Townsend Group Investments

Item 5         Fees and Compensation

A.     The Townsend Group Investments is compensated on a fee only basis.

Our Management Fees are based on a percentage of assets under management as computed on a
quarterly basis according to the following schedule.

       Client’s Account Balance       Percent per Annum Fee
               Up to $500,000                2.00%
               $500,000 to $1 million        1.75%
               $1 million to $2 million      1.50%
               Above $2 million              1.25%

       Our fees are negotiable for accounts greater than $2 million.

Each client is aware that the Townsend Group’s advisory fees may be higher than fees charged
by other advisors.

For computation of our fees, the securities in the client’s account are valued based on the closing
market prices as of the last business day of each calendar quarter. This value, plus the amount of
cash and cash equivalents, is the basis on which our advisor fee (aka management fee) for the
following quarter is calculated.

If a client has more than one account, or if the client has immediate family members who also
have accounts under our management, the values of all of those accounts are combined to
determine the basis for calculating our management fee.

For example:
            Client                           Account Value
             Single Account                  $ 260,000
             IRA Account                     $ 175,000
             Joint Account                   $ 740,000
                Combined Accounts            $1,175,000

                      $500,000 @ 2.00% $2,500.00
                      $675,000 @ 1.75% $2,953.13
                        Total Fee      $5,453.13

       Fee is billed: Single Account         22.13% of Total        Fee = $1,206.65
                      IRA Account            14.89% of Total        Fee = $ 812.17
                      Joint Account          62.98% of Total        Fee = $3,434.31

All accounts are billed with the exception of 5 clients and the accounts of Townsend Group
employees and their immediate families.

B.     Fees are computed and payable in advance on a quarterly basis.

Unless otherwise agreed to in advance, the management fee is deducted on a quarterly basis from
the client’s account. A copy of our fee computation is included as part of the client’s quarterly
report and is sent to the brokerage firm or bank that holds the client’s assets in conjunction with
our deduction request.

C.     The Townsend Group does not charge any other types of fees or expenses in connection
with our advisory services.

Additionally, we consider the following securities which may be in a client’s account as “Non-
Billable” assets. This means we do not factor their value into the account valuation used for
computing our management fee:
    • Fixed Income Securities (e.g.: bonds)
    • Mutual Funds
    • Privately held securities
    • Venture capital investments and limited partnerships.
        This includes those limited partnerships/LLCs discussed below and in Item 10 of this
        Brochure.
These exclusions from account values for fee calculation purposes prevent any fee conflicts or
issues which may arise from the valuation of illiquid securities or from fees which may be
charged by mutual funds.

For those clients with retirement accounts like IRAs we do not charge any fee other than our
usual management fee. However, the custodian or plan administrator may charge their own fee
for maintaining those types of accounts. While the Townsend Group may have given advice to
the client in the selection of a retirement account custodian it has no control over fees charged by
that custodian. Additionally, we do not adjust our fees to compensate for any fees that custodian
might levy.

Each client is aware that they will incur brokerage and other transaction costs related to the
purchases and/or sales of securities in their portfolio.

Please refer to Item 12 – Brokerage Practices for additional details.

D.     As mentioned earlier, our fees are computed and payable in advance on a quarterly basis.

For new clients, the initial fee is payable on acceptance of the Management Agreement and is
based on the closing market prices of the assets in the account (excluding those “non-billable”
assets noted above) on the date of acceptance, plus cash, and prorated to the end of the current
calendar quarter. This fee is deducted from the client’s account following the same procedure as
that for existing clients. Based on the time remaining in the quarter we may elect to forego the
initial partial quarter fee and begin regular billing as of the next calendar quarter.

If a client closes his/her account the unused portion of our management fee is refunded.

This refund is calculated by determining

     1. The daily rate for the fee           Full Quarter’s Fee
                                             Number of Days in the Quarter

     2. The number of days the account was open during the quarter

     3. The pro-rated fee amount             Daily Rate
                                             x Number of Days Account Open

     4. Refund Amount                        Full Fee – Pro-Rated Fee

E.       The Townsend Group does not:
     •   Receive compensation in connection with the purchase or sale of securities.
     •   Adjust our fees to compensate for any brokerage or transactions costs.
     •   Have a minimum account size or a minimum fee.
     •   Base its fees on appreciation of capital gains.
     •   Receive cash or any other economic benefit (including commissions, equipment or non
         research services from anyone in connection with giving advice to clients.
     •   Directly or indirectly compensate any person for client referrals.

Both David Butterworth and T. Brook Townsend, IV, our owners/executive officers, are
Managing Members/General Partners on the partnerships detailed in Item 10 of this Brochure.
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Item 7         Types of Clients

As of 12/31/2017 the Townsend Group had $132,418,931 regulatory assets under management,
       $129,210,771 on a fully discretionary basis
       $3,208,160 on a non-discretionary basis

Approximately 60% of this capital is related to the Townsend family, and each of our owners
(control or related persons) has an account under management by the firm. Regular clients of the
Townsend Group Investments are either individuals or their trusts or estates and many have
multiple accounts under our management.

While we do not have minimum account size we recommend a minimum of $250,000.
We do not accept accounts that want check writing or debit card features attached.
Also, we do not accept “margin accounts”.

We currently have 53 clients with the following general breakdown (including accounts of
employees and control persons):
   • 60.4% are individuals (other than high net worth individuals)
   • 37.7% are high net worth individuals
   • 1.9% is from a private charitable organization

    •   53 Clients
               52 Discretionary clients which constitutes 97.6% of assets under management
               1 Non-Discretionary client which constitutes 2.4% of assets under management
    •   101Accounts
               74 Are billed based on the management fee schedule detailed in Item 5 above
               27 Are non-billed

Accounts for the “non-billed” discretionary clients, may become “billed” at a future date.
Accounts of employees, control or related persons and their immediate families are not billed.
While we provide continuous and regular supervisory or management services to our non-
discretionary client’s accounts, we do not bill them and there are no plans to bill them in the
future.

All non-billed accounts are treated the same as those that pay. As for the accounts of employees
and control or related persons, we invest along side of you and may include our accounts in
trades which are entered as “block” orders. We do not give preferential treatment to our
accounts when allocating these trades, or any others.

In our view any conflict of interest (whether actual or potential) due to our direct involvement as
clients is avoided because every action we take is designed to grow the capital base at an
acceptable risk. What we personally have at stake, meaning the percent of our own assets and

those of our families at risk, will likely be much greater than what our clients have at risk. We
feel this results in an excellent alignment of client interests and our own.
 None of our clients are:
     • Banking or thrift institutions
     • Investment companies
     • Business development companies
     • Pension and Profit Sharing Plans
     • Pooled investment vehicles
     • Corporations or other businesses
     • State, municipal or federal government entities
     • Other investment advisers.

We have only one portfolio which is a private charitable organization.

We do not participate, sponsor or act as a portfolio manager to a wrap fee program.

Our clients will generally see a portfolio comprised of approximately 8-12 common stocks. A
new client may come to us with a portfolio which includes mutual funds, warrants, corporate
bonds, municipal bonds and/or United States government securities. These types of investments
are not part of our investment strategy and will gradually be liquidated. Until then we consider
them to be “Non-Billable” assets. This means we do not factor their value into the account
valuation used for computing our management fee.

Occasionally we will provide advice on Venture Capital opportunities to select clients who are
“Accredited Investors” (as defined in Regulation D of the Securities Act of 1933) and who have
expressed an interest in such opportunities. These opportunities have included, but were not
limited to, LLCs/LPs of which David Butterworth, our Chairman and President, and T. Brook
Townsend, IV, our Vice President and Director of Business Development, are Managing
Members. Details on these LLCs/LPs can be found under Item 10 of this Brochure.

When a client makes us aware of holdings in privately held securities, venture capital
investments and limited partnership investments we enter this information into their records for
accounting and record keeping purposes only.
       We do not consider these to be assets under management.
       We do not factor their value into the account valuation used for computing our
        management fee.

This pertains to those LLCs/LPs detailed in Item 10 as well.

These exclusions from account values for fee calculation purposes prevent any fee conflicts or
issues which may arise from the valuation of illiquid securities or from fees which may be
charged by mutual funds.

To summarize. Our clients:
   • Are individuals who can set aside a portion of their capital for growth over a long period.
   • Are aware that we do not tailor our services to individual client needs.

   •   Are not allowed to impose restrictions on investing in certain securities or types of
       securities.
   •   Understand that we accept portfolio volatility as a cost in achieving our results.

We send our clients a Quarterly Report which includes a detailed breakdown of:
        a)        Portfolio composition and valuation as of quarter end
        b)        Year-to-quarter end account performance
        c)        Year-to-quarter end realized capital gains/losses
        d)        Year-to-quarter end income and expenses
        e)        Year-to-quarter end capital flow report
        f)        Year-to-quarter end transaction ledger showing basis adjustment(s) if any
        g)        Billing statement showing how our management fee has been computed

For those clients who have multiple accounts, whether individual or family/related, we also
include “Group Reports” which treat all those accounts as one. These reports show:
       a)      Portfolio composition and valuation for the group
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