Pacific Wealth Management LLC

Item 5          Fees and Compensation

ASSET MANAGEMENT SERVICES PROGRAM FEE SCHEDULE

The annual fee for PacWealth’s asset management program will be charged as a percentage of assets under
management, including cash holdings, according to the appropriate schedule below:

For Non-Institutional Accounts

   Assets under management                    Annual Fee (%)
 Under $250,000                                    2.00%
 $250,000 to $499,999                              1.50%
 $500,000 to $999,999                              1.30%
 $1,000,000 to $2,999,999                          1.00%
 $3,000,000 to $4,999,999                            .80%
 $5,000,000 to $9,999,999                           .70%
 $10,000,000 plus                                Negotiable

For Institutional Accounts (Typically Third Party Trusts and Estate Accounts)

   Assets under management                    Annual Fee (%)
 $500,000 to $999,999                              1.50%
 $1,000,000 to $2,999,999                          1.20%
 $3,000,000 to $4,999,999                          1 00%
 $5,000,000 to $9,999,999                           .80%
 $10,000,000 plus                                Negotiable

The fee schedule represents only the maximum total fee that may be charged to a client and may be
negotiable at the discretion of PacWealth. A minimum account size of $250,000 is required for non-

institutional accounts and $500,000 for institutional accounts. The amount of the fee will be as stated in the
written investment advisory agreement.

With respect to accounts where Schwab serves as the Account’s custodian, the fee for the asset management
program will be payable quarterly in advance. Fees will be charged quarterly in advance based on the
average daily value of the account during the prior calendar quarter. The first payment will be charged at
the beginning of the next calendar quarter following account opening and will include fees for (i) the
upcoming quarter based on the average daily value of the partial prior quarter and (ii) the initial partial
calendar quarter using the actual average daily value for the number of days the account was opened.
Subsequent payments are due and will be assessed at the beginning of each calendar quarter based on the
average daily value of the account during the prior calendar quarter.

With respect to accounts where the custodian is a firm other than Schwab, the payment of fees may be paid
by deducting the fee from another Schwab account for the client that is managed by PacWealth if authorized
by the client or direct by the client by making a check made payable to Pacific Wealth Management upon
receipt of an invoice from PacWealth.

       On an exception basis and solely with the approval of PacWealth and under the conditions noted
       below, client may authorize the custodian holding client funds and securities to deduct PacWealth
       advisory fees directly from the client account in accordance with invoices prepared by PacWealth.
       The custodian will provide periodic account statements to the client. Such statements will reflect all
       fee withdrawals. It is the client’s responsibility to verify the accuracy of the fee calculation. The
       custodian will not determine whether the fee is properly calculated.

       Advisory fees may be directly debited from a client account if the following conditions are met.

       1. PacWealth makes available upon request an invoice for the client showing the amount of the fee,
       the value of the client's assets upon which the fee was based, and the specific manner in which the fee
       was calculated; and

       2. PacWealth discloses to the client that it is the client's responsibility to verify the accuracy of the
       fee calculation and that the custodian will not determine whether the fee is properly calculated; and

       3. The client authorizes PacWealth in writing to receive fee payments directly from the client's
       account being held by an independent custodian; and

       4. The independent custodian agrees to send the client, at least quarterly, a statement indicating all
       amounts disbursed from the account.

The advisory fees noted above are for the asset management only and do not include any other fees and
charges that may be charged separately by the custodian of assets. For accounts custodied at Schwab, the
client will be charged transaction charges by Schwab that vary based on the type of investment (e.g., mutual
fund, ETF, equities, fixed income, or options) and range from $0 to $275. The transaction charges assessed
by Schwab may be lower than the charges customarily imposed by Schwab when processing similar
transactions for similar accounts. This is because PacWealth has entered into an arrangement based on the
scope of business PacWealth engages in with Schwab, including the value of PacWealth’s client assets with
Schwab. This presents an incentive for PacWealth to recommend that you use Schwab for client’s account so
that all PacWealth clients continue to receive the favorable pricing. We believe this arrangement benefits
clients because the transaction charges may be lower than they would be normally. As a result, we believe
that using Schwab to execute transactions for client’s account is consistent with our duty to obtain best
execution. We will provide you with a copy of the transaction charge schedule at the time you open your
account. PacWealth does not receive any portion of these transaction charges. Schwab may also charge
other administrative fees and charges as well, including but not limited to, IRA and qualified retirement plan
fees and termination fees, administrative servicing fee for trust accounts, fees based on cash or money

market deposits, wire transfer fees, and other charges required by law and imposed by the custodian. All
fees charged by custodians or broker/dealers the client may use are separate and distinct from the fees paid
...

Item 7          Types of Clients

PacWealth provides advisory services to individuals, trusts, estates, pension and profit sharing plans and
other ERISA accounts, and business entities.

Generally, the minimum account size is $250,000 for non-institutional accounts. The minimum account size
for institutional accounts is $500,000. In some cases, the minimum account size may be negotiable at the
discretion of PacWealth.

There is no minimum account size for clients retaining financial planning services and/or consulting
services.