Investment Policy Statement

Prepared for
Mr. and Mrs. Client

XYZ Financial

August 2009

The purpose of this Investment Policy Statement (“IPS”) is to establish a clear understanding between Mr. and Mrs. Client (“you”) and XYZ Financial as to the investment objectives and policies applicable to your investment portfolio.

At the end of this IPS, we will ask for your signature(s). This IPS is not a contract and does not modify or amend any existing contracts between [Advisor] and you but will provide the framework within which XYZ will manage your assets. This IPS is intended to be a summary of an investment philosophy that provides guidance for XYZ and yourself. Its intent is to explain the nature of our relationship and the investment strategies we have agreed to implement as well as help balance your desire for returns with your level of risk tolerance so as to seek to achieve your long-term investment goals.

Investment Objectives

The primary investment objective of the assets placed under management is (enter Investment Objective from one of five below). Although past performance does not guarantee future results, this portfolio should be constructed to satisfy diversification and asset allocation strategies and designed to seek to meet your goals and objectives over time. You acknowledge that there is a distinction between an investment objective and a guaranteed investment result, and that investment results cannot be guaranteed.

The nature of the investment objective reflects your risk tolerance, time horizon and goals, and can be described as follows:

(Note to Advisor: Select One Objective and increase font size to fit on rest of page)

Aggressive Growth

Assets generally will be invested in domestic and foreign equities (with the exception of a small cash position). Additionally, this portfolio may include global real estate, currencies, and commodities, as well as managed futures and long-short funds.
Investors in this portfolio should have a long time horizon of fifteen years or greater, an understanding of the risks associated with equity investments, and a propensity to add money to the account on a systematic basis.
This portfolio is very aggressive by nature, and should not be considered by anyone unwilling to take on significant risk.
Emphasis is placed on aggressive growth and maximum capital appreciation.
There is no focus on generation of current income.

Growth

Assets generally will be invested in domestic and foreign equities. Secondarily, there will be some fixed income assets (including a small cash position), holding both US and international bonds. Additionally, this portfolio may include global real estate, currencies, and commodities, as well as managed futures and long-short funds.
Investors in this portfolio should have a long time horizon of more than ten years, an understanding of the risks associated with equity investments, and a propensity to add money to the account on a systematic basis.
This portfolio is aggressive by nature, and should not be considered by anyone unwilling to take on significant risk.
Emphasis is placed on achieving high long-term growth and capital appreciation.
There is little focus on generation of current income.

Growth with Income

Asset allocation targets generally will mirror a balanced portfolio, with equity assets and fixed income assets (including a small cash position), holding both US and international stocks and bonds. Additionally, this portfolio may include global real estate, currencies, and commodities, as well as managed futures and long-short funds.
Investors in this portfolio should have a relatively long time horizon, that is greater than five years, and an understanding of the risks associated with equity investments.
The primary investment objective of this portfolio is growth of principal. Fixed income and fixed income alternative assets are included to generate income and reduce overall volatility.
Emphasis is placed on modest capital growth with some focus on generation of current income.

Income with Moderate Growth

Assets will be allocated between equity assets (primarily income-oriented) and fixed income assets (including a small cash position). Additionally, this portfolio may include global real estate, currencies, and commodities, as well as managed futures and long-short funds.
Investors in this portfolio should have a time horizon of more than five years, and be comfortable with the risks associated with of equity investments.
Fixed income and fixed income alternative assets form the core of the portfolio, generating income and lowering the portfolio’s overall volatility.
The majority of fixed income investments are allocated to higher quality bonds. Additional fixed income allocations to high yield and foreign bonds may provide opportunities for increased income and diversification.
Equity assets provide the opportunity for long-term growth of principal.
Equity investments are divided among large company, small company, and international companies.
Emphasis is placed on income with growth of principal being an important consideration.

Income with Capital Preservation

Asset allocation will be primary targeted toward fixed income assets (including a small cash position), along with some income-producing equity assets. Additionally, this portfolio may include global real estate, currencies, and commodities, as well as managed futures and long-short funds.
Investors in this portfolio should have a time horizon of more than three years and be comfortable with the risks associated with modest equity portion of their investment portfolio.
Emphasis is placed on generation of current income and prevention of capital loss.
The primary investment objective of this portfolio is income, with growth of principal a secondary concern.
-Fixed income and fixed income alternative assets form the core of the portfolio, generating a steady income stream.
The majority of fixed income investments are allocated to higher quality bonds. Additional fixed income allocations to high yield and foreign bonds provide opportunities for increased income and diversification.
A small investment in equity assets may provide the opportunity for modest long-term growth of principal.
Equity investments are divided among large company, small company, and international companies.

Liquidity and Income Needs

In conjunction with XYZ, you have determined that sufficient disposable income and liquidity is available from other sources so that you do not need to maintain cash balances among these assets, except for investment reasons, including payment of management fees or as indicated below. Your income need from the investment portfolio is approximately $xx,000 per year subject to an annual cost of living/inflation adjustment, if necessary. Income is to be achieved on a total return basis (i.e., interest, dividends and capital appreciation). The size of the required annual distribution relative to the size of the account may necessitate a withdrawal of principal depending on market performance. Prolonged periods of poor market performance may require an alteration of investment policy.

Time Horizon

For the purpose of planning, the time horizon for these investments is estimated to be yy to zz years. Capital values fluctuate and you recognize that the possibility of capital loss does exist. Your time horizon may change based on unforeseen circumstances or changes in financial conditions and if such an event were to occur, you should contact XYZ promptly. Historical asset class return data suggests the shorter the holding period the greater the risk of your objective not being achieved.

Risk Tolerance

It is understood that risk is inherent in investing in marketable securities and results in the future could be better or worse than expected. You must be prepared to tolerate occasional negative performance in order to meet longer-term investment goals. Maintaining a consistent strategy during good and bad markets is an important factor in achieving longer-term objectives.

The Portfolio will be managed in a manner consistent with the stated objectives and the chosen asset allocation over the established horizon. Financial research has demonstrated that risk is best minimized by holding assets over time and through diversifying across low-correlating assets. Please recognize that that your portfolio performance will differ over various time periods. Please remember that performance results can never be guaranteed and historical performance is not indicative of future performance.

Asset Allocation / Diversification

Academic research suggests that the decision of how to allocate total assets among various asset classes will have far greater impact upon portfolio performance than security selection and market timing. In general, greater allocation in riskier asset classes is expected to provide a higher expected return and more effective diversification but may lead to increased volatility. Increasing allocation to fixed income typically, in general, decreases the volatility risk of a portfolio but may lead to decreased returns.

Deciding on your appropriate asset allocation should be based on a review of your personal circumstances. This review may include your assets not included in accounts covered by this IPS, your income sources, and your employment or business holdings, and their sensitivity to factors which may impact individual asset classes specifically or markets generally. After reviewing both personal circumstances and the long-term performance and risk characteristics of various asset classes, the asset classes shown in the attached Exhibit A were selected to achieve your portfolio’s objectives, as stated above, subject to any constraints listed below:

Other assets / accounts considered in determining this asset allocation:
________________________________________________________________________

Investment constraints and/or preferences:
________________________________________________________________________

Investment of the funds shall be limited, in general, to actively managed mutual funds, exchange traded funds (enhanced, active, and passive), individual stocks, bonds, and money market investment funds which may invest in the following categories:

Cash and cash equivalents, including money market funds, and bank certificates of deposit
Bonds (including corporate, government, and municipal - both U.S. and international)
Stocks (large, mid, and small cap domestic as well as foreign-based companies)
Real Estate (REIT’S) – both domestic and international
Alternative positions including commodities, managed futures, currency, market neutral, and long-short funds as well as structured products

Investment Management

Our approach is based upon the major tenets of Modern Portfolio Theory which states that markets are “efficient” and that investors’ returns are determined principally by asset allocation decisions, not market timing or selection of specific securities. XYZ does not rely on short term economic forecasts, employ strategies which actively shift allocations between stocks, bonds and cash, nor search for “undiscovered” stocks. Thus, XYZ will not attempt to “time” any market.

Our portfolios are globally diversified. Asset classes with historically-demonstrated low correlation and varying risk/return profiles are combined together in an attempt to lower the volatility of the overall portfolio as well as enhance long-term returns. There is no guarantee that this strategy will produce similar results in the future.

Portfolio Review and Rebalancing Allocation

From time to time, market conditions are likely to cause the Portfolio’s investment in various asset classes to deviate from the allocation guidelines established by this IPS. Each asset class in which the Portfolio is invested is reviewed by XYZ and may be rebalanced back to the recommended weighting when appropriate. When necessary and/or available, cash flows will be deployed or withdrawals will be made in a manner consistent with rebalancing the asset allocation. Income tax considerations may influence the appropriateness of rebalancing activity but will not dictate that process.

The approved asset allocation indicates an initial target allocation for each asset class. From time to time, for various reasons, including, changing personal or financial circumstances or new research, it may be desirable to make changes in the target allocation. Such changes will not be made due to short-term expectations of the relative performance of individual asset classes.

Investment Strategy Performance

You recognize that asset class investment performance is cyclical and, therefore, you may experience periods of time in which investment objectives are not met. In addition, unless there are extenuating circumstances, patience will often prove appropriate when performance has been disappointing for a particular asset class or the overall portfolio.

For the overall portfolio, the Investor should allow a five-year time period or longer for achieving the stated investment objectives. Shorter time periods contradict the principles of long-term investing. Under no circumstances, however, can results be guaranteed.

Duties and Responsibilities

Please remember that you have the ultimate responsibility for the investment of your own assets. You acknowledge that it is your responsibility to review confirmations and periodic account statements upon receipt and to notify XYZ of any questions or concerns.

We will assist you in making appropriate asset allocation decisions based on your particular needs, objectives, and risk profile, implementing such decisions, reporting portfolio performance to you as well as rebalancing and managing the tax efficiency of the portfolio, as necessary.

XYZ is your Investment Advisor Representative and shall act as the investment advisor to you, the Investor, pursuant to the Investment Advisory Agreement between you and XYZ.

You, the Investor, should provide the Advisor with all relevant information on your financial condition, net worth, and risk tolerances. You must promptly notify XYZ of any changes to this information. Failure to disclose all such relevant information will limit our ability to provide prudent investment advice. Your duties, rights, and responsibilities are set forth in the Investor’s Investment Advisory Agreement with the Advisor and are not altered in any way by this IPS.

Adoption Investment Policy Statement

Adopted by the below signed Investor this xxth day of Month 2009.

Names and Signatures

(Client Name)
_______________________________
(Signature)

(Spouse Name)
_______________________________
(Signature)

Exhibit A

Recommended Global Allocation

(Insert XYZ Portfolio)

Exhibit B

Investment Accounts Covered by this IPS

Custodian	Account Number	Account Registration / Type
XYZ	1234-5678	Joint (Non-qualified)
XYZ	8765-4321	IRA Rollover
XYZ	123456789	IRA – Mr.
PDQ	1234567890	IRA – Mrs.