Ferguson Shapiro LLC

Item 5 – Fees and Compensation
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 and calculated at an
annual rate and billed in advance on a monthly basis. A maximum fee of 2% annually is based on
the assets in the account and the complexity of the portfolio and level of service required for
each client. Fees are negotiated with each client and the actual fee charged is in each client's
written agreement.

Client will pay Ferguson Shapiro a fee for its investment advisory services, calculated using a
tiered fee structure, in accordance with fee schedule in the client agreement. Under this
structure, fees are applied progressively so that portions of the client’s account balance are
charged at different rates according to the tiers set forth in Ferguson Shapiro’s fee schedule. The
fee is based on the market value of assets in the client’s account as of the last trading day of each
month.

General Fee Schedule
Account Balance Tier                   Fee Rate (Annual)
First $0 – $499,999                    1.25%
Next $500,000 – $4,999,999             1.00%
Next $5,000,000 – $9,999,999           0.75%
Amount over $10,000,000                0.50%

Individually Billed Accounts
Fees for an individual account are calculated using the market value of the account on the last
trading day of each month. The portion of the assets in each tier is multiplied by the annual fee,
multiplied by the number of days in the following month and then divided by the number of days
in a year.
Example I
For example, using an account with a market value of $1,750,000 on April 30th:

$499,999.00 x 1.25% x 31 / 365 = $530.82
$1,250,001.00 x 1% x 31 / 365 = $1061.64
Total fee = $1,592.47

Aggregated Household Accounts
Householding accounts is the practice of aggregating multiple accounts within one household to
receive the reduced fee at the next tier. The fee is calculated the same as above but to determine
the portion of the fee to charge to each account we first determine each account’s weighted
average of the total market value of all accounts.
Example II
Using the same value as Example I, calculate the weighted average (account value divided by
aggregated account total):

Account A – $1,000,000 / $1,750,000 = 57.14%
Account B – $250,000 / $1,750,000 = 14.29%
Account C - $500,000/ $1,750,000 = 28.57%

Fee applied to each account:
Account A – 57.14% x $1,592.47 = $909.98
Account B – 14.29% x $1,592.47 = $227.50
Account C - 28.57% x $1,592.47 = $454.99

Refunds for Mid-Month Withdrawals
Accounts are billed or refunded fees, as appropriate, for any deposits and withdrawals
throughout the month. For example, using the scenario above, the client accounts are billed, in
advance, the fee of $1,592.47 for April. April 15th the client withdraws $450,000.00. April 30th
the accounts’ market value is $1,000,000, for example. The client is refunded a portion of the
advance fee based upon the number of days remaining in April after the withdrawal.
Example III
To calculate the refund, determine the aggregate portion of the withdrawal per tier by dividing
the withdrawn amount by the market value on April 30 plus the withdrawn amount:
$450,000 / $1,450,000 = 31.03%

Calculate the normal May fee using the market value plus the withdrawn amount:
$499,999.00 x 1.25% x 31 / 365 = $530.82
$950,001.00 x 1% x 31 / 365 = $806.85
Total May fee = $1337.67

The amount withdrawn constitutes 31.03% of the market value. To determine the amount of the
refund, take the aggregate portion in each tier and multiply it by the fee, the number of days left
in the month then divide by the number of days in the year. This will be the refund amount. In
households with multiple accounts, you will aggregate the refund according to
Example II.

$294,827.90 x 1.25% x 15 / 365 = $151.45
$155,172.10 x 1% x 15 / 365 = $63.77
Total refund to offset the May fee = $215.22
Total May Fee = $1,122.45

Prorated Fees for Deposits Mid-Month
Using the scenario (Example I) above in which the client accounts were billed in advance, the fee
of $1,541.10 for April, the client subsequently deposits $500,000.00 on April 15th. The market
value on April 30th is $1,950,000. The May fee will be calculated according to Examples I and II
above. To calculate the additional fee due for the mid-month deposit you will have to determine
the aggregate portion of the deposit, per tier, by dividing the deposited amount by the market
value on April 30th.
Example IV
$500,000.00 / $1,950,000 = 25.64%

Calculate the normal May fee using the market value on April 30th:
$499,999.00 x 1.25% x 31 / 365 = $530.82
$1,450,001.00 x 1% x 31 / 365 = $1,231.51
Total May fee = $1,762.33

Calculate the additional amount due for the mid-month deposit:
$499,999.00 x 25.64% x 1.25% x 31 / 365 = $70.25
$1,450,001.00 x 25.64% x 1% x 31 / 365 = $162.98
Total Adjusted May fee = $1,995.56

Variable Annuity Advisory Services
Lincoln Financial Group Fee-Based Structure and Compensation. The Lincoln variable annuity
products utilized by Ferguson Shapiro are fee-based products, meaning Ferguson Shapiro's IARs
are compensated through advisory fees rather than commissions. This fee-based structure is
designed to align the interests of Ferguson Shapiro Shapiro's IARs with those of the client by
reducing potential conflicts of interest that may arise from commission-based compensation.
Clients should be aware of the following:

   •   Ferguson charges an advisory fee for ongoing investment management services provided
       within the Lincoln variable annuity. Fee schedules are disclosed in the client's Investment
       Advisory Agreement and in this Brochure (see above).
   •   Because these are fee-based products, Ferguson Shapiro's IARs do not receive sales
       commissions or trail commissions from Lincoln in connection with the advisory services
...

Item 7 – Types of Clients
Ferguson Shapiro provides portfolio management services to individuals, corporations and
business entities, pension and profit-sharing plans, charitable institutions, foundations,
endowments, estates, trusts, and other U.S. and international institutions. While we do not have
a minimum individual account size, the family household minimum is $100,000. Ferguson
Shapiro has the discretion to waive the account minimum.

Certain managers may require a higher minimum as disclosed in the individual manager’s Firm
Brochure. Under certain circumstances, the minimum may be waived, including related accounts
that are combined to meet the minimum.