Your Rights and Responsibilities as a Raymond James Client

Commissions and Costs Attendant to Investing

As a securities firm, we are in the financial consulting and transaction execution businesses. We are paid in commissions on transactions, fees based on assets and/or hourly fees. Generally, commissions on transactions range from less than 1% to 7% of the principal involved, depending on the type and size of the transaction.

The most common transactions are purchases or sales of securities on an agency basis in which the securities firm is utilized as an “agent” for the client. Except for very small transactions, agency stock and bond trades have commissions that generally range from 3/4% to 3% of the principal involved. The commission is added to the principal amount of a purchase or subtracted from the proceeds of a sale. A major portion of the cost is remuneration to the financial advisor. This directly and indirectly benefits the client, as the financial advisor earns compensation for providing the financial advice and dedicating the time to servicing the client’s account. Contrasted to the costs of marketing and selling other types of products, these costs are very low and include both the internal and external out-of-pocket costs associated with effecting the trade on an exchange or in the over-the-counter market.

If a client generates considerable activity and consequent commission revenue or does not utilize the services of the financial advisor, a discount from standard rates may be negotiated. However, if a financial advisor is providing good service to a client, the client’s cost is small contrasted to the value of professional financial advice. Good financial decision making requires broad investment knowledge, a general understanding of tax laws, the capacity to analyze investment alternatives and the skill to design a financial plan and complementary investment strategy customized to an individual’s needs, objectives and risk profiles, as well as input related to the method and timing of a transaction. Research information on securities provided by the investment firm is an essential element in the decision-making process.

Principal products (i.e., over-the-counter stocks or bonds in which the financial advisor’s brokerage firm is a dealer as well as a broker) have commissions that are more difficult to identify. The financial advisor receives a commission that is referred to on the trade confirmation as a markup or markdown. Additionally, the broker/dealer may also make a trading profit or take a trading loss on the transaction. Prices are reflected to the client net of these costs.

New issues of securities include remuneration to the financial advisor and the securities firm. The amount is included in the offering price and reduces the net proceeds to the issuer. The total spread and the commission portion are described in the offering prospectus. These securities include initial public offerings of all security types, new issues for companies that are already public, as well as open-end mutual funds, unit investment trusts and annuities, among others. In addition, there may be alternative methods of paying sales costs or discounts for which you may be eligible. (please see “Mutual Funds” and “Annuities”)

An asset-based fee is an annual fee – paid quarterly – based on a percentage of assets in the account. The fee varies with respect to account size, types of securities, and the level of advice and services provided by the financial advisor. Through this compensation structure, the client, the financial advisor and the securities firm share a common interest in increasing the size of the client’s assets. The asset-based fee is independent of transaction activity. As a result, the fee may be higher than the cost of a commission alternative during periods of lower trading activity. When considering your payment alternatives, you should carefully analyze the projected costs of an asset-based fee account versus other types of accounts, including such factors as transaction size and volume, level of service expected from the financial advisor and personal philosophical convictions.

There are also pricing alternatives utilizing asset-based fees, in conjunction with lower transaction fees, to accommodate various types of assets and activity levels. In the event a client wishes to purchase a new issue in this type of account, there is an exception, as the client will pay the commission described in the prospectus and that security will be excluded from the asset-based fee for one year.

Raymond James client accounts offer all of these pricing options. A client should consult his or her financial advisor to select the alternative or series of alternatives that best suit his or her individual needs.

In order to recognize that the maintenance of cash reserves and/or the use of leverage through a Raymond James Ready Access Account margin loan are often appropriate, financial advisors are compensated at a rate of approximately 15 basis points (0.15%) on a combination of the Heritage Cash Trust, Heritage tax free money market account, Raymond James Client Interest Program, Raymond James Bank, FSB and margin balances, credited to them annually.

Commissions and related costs are reported to clients on trade confirmations. Read your confirmations as they describe the security in detail not provided by other firms. A current copy of our fees and charges is available from your financial advisor or by visiting the “Personal investing” section of our Website, www.RaymondJames.com, and reading the “Personalized client account services fees and charges” after clicking on “Client Bill of Rights.”

The information in this section also appears in the brochure entitled: “Your rights and responsibilities as a Raymond James client.”