Sierra Investment Management LLC

Item 5 Fees and Compensation
Sierra Investment Management Services
Advisory Fees
The Sierra Advisory Fees earned through accounts custodied at Schwab are considered “wrap fees”
because each Client account is charged a single asset-based Advisory Fee that covers the advisory fees of
Sierra together with various fees, commissions, expenses and charges related to brokerage transactions
effected for the Client account, and fees charged by the Custodian for custodial services provided to the
Client account in the ordinary course.

For Clients who hold assets custodied away from Schwab, the Advisory Fees charged are not a wrap fee.

Sierra reserves the right, in its sole discretion, to negotiate or modify the Standard Advisory Fee
Schedule set forth herein for any Client due to a variety of factors, including but not limited to: the
Client’s financial complexity, type and size of the accounts, the historical or anticipated transaction
activity, the level of reporting and administrative operations required, the investment strategy or style,
the number of portfolios or accounts involved, the Client’s current or expected total relationship assets
under management, terms of the relationship between Sierra and the Client, and/or the number and
types of services provided for the Client. Negotiation of Client fees will generally apply only to household
relationships that exceed $2 million in current or expected investible assets. Because the Advisory Fee is
negotiable, the actual fee paid by any Client or group of Clients may differ by Client.

Sierra requires all Clients to enter into an Agreement. The specific fees Clients are obligated to pay will
be outlined in their respective Agreement.

Clients who custody accounts at Schwab elect to authorize Schwab to directly debit fees from Client
accounts at the direction of Sierra. Advisory Fees for Client accounts held at Prudential are not directly
debited and instead are either paid via invoicing or are directly debited from the Client accounts held at
Schwab.

Advisory Fees are payable quarterly in advance, generally in an amount equal to the Advisory Fee
Rate(s), as shown below in the Standard Advisory Fee Schedule, or as otherwise negotiated and
displayed in a Client’s Agreement. Advisory Fee Rates are assessed against the Client’s Account Value, as
of the last market business day of the immediately preceding calendar quarter. The Client’s Account
Value is the total market value of the assets under management in the Client Account, as determined by
the custodian on the appropriate day at quarter-end (typically, the last market business day of the
immediately preceding calendar quarter). The Advisory Fee will be prorated for initial contributions by
Client to each new account that is effective other than as of the first day of a calendar quarter, based on
the actual number of days remaining in such partial calendar quarter.

Sierra aggregates related Client Account Values of the same Client based on Clients being in the same
immediate household (i.e., spouses, children, etc.). Householding can include trust and other entity
accounts controlled by, or for the benefit of same Clients. Sierra Households accounts for the purpose of
achieving the Advisory Fee breakpoint discounts at aggregated asset values. Because Householding
generally results in combined reporting as well, Clients may choose to opt out of Householding by
notifying Sierra.

Advisory Fees are calculated and debited during the first month of each calendar quarter from the Client
account(s), each such account as specified by the Client, and apply to all Client account holdings
including money market and interest-bearing account allocations.

Standard Advisory Fee Schedule
The Standard Advisory Fee Schedule is as follows:

•   If the Account Value is $500,000 or less, the Advisory Fee Rate used to calculate the Advisory Fee
    payable for each calendar quarter shall be 0.45% (1.8% annualized).
•   If the Account Value is more than $500,000 but less than or equal to $1,000,000, the blended
    Advisory Fee Rate used to calculate the Advisory Fee payable for each calendar quarter shall be (x)
    0.45% (1.8%annualized) for such portion of the Account Value up to $500,000, and (y) 0.30% (1.2%
    annualized) for such portion of the Account Value in excess of $500,000.
•   If the Account Value is more than $1,000,000, the Advisory Fee Rate used to calculate the Advisory
    Fee payable for each calendar quarter shall be 0.25% (1.0% annualized).

Accounts which hold a position in one or more of the Affiliated Funds will have their quarterly Advisory
Fee reduced by the Affiliated Funds’ Fee Offset Credit as described below.

Wrapped-Advisory Fees that a Client pays may be higher or lower than the aggregate fees, commissions,
expenses, or charges that the Client would otherwise pay if advisory, brokerage, and custodial services
were separated. Additionally, wrap-fee accounts with low trading volumes, high cash balances or
significant fixed income weightings may be able to receive similar services at a lower cost outside of the
Sierra Programs. Sierra makes no guarantees that the cost of participating in the Sierra Programs on a
wrap-fee basis will be lower than the cost that would be borne by a Client investing through a regular
investment account with Sierra or another advisor.

Clients should explore this subject carefully to determine whether a wrap fee program or a regular
investment account is appropriate for their investment goals.

Private Placement Variable Annuity (PPVA)
For its investment management/asset allocation services to Axcelus PPVA separate accounts, Sierra
charges a flat 1% Advisory Fee for all assets in PPVA separate accounts. Fees are debited directly from
the separate account, quarterly in advance as described above.

In addition to the Advisory Fee, separate accounts are also generally subject to Axcelus’s Mortality and
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Item 7 Types of Clients
Sierra provides services to various types of Clients, including individuals and high net worth individuals;
trusts, estates, and charitable organizations; corporations or other business entities; not for profit
entities; and pension and profit-sharing plans.

Sierra provides services to the separate accounts of PPVAs of Axcelus, an insurance company.

The stated minimums for the Sierra Programs are $500,000 per household, and $50,000 per account
registration, although Sierra reserves the right in its sole discretion to accept households and accounts of
a smaller size.

Generally speaking, and unless agreed upon otherwise in consultation with Clients, the Sierra Schooner
Programs are made available to accounts with a $25,000 minimum.

Clients must have a written and executed Agreement with Sierra. Clients who wish to engage Sierra on a
wrap-fee basis must also open or have an investment account at Charles Schwab.

Sierra does not recommend variable annuities and will only accept investment management
appointment for existing variable annuity accounts of Clients or prospective clients. To provide
investment management services, Sierra requires the variable annuity accounts to be held at Prudential,
which provides Sierra investment advisory access to such accounts.

The PPVA solution and Programs are only available to Accredited Investors as that term is defined under
Regulation D of the Securities Act of 1933. Clients must have a household total of $1,000,000 of assets
under management with Sierra to engage Sierra in the recommendation of such services. Clients enter
into a separate relationship with Axcelus and can only access PPVA accounts through the required
offering documents provided by Axcelus.