BIRMINGHAM CAPITAL MANAGEMENT CO INC

Form ADV' Part II BIRMINGHAM CnpITAL MANAGEMENT 2 Perimeter Park South . Suite 235-East . Birmingham, AL 35243-3253 Phone: 2051967-7062 . Fax: 2051967-7013  Birmingham Capital Management Form ADV Part II 2 Perimeter Park South, Ste.235 East Birmingham, Alabam a 35243 (20s)-976-7062 Contacts: H. Thomas Smith \ililliam H. Couchman Under SEC Rule IA-3060, advisers must provide new and prospective clients with narrative brochures that are orgarized in a consistent, uniform manner and that include plain English disclosures of the adviser's business practices, fees, conflicts of interest, and disciplinary information. Advisory firms also must provide information about the qualifications of those employees who will provide the advisory services to that client. This brochure provides such information. If you have any questions about the contents of this brochure, please contact us at the address or telephone number listed above. The information contained in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Additional information about Birmingham Capital Management is also available on the SEC's website at www.advisorinfo.sec.gov. The information contained herein is accurate as of February 112025  1 Birmingham Capital Management Form ADV II Table of Contents Page 3. Birmingham Capital's Advisory Business Page 4. Fee Structure and Compensation Page 5. Types of Clients Investment Methodology and Risks Pages 6. -7. Page 8. Disciplinary Actions Page 9. Other Activities and Affiliations Page 10. Code of Ethics and Conflicts of Interest Pages 11.-13. Brokerage Practices Page 14. Review of Accounts Page 15. Custody of Assets Page 16. Investment Discretion Page 17. Voting Proxies Page 18. Fiduciary Responsibility Page 19. Investment Professionals  2 Advisory Business & Services Birmingham Capital Management was founded in 1983. The sole business of Birmingham Capital is to provide investment management or supervisory services for clients who want to have their assets invested in stocks and bonds. We manage portfolios of assets for our clients by making the decisions about what securities should be bought or sold for our clients based on their goals and risk tolerances, and then implementing those decisions. We are neither a financial planner nor a broker-dealer, and we do not offer investment advice on the basis of a subscription service or publication. The onl)' fee we receive for our services is based on a percentage of the market value of the assets we manage for each client. As of December 31,2024, we managed$322 million on a fully discretionary basis. Birmingham Capital is managed by the two principals, H. Thomas Smith and William H. Couchman. The two principals are also responsible for the investment decision-making and portfolio management for all client accounts. We also are the contacts for clients and client prospects. Our goal is to provide investment management that is tailored to the needs of each client. V/e do this by maintaining a high level of communication with our clients and an on- going understanding of the needs and risk tolerances of each client. Clients may, at their discretion, communicate to us any restrictions they would like to place on specific investments or industries that they prefer not to own; and we will, to the best of our ability, incorporate those restrictions into our management of their assets.  3. Fee Structure and Compensation As we noted on the previous pl1e, the only fee we receive for our services is based on a percentage of the market value of the assets \r/e manage for each client. At the client's discretion and instructions that fee may be deducted directly from the assets we manage, or billed directly to the client at the end of each quarter. For our investment management services, we charge the following annual fees For accounts with a market value of up to $5 million, the annual fee is3/q of IYo of the client's net assets under management. The fee is payable quarterly in arrears (payable at the close of the quarter for management for that just-completed quarter) and is billed on the net market value of the assets under management at the close of each calendar or fiscal quarter. For amounts greater than $5 million, an annual fee of % of lYo will be charged on the f,rrst $5 million, and an annual fee of % of l%o will be charged on the remainder of the assets above $5 million. Again, the fee will be payable quarterly. Birmingham Capital's fees may be negotiable depending on the circumstances of each individual case. An exception may be made to the practice of collecting fees in arrears when a client or a broker/dealer who may be acting as a financial advisor to the client requests that our fees be charged quarterly in advance. In such cases, if an account is terminated in the middle of a quarter, since the fee would already have been collected for that quarter, we will refund that unearned fee pro rata for the portion of the quarter for which we did not manage the assets. Our standard contract does require a 30-day advance notification if the client wishes to terminate the contract. Since we cannot act as a custodian for client funds, and since we are not a broker-dealer, clients may also pay other fees to other service providers such as custodians, brokers, or mutual funds. Client accounts will incur the cost of trades (such as brokerage commissions) in the course of our management of those accounts. More information is available on this subject in the sections of this brochure subtitled Investment Methodology (p. 6) and Brokerage Practices (p. 11). Birmingham Capital does not accept performance-based fees  4. Types of Clients We provide our services for a variety of clients, including pension and profit sharing plans, corporations who wish to invest a portion of their corporate assets, endowments and foundations, trusts of various types, and high net worth individuals. Birmingham Capital generally imposes a new account minimum asset value of $750,000. This figure is subject to negotiation.  5. Investment Methodology and Risks Birmingham Capital employs an investment style that can best be characterized as a large capitalization value approach. What this means is that the majority of the stocks that would be purchased or held in our clients' portfolios would be the stocks of very large, generally well-known companies who are leaders in their field or industry. Furthermore, we seek to purchase our portfolio holdings at what we believe is a "value" price, meaning that we try to be attentive to how much we pay for a holding. Our belief is that overpaying for securities that have high market expectations is counterproductive to the long term enhancement of asset values. This is where the oovalue" part of our description is derived. Our research method can best be described as "fundamental." What this means is that we evaluate the attractiveness of a security based most significantly on the fundamentals of the underlying company, and not on the basis of market trends or charts. Our information for these evaluations comes from a variety of sources, including but not limited to financial periodicals, inspection of documents issued by companies (annual reports, lOQ's, SEC filings), research materials provided by others (brokerage firms or other such providers), corporate rating services (such as Moody's), and company press releases or other information that we may lawfully obtain from company sources. When we purchase a security for a client's portfolio, and in particular an equity security, our intention is usually to hold it for an extended period of time (over a year, and usually well beyond that). On occasion the holding period may be less than ayeat, but such instances are rare. Generally speaking, we have a low turnover rate in our portfolios because of this focus on longer term holdings. In our equity, or common stock investing, we generally purchase individual securities for our clients' portfolios, and we focus our attention on exchange-listed securities, most of which will be U.S. corporations. We do use the securities of foreign corporations on occasion (and they will trade on U.S. exchanges as ADR's, just like U.S. stocks do), but for the most part, our equity investments will be in U.S. companies. We may on rare occasions use a mutual fund when it is advantageous to the client to do so, primarily to achieve diversification within a particular sector. It should be noted, however, that when a mutual fund is used, the client may be paying a "double fee" in that the mutual fund will likely be charging an unseen fee which is deducted from the fund value, and the client will also be paying our fee for asset management. In our fixed income investing, for the most part we use corporate, government, or municipal debt securities issued by U.S. companies, the U.S. government, or states and municipalities within the U.S. V/e may on rare occasions use the debt securities of a foreign company as we would occasionally buy the common stock of a foreign company. For the temporary investment of cash within portfolios, we generally use a short term investment vehicle managed by the custodian of the client's assets. These investment vehicles will in turn employ certificates of deposit issued by U.S. banks, the commercial  6. paper of U.S. corporations, or treasury bills issued by the U.S. government, all with maturities of less than one year and generally less than 90 days. As a general rule, we do not use options, futures, or derivatives in managing our clients' funds. V/e do not sell ooshort" (selling a stock one does not own, and attempting to buy it back later at a lower price) or trade on "margin" (borrowed money). V/e may on rare occasions invest our clients' funds in a partnership security or an REIT if it is in our clients' interest to achieve their goals, but these will be limited to securities that are listed and traded on U. S. exchanges. Investing in securities, whether stocks or bonds, entails the risk of loss. Investing in stocks entails the risk of material loss. Clients and prospective clients must be financially able to bear the possibility of such losses.  7. Disciplinary Actions As a part of the information included in this brochure, we are required to disclose any disciplinary action taken on the part of any regulatory or law enforcement agency against either our firm or any employee of our firm. Neither Birmingham Capital nor any employee of Birmingham Capital has ever been subject to any disciplinary action or any criminal or civil action by any overseeing agency.  8. Other Activities and Affiliations No employee of Birmingham Capital Management, nor any related person, is engaged in any business, activity, or relationship that would be material to our advisory business or to our clients. None of our employees or related persons receives any compensation from any other source that is in any way related to our business or our clients.  9. Code of Ethics and Conflicts of Interest SEC rule 204A-l requires that all investment management organizations that are registered with the SEC adopt and maintain a Code of Ethics that outlines the core values and objectives of the firm in relation to both the standard and the spirit of the laws that govern our business. Our Code also explains the priorities that we incorporate into our business practices in order to protect the interests of our clients and maintain the integrity of our organization. Our Code of Ethics statement is available to clients andlor prospects upon request. Some of the practices of our firm, as well as just about any other firm in the same business, carry the potential for creating conflicts of interest between those practices and the interests of the clients. Our objective, as outlined in the Code of Ethics referenced above, is to avoid the appearance of such conflicts of interest, and to place the interests of our clients ahead of our own. Below, we will describe some areas where the potential for conflicts exists, and what we do to try to avoid those conflicts. Birmingham Capital may, from time to time, purchase or sell securities for its employee savings plan that it is also purchasing or selling for its clients. Also, our employees or related persons may, from time to time, purchase or sell securities for their own interest that are also being purchased or sold in client accounts. In such cases, our policy is to always give priority to activities for client accounts. In other words, our employees will not knowingly execute trades for their own accounts immediately prior to executing trades for client accounts in the same security (a practice known as 'ofront-running"). This will be particularly important in cases where we are planning to purchase one or more securities for a large number of clients, and in some meaningful size (thousands or tens of thousands of shares). In cases where only a small number of shares are potentially involved, as might happen if we were purchasing a security for only one or two accounts, it is unlikely that any material advantage or disadvantage might be created because of the size of the companies we invest in and the liquidity of the trading in those shares. Nonetheless, it is our policy to avoid any appearance of conflicts of interest in the purchase or sale of securities. Also to that end, no Birmingham Capital employee or related person is a general partner or owner in any business in which our clients may be solicited to invest, nor any business from whom we might purchase goods or services. Birmingham Capital does not act as a broker/dealer. In other words, we do not have an arm of our company that can execute trades and charge a commission. V/e generally have no conflict of interest in the selection of brokers chosen to execute trades for our clients' accounts. However, more specific information is available on this topic in the section of this brochure subtitled Brokerage Practices, including a discussion of how the selection of certain brokers may involve higher commissions and how this benefits our clients. Birmingham Capital is not compensated by any third party, broker, or custodian for recommending or using the services of that third party.  10. Brokerage Practices As was mentioned in the section above, Birmingham Capital does not act as a broker/dealer, so when we decide to execute a purchase or sale in a client's account, we must choose the appropriate broker to execute the transaction. Discretion in the selection of the executing broker and the commission rate to be paid on a particular trade may vary depending on whether the client is a non-sponsored client or a sponsored client, and on the basis of what additional services a particular broker may offer that are of benefit to all of our clients. A non-sponsored client is one who comes to Birmingham Capital directly, without the aid or recommendation of a third party securities broker acting as a middleman or advisor. In the case of non-sponsored clients, the selection of brokers and/or custodians, and the negotiation of commission rates will primarily be our responsibility, although the client may wish to provide input. If the client wants us to, we may suggest a choice of several brokers andlor custodians that we have a relationship with, and that have demonstrated that they provide a cost-effective and reliable service. The client may choose to select one of those brokers and lu custodians that we suggest, or they may choose their own independent of our suggestions. There are several factors that weigh in the selection of brokers and negotiation of commission rates. We will consider the execution capabilities of the broker relative to the anticipated size of the transactions in the client account. Most security transactions, particularly those that involve purchases and sales of stocks, and that involve trades of only a few hundred or even thousands of shares (as a general rule, less than 10,000 shares) are executed by securities exchange computers that simply match orders and do not require the working attention of a broker. In such cases, there is very little difference in the execution capabilities between brokerage firms. If we anticipate that a client's account might involve transactions of a greater size, broker selection will be more important, and the selection of a brokerage firm with more advanced capabilities in 'oworking an order" will be a consideration. V/e will also consider the commission rates that will be charged relative to the anticipated size and frequency of the transactions. Additionally we will consider the record-keeping and transaction accounting capabilities of the broker, as that can have a significant impact on the client's overall satisfaction with the investment product. The objective is to obtain a high overall quality of service from the broker, and not necessarily the lowest possible commission rate. The single-minded objective of finding the lowest possible commission rate or cost per trade may often come at the expense of other factors thatmay in fact be more important to the overall satisfaction level of the client with the broker selected. One very important factor that affects our ability to obtain important information about the industries and companies we invest in is the availability of reliable research products. Larger brokerage firms often have research capabilities that are available to us through  11. the use of brokerage commissions. When we receive research products from such brokerage firms, our clients directly benef,rt because we do not have to independently produce or pay for that research. We are not speaking here of what will later be described as "soft dollar" services. In this case, we are discussing research that larger brokerage firms make generally available to investment managers who from time to time execute trades with those brokerage firms, but with no set expectation for the amount of brokerage that may be generated. In other words, we aren't "contracting" with them for a set amount of brokerage commissions in exchange for a specified research product. We will discuss that arrangement below. Therefore it may be the case that the use of certain brokers will be determined on the basis of their ability to provide research services to Birmingham Capital. In those cases, brokerage commissions are not only paying for execution, but also for research services. In such cases it is not reasonable to expect that the commission rate paid will be the lowest absolute rate available. Such research services are of value to all Birmingham Capital clients because they provide a basis for our security selections and the timing of our trades. These services may include company and industry reports, market or economic evaluations or forecasts, and statistical information that is critical to our ability to evaluate investment opportunities. Since all clients benefit from the use of research services that may be paid for by brokerage commissions, there may be no direct correlation between the benefits received by any one client and the brokerage commissions that come from transactions from that or any other portfolio. In other words, any number of accounts may participate in trading that generates commissions that help to pay for research services. As a result, BCM recognizes, and advises clients, that our objective in negotiating commissions with any particular broker may not always be the obtaining of the absolute lowest commission rate. As a result of all these factors, we will place orders for the purchase and sale of securities with the primary objective of obtaining a competitive commission rale, an efficient execution of the trade, and the possibility that certain brokers are providing vital research products and information. V/e will insist on a high standard of quality in evaluating execution capabilities, and will occasionally test broker execution capabilities. We will deal only with brokers who can meet those standards of quality execution. A sponsored client is a client who has been brought to us or introduced to us by a third party securities broker, usually someone with whom the client has had a prior relationship. Birmingham Capital does not compensate, directly or indirectly, ãîy person or organization for client referrals. In the case ofa sponsored client, the introducing broker will usually also serve as the custodian of the client's assets. There may also be cases where clients that come to us as sponsored clients will be in an anangement with the sponsoring broker that is called a "wrap fee" arrangement. Under this arrangement, the client generally pays one fee to the broker (usually a percentage of assets under management), and from this one fee all other expenses are paid, including brokerage  12. charges for trades and Birmingham Capital's investment management fee. Birmingham Capital currently has one wrap fee arrangement in force with a specific brokerage firm. As was mentioned earlier, we may also from time to time execute trades with certain brokers with whom we have contracted to obtain specific research materials in exchange for brokerage commissions. This is known as a "soft dollar" arrangement. We use these types of commissions to purchase products and services that aid in investment decision- making and trade executions. Specifically, during the past year, we have used soft dollar commissions to purchase our securities quotation and trading service supplied by Telemet. The commission rates we receive by trading with the broker we use for this type of trading are very competitive, but we cannot guarantee that they are the lowest possible rates. Again, all of our clients are receiving the benefits of this service, and should expect that there might be a higher commission rate involved, and we do not attempt to proportionately allocate those benefits only to the accounts that might have paid the commissions. Sponsored clients, which are clients that come to us on the advice of a third party such as their broker, will almost always direct us to execute trades with the broker who introduced us to the client, and who in most cases has custody of their assets. In such cases Birmingham Capital does not accept responsibility for execution capabilities nor commission rates. We will assume that the sponsored client and the sponsoring broker have accomplished those negotiations themselves, and that they are satisfactory to the client. In such cases, the client should realize that they are likely paying higher transaction costs or custodial fees than might be available through other brokers. Finally, it may be our practice from time to time, especially in cases where we plan to purchase or sell a particular security for a large number of client portfolios, to aggregate or combine all the trades into one large trade with one broker. We can only do this if the clients have not expressed a preference for a particular broker or ifthe custodial situations allow it. In those cases, it might be advantageous to the accounts involved to aggregate, in that they could potentially receive a lower commission rate than if the trades had been done one at atime in individual accounts. We will use our best judgment to determine when it might be advantageous to our clients to do this.  13. Review of Accounts Client portfolios at Birmingham Capital will be managed by one or both of the firm's principals and foundets, H. Thomas Smith and William H. Couchman. Tommy and Bill have extensive backgrounds in money management. Tommy (born 03106140) has been a professional investor since 1969, including 3 years at Integon Corporation and I I years at AmSouth Bank in the Trust Investment Department. Bill (born 07103152) has been in the investment management business since 1976, including nearly I years at AmSouth Bank in the Trust Investment Department. Both Tommy and Bill have advanced degrees in business, and both are Chartered Financial Analysts (see the section subtitled Investment Professionals, p. 18). Client accounts are reviewed by one or both of the principals on at least a monthly basis to insure that the holdings are consistent with previously stated client objectives. Accounts may be reviewed more frequently as securities are bought or sold in accounts or as portfolio strategies may change. Individual accounts may also be reviewed more frequently if there are changes in the client's objectives. Accounts are generally managed by the principals as a team, but one of the principals will usually be designated as the primary contact on each account. The principals will meet with clients and/or client representatives (such as financial advisors) periodically to discuss client objectives, strategies, portfolio changes, and performance. Should modifications in client objectives occur, those changes will be immediately noted on the client profile. There is no formal scheduling of such meetings unless the client requests that such be the case. We will attempt to schedule and conduct such meetings at least annually, subject to the client's availability. Meetings may be more frequent if the client requests such.  14. Custody of Assets Birmingham Capital does not have the authority to act as a custodian for client funds. Prospective or current clients may direct us to use a custodian of their choice. If a prospective client has no preference with regard to a custodian, we may suggest a set of alternatives with regard to the choice of an appropriate custodian. If the prospective client still has no preference, we will exercise the authority to choose an appropriate custodian for the client's funds. Prospective clients should be aware that some custodians may charge a custodial fee that the client must pay in addition to our management fee. Any custodian that we may choose on behalf of a client will send the client a statement of their account at least quarterly, which will list all transactions for the time period covered, as well as a market valuation for the assets. Clients should carefully review these statements, as they represent the official picture of the account's transactions, asset values, and potential tax liabilities. We also utilize an accounting system for account management, and if a client requests it, we will furnish a monthly or quarterly statement from our internal accounting system. Even though we balance our statements monthly with those provided by custodians, clients should nonetheless carefully compare our statements with those of their custodian.  15. Investment l)iscretion All prospective clients who wish to hire Birmingham Capital must execute an investment management agreement which gives us, in effect, a power-of-attorney to execute securities transactions in a specified account. The management agreement does not give us authority to direct the custodian to transfer assets into or out of a client's account without the client's consent or direction. The only exception is that the client may also give us standing authority to bill the custodian for our investment management services, and the custodian can then pay our management fee from the account we manage. In any such case, we will also send the client a copy of the invoice sent to the custodian so that the client can see the asset values and amount billed. In cases where a "wrap fee" arrangement exists between the client and a brokerage firm (a sponsored client as described in the Brokerage Practices section), there may be a single contract executed between Birmingham Capital and the sponsoring broker that covers all clients whose accounts we manage under that wrap fee arrangement. We will generally exercise full discretionary authority with regard to the selection of securities to be bought or sold within a client's account. In other words, it will not be our practice to seek client approval prior to any particular transaction. It will be the client's responsibility to notif, us if they wish to create any limitations on that discretionary authority, such as the identification of particular securities or types of businesses that they do not wish to own. Unless the investment management agreement or a written notification specifies otherwise, we will assume full discretionary authority in the selection of securities to be bought and sold in such client's account.  16. Voting Proxies If the client wishes for us to do so, we will accept responsibility for voting the proxies for securities held in the client's account. Clients and prospective clients should know that we do not hold ourselves out to be "Activists" in proxy voting. It is generally not our goal to actively seek to influence decisions that the boards of directors of companies in whom we own shares for our clients might make. Consequently, our normal practice with regard to proxy voting will be to vote with company management. There may be an exception to that practice if; in our judgment, a proxy item that is up for a vote appears to us to give company management some sort of advantage over shareholders. As an example, in times past it might have been the case that managements might ask shareholders to approve a provision that allowed certain company managers to purchase shares of their own stock in the market at a price discounted to the current trading value. If we see such a proposal on a proxy ballot, we might vote against it because we might consider it to be disadvantageous to shareholders in favor of management. We would hasten to add, however, that in the current era of higher scrutiny of management practices, such situations are very rare. Clients may wish to vote their own proxies, in which case we will make that provision available to them by giving the custodian appropriate instructions with regard to who receives the proxies when they are issued. Clients may also direct us as to how to vote on a particular matter that may appear in a proxy by giving us written instructions for such a vote for securities in their account. Clients may request from us a copy of our voting policies and procedures, as well as information about our voting record for proxies in their account.  T7 Fiduciary Responsibility V/ithin the financial services industry, a Fiduciary is defined as a professional practitioner who is obligated to always, and in every way, place the interests of his clients ahead of his company or personal interests. As we state I our Code of Ethics, it is always our practice to put our clients' interests first, and we work very hard to accomplish that. In that sense, we act as Fiduciaries I the practice of investment management for our clients, and in the way we run our business as it may impact our clients. More recently, the definition of a Fiduciary has been enhanced to include proper care in The offering of advice on specifics such as how best to structure a retirement plan for A business or an individual. In other words, should the client or prospective client create Or use a 401k, an IRA or some other type of vehicle to best accomplish their retirement Objectives? Recent changes in the laws that govern the Financial Services industry now Require professionals who would offer such advice to clients or prospective clients to Act in a Fiduciary manner. This means that they ought to be well informed about the Available retirement vehicle options, and must be prepared to discuss in great detail the advantages and disadvantages ofthese options. Ifthey choose to offer such advice, they must be prepared to offer the client or prospective client a full and impartial picture of the various options available. However, these are decisions that are beyond the purview of our investment management practices at Birmingham Capital. Since such decisions are out of the realm of our regular investment management practices, We do not hold ourselves out to be Fiduciaries within the context of offering this sort of advice. And so as a general rule, we will not offer advice as to how to best structure a retirement plan in terms of what specific vehicle to use. Clients and prospective clients are advised to consult their accountant or other financial services providers for guidance in this area.  18. Investment Professionals We are required to provide clients and prospective clients with information about our employees who are involved in the formulation of investment advice for our clients and who have direct client contact, and, for employees who have discretionary authority over our clients' assets. As we stated in the section subtitled Review of Accounts (p. 14), all client contact and portfolio supervision is done by one or both of our founders and principals, H. Thomas Smith and William H. Couchman. Tommy and Bill both have advanced college degrees. Tommy has degrees from Wake Forest University (Bachelors) and the University of North Carolina (MBA); and Bill has degrees from the University of Alabama (Bachelors and Masters). Tommy (bom 03106140) has been a professional investor since 1969, including 3 years at Integon Corporation and 11 years at Amsouth Bank in the Trust Investment Department. Bill (born 07103152) has been in the investment management business since 1976, including nearly 8 years at Amsouth Bank in the Trust Investment Department. Both Tommy and Bill are Chartered Financial Analysts*. *The Chartered Financial Analyst (CFA) designation is conferred on investment professionals who have completed a 3-year study and testing program designed to enhance their knowledge of a variety of aspects of investment research and portfolio management. CFA's are members of the national Association for Investment Management and Research.  Birmingham Capital Management Form ADV-II Customer Relationship Summary (CRS) The information contained herein is current as of March 15, 2025 The U.S. Securities and Exchange Commission has mandated, by SEC Release 34-86032,that Registered Investment Advisors should make available to retail clients (clients that are not institutions) ADV Form III, which is an easy-to-understand summary of the relationship that a client is entering into with an Investment Advisor. The required start date for distribution of this Form III is June 30,2020. Birmingham Capital Management is a Registered Investment Advisor under the Investment Advisors Act of 1940, and is subject to oversight by the U.S. Securities and Exchange Commission. Birmingham Capital does not act as a Broker-Dealer. We provide investment advisory services (usually referred to as 'money management') to our clients. This document is intended to provide easy-to-understand information about us and our services, and how you as a prospective client will be offered those services. Additional free and simple tools are available to you to research firms such as ours, and financial professionals, at Investor.gov/CRS. This site also provides educational materials about broker-dealers, investment advisors, and investing. Below are several commonly asked questions about investment advisory services and our comments on what Birmingham Capital provides in these areas. a What ¡nvestment services and advice can you provide me? We provide investment advice and management to retail investors- individuals who are not institutions. This would include taxable investment accounts, individual IRA's, and other retirement accounts. We are hired by such individuals who want their assets invested primarily in the u.s. equity markets, although we also use fixed income investments from time to time to help meet the client's needs and circumstances. Our primary product is the portfolio management of invested assets, and we generally invest in the securities of well-known companies that are listed on the U.S. stock exchanges. We design the structure of the portfolio of investments to best suit the needs and risk tolerances of the individual client using specific stocks and fixed income investments. We do not offer index funds nor mutual funds as a part of our services except as they might fit an overall structure. ln other words, in your portfolio you would see prímarily individual stocks. Only rarely would we use a mutual fund or ETl, and then only as an adjunct to the individual names in the portfolio.  Each client would have your own portfolio of investments that are best suited to your needs. Your assets would not be invested in a mutual fund or ETF except as noted above. Your communication would be directly with the decision-makers. We do participate in wrap fee programs where clients are brought to us by an outside financial advisor; and in those cases we work with your outside advisor through shared communication. But even in those cases you can still communicate with your portfolio manager. Once a relationship is established, we exercise full discretionary authority to make the investment decisions, but to the best of our ability, we do so consistent with your objectives. lf you tell us in writingthatyou do notwish to invest in certain specific companies or industries, we will incorporate those instructions in our actions in your portfolio. We monitor portfolios continuously and report to our clients as frequently as they desire. We are happy to discuss with our clients other financial issues that they may want advice on, but we do not hold ourselves out to be experts in other areas outside of investment management. For specific advice on matters such as tax laws, estate planning, insurance, or other financial issues, we advise the use of appropriate accountants, attorneys, or financial planners. Our new account minimum is generally 5750,000, although there could be exceptions. Additional and more specific information about Birmingham Capital's services can be found in our ADV Part ll (available upon request). a Given my financial situation, should I choose an investment advisory service? The decision to use an Investment Advisor is a very personal decision, but it is best driven by a recognition that your investable assets have reached a critical mass that causes you to realize that ahigher level of professionalism is appropriate. We can medicate ourselves if we have a cold, but if things get more serious, we may and should recognize that amedical professional is needed. And so it is with your investments. Emotional decisions with regard to investments are almost always fraught with impairment, and most people have an almost emotional connection to their investible assets. In such cases it is diffrcult to make non-emotional decisions. An investment professional can make a more emotionally detached decision on your behalf. In addition, investment professionals are able to devote the time and expertise to a process that individuals usually cannot.  Having said all of that, it is important for an individual investor to understand his or her limitations in terms of letting someone else have an element of control over their money. There are many people who are just not comfortable turning such decisions over to someone else. And in such a case, an outside manager may simply be a source of constant conflict. So in summary,have you reached the point that your assets and the decision-making needed to employ them are now beyond your own comfort level? Are you emotionally capable of giving someone else an element of control and decision-making on your behalfl If you answered 'yes'to both of these questions, then you are a candidate for investment management services. o What fees will I pay for your services? The only fee you will pay for our services is our investment management fee, which is calculated as a percentage of the market value of the assets we manage for you. We believe this best aligns our interests with yours. Our fee is typically .75 of l%o of that market value annually. And we collect that fee in quarterly increments. So if we are managing a portfolio of $1,000,000 for a client, the annual fee would be $7,500. And we would collect it (if the market value stayed constant) in four increments of $1,875 each at the end of each quarter. It can be paid to us directly by you, or you can instruct the account custodian to pay it to us out of your account. In either case you would get a quarterly accounting of the fee so that you will know what is being paid. If there are commissions on trades we may do in your account, those commissions go to the executing broker and not to us. They are paid out ofthe proceeds ofthe trade. There may also be fees paid to the institution or firm that has custody of your assets. We are not allowed by law to have custody nor can we affect the movement of your funds except to enter trades. Some custody institutions may charge a custody fee, usually less than .10 of r%. An exception may exist in the case of wrap fee programs. In those cases, it is common for the sponsoring institution (such as a brokerage firm) to charge one umbrella fee to the client, and our fee would be a part of that larger fee. In such instances, Birmingham Capital has no control over the calculation of that larger fee. If there is a mutual fund that is used in your account along with other individual investments, the mutual fund fees will be collected by the Fund sponsor and will be reflected in the unit value of the fund. In other words, if a mutual fund was used, you would not see the fees collected by the fund, but they would be collected nonetheless. We generally do not use mutual funds unless specific circumstances make it advantageous to the client because the client in such cases is paying two fees- ours plus what the Fund may charge. In all the cases described above, please note that you will be paying management or custodial fees and commissions on trades whether your account makes money or not. It is important for you as a client to understand the total range of fees you are paying because in many cases out there in the real world, the cumulative effect of those fees can be substantial.  Help me understand how these fees and costs can affect my investments. All fees come out of the principal value of your assets under management. A typical accounting could look like this: You open an account for $1,000,000. You would pay Birmingham Capital an annual management fee total of $7,500 unless the asset value of your account changes. If it goes up, our fee would go up commensurate with that change. Likewise if it goes down. You could also pay commissions if the broker we used to affect trades chooses to charge a commission. Many on-line brokers such as Schwab or E*Trade no longer charge commissions on trades. But if commissions are charged, they are generally not very substantial. If in the course of a year's time there were, say,20 trades made in such an account, the total commissions paid (assuming a broker is used who charges commissions) would probably not exceed $1,500. If we add in a custodial charge to the account of .10 of lYo, then the total fees paid from the account for the year would approximate $9,750. That is approximately lo/o of the market value of the account. So if the investments in the account eam a return in excess of IYo for the year, it is now making a positive return for the owner. a What are your legal obligations to me when providing or enacting recommendations? We as a Registered Investment Advisor are legally obligated to abide by all the relevant securities laws that the SEC and the Securities Commission of the State ofAlabamaare charged with enforcing. And at Birmingham Capital we also strive to abide by the spirit of those laws. We earn fees ONLY from our investment management services, and have no conflicts of interest created by being involved in other aspects of the financial services industry. V/e abide by a Code of Ethics (which is available upon request) that emphasizes always putting the client's interests ahead of our own. So, when we øct as your investment ødvísor, we will act in your best interests and not put our own interests ahead ofyours. It is certainly possible for money managers to have conflicts of interest with their clients as they work to make money for their clients. As an example, our choice of which broker to use to execute atrade could be influenced to a limited degree by the investment research services that broker may offer. So it may be that we would use a particular broker that charged slightly higher commission than an alternative. But the value we receive for using that broker (good execution plus research services that are exceedingly helpful to our decision making for your account) would justiôr that decision. On the surface this might appear to create a conflict, but in the big picture, all of our clients are benefitting from the insights we gain by the use of that broker's proprietary research products. W'e would be happy to discuss with you what any such conflicts might involve and how we seek to minimize or eliminate them. So, we are going to try to make the best decisions we can on your behalf, but investing in securities markets entails risk of loss, and in the case of equities, the losses can on occasion be substantial. Potential investors are strongly encouraged to recognize that no investment program involving equities can ever guarantee that no losses will occur.  a How do your professionals make money? Our professionals are the owners of the firm, and all of the revenues of the firm come from the management fees our clients pay for our services as their money manager. We have no other sources of income, and in particular, no sources of income that are in any way related to our activities as investment advisors. We are not paid to endorse products of any kind, and we are not paid on the basis of whether our portfolios exceed a particular benchmark (often referred to as "incentive fees"). We have no direct or beneficial interest in any other endeavor that could create a conflict. In other words, we are not involved in any way in other organizations that provide products or services to firms such as ours. W'e do not make more money by increasing the frequency of trading in our clients'accounts. Nor do we get paid by any organization that might sponsor investment products such as mutual funds, so we have no incentive to direct our clients to such products except as it may be in their best interests in order to earn a better investment return. Do you or your financial professionals have legal or disciplinary history? None of our professionals nor staffhave had any instances of legal or disciplinary issues of any kind related to our business. Both prospects and clients are encouraged to visit Investorgov/CRS to see the history of both investment professionals as well as management firms in this regard. a Who would be my primary contact person should I become a client? Who could ltalk to if I have concerns about how I am treated? As a client, your primary contact would be one of the two owners and investment professionals. Tommy Smith has over 55 years'experience in asset management and is a Chartered Financial Analyst. Tommy is the President of Birmingham Capital and manages about half of the firm's portfolios. Bill Couchman is also one of the owners and investment professionals. Bill has 50 years' experience and is a Chartered Financial Analyst. Bill manages the other half of the firm's portfolios. Bill is Executive Vice President and Chief Compliance Officer of Birmingham Capital. He would be the primary contact for clients who have concerns about any aspect of the firm's actions or behavior. If you have additional questions about the advisory services provided by Birmingham Capital, please contact us at: Birmingham Capital Management 2 Perimeter Park South, Ste. 235 East Birmingham, AL 35243 205-967-7062 You can request a copy of this Relationship Summary as well as otherADV hlings and an information brochure on us. Thank you for your interest in Birmingham Capital Management.