Pacific Income Advisers Inc

Item 5. Fees and Compensation
Description and Billing

When calculating the value of client investments for reporting or fee calculation purposes, PIA
utilizes recognized and independent pricing services to the fullest extent possible. Whenever
valuation information for specific, illiquid, foreign, private, or other investments is not available
through pricing services, PIA will obtain and document price information from at least two
independent sources, such as broker-dealers, banks, pricing services or other sources, where
practicable and appropriate. The client has the ability to determine the method for computing fair

market value used in the fee calculation. Most commonly, management fees are calculated by
applying the advisory fee percentage to the market value of the account at the end of each quarter.
When calculating the value of client investments for reporting or fee calculation purposes, by
default, PIA includes accrued interest on fixed income securities under management. Another
common practice is to use the average of three month-end values on a quarterly basis. In rare
situations, PIA takes significant cash flows into account when computing the average. The method
utilized will be noted within the client’s investment management agreement.

Institutional SMA
For all Separately Managed Accounts, PIA charges an annual advisory fee that is calculated and paid
quarterly in accordance with the following fee tables:

        Annual Fee Based on Total Value of Eligible Client Assets under Management with PIA*

               Portfolio Style             1st 50MM        Next $50MM     Thereafter
                 High Yield                0.50%           0.45%          0.40%
                 High Yield + Reg S        0.65%           0.45%          0.40%

               Portfolio Style             1st 25MM        Next $25MM     Thereafter
                 Core Plus                 0.35%           0.30%          0.25%
                 Intermediate Core Plus    0.35%           0.30%          0.25%

               Portfolio Style             1st 10MM        Next $40MM     Thereafter
                 Corporate                 0.40%           0.30%          0.25%
                 Limited Duration          0.35%           0.30%          0.25%
                 Market Duration           0.35%           0.30%          0.25%
                 Moderate Duration         0.35%           0.30%          0.25%

               Portfolio Style             1st 10MM        Next $40MM     Next $50MM     Thereafter
                 Short-Term                0.25%           0.20%          0.18%          0.15%
                 Ultra Short-Term          0.25%           0.20%          0.18%          0.15%

               Portfolio Style             1st 10MM        Next $40MM     Thereafter
                 Small Cap                 1.00%           0.80%          0.70%

      *Fees are negotiable.

Retail Wrap-Fee Programs
PIA’s fee for its wrap-fee arrangements is determined by separate contracts entered into with various
program sponsors. These fees, including any and all trading and transaction costs, are “wrapped” into
one overall fee as determined and calculated by the wrap-fee sponsor. Annual wrap-fees for PIA clients,
charged by the program sponsor, generally vary between 1.00% and 1.50% of the assets under
management.

The amount of PIA’s portion of the wrap fee varies dependent upon several factors, including: (1) the
specific terms agreed on between PIA and the wrap-fee sponsor, (2) the client’s account size, (3) the
client’s related investment management accounts, (4) individual account investment restrictions, (5)

and whether any assets are invested in one of PIA’s Mutual Funds.

Important information about the program sponsor’s advisory programs, brokerage services, custody
relationships, and conflicts of interest is available in the Program Sponsor’s Form ADV Part 2. To obtain
a copy, please contact the Program Sponsor directly.

Mutual Funds
PIA charges management fees for acting as investment manager for PIA’s non-MACS Mutual Funds. Such
fees are calculated depending on the portfolio style, and paid monthly in arrears.

    •   PIA Short-Term Securities Fund                    0.20% of assets under management
    •   PIA High Yield Fund, Institutional Class          0.55% of assets under management
    •   PIA BBB Bond Fund, MACS                           Fee charged through Program Sponsor *
    •   PIA High Yield (MACS) Fund                        Fee charged through Program Sponsor *
    •   PIA MBS Bond Fund, MACS                           Fee charged through Program Sponsor *

* PIA clients and the clients of PIA’s Plan Sponsors may permit their account(s) to invest in the BBB Bond
Fund, the MBS Bond Fund, and the PIA High Yield (MACS) Fund. Therefore, in order to avoid charging
clients two advisory fees on managed assets which may be invested in these funds, the MACS mutual
funds do not charge any management fees directly inside these funds.

PIA recommends investment in the PIA Funds to certain clients. Such a recommendation could create a
conflict of interest between PIA and the client. PIA will only recommend an investment in Fund shares
for client portfolios if it represents a suitable investment based on that client’s investment objectives.
PIA receives an account-level investment management fee from its clients (as stated in clients’
investment management agreement), calculated as a percentage of client assets, which includes assets
invested in the Funds. Clients that invest directly in a PIA MACS Fund, as part of a PIA strategy with an
account-level management fee, will pay fees associated with the Funds’ operations, but do not pay
additional investment management fees inside the respective PIA MACS mutual fund to PIA on those
assets invested in the Fund. For clients (including ERISA plans) that invest directly in a PIA Non-MACS
...

Item 7. Types of Clients
Description

PIA currently provides advisory services to individuals, trusts, estates, investment companies, pension
and profit sharing plans, charitable organizations, state or municipal government entities, insurance
companies, corporations and business entities, and unions.

Account Minimums

PIA typically recommends institutional accounts open at no less than $1 Million. Furthermore, those
clients who wish to open separately managed fixed income portfolio accounts should be aware that
frequent requests to liquidate all, or a portion, of their accounts to a size of $10 Million or less will most
likely result in “odd lot” bond transactions. Odd lot bond transactions can usually only be executed at
levels that are less favorable than “round lot” bond transactions ($1+ million par value). Therefore,
potential clients are discouraged from entering into any separate account investment advisory
arrangement with PIA if there is any material likelihood of frequent significant bond portfolio
liquidations.

For wrap-fee accounts, PIA and the program sponsor generally recommend accounts opening at not less
than $70,000. However, no minimum annual fee is assessed.