Baugh & Associates LLC

Item 5 – Fees and Compensation
Baugh & Associates, LLC bases its investment management fees on a percentage of assets under
management.

Baugh & Associates, LLC, in its sole discretion, may negotiate its fee based upon certain criteria (e.g.,
historical relationship, type of assets, anticipated future earning capacity, anticipated future additional
assets, dollar amounts of assets to be managed, related accounts, account composition, negotiations
with clients, etc.).

The specific manner in which fees are charged by the Firm is established in a client’s written
agreement. Fees are based on a percentage of assets under management, calculated at an annual rate
and billed in advance on a quarterly basis based on the assets in the account, at the end of each quarter,
per the schedule below, and in some instances, may be negotiated.

FEE SCHEDULE
 Account Value                Annual Fee
 Up to $300,000               1.00%
 $301,000-$1,000,000          0.75%
 Above $1,000,000             0.50%

There is no initial fee. If a client engages Baugh & Associates mid-quarter, they are not billed for that
partial quarter. Billing begins with the next quarter, in advance. The fee will be calculated by multiplying
the fair market value of the assets in the account as of the last trading day of each calendar quarter by
the annual fee and then dividing that result by four, which equals one quarter. Upon termination of an
account, any prepaid, asset-based fees will be prorated according to the number of days the account
was open and under Baugh & Associates management during the calendar quarter, and excess fees will
be returned to the client.

Margin
Investment adviser representatives trade on margin for client accounts when consistent with the client’s
suitability profile and risk tolerance or at the client’s directive. This could result in a high portfolio
turnover ratio and higher transaction charges in accounts with such charges. Additionally, the use of
margin results in interest charges as well as all other fees and expenses associated with the security or
account involved.

Fees are debited directly from client accounts and are calculated using the total assets in the account as
shown on the client custodial statement, including any assets purchased on margin. If there is a net
debit cash balance in the account as a result of using margin, the total assets in the account will be

reduced by the negative cash balance in the fee calculation. Net positive cash balances in type 1 (cash
account) and type 2 (margin account) are included in the fee calculation.

Other Charges
Baugh & Associate’s fees are exclusive of brokerage commissions, transaction fees, and other related
costs and expenses which shall be incurred by the client. The advisory fees and transaction charges do
not cover charges imposed by third parties for investments transferred in and held in the account, such
as contingent deferred sales charges or 12(b)-1 trails on mutual funds. In addition, each mutual fund
charges asset management fees, which are in addition to the advisory fees charged by our firm. The
fees charged by such funds are disclosed in each fund’s prospectus. The Management Fee also does not
cover fees and charges in connection with: debit balances; margin interest; odd-lot differentials; IRA
account maintenance fees; transfer taxes; exchange fees; wire transfers; extensions; non-sufficient
funds; mailgrams; legal transfers; bank wires; postage; costs associated with exchanging foreign
currencies; and SEC fees or other fees or taxes required by law, which may be imposed by Schwab or
others.

12(b)-1 Fees
In addition to the advisory fees paid to Baugh & Associates, clients can also incur certain charges
imposed by other third parties, such as broker-dealers, custodians, trust companies, banks, and other
financial institutions (collectively “Financial Institutions”). These additional charges include securities
brokerage commissions, transaction fees, custodial fees, fees charged by the Independent Managers,
and charges imposed directly by a mutual fund or ETF in a client’s account, as disclosed in the fund’s
prospectus (e.g., fund management fees and other fund expenses, 12(b)-1 fees), deferred sales charges,
odd-lot differentials, transfer taxes, wire transfer and electronic fund fees and other fees and taxes on
brokerage accounts and securities transactions.

Some mutual funds pay 12(b)-1 service fees (normally 0.25% per year) to the Custodian. These fee
arrangements will be disclosed upon request of a client and are available in the applicable fund
prospectus.

Baugh & Associates does not recommend mutual funds; however, there are instances in which mutual
funds charging 12(b)-1 fees are transferred into the Firm. In such cases, Baugh & Associates may
recommend that the client holds the existing share class instead of selling the fund and buying a lower-
cost share, which could result in a tax liability. The Firm compares and reviews different available share
classes along with the anticipated investment timeframe, potential tax consequences, future anticipated
transactions, and other costs to determine the best recommendation for the client at that time. Baugh
& Associates does not receive any part of the fees charged by mutual funds.

Baugh & Associates believes its fees are reasonable in light of the services provided. All fees described
herein are subject to negotiation depending on a range of factors including, but not limited to, account
size and the overall range of services requested.

Account Termination
Client and/or the firm may initiate termination of the contract at any time by sending written notice to
the contra party and will be deemed accepted the day that it is received by the contra party. Upon
termination of an account, any prepaid, asset-based fees will be prorated according to the days the
account was opened during the calendar quarter and excess fees will be returned to the client. Upon
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Item 7 – Types of Clients
Baugh & Associates provides portfolio management services to individuals, corporations, and business
entities, pension and profit-sharing plans, estates, trusts, and other U.S. institutions. Baugh &
Associates does not require clients to have or maintain a minimum account size.