Fagan Associates Inc

Item 5: Fees and Compensation

Compensation
FAI bases its fees on a percentage of assets under management and hourly charges. FAI’s fee
schedules are described below.

Compensation – Investment Advisory Services
For the vast majority of its clients, FAI levies a fee that is negotiable, as a percentage of assets
under management with a minimum fee of $500. This investment advisory fee shall be pro-
rated and paid quarterly, in arrears, based upon the value of the assets on the last day of the
previous quarter.

Schedule of Management Fees:

                      Assets Under Management                   Annual Fee
                         Less than $1,000,000                     1.50%
                       $1,000,000 to $2,500,000                   1.25%
                       $2,500,001 to $5,000,000                   1.00%
                           Over $5,000,000                        0.50%

An Investment Advisory Agreement detailing the services provided by FAI, the basic fee
schedule, the minimum fee, how fees are charged, when fees are payable, and will be provided
to each client prior to or simultaneously with the execution of any formal documents required
by the custodian, Charles Schwab & Company, Inc. Furthermore, the client along with the
Advisor will sign and date the Investment Advisory Agreement with a copy provided to the
client and the original maintained in his/her file.

After information is obtained and at the discretion of the client and the consent of the advisor,
FAI may also provide investment advice on an hourly basis at a negotiable rate of not more than
$400 per hour.

FAI may also charge project fees, which are determined by the breath, depth, and nature of the
specific project. This project is confined to investment advice, income tax preparation,
insurance review and estate planning.

Compensation – Financial Planning Services
FAI generally does not charge a separate fee for financial planning services for investment
advisory clients.

Calculation and Payment
The specific manner in which fees are charged by FAI is established in a client’s written
agreement with FAI. FAI will generally calculate fees in arrears on a quarterly basis. Clients may
also elect to be invoiced directly for fees or to authorize FAI to directly debit fees from client
accounts.

Accounts initiated or terminated during a calendar quarter will be charged a prorated fee. Upon
termination of any account, any earned, unpaid fees will be due and payable.

Agreement Terms
Either party may terminate the agreement upon written notice. In the event of cancellation, FAI
shall complete the outstanding commitments made by him on behalf of the client. However,
FAI shall not make any further commitments or be otherwise responsible for any acts on behalf
of the client.

Cash Balances
Some of your assets may be held as cash and remain uninvested. Holding a portion of your
assets in cash and cash alternatives, i.e., money market fund shares, may be based on your
desire to have an allocation to cash as an asset class, to support a phased market entrance
strategy, to facilitate transaction execution, to have available funds for withdrawal needs or to
pay fees or to provide for asset protection during periods of volatile market conditions. Your
cash and cash equivalents will be subject to our investment advisory fees unless otherwise
agreed upon. You may experience negative performance on the cash portion of your portfolio if
the investment advisory fees charged are higher than the returns you receive from your cash.

Retirement Plan Rollover Recommendations
As part of our investment advisory services to our clients, we may recommend that clients roll
assets from their employer’s retirement plan, such as a 401(k), 457, or ERISA 403(b) account
(collectively, a “Plan Account”), to an individual retirement account, such as a SIMPLE IRA, SEP
IRA, Traditional IRA, or Roth IRA (collectively, an “IRA Account”) that we will advise on the
client’s behalf. We may also recommend rollovers from IRA Accounts to Plan Accounts, from
Plan Accounts to Plan Accounts, and from IRA Accounts to IRA Accounts.

If the client elects to roll the assets to an IRA that is subject to our advisement, we will charge
the client an asset-based fee as set forth in the advisory agreement the client executed with our
firm. This creates a conflict of interest because it creates a financial incentive for our firm to
recommend the rollover to the client (i.e., receipt of additional fee-based compensation).
Clients are under no obligation, contractually or otherwise, to complete the rollover. Moreover,
if clients do complete the rollover, clients are under no obligation to have the assets in an IRA
advised on by our firm. Due to the foregoing conflict of interest, when we make rollover
recommendations, we operate under a special rule that requires us to act in our clients’ best
interests and not put our interests ahead of our clients.’

Under this special rule’s provisions, we must:

   •   meet a professional standard of care when making investment recommendations (give
       prudent advice);
   •   never put our financial interests ahead of our clients’ when making recommendations
       (give loyal advice);
   •   avoid misleading statements about conflicts of interest, fees, and investments;

   •    follow policies and procedures designed to ensure that we give advice that is in our
        clients’ best interests;
   •    charge no more than a reasonable fee for our services; and
   •    give clients basic information about conflicts of interest.

Many employers permit former employees to keep their retirement assets in their company
plan. Also, current employees can sometimes move assets out of their company plan before
they retire or change jobs. In determining whether to complete the rollover to an IRA, and to
the extent the following options are available, clients should consider the costs and benefits of
...

Types of Clients
As described in Item 4, FAI‘s clients include individuals, high net worth individuals, pension and
profit-sharing plans, trusts, and estates, charitable organizations, and corporations.

Account Minimums
FAI requires a minimum account of $250,000 for investment advisory clients, although this may
be negotiable under certain circumstances. FAI may group certain related client accounts for
the purposes of achieving the minimum account size. FAI may charge a minimum fee of $500.