Product Sponsor Compensation

March 2010 

In the normal course of business, ProEquities, Inc. and its registered representatives receive compensation and other payments related to the sale of securities and to the financial planning and asset management services provided by ProEquities and its investment advisor representatives. ProEquities and its registered representatives sell a variety of securities, including mutual funds, variable products (variable annuities and variable universal life insurance), stocks, bonds, Section 529 college savings plans, and alternative investments (such as real estate investment trusts, oil and gas partnerships, Section 1031 exchange programs and similar programs). The investment advisory services offered by ProEquities and its investment advisor representatives include "sub-advisory" arrangements with third-party money managers. The compensation and other payments may be in the form of:

• commissions from product sponsors based on transactions effected.
• recurring distribution fees from product sponsors based on assets held in an investment, commonly referred to as trail commissions or 12b-1 fees.
• advisory fees from our customers based on the amount of assets under management by our Firm (or by third-party money managers) or upon the financial planning services provided by our investment advisor representatives. 
• cash payments from product sponsors as reimbursement for training and educational expenses incurred by our registered representatives when attending educational meetings or conferences that are held by ProEquities or by the product sponsor. 
• cash payments from product sponsors through the Firm to its registered representatives as reimbursement for product marketing efforts or attendance at due diligence meetings (in accordance with NASD rules). 
• cash payments from product sponsors to ProEquities for research and due diligence associated with securities offered for sale by the Firm. 
• other cash payments from our “product partners” to ProEquities, as discussed in more detail below. 
• “ticket charge” waivers received by our registered representatives from ProEquities for brokerage account trades in mutual funds offered by product partners, as discussed in more detail below.
  
  The product sponsor of a mutual fund, variable contract or alternative investment generally funds all or some portion of the commissions and distribution fees for the investment through fees and expense charges that are associated with that investment. These fees and expense charges are described in the prospectus, private placement memorandum, or other disclosure documents for that investment. Fees based on assets under management and for financial planning services are disclosed in the client’s investment advisory and financial planning agreements with ProEquities and (if applicable) the third-party money manager.
  
  ProEquities has also entered into marketing arrangements with a number of mutual fund, variable contract and alternative investment product sponsors and third-party money managers. These “product partners” are sometimes invited to attend or participate in educational meetings and conferences for ProEquities registered representatives, and may be featured more prominently on the ProEquities website or other communications than other product sponsors. As a result, these product partners may have greater access to our registered representatives than other product sponsors. Also, if a customer holds mutual funds in a brokerage account, the customer’s registered representative may not be assessed certain ticket charges by ProEquities if the customer invests in mutual funds issued by a product partner.
  

Product partner marketing arrangements include provisions for cash payments to ProEquities. The cash payments may be based on a fixed amount per year, on a percentage of the amount that ProEquities customers have invested with the product partner, or both.

Except for reimbursement of certain ticket charges (as discussed above), ProEquities registered representatives do not receive additional compensation for selling securities offered by a particular product sponsor, whether it is a product partner or not. Furthermore, they are not required to achieve a sales quota with respect to investments or services offered by any product sponsor. ProEquities also has a policy against accepting reimbursement through brokerage transactions directed to the Firm by product sponsors.

The Firm believes that, in general, the product partners offer investment and advisory products and services of a high quality. However, ProEquities does not guarantee that these products and services will perform better than others that may be available, and encourages its registered representatives and customers to consider any product sponsor or third-party money manager whose products and services might be suitable for the customer.

Registered representatives of the Firm who are associated with Mennonite Mutual Aid (“MMA”) may be eligible for incentives provided through MMA (such as eligibility for deferred compensation and health benefit programs and matching certain charitable contributions made by the registered representative) based on their sales of MMA Praxis mutual funds and other products (such as insurance) that are offered by MMA or its affiliates.

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