Covington Capital Management

Item 5 – Fees and Compensation
Covington receives compensation from 1) a percentage of the assets under management and
2) fixed fees.

Advisory fees are payable quarterly in advance. The first fee will be calculated as a
percentage of the market value of all assets on the last trading day of the month in which the
client’s account was fully funded. For any partial calendar quarter, the advisory fee will be
pro-rated based upon the number of days that the account was open (date of initial funding)
during the quarter. Thereafter, the fee will be calculated based upon the market value at the
end of the prior calendar quarter. The compensation for our services is as follows:

  Assets under Management
                                        Annual Fee Rate
     (Balanced Accounts)
 First $5 million                            1.00%
 Next $5 million                             0.75%
 Balance over $10 million                    0.50%

There is a minimum relationship market value of $2,000,000.

Fees are deducted directly from the client's custody account pursuant to written agreement.
The advisor will consider invoicing advisory fees if specifically requested by the client. The
advisor reserves the right to adjust the fee schedule for accounts depending on the size and
type of account and the services required. Clients will be provided with advanced written
notification of any such adjustment. In some cases, negotiation of fees may result in different
fees being charged for similar services and may be less than the stated fee schedule, (e.g., a
flat annual fee charged quarterly).

Notwithstanding, as the custodian will not determine whether the fee has been properly
calculated, clients should always verify the accuracy of the fee calculation submitted thereby.

Termination of Agreement. Either the Advisor or the client may terminate the agreement
in writing at any time upon at least a 30 day written notice by either party. The client is
responsible to pay for services rendered until the termination of the agreement. The client
can cancel the agreement without penalty within the first five days after the signing of the
agreement. Upon termination, the client shall receive a pro-rata refund of that portion of
any prepaid advisory fees that have yet to be earned by Advisor.

Mutual Fund Fees. Advisory fees charged by the Advisor are separate and distinct from fees
and expenses charged by mutual and/or exchange traded funds, which may be

 Covington Capital Management – Form ADV Part 2A (“Brochure”)                      Page 3 of 13

recommended to clients. A description of these fees and expenses are available in each
fund's prospectus. Additionally, the fees charged by the Advisor are exclusive of any costs
related to custodians, brokers, or any other third parties. Clients should review all fees
charged by the Advisor, custodians, brokers, and others to fully understand the total amount
of fees incurred.

ERISA Accounts. If a client’s account is a pension or other employee benefit plan governed
by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Advisor
acknowledges that it is a fiduciary to the plan under Section 3(38) of ERISA. In providing its
services, the sole standard of care imposed upon the Advisor is to act with the care, skill,
prudence, and diligence under the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in the conduct of an enterprise of
a like character and with like aims. Furthermore, the fact that the Advisor may acquire, or
not acquire, securities or property for itself or for any other client is not to be considered in
determining the advisability of acquiring or not acquiring similar securities or property for
the portfolio account of any client. The Advisor is a fiduciary and may be liable under federal
and state securities laws in certain instances for actions undertaken in good faith. In
addition, the Advisor assumes no responsibility for the accuracy of information furnished to
the Advisor by a client or a client’s agent.

Item 7 – Types of Clients
Covington provides portfolio management services to high net worth individuals and
families, companies, retirement plans (IRAs, corporate pension and profit-sharing plans),
charitable institutions (foundations, endowments), and trusts.

While we do not have a minimum fee, we have a minimum relationship market value of
$2,000,000.

 Covington Capital Management – Form ADV Part 2A (“Brochure”)                       Page 4 of 13