Penn Davis McFarland Inc

Item 5 – Fees and Compensation
Investment Management Services
We are paid by clients based on a percentage of our clients’ assets under management. Our fee
is computed quarterly (the quarterly fee percentage is ¼ of the annual fee percentage). The fee
is calculated based on assets under management on the final day of the preceding quarter and
is billed quarterly in advance. The fee is due upon receipt of our invoice. We typically deduct our
advisory fees directly from clients’ accounts, although clients do have the choice to pay their fees
in another manner. If an account is terminated, the fee is prorated, and the unearned portion is
returned to the client.

       Annual Fee Schedule
       One and one-quarter percent (1.25%) of the first $1,000,000 of assets under
       management;

Penn Davis McFarland, Inc.

       One percent (1.00%) of assets from $1,000,000 to $4,000,000;

       Three quarters of one percent (0.75%) of assets from $4,000,000 to $10,000,000;

       One-half of one percent (0.50%) on assets $10,000,000 and above.

While PDM’s investment management fees are generally not negotiable, the firm has in some
instances negotiated a fee with clients opening several accounts (e.g., a family).

Financial Planning and Other Services
In some cases, we provide financial planning services free of charge to existing clients.
Otherwise, we negotiate fees for this service individually with clients.

Our fees for non-advisory family office services are negotiated individually with clients and range
from $1,250 to $12,500 a quarter depending on the amount of work performed.

Regardless of the services performed, neither PDM, nor any of our employees, receives any
compensation for the sale of securities or other investment products.

Other Types of Fees and Expenses
In addition to the fees PDM charges, your account may incur other types of fees and expenses in
connection with the investment of your assets. These include custodian fees and brokerage
commissions or other transaction-related charges. Accounts that hold mutual funds will incur
management and other fees in addition to the advisory fees PDM charges. Although PDM
endeavors to help clients optimize their investment returns, we do not guarantee that clients will be
invested in the lowest mutual fund expense share class at all times. New share classes are
introduced from time to time and in some cases, investment in lower-cost classes is restricted by
the fund or the custodian. Please see Item 12-Brokerage Practices below for more information.

Item 7 – Types of Clients
Our Clients
The majority of our clients are high net worth individuals. We also offer our services to trusts,
charitable organizations and retirement plans.

Minimum Account Size
PDM prefers a minimum account size of $1,000,000 but has accepted smaller accounts under
certain circumstances.