Terry McDaniel & Company

Item 5       Fees and Compensation

The firm offers investment advisory services for a percentage of assets under
management. The current fee schedule is as follows:

         First $ 2 million....…………………………………….…….…1.0% per year
         Next $ 23 million………………………………………………0.75% per year
         Next $ 75 million………………………………………………0.50% per year
         Above $100 million……………………………...………….….0.25% per year

Under the terms of the firm’s standard form investment advisory agreement, the compensation
of the firm is payable quarterly in advance. Clients may elect to be billed directly or give
authorization to have fees deducted from accounts electronically. In the event of termination
during a quarter, any compensation paid in advance shall be refunded to the client in the
amount equal to the quarterly fee prorated from the date of termination. The client may
terminate the investment advisory agreement, without penalty, any time within 5 days of
signing the agreement. Thereafter, the agreement may be terminated upon 30 days written
notice by either party. Fees are negotiable in certain instances.

In addition to fees paid directly to the firm for investment supervisory services, clients may
also be assessed fees by custodians or other parties to their assets. This may result in multiple
fees being assessed on the same assets. As one but not the only example, money market funds
or closed-end investment companies may constitute a portion of portfolios. In those cases,
clients may incur management fees or other charges by managers of those assets while at the
same time being charged fees by the firm on those same assets.

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Item 7       Types of Clients

The firm generally provides investment advisory services to a wide variety of clients.
These clients include individuals, retirement plans, trusts, estates and charitable
organizations. The minimum dollar amount of assets required for the establishment and
maintenance of an investment advisory account is $1,000,000. There are circumstances
under which this minimum may be waived.