Professional Advisory Services Inc

Item 5: Fees and Compensation
We work strictly on a fee for service basis calculated on dollars under management. Our fee
begins at 1% annually, with a declining rate structure beyond the first $500,000. As a fee-only
adviser, our interests are aligned with our clients – the growth of the account values. To achieve
a beneficial reduction in fees, related accounts are aggregated to calculate billable asset value.

               BILLABLE ASSET VALUE                     ANNUAL FEE SCHEDULE

               First          $500,000                       1.0% of Asset Value
               Additional     $500,000                       0.9% of Asset Value
               Additional $1,000,000                         0.8% of Asset Value
               Additional $1,500,000                         0.7 % of Asset Value
               Additional $1,500,000                         0.6% of Asset Value
               All Additional                                0.5% of Asset Value

Fees above are expressed on an annual basis. Billing is calculated on the accrued account value
at the end of the quarter and billed at 1/4th the rate shown above. Our billing is submitted to the
client within thirty days after the end of the quarter in which our services were provided. Clients
may elect to have fees deducted by signing a fee deduction authorization. If fees are deducted
from an account, we will send a copy of the invoice along with a statement specifying the
information is for their records only and that the fee has been deducted. New or terminating
accounts managed less than a full quarter will be billed a prorated amount.

Our bills are due and payable within a reasonable length of time; there is no service,
maintenance, penalty, or interest charge for late payment.

We have a written agreement containing our standard fee schedule as outlined above which
serves as a contract between our company and its clients. The agreement contains the provision
that we will not assign the agreement without the client’s consent. Either party can terminate the
agreement at any time with written or other acceptable notice. Any deviation resulting in a
nonstandard agreement must be negotiated.

Clients sign a separate agreement with an unrelated third-party custodian which includes their
custodial fee agreement. PASI does not receive any commissions or fees from custodians or
broker/dealers. For more information, please see Item 15, Custody on page 11.

A Bloomberg Terminal has been installed in our office providing interactive financial
information including direct electronic trading. Currently, trades executed through the
Bloomberg Terminal are a nominal commission of $0.025 per share of stock bought or sold.
Please see Item 12: Brokerage Practices on page 10 for more information on our brokerage
arrangements.

Some accounts are housed at brokerage firms or other banks per the client’s direction. We
monitor broker execution and commissions closely for accounts housed outside our primary
custodian, consulting with the broker and client if costs are found to be outside acceptable norms
for similar size trades.

Item 7: Types of Clients
The majority of PASI clients are individuals with personal custodial accounts, trusts, and
individual retirement accounts (IRAs). We also invest for a number of corporate clients who
have pension, profit sharing, and 401(k) plans. Additionally, we invest for charities and business
entities. Although we do not have a stated required starting balance, we recommend a minimum
of $500,000 to properly allocate our Portfolio holdings and ensure adequate diversification.