KEY CONCEPTS

RISK: Risk has several meanings in the investment area: 1) The possibility of not achieving an expected result; 2) a decline in the value of an investment; and 3) the range of price changes that, if severe enough, can cause the sale of investments at an inopportune time. Another type of risk is that the purchasing power of investments declines over time, either because of losses in value or because investment results fail to keep pace with inflation, defined as a decline in the purchasing power of money over time.

RISK-REWARD TRADEOFF: Investments with greater risk typically provide higher investment gains over time. The possibility of achieving these better results therefore requires a willingness to accept the risks associated with trying to achieve them.

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FEES

The basic annual fee for PPA's services ranges from 0.5% to 1.0% of clients' assets under management. The basic fee may be changed with appropriate disclosure to clients. PPA has no asset minimums, but does charge a minimum fee of $2,000 per year. The fee is billed quarterly and paid directly from the client's NFS or SI account(s). For accounts not held at NFS or SI, PPA bills quarterly fees directly to clients.

There are also transaction costs associated with any purchases or sales of securities in NFS or SI accounts. Most transactions in NFS accounts are charged at a flat rate of $100. Transactions in accounts held at SI cost $25. In either case, PPA minimizes overall transaction costs based on the infrequent turnover of investments inherent in PPA's long-term investing approach.