Investment Policy Statement

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An asset allocation plan for Family Hu Trust is attached as Appendix 1, and requires periodic reviews and changes under the sole authority of Python Capital. For each asset class, a target allocation has been built up based on the market research by Sigma Investment. Actual ranges of each asset class allocation may vary according to the market condition. Each quarterly report by the investment manager, Sigma Investment, to the trustee, Python Capital, should confirm that actual allocations during the quarter were within allowable ranges.

3c. Risk tolerance of the investor. Sam and Susan Hu seek to generate investment returns that are proportionate to the risks assumed in the Family Hu Trust portfolios, understanding that the very nature of risk is uncertainty about the future. Python Capital, as investment advisor, seeks to implement an investment strategy that balances the need to grow the trust assets consistent with Sam and Susan Hu’s risk tolerance level: an absolute loss in any 12 month period of more than -40% is unacceptable, and policies and procedures to minimize subsequent risk of further loss should be implemented by Python Capital at that threshold.

3d. Relevant constraints. The investment advisor will provide the Family Hu Trust trustees with a quarterly report that summarizes the performance of assets managers, each asset class and the entire trust. However, the evaluation of performance will be on a 1-year rolling basis.

At least 10% of the market value of the trust portfolio should be invested in high-liquidity assets such as money market securities to prepare the trust for possible severe liquidity shocks.

3e. Other considerations relevant to investment strategy. Investment Philosophy: Sam and Susan Hu believe in that the U.S. securities market is not strongly efficient, which means that active managements may achieve considerable extra returns. Sam and Susan clearly recognize the risk nature associated with the active management and aim to grasp the opportunities in the long term to grow the trust.

4. Risk Management

4a. Python Capital, as investment advisor to the Family Hu Trust, will calculate the performance of each investment account under its supervision and report to the trustees by the 15th day of the new quarter. Calculations will be performed consistent with the Global Investment Performance Standards published by CFA Institute.

4b. In addition to performance reporting, Python Capital shall report to the Family Hu Trust trustees on a quarterly basis indicative risk metrics, calculated as the annualized standard deviation of portfolio returns relative to each portfolio’s specified benchmark; and the information ratio for each portfolio based on annualized returns for the portfolio and benchmark as of the end of each quarter.

4c. On the first business day of each new quarter, the investment advisor for the Family Hu Trust will propose rebalancing transactions to return the accounts to their target allocations, and shall execute these transactions within two business days of receiving authorization from the Investment Committee, except that if the principal value of a proposed rebalancing transaction is less than $50,000, that rebalancing transaction will be deferred indefinitely.

Impression on the IPS

Our first impression is that the IPS has a clear statement of obligation for both sides of the investment portfolio, giving investors a detailed description of the return, distribution, and risk of possible investment. Also, a high quality IPS is a credential, based on which, the possible conflicts of interest can be clearly identified. On the contrast, the IPS says nothing about the penalty if the trustee fails to achieve the investment targets. The IPS is subject to the owners’ investment philosophy, so the investment strategy can be very subjective and may reflect more active risks.