Heritage Investors Management Corp

Item 5: Fees and Compensation

        Heritage charges a fee for its investment services. Usually a percentage of assets
under management is charged, but occasionally an hourly charge or a fixed fee may be
negotiated. The fee for the first period of service is based upon the market value of the
account at its inception. Thereafter, the fee is based on the value of the account as of the
last day of the previous billing period. The annual rate shall equal:

       1.00% on the first $1,000,000 under management and
       0.50% on the balance over $1,000,000.
       The minimum fee is $15,000.

       In certain circumstances, the fees may be negotiable.

        Accounts of family members are managed separately but are often combined for
fee purposes. Clients are given the option of paying the management fee by check or by
having the fee deducted from the client's portfolio. Accounts initiated and terminated
during a calendar quarter may be charged prorated fees. In the event the relationship
terminates prior to the end of a billing period, the fee is refunded on a pro-rata basis.
Management fees will be assessed in advance on a quarterly basis for all the assets in the
portfolio including cash. Mutual funds, money market funds, exchange traded funds, and
other similar asset categories in the portfolio generally carry their own fees that are separate

from the management fee. Clients with margin accounts are charged fees based on the full
value of their assets, excluding the margin balance. Heritage does not participate in any
sales based compensation. Unless directed otherwise, we do not buy mutual funds for
our clients. Thus, we do not have a conflict of interest other advisors might have who may
receive asset based sales or service fees.

        When appropriate, Heritage may recommend that a client roll over an account held
in a former employer’s retirement plan or transfer an existing Individual Retirement
Arrangement ("IRA") to an IRA for Heritage to manage. When Heritage provides
investment advice regarding workplace retirement plan accounts or IRAs, we are acting as
a fiduciary within meaning of Title I of ERISA and/or the Internal Revenue Code, which
are laws that govern retirement accounts. The way Heritage makes money creates some
conflicts with the client’s interests, so Heritage operates under a special rule that requires
Heritage to act in the client’s best interest and not put the firm’s interests ahead of the
interests of its clients. If the client elects to rollover assets into an IRA to be managed by
Heritage, the account will be subject to Heritage’s advisory fee per the client’s agreement.
No client or prospective client is under any obligation to roll over retirement plan assets or
transfer an existing IRA to an account managed by Heritage.

        Clients and prospective clients considering a rollover are encouraged to
consider the advantages and disadvantages of a rollover including, but not limited to,
factors such as management expenses, transaction expenses, custodial expenses,
and available investment options. If requested, Heritage will perform an analysis of
the economics of such a rollover or transfer.

        Occasionally, Heritage will be engaged to consult on a financial matter. Such
consulting services are available to individuals and entities that are not clients on an hourly
basis not to exceed $500 per hour. Investment advisory clients are not charged for meetings
or consultations.

        As a condition of Heritage’s managing their assets, clients are required to arrange
for custody of their assets either at a trust department, trust company, or a brokerage firm.
These qualified custodians provide many valuable services which include holding the
client's assets, settling trades, collecting dividend and interest payments, providing
statements to the client, arranging for transfers of cash to the clients, issuing tax statements,
and following instructions for collecting fees from the account.

       When a client has an account at a trust company or a trust department, that
arrangement allows Heritage to trade with any number of brokerage firms. We believe that
the advantages of this type of relationship are greater flexibility on stock broker selection,
low commission rates when trading stocks, and lower transaction costs when trading bonds.
These custodians charge asset-based monthly or quarterly fees to administer the account.
We believe these fees are cost effective.

       Clients who custody their assets at brokerage firms will generally not pay asset-
based fees to administer the account. Currently, stock trading in these accounts is less
expensive than for clients who have selected a trust company or a trust department

custodian. These stock trades (often free) are effectively limited to the brokerage firm that
holds custody. For this reason, these relationships are considered Directed Brokerage (see
discussion in Item 12: Brokerage Practices). Bond trades are generally executed through
financial institutions other than the designated brokerage firm which holds custody and
have an added cost of a trade away fee.

       There are other fees that clients of investment advisory firms are charged. For
example, sales of stock are subject to a nominal Securities and Exchange Commission
Section 31 Transaction Fee. Some security trades are subject to negotiated broker
commission rates and bid/ask spreads. Heritage is not a brokerage firm and does not
receive cash compensation for the trades it enters on behalf of its clients. Additional
information on Heritage's brokerage practices can be found in Item 12.

Item 6: Performance-Based and Side-by-Side Management

        Heritage does not charge performance-based fees; consequently, we have no
incentive to favor one client over another.

Item 7: Types of Clients

        Heritage manages portfolios for individuals, IRAs, pension and profit sharing plans,
trusts, estates, charitable organizations, corporations, partnerships, endowment funds,
conservatorships, associations, foundations, donor advised funds, and guardianships. Our
minimum account size for new relationships is $2,000,000 although exceptions are made
from time to time.