HYNES & HOWES INSURANCE COUNSELORS, INC.
                          Notes to Financial Statements
                     Years Ended September 30, 1999 and 1998

Note 9 - Stock Held in Escrow

         At September 30, 1999 and 1998 there were 3,546,000 shares of the
         Company's common stock held in trust.  Those shares were owned by the
         Frank B. Howes Trust and by directors or former directors of the
         Company.  The Trust agreement was required by the Commissioner of
         Insurance of the State of Iowa in order to gain approval of the
         Company's stock issue of April, 1971.  Under terms of this agreement
         these shares were to be released after a period of five years or when
         the Company attains certain profitable goals for three consecutive
         years and upon written approval from the Commissioner of Insurance of
         the State of Iowa.  It is also required that should the Company
         dissolve during this period that the pro-rated distribution of assets
         to stockholders would be done on a basis which would pay these
         shareholders less per share than would be distributable to the
         shareholders of the new issue.  The Company's earnings to date have not
         been sufficient to qualify for the release of these shares held in
         escrow.  The condition requiring that these shares be held in escrow
         for five years has been fulfilled, however, the Commissioner of
         Insurance of the State of Iowa has not granted the written approval for
         the release of these shares at this time.  The shares will continue to
         be held in escrow until written approval for their release is granted
         by the Commissioner.

Note 10 - Contingent Liability for Rescission of Capital Stock Sales

         Since its inception, the Company has issued and sold 11,222,699 shares
         of its common stock.  Although most of these shares were registered
         with the State of Iowa, none of these shares were registered for sale
         under the federal securities law.  These shares were issued and sold in
         reliance either upon the exemption provided in Section 4 (2) or Section
         3 (a) (11) of the Securities Act of 1933.

         The Company feels that any possible shares and federal contingent
         liabilities that may have existed because of the issuance of securities
         which may not have been exempt from registration under the Securities
         Act of 1933 and unless the subject of an existing legal proceeding
         filed appropriately may now be extinguished as a result of the new Iowa
         Uniform Securities Act which became effective on January 1, 1976 under
         Section 613 of that Act, liability must now be ascertained by looking
         to the statute in effect at the time that the stock issue was sold.
         The two year statute of limitations in effect on January 14, 1973, at
         the time of the closing of the issue, has run as have the other
         applicable federal statutes of limitation. As a result, wit h the
         exception of the Federal and State Tolling Doctrines, possible
         contingent liabilities may no longer exist.