investments
through parallel investment entities or alternative investment entities in accordance with the
Governing Fund Documents. The Governing Fund Documents also permit Silver Hill to form one
or more successor funds. Such entities and/or successor funds may also be Clients of the Adviser.