Three Magnolias Financial Advisors LLC

Item 5 - Fees and Compensation

General Fee Information
Some new clients open accounts with our broker-dealer/custodian Private Client Services (PCS),
and as such will incur customary transactional charges as assessed by PCS, such as commissions,
brokerage fees, ticket charges, etc. With the exception of certain purchases that generate 12b-
1 fees, Three Magnolias does not share in these brokerage-based fees. Since Three Magnolias
does not offer a wrap fee option, the brokerage expenses are borne by the client. Clients opening

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brokerage accounts at PCS creates a conflict of interest insofar as Three Magnolias has an ongoing
relationship with PCS. This conflict is mitigated by the fact that Registered Investment Advisors
have a fiduciary duty to clients and will make decisions in the best interest of the client. The
conflict is further mitigated by virtue of the fact clients are free to open brokerage accounts
through other broker dealers or advisers although doing so will restrict Three Magnolia’s ability
to negotiate commission rates and/or other terms on the client’s behalf. Please see Section 12
for additional discussion of brokerage topics.

In any case, these fees are separate and distinct from the fees and expenses charged by mutual
funds, ETFs (exchange traded funds) or other investment pools to their shareholders (generally
including a management fee and fund expenses, as described in each fund’s prospectus or
offering materials). The client should review all fees charged by funds, brokers, Three Magnolias
and others to fully understand the total amount of fees paid by the client for investment and
financial-related services.

Financial Planning Fees
Financial Planning is normally performed on an hourly basis, at the rate of $150 per hour. In most
instances, a minimum fee of $500 applies. The fee is due upon presentation of the financial plan
to the client.

Portfolio Management Fees
The annual fee schedule, based on a percentage of assets under management, is as follows:

Schwab Accounts:
Accounts held at Schwab are invoiced quarterly in advance. The annual fee schedule for these
services is as follows:

Assets Under Management              Annual Fee
First $2,500,000                     1.50%
Next $2,500,000                      1.25%
Balance above $5,000,000             1.00%

Accounts Managed by a Sub-Advisor:
For accounts that are managed by a Sub-Advisor, the fees are as follows:

Assets Under Management              Annual Fee
First $2,500,000                     2.00%
Next $2,500,000                      1.75%
Balance above $5,000,000             1.50%

The advisory fees above are for accounts that are managed by a Sub-Advisor. Fees may be paid
directly to both Three Magnolias and the Sub-Advisor, but total fees to the client will not exceed
the above fee schedule. The fees paid to Three Magnolias in these accounts are negotiable.

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Three Magnolias may impose a minimum portfolio value of $100,000. Minimum annual fees of
$1,000 may apply. Three Magnolias may, at its discretion, make exceptions to the foregoing or
negotiate special fee arrangements where Three Magnolias deems it appropriate under the
circumstances.

As mentioned above, portfolio management fees are payable quarterly, either in advance or
arrears depending upon custodian of the account. If management begins after the start of a
quarter, fees will be prorated accordingly. Fees are normally debited directly from client
account(s) unless other arrangements are made.

Either Three Magnolias or the client may terminate their Investment Management Agreement at
any time, subject to any written notice requirements in the agreement. A client may terminate
an advisory agreement without being assessed any fees or expenses within five (5) days of its
signing. In the event of termination, any paid but unearned fees will be promptly refunded to
the client, and any fees due to Three Magnolias from the client will be invoiced or deducted from
the client’s account prior to termination.

General Consulting Fees
When Three Magnolias provides general consulting services to clients, these services are
generally separate from Three Magnolias’ financial planning and portfolio management services.
Fees for general consulting are negotiated at the time of the engagement for such services and
are normally based on an hourly rate of $150 and billed monthly in arrears.

Item 7 - Types of Clients

Three Magnolias serves individuals, pension and profit-sharing plans, corporations, trusts,
estates and charitable organizations. With some exceptions, Three Magnolias may impose a
minimum portfolio value of $100,000 for asset management services. Minimum annual fees of
$1,000 may apply. Under certain circumstances and in its sole discretion, Three Magnolias may
negotiate such minimums.

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