Pinnacle West Asset Management Inc

Fees & Compensation

Description
All fees charged by Pinnacle West Asset Management, Inc. are calculated on an annual
basis. The fees are billed quarterly in arrears. The fee is calculated based on the end of
quarter valuation. Fees are prorated for any period less than a full quarter.

       Minimum fee charged per household                                  $100.00
       Cash and cash equivalents                                             .25%

       Fixed income securities                                              .25%
       Equity securities                                                   1.00%
       Equity income securities                                            1.00%
       Exchange traded index shares                                         .50%
       Mutual funds                                                         .50%

Other Fees
The fees charged for mutual funds and exchange traded index shares do not include any
fees charged directly by the fund or index shares. The fees charged do not include any
transaction costs, or handling fees charged by the custodial firm handling the account. The
fees do not include any charges by trustees if the assets are held by a corporate trustee.
Fees may be negotiable on larger accounts.

Fee Billing
Fees are deducted directly from client assets after the end of each quarter unless other
arrangements are agreed to. A copy of the invoice showing the calculation of the fees is
included with our quarterly reporting to clients.

Fees Paid in Advance
Fees for our services are not charged in advance.

Additional Compensation
Pinnacle West Asset Management, Inc. does not receive any other forms of compensation
related to client assets.

Performance-Based Fees & Side-by-Side Management
Pinnacle West Asset Management, Inc. does not receive performance-based fees of any type.

Types of Clients

Description
Pinnacle West Asset Management, Inc. provides investment management services to
individuals, families, trusts, business entities, charitable foundations, and pension and
profit-sharing plans.

Account Minimums
Pinnacle West Asset Management, Inc. minimum account size is $500,000. Accounts with
assets less than $500,000 allocated to large capitalization equities are advised to utilize
exchange traded index shares.

Methods of Analysis, Investment Strategies and Risk of Loss

Methods of Analysis and Investment Strategies
Our approach towards investing in equities is the long-term holding of fundamentally sound
companies, that are market leaders in their respective industries and operated in our judgment
by superior management teams. Additionally, we view investments in equities not as
investments in stocks, but rather as ownership in respective businesses. We believe consistent
risk adjusted returns can be obtained with an allocation across both the value and growth
sectors of the market. Further, management of risk we believe is achieved with diversification
across many industries and among various companies within an industry.

We begin by developing an economic model to forecast long-term trends of the economy.
Additionally, we work to identify long-term societal and demographic trends and as much
as is possible effects of governmental monetary and fiscal policy. We utilize this
information as the basis for our sector allocations and our industry weightings within each
sector.

We then select specific large capitalization equities for inclusion in each sector and industry
by employing a screening process based on pre-determined financial variables and risk
measurements, but not to the exclusion of certain intangible attributes. The financial
variables might include but not be limited to, market capitalization, a conservative amount
of leverage appropriate for a given industry, a favorable working capital position, strong
and growing cash flow from operations and consistent growth in both revenues and
earnings. Risk measurements include market betas and standard deviation measurements.
Intangible attributes might include but not be limited to superior and stable management
teams, a progressive management style, and a stated commitment to being leaders in their
respective industries. Barriers to entry into a given industry by competitors are often
considered as well.

Our approach toward fixed income investing is to preserve capital and generate a desired
level of income. It is not investing for short-term market gains. Our primary concerns are
to minimize credit risk and interest rate risk while obtaining the highest possible yield on
the fixed income portfolio.

We attempt to mitigate credit risk or the risk of default by investing primarily in bonds with
an investment grade credit rating by two debt rating agencies, Standard & Poor’s and
Moody’s. We utilize our economic model as the basis for our projection of interest rate
trends. We mitigate the effects of interest rate changes by laddering bonds maturities along
what we believe to be the most favorable part of the interest rate yield curve. Further, we
specifically design the bond ladder, so a certain portion of the bond portfolios matures
annually enabling reinvestment at current market rates at the far end of the ladder.

Risk of Loss
Investing in securities brings with it the risk of loss. Clients are advised that they should be
prepared and able to tolerate loss of value especially in the short-term.