Understanding Hedge Fund Fees: Implications for Hedge Fund Managers

K&L GATES FULCRUM FEES How Sextant Fulcrum Fees Are Calculated Each month, the Sextant Funds' 12-month trailing total investment returns are compared to the total return of their corresponding Morningstar categories. If a fund outperforms or under performs the total return of its category, the base administrative fee is increased or decreased according to the fee structure table shown below Sextant Fund Growth Fund International Fund Core Fund Global High Income Fund Bond Income Fund Short-Term Bond Fund Morningstar Category Large Growth Funds Foreign Large Blend Funds Moderate Allocation Funds Tactical Allocation Funds Long-Term Bond Funds Short-Term Bond Funds "The fulcrum fee has two components: a base fee which represents the midpoint of the entire fulcrum fee; and an incentive adjustment. The incentive adjustments must be symmetrical - hence the term 'fulcrum." Andrew Donohue, Former Director of Investment Management, U.S. Securities and Exchange Commission Sextant Funds' Fulcrum Advisory Fee Structure Performance Adjustment annual rate Base Fee Annual rate Growth Fund International Fund & Care Fund 0.60% Global High Income Fund, Short-Term Bond Fund & Income Fund 0.60% <1% more or less than benchmark 0.00% 0.00% +/- 0.10% +/- 0.10% 1-2% more or less than benchmark 2-4% more or less than benchmark +/- 0.20% >4% more or less than benchmark +/- 0.30% +/- 0.30% +/- 0.20% klgates.com 45

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