David Kennon Incorporated

Item 5 Fees and Compensation

Asset Management Fees
Pursuant to an Investment Advisory contract signed by each client, the client will pay Kennon
Financial an annual management fee, payable quarterly in advance, based on the value of portfolio
assets of the account managed by the Advisor as of the opening of business on the first business
day of each quarter. The management fee may be adjusted to account for significant contributions
or withdrawals made to the account during the quarter. New account fees will be prorated from
the inception of the account to the end of the first quarter.

Management fees range up to 1.00% per annum depending on the type and complexity of the
investment management strategy employed as well as the size of the account or overall client
relationship. Management fees may be reduced or waived for directors, officers, and employees

Kennon Financial                             Page 4

of Kennon Financial at the discretion of management. These fees may be negotiated by Kennon
Financial at its sole discretion. The client will give written authorization permitting the Advisor to
be paid directly from their account held by the custodian. The custodian will send a statement at
least quarterly to the client. Where it is not practical to deduct fees directly from client accounts,
client will be sent an invoice on a quarterly basis for any outstanding advisory fees due. The
invoice is due within five days of receipt by client.

All fees paid to Kennon Financial for investment advisory services are separate and distinct from
the expenses charged by ETFs to their shareholders. These fees and expenses are described in
each fund’s prospectus. These fees will generally include a management fee and other fund
expenses.

At no time will Kennon Financial accept or maintain custody of a client’s funds or securities except
for authorized fee deduction. Client is responsible for all custodial and securities execution fees
charged by the custodian and executing broker-dealer. The Advisor’s fee is separate and distinct
from the custodian and execution fees.

Kennon Financial’s management fee is payable in advance. Upon termination, any fees paid in
advance will be prorated to the date of termination and any unearned fees will be refunded to client.

Where acting in the capacity of an insurance agent, investment advisor representatives of Kennon
Financial may effect insurance product transactions for typical and customary compensation.
Clients are not obligated to use investment advisor representatives of Kennon Financial to execute
such insurance transactions.

This practice presents a conflict of interest by creating an incentive to recommend investment
products based on the compensation received, rather than on a client’s needs. Where client chooses
to purchase insurance products through Kennon Financial, there is no advisory fee associated with
these insurance products, and clients will be made aware of all commissions associated with the
products prior to the transactions.

A client may be able to invest in products recommended by the firm directly, without the services
of Kennon Financial. In that case, the client would not receive the services provided by Kennon
Financial which are designed, among other things, to assist the client in determining which
products or services are most appropriate to each client’s financial condition and objectives.

Kennon Financial does not expect commissions from insurance transactions to constitute more
than 50% of Firm revenues.

Item 7 Types of Clients

The Advisor generally will offer its services to individuals and does not have any minimum
requirements for opening or maintaining an account.

Kennon Financial                            Page 5