Ervin Investment Management LLC

ITEM 5: FEES AND COMPENSATION

Fees follow a simple schedule: 0.4% of the first $4,000,000; 0.2% of the next $6,000,000; and 0.1%
of remaining assets annually. We occasionally negotiate lower fees when warranted by a client’s
circumstances, for example exempting an account holding only cash or an account managed by the
client. Management fees generally apply to all assets in all accounts; negotiated exceptions to this
include circumstances like large cash balances or clients bringing in alternative investments that
cannot be traded.

Management fees are based on the value of assets subject to fees at the beginning of each quarter
with clients paying quarterly. Should a client leave our services, we refund fees by check or direct
transfer for the fees already paid attributable to the remaining portion of the quarter. We provide
this refund whether or not clients directly request it.

We generally debit fees from client accounts, although clients may elect to pay by check. Clients
must authorize fee debiting in advance, and we always send clients an invoice before debiting fees.
Clients may elect to change payment methods at any time. For most clients and for us, it is more
convenient to have fees debited directly from accounts.

We have a fundamental conflict of interest to increase the value of accounts under our
management, which has the potential to incentivize us to advise clients to retain their assets with
us and not to manage their own investments or transfer them elsewhere. When we recommend
that you rollover retirement assets or transfer existing retirement assets (such as a 401(k) or an
IRA) to our management, we have this conflict. This is because we will generally earn additional
revenue when we manage more assets. In making such a recommendation, however, we do so

  1037 NE 65th St #359 Seattle, WA 98115 | John Ervin: 206-495-9957, john@ervins.net | Daniel Ervin: 206-414-2518, daniel@ervins.net

                                          Ervin Investment Management, LLC - Form ADV Part 2 - Brochure - Page 4 of 18

only after determining that the recommendation is in your best interest. Further, in making any
recommendation to transfer or rollover retirement assets, we do so as a “fiduciary,” as that term is
defined in ERISA or the Internal Revenue Code, or both. We also acknowledge we are a fiduciary
under ERISA or the Internal Revenue Code with respect to our ongoing investment advisory
recommendations and discretionary asset management services, as described in the advisory
agreement we execute with you. To the extent we provide non-fiduciary services to you, those will
be described in the advisory agreement.

Beyond the fees for assets under management, we occasionally offer consulting services to clients
on an hourly basis. We receive no compensation, in any form, other than client fees. The broker
who has custody of client assets charges commissions for some trades and occasionally charges
modest fees for other sorts of transactions, examples of which may be charges for providing
checkbooks and overnighting checks or documents. We often can obtain lower fees or have fees
waived on behalf of clients. See item 12 for additional information about our brokerage practices.

When we determine that positions in an ETF (exchange traded fund) or mutual fund are in clients’
best interest, we may establish a position in a fund. You should know that funds charge
management fees. If you hold mutual funds and they are part of the portfolio for which we charge
fees, you will be paying fees to the mutual fund company and to us.

Your investment returns will be a function of the performance of the securities held in your
accounts less any transaction costs (primarily commissions charged by the broker), fees
(primarily our management fees and any fees charged by the funds you hold). For taxable
accounts, your realized returns will also be lowered by the taxes you have to pay on interest and
dividend income and, when a security is sold for a profit, on capital gains (which aren’t offset by
losses you may have from other transactions).

We think you should pay serious attention to risk (more about this later) and performance over
reasonable time periods and should minimize investment expenses. We will discuss this with you.
You might measure how we do vs. another manager, a broker, a few mutual funds, or a low-cost
index fund.

Although we expect that you’ll regularly monitor accounts we manage for you, we also encourage
you to read as much as interests you about investing. The more you know, the better able you’ll be
to assess our management style and performance. See Item 8, below, for more.

ITEM 7: TYPES OF CLIENTS

We manage assets for individuals, families, trusts, charities, and pension funds. We do not have a
required minimum account size or other requirements for opening or maintaining an account.

ITEM 8: METHOD OF ANALYSIS, INVESTMENT STRATEGIES, AND RISK OF LOSS

Investing in securities involves risk of loss that clients should be prepared to bear. We try to
maximize risk-adjusted returns. In other words, we try to earn substantial returns without taking
significant risk (see below). Stock markets are always somewhat volatile. While stocks tend to
outperform other financial assets over long time periods, short-term performance is variable.
Everyone investing in stocks should have sufficient cash flow and cash and short-term fixed
income (for instance, CDs, money market funds, bank accounts) to meet short-term cash
requirements. Cash flow may include your wages, pensions, annuity payments (such as social
security), interest and dividends from bonds and stocks, etc. While we’ll be happy to help you find
alternatives for short-term savings, we’ve no interest in buying stocks with cash you’ll likely need
in the next couple of years.

We differentiate between volatility and risk. Volatile markets actually provide us with
opportunities to buy securities for lower prices or sell them for higher prices. We think of risk as
the probability of permanently losing capital. Volatility is inevitable; we try to minimize risk.
Nevertheless, when you buy stocks you can lose money. Money which you are likely to need over
the next couple of years shouldn’t be invested in stocks. Stocks are riskier than short-term debt
securities (CDs, for instance or money funds) over short time periods. We think that a reasonably
diversified portfolio of stocks – shares of solid companies, with good managements, bought at
favorable prices—is less risky than cash or CDs over medium and longer time periods (three to
five years or longer). We also believe that low-fee funds, particularly index funds, can form the
core of such a portfolio.

Although we’re not enamored with the term, our approach to investing is frequently referred to as
“value investing”. As far as we’re concerned, all investing should be value investing. Buying or
selling securities without regard to value is speculation. We try to buy shares of the best
companies we can find, for prices which are significantly less than they are worth. We invest for
the long term using fundamental analysis to look for businesses with solid and increasing cash
flow, excellent management, and strong business plans. We do not invest based on technical
analysis. We trade infrequently, which we believe tends to increase investor returns through
minimized transaction costs and taxes. This approach carries with it the risks that our analysis of
the merits of individual companies could be incorrect and result in losses; the risk of
concentrating investments into individual companies even if our analysis is correct (even great
companies can fail to perform as expected or hoped), and the opportunity risk of not having funds
available to invest elsewhere.

  1037 NE 65th St #359 Seattle, WA 98115 | John Ervin: 206-495-9957, john@ervins.net | Daniel Ervin: 206-414-2518, daniel@ervins.net

                                          Ervin Investment Management, LLC - Form ADV Part 2 - Brochure - Page 6 of 18

In addition to investing in stocks of individual companies, we also often recommend that clients
hold a portion of their portfolio in low-cost index funds and very occasionally in low-cost active
funds. The use of these funds allows clients to diversify broadly in ways that are difficult to
accomplish when investing in a small number of individual securities. Because the use of these
funds is less complex and less time intensive than investments in individual companies, their use
also helps to minimize fees and to enable us to spend time on other aspects of investment
advising. In selecting ETFs, we focus on finding funds with low fees, high liquidity, and a clear
strategy. We believe that avoiding high-fee actively managed funds is in the best interest of clients,
but avoiding them necessarily means incurring the risk of missing out on higher returns from
talented or lucky management teams.

The art, for an investor, is recognizing “noise”; information is ubiquitous and voluminous. We do
our best to sort through what’s available and concentrate on information which helps us better
invest our clients’ (and our personal) assets. Much of what we read is related to our current
holdings or securities we’re considering owning. Some of the reading we’ve found most valuable
adds to our fundamental understanding and knowledge, whether or not it has immediate utility
regarding current investments. We’re incredibly curious; we’re passionate about investing. One
reason we don’t market our investment advisory operation, aside from our general distaste for
this sort of thing, is that it takes time away from thinking, studying, and attending to our
investments.