Investment Policy Statement

Creating Your Personal Investment Policy

This Investment Policy Statement (IPS) serves as a foundational document for the management of your investment portfolio by Farris Capital Management Inc. An IPS is a critical tool for realizing your long-term financial objectives.

What is an Investment Policy Statement?

An Investment Policy Statement documents your specific, long-term portfolio goals and parameters. These include your risk tolerance, return goals, investment timeline, and other personal considerations.

By integrating your IPS with your Financial Plan, we can tailor your portfolio to meet your unique financial needs and risk tolerance. This collaborative approach enables us to optimize your investment strategy for long-term success.

Why Establish an Investment Policy Statement?

Your Investment Policy Statement (IPS) is your financial compass, guiding you through market storms. A written Investment Policy Statement (IPS) helps safeguard your long-term investment strategy from impulsive decisions driven by short-term market fluctuations. By establishing clear guidelines, we can maintain focus and avoid emotional reactions that may compromise your financial goals.

The process of formulating an Investment Policy Statement epitomizes the core principles of financial planning. By systematically evaluating your financial circumstances, establishing clear objectives, developing a strategic investment approach, executing the plan, and conducting periodic reviews, we can work together to achieve your long-term financial aspirations.

By connecting your dreams to a solid investment plan, you're setting yourself up for financial success. Farris Capital Management Inc. can help you navigate the complexities of investing, but it's your vision that drives the process. By defining your goals and risk tolerance, you empower us to make informed decisions. We can then take the reins, managing your investments to help you achieve your dreams.

How an Investment Policy Statement Can Help You

Once established, your IPS helps ensure we're both on the same page, and it serves as a roadmap for ongoing investment decisions about your portfolio. We buy or sell investments from your accounts based upon your IPS.

Investing with your IPS helps us:

• Achieve your target return with the least possible risk
• Ensure your investment taxes are minimized
• Avoid adjusting portfolio strategies based on short term market movements
• Make changes based on projected planning goals vs stretching for return for no reason

Developing a thorough, personalized Investment Policy Statement is a critical first step in long-term financial planning, and it will help us maintain our long-term focus during short-term market movements or life changes. As markets swing, your documented goals will keep us both focused on reaching your goals.

Your Portfolio Description

Based upon our conversations, the information you have provided, and your stated objectives, we have selected _______________ as the most appropriate investment portfolio for you now.

Your Cash Requirements

The portfolio will be managed with a total return objective. As such, funds for distributions may be drawn from either income or capital. Farris Capital Management will implement a total-return-based spending policy. Distributions will be satisfied using investment income, capital gains distributions, or the sale of portfolio assets if necessary.

Investment Time Horizon

We define your investment time horizon as the length of time prior to needing periodic withdrawals. For equity-focused portfolios, we recommend a minimum holding period of two to three years. Otherwise, a primarily fixed-income strategy is more suitable. All variable-return investments, including stocks, should be considered long-term. Remember, longer holding periods can significantly reduce portfolio volatility.

Should you require funds from the portfolio prior to this time, please note that withdrawing funds from the portfolio before the planned date could result in higher volatility. Unplanned withdrawals may have a negative impact on your ability to achieve your long-term financial goals.

Your Risk Tolerance

Clients recognize that investment returns are accompanied by a certain level of risk. Farris Capital Management Inc. and its advisors determine a client's risk tolerance by identifying the maximum annual loss that would cause serious discomfort or concern. Risk is quantified statistically using volatility, standard deviation, beta, and downside capture ratios.

While complete certainty is not possible, we analyze the probability of losses exceeding your maximum tolerance level. Based on our best assumptions, we have a high level of confidence that your portfolio will not experience losses beyond your predetermined limit.

Asset Allocation and Performance Expectations

The portfolio will be managed with a long-term focus, considering prevailing economic and market conditions. The portfolio will be reviewed annually for significant investment changes and rebalanced approximately every 6-8 weeks. Allocations may deviate from their target weightings to minimize unnecessary tax implications.

The primary focus of the portfolio's management will be asset allocation and targeting a specific level of risk as measured by standard deviation, correlation, and expected returns. Asset allocation involves selecting a mix of investments and allocating capital to those investments in a manner that aligns with a specific risk tolerance and return objective. The target asset allocation and performance benchmarks are outlined below.

How We Implement Your Investments

Each investor typically establishes his or her own individual account at Schwab or Fidelity. Many clients have several accounts (e.g., a joint account, a trust account, several IRA accounts, etc.). After you have approved your portfolio's risk/reward profile, we implement the investment plan and execute the transactions in your accounts. Mutual funds, ETFs, individual stocks and bonds, and options are the primary investment vehicles used in your portfolio.

Adoption and Synopsis of Your Investment Objectives

This is a critical first step in long-term financial planning, and it will help us maintain our long-term focus during short-term market movements or life changes. This page is an overview of the objectives you have established during this process. This policy will be reviewed periodically to ensure its continued appropriateness. Guidelines may be adjusted at any time there is a major change in your life or upon written notice.

Based upon our conversations, the information you provided, and given the long-term nature of your objectives, the following is an overview of your investment policy.

Our goal is to establish a managed portfolio that achieves growth with a level of risk that is appropriate for your objectives. This Investment Policy Statement has been reviewed, mutually adopted, and incorporated into the Investor's asset management and Portfolio records.

Description of Investment Strategies

The role of an investment manager is not necessarily to beat the market but, rather, to establish and manage a portfolio consistent with the client's objectives, with appropriate diversification and asset allocation, while taking into consideration the risk preferences and tax situation of the client.

Investment Discipline - Strive to provide long-term capital growth

Discipline is essential to maintaining a successful and sustainable investment strategy. Therefore, a disciplined approach is at the core of the investment strategy.

The key beliefs are:

• The most important mission is the preservation of investors' capital.
• While performance is important, the primary measure of success is the length of the client relationship and adherence to the individual client risk tolerance and the accomplishment of financial goals.
• A sound risk/reward profile is the foundation on which to build portfolios. There is a high correlation between long-term performance and error avoidance.
• Risk is unavoidable; however, we attempt to lessen one of the key risks of investing - avoiding the BIG MISTAKE.

Asset Allocation Strategy

Portfolio holdings will generally include individual stocks, market indexes such as the S&P 500 ETF, Protective index ETFs, Accelerated outcome ETFs, options, and potentially mutual funds and ETFs (for fixed income exposure) to gain proper diversity. The reason we utilize all of the above is to reduce the internal costs of our portfolios, gain tax efficiencies, and to regulate risk in the portfolio.

Differences in client risk tolerance are addressed through our asset allocation strategy and based on our opinion of each investment's risk evaluation. We review and manage this asset allocation on an ongoing basis. Based on each risk tolerance, we must be confident each client has a reasonable expectation return potential. It is our investment philosophy that will allow construction of portfolios where clients can store the majority of their wealth.

Individual stock weightings will range between 0.50%-3% at time of purchase. No individual stock should be more than a 5% weighting. ETF's and mutual funds will comprise a larger weighting due to the added diversification via the underlying holdings.

Individual Stock Investment Strategy

Our primary investment objective is to construct a stock portfolio that tracks the overall US stock market. We aim to outperform by implementing a stock selection process focused on identifying and avoiding companies that exhibit stressed business models or balance sheets, and are expected to underperform current market expectations.

Our investment strategy focuses on avoiding losers; rather than finding the high-flying winners. Our investment process involves screening top-tier research from leading investment firms, such as Goldman Sachs, Merrill Lynch, Raymond James, JP Morgan, and others, and augmenting these insights with our own internal research and proprietary screening models.

Index Investment Strategy

We use index investments (via ETFs) as a core component of our portfolios. Our index investments provide a diversified selection of securities in one easy, low-cost, tax efficient investment. Most index funds will provide exposure to hundreds if not thousands of securities in a single fund, which helps lower your overall risk through broad diversification. By investing in an index fund, we can construct diversified portfolios tailored to a specific risk tolerance with very few purchases.

Protective Index ETF Strategy

To safeguard investments, we incorporate ETFs that provide downside protection against market declines over 12 month periods. By sacrificing some upside potential, these ETFs can shield investments from significant losses. We strategically select ETFs with buffer levels ranging from 9% to 20%, tailoring the risk-reward profile to individual client objectives. This approach helps ensure portfolios remain resilient in challenging market conditions.

Accelerated Outcome ETFs

To enhance potential returns, we've incorporated accelerated ETFs into our portfolios. These funds aim to amplify returns by 2 to 3 times the benchmark index, up to a specified cap (Usually ranging 18-25%). While they offer the potential for higher returns in low to moderately rising markets, they maintain the same risk profile as the benchmark during downturns.