Avocet Capital Management LLC

Item 1: Cover Page Item 1: Cover Page Part 2A of Form ADV Firm Brochure March 4, 2026 Avocet Capital Management LLC CRD No. 156261 1363 Shermer Road, #200 Northbrook, IL 60062 phone: 312-925-0152 email: alan.loewy@avocetcapital.com website: www.avocetcapital.com This brochure provides information about the qualifications and business practices of Avocet Capital Management LLC. If you have any questions about the contents of this brochure, please contact us at alan.loewy@avocetcapital.com. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission or by any state securities authority. Registration with the SEC or State Regulatory Authority does not imply a certain level of skill or expertise. Additional information about Avocet Capital Management LLC is also available on the SEC’s website at www.adviserinfo.sec.gov. Page 1 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 2: Material Changes Item 2: Material Changes This Firm Brochure is our disclosure document prepared according to regulatory requirements and rules. Consistent with the rules, we will ensure that you receive a summary of any material changes to this and subsequent Brochures within 120 days of the close of our business fiscal year. Furthermore, we will provide you with other interim disclosures about material changes as necessary. The firm has made no material changes since the last annual update of this Brochure issued February 24, 2025. Page 2 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 3: Table of Contents Item 3: Table of Contents Item 1: Cover Page .......................................................................................................................................................................1 Item 2: Material Changes ...........................................................................................................................................................2 Item 3: Table of Contents ...........................................................................................................................................................3 Item 4: Advisory Business ...........................................................................................................................................................4 Item 5: Fees and Compensation ..............................................................................................................................................6 Item 6: Performance-Based Fees and Side-by-Side Management .............................................................................9 Item 7: Types of Clients ............................................................................................................................................................ 10 Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss ................................................................... 11 Item 9: Disciplinary Information ........................................................................................................................................... 20 Item 10: Other Financial Industry Activities and Affiliations ......................................................................................... 21 Item 11: Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading ..................... 22 Item 12: Brokerage Practices .................................................................................................................................................... 24 Item 13: Review of Accounts .................................................................................................................................................... 30 Item 14: Client Referrals and Other Compensation ......................................................................................................... 31 Item 15: Custody ........................................................................................................................................................................... 32 Item 16: Investment Discretion................................................................................................................................................ 33 Item 17: Voting Client Securities ............................................................................................................................................. 34 Item 18: Financial Information ................................................................................................................................................. 35 Page 3 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 4: Advisory Business Item 4: Advisory Business A. Avocet Capital Management LLC Avocet Capital Management LLC (“Avocet” or the “firm”) is a single, individual member Illinois limited liability company. Alan Loewy is the sole member. Avocet offers investment advisory and financial planning services to its clients. B. Advisory Services Offered Avocet is an independent asset management and financial planning firm offering a variety of financial services to various types of clients, including individuals and high-net-worth individuals, trusts and estates, corporations and other businesses. Discretionary Asset Management Services Avocet's Investment Advisory Services consist of its management of client accounts on a discretionary basis. For its discretionary asset management services, Avocet receives a limited power of attorney to effect securities transactions on behalf of its clients that include securities and strategies described in Item 8 of this Brochure. Avocet will structure a portfolio based on an assessment of the client’s financial situation, return expectations, sensitivity to volatility, and an assessment of the economic and market environment. The client may impose reasonable restrictions concerning the management of his or her account(s). Clients have the right to provide the firm with any reasonable investment restrictions on the management of their portfolio, which must be in writing and sent to the firm. Clients should promptly notify the firm in writing of any changes in such restrictions or in the client's personal financial circumstances, investment objectives, goals and tolerance for risk. Avocet will remind clients of their obligation to inform the firm of any such changes or any restrictions that should be imposed on the management of the client’s account. Avocet will also contact clients at least annually to determine whether there have been any changes in a client's personal financial circumstances, investment objectives and tolerance for risk. Retirement Rollovers – Conflicts and Added Fees. Plan participants may be paying little or nothing for the plan’s investment services. As such, investment management costs are likely to be higher when engaging an investment adviser for professional investment management. Alternative courses of action are available to the plan participant: (i) Assuming it is permitted by the Plan, you can leave your money in your current Plan. (ii) If you have changed employers, you can roll your assets into the new employer’s Plan, if permissible by your new employer. (iii) You can establish an IRA R/O and place into a commission-based account at a broker-dealer. (iv) You can establish an IRA R/O and place into a fee-based advisory account. (v) You can withdraw your retirement money and pay the taxes and any applicable penalties. Your decision to roll assets from a qualified plan to a financial professional should be determined by your need for a desired level of investment services, the associated costs, and access to a diverse range of investment products that meet your personal risk tolerance and investment objective. Financial Planning Services Avocet offers its financial planning services on an hourly basis. Clients will receive a written or oral report (depending on the client’s preference), providing the client with a detailed financial plan designed to help achieve the client’s stated financial goals and objectives. Generally, any of the categories below require a Page 4 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 4: Advisory Business minimum of ten hours to compile the necessary data to formulate recommendations. Based on the client’s needs, financial planning services may include, but are not limited to, the following: ▪ Preparation of a recommended asset allocation that serves to diversify the client's portfolio among different categories of investments such as small, medium, and large capitalization securities; corporate and government fixed income (short, intermediate, and long-term maturities); emerging market securities (i.e., foreign issuers); and such other asset categories that are suitable in light of the client's investment goals, objectives, and risk tolerance. ▪ Preparation of an investment policy statement setting forth the investment plan of the client with specific direction in terms of diversification requirements, tax issues, estate planning issues, risk tolerance, retirement, and other identified objectives of the client, including a targeted rate-of- return objective. ▪ Preparation of a retirement plan that serves to identify whether the client is saving enough and investing in a way that meets retirement objectives in light of the client's financial circumstances and risk tolerance. ▪ Preparation of cash flow projections to ensure the client is able to meet daily living expenses and obligations. ▪ Preparation of an estate plan to ensure that wealth transition, tax, and related issues are met in accordance with the client's wishes. In many instances, an outside attorney will need to be hired to handle specific legal issues that arise in the formation and implementation of an estate plan. Avocet gathers required information through in-depth personal interviews and questionnaires. Information gathered include a client's current financial status, investment objectives, future goals, and attitudes toward risk. Related documents supplied by the client are carefully reviewed, and a report is prepared covering one or more of the above-mentioned topics as directed by the client. C. Client Tailored Services and Client Imposed Restrictions Each client’s account will be managed on the basis of the client’s financial situation and investment objectives, and in accordance with any reasonable restrictions imposed by the client on the management of the account—for example, restricting the type or amount of security to be purchased in the portfolio. D. Wrap Fee Programs Avocet does not participate in wrap fee programs. (Wrap fee programs offer services for one all-inclusive fee.) E. Client Assets Under Management As of December 31, 2025, Avocet managed $150,634,190 of discretionary assets and $7,140,583 of non- discretionary assets. Page 5 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 5: Fees and Compensation Item 5: Fees and Compensation A. Methods of Compensation and Fee Schedule Asset-Based Fee Schedule As set forth is Schedule A of the Investment Management Agreement, Avocet's investment advisory services basic fee schedule is calculated based upon the client's assets under management as follows: Annual Percentage Fees Market Value of Assets First $1,000,000 Next $4,000,000 Next $5,000,000 All AUM in excess of $10,000,000 1.25% 1.00% 0.75% 0.50% Avocet requires a minimum account size of $500,000 for accounts it manages on both a discretionary and non-discretionary basis. Avocet, in its sole discretion, may waive the required minimum account size. Compensation to the firm for investment advisory services will be calculated as a percentage of the fair market value of all assets in client’s account(s) as of the last trading day of the immediately prior calendar month in accordance with Avocet’s fee schedule, which may be amended from time to time by Avocet upon 30 days’ prior written notice to client. The fees are paid by the client to the firm on a monthly basis in arrears. No fees are required to be paid before investment advisory services are provided. Each client is required to provide the qualified custodian of the client's assets written authorization to deduct the monthly fee described above directly from the client's account(s) upon submission by Avocet. Non- payment of fees may result in the liquidation of client's securities if there is insufficient cash in the account(s). In general, the firm's fees are not negotiable; however, in rare circumstances, the firm may decide in its own discretion to charge a specific client a fee for investment advisory services that is different than the fees set forth in the basic fee schedule above. A client investment advisory agreement may be canceled by either party upon 30 days’ prior written notice to the other. Upon termination, any earned, unpaid fees will be due and payable. The client has the right to terminate an agreement without penalty within five business days after entering into the agreement. Financial Planning Fees Avocet offers its financial planning services for an hourly fee only. There is a minimum net worth of $500,000 for financial planning clients. For accounts with net worth values less than $500,000, clients may be able to receive comparable services at more favorable pricing elsewhere. Avocet, in its sole discretion, may waive the required minimum account size. A financial planning agreement may be terminated by either party for any reason upon receipt of written notice. Upon termination of any account, any earned, unpaid fees will be due and payable. The client has the right to terminate an agreement without penalty within five business days after entering into the agreement. Page 6 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 5: Fees and Compensation B. Client Payment of Fees Asset-Based Fees Avocet generally requires clients to authorize the direct debit of our fees from their accounts. Exceptions may be granted subject to the firm’s consent for clients to be billed directly for our fees. For directly debited fees, the custodian’s periodic statements will show each fee deduction from the account. Clients may withdraw this authorization for direct billing of these fees at any time by notifying us or their custodian in writing. Avocet will deduct advisory directly from the client’s account provided that (i) the client provides written authorization to the qualified custodian, and (ii) the qualified custodian sends the client a statement, at least quarterly, indicating all amounts disbursed from the account. The client is responsible for verifying the accuracy of the fee calculation, as the client’s custodian will not verify the calculation. Financial Planning Fees Avocet will bill financial planning clients monthly in arrears as work is performed. C. Additional Client Fees Charged All fees paid for investment advisory services are separate and distinct from the fees and expenses charged by exchange-traded funds, mutual funds, separate account managers, private placements, broker-dealers, and custodians retained by clients. Such fees and expenses are described in each exchange-traded fund and mutual fund’s prospectus, each separate account manager’s Form ADV and Brochure and Brochure Supplement or similar disclosure statement, each private placement’s confidential offering memoranda, and by any broker-dealer or custodian retained by the client. Clients are advised to read these materials carefully before investing. If a mutual fund also imposes sales charges, a client may pay an initial or deferred sales charge as further described in the mutual fund’s prospectus. A client using Avocet may be precluded from using certain mutual funds or separate account managers because they may not be offered by the client's custodian. Please refer to the Brokerage Practices section (Item 12) for additional information regarding the firm’s brokerage practices. D. Prepayment of Client Fees Avocet bills clients for its services monthly in arrears and does not require the prepayment of fees. A client investment advisory agreement may be canceled at any time by either party upon 30 days’ prior written notice to the other. A financial planning agreement may be terminated by either party for any reason upon receipt of written notice. Upon termination of any account, any earned, unpaid fees will be due and payable. The client has the right to terminate an agreement without penalty within five business days after entering into the agreement. E. External Compensation for the Sale of Securities to Clients Avocet is not paid any sales, service or administrative fees for the sale of mutual funds or any other investment products with respect to managed advisory assets. Page 7 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 5: Fees and Compensation F. Important Disclosure – Custodian Investment Programs Please be advised that the firm utilizes certain custodians/broker-dealers. Under these arrangements we can access certain investment programs offered through such custodian(s) that offer certain compensation and fee structures that create conflicts of interest of which clients need to be aware. Please note the following: Limitation on Mutual Fund Universe for Custodian Investment Programs: There are certain programs in which we participate where a client’s investment options may be limited in certain of these programs to those mutual funds and/or mutual fund share classes that pay 12b-1 fees and other revenue sharing fee payments, and the client should be aware that the firm is not selecting from among all mutual funds available in the marketplace when recommending mutual funds to the client. Conflict Between Revenue Share Class (12b-1) and Non-Revenue Share Class Mutual Funds: Revenue share class/12b-1 fees are deducted from the net asset value of the mutual fund and generally, all things being equal, cause the fund to earn lower rates of return than those mutual funds that do not pay revenue sharing fees. The client is under no obligation to utilize such programs or mutual funds. Although many factors will influence the type of fund to be used, the client should discuss with their investment adviser representative whether a share class from a comparable mutual fund with a more favorable return to investors is available that does not include the payment of any 12b-1 or revenue sharing fees given the client’s individual needs and priorities and anticipated transaction costs. In addition, the receipt of such fees can create conflicts of interest in instances where the custodian receives the entirety of the 12b-1 and/or revenue sharing fees and takes the receipt of such fees into consideration in terms of benefits it may elect to provide to the firm, even though such benefits may or may not benefit some or all of the firm clients. Page 8 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 6: Performance-Based Fees and Side-by-Side Management Item 6: Performance-Based Fees and Side-by-Side Management Avocet does not charge performance-based fees and therefore has no economic incentive to manage clients’ portfolios in any way other than what is in their best interests. Page 9 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 7: Types of Clients Item 7: Types of Clients Avocet offers its investment services to various types of clients, including individuals and high-net-worth individuals, trusts and estates, corporations and other businesses. Avocet requires a minimum account size of $500,000 for accounts it manages on a discretionary or non- discretionary basis. Avocet, in its sole discretion, may waive the required minimum account size. There is a minimum net worth of $500,000 for financial planning clients. Avocet, in its sole discretion, may waive the required minimum account size. Page 10 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss A. Methods of Analysis and Investment Strategies Avocet uses a variety of sources of data to conduct our economic, investment and market analysis, such as financial newspapers and magazines, economic and market research materials prepared by others, conference calls hosted by mutual funds, corporate rating services, annual reports, prospectuses, and company press releases. It is important to keep in mind that there is no specific approach to investing that guarantees success or positive returns; investing in securities involves risk of loss that clients should be prepared to bear. Avocet and its investment adviser representatives are responsible for identifying and implementing the methods of analysis used in formulating investment recommendations to clients. The methods of analysis may include quantitative methods for optimizing client portfolios, computer-based risk/return analysis, technical analysis, and statistical and/or computer models utilizing long-term economic criteria. ▪ Optimization involves the use of mathematical algorithms to determine the appropriate mix of assets given the firm’s current capital market rate assessment and a particular client’s risk tolerance. ▪ Quantitative methods include analysis of historical data such as price and volume statistics, performance data, standard deviation and related risk metrics, how the security performs relative to the overall stock market, earnings data, price to earnings ratios and related data. ▪ Technical analysis involves charting price and volume data as reported by the exchange where the security is traded to look for price trends. ▪ Computer models may be used to derive the future value of a security based on assumptions of various data categories such as earnings, cash flow, profit margins, sales, and a variety of other company specific metrics. In addition, Avocet reviews research material prepared by others, reviews corporate filings, corporate rating services, and a variety of financial publications. Avocet may employ outside vendors or utilize third- party software to assist in formulating investment recommendations to clients. Mutual Funds, Exchange-Traded Funds, Individual Equity and Fixed Income Securities Avocet may recommend no-load and load-waived mutual funds and individual securities (including fixed income instruments). Such management styles may include, among others, large-cap, mid-cap, and small- cap value, growth and core; international and emerging markets; and alternative investments. A description of the criteria to be used in formulating an investment recommendation for mutual funds, exchange-traded funds (ETFs), and individual securities (including fixed-income securities) is set forth below. In addition, Avocet may have formed relationships with third-party vendors that ▪ prepare performance reports ▪ perform due diligence monitoring of mutual funds ▪ perform billing and certain other administrative tasks Avocet may utilize additional independent third parties to assist it in recommending and monitoring individual securities, and mutual funds to clients as appropriate under the circumstances. Page 11 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss Avocet reviews certain quantitative and qualitative criteria related to mutual funds and to formulate investment recommendations to its clients. Quantitative criteria may include ▪ the performance history of a mutual fund evaluated against that of its peers and other benchmarks ▪ an analysis of risk-adjusted returns ▪ an analysis of the standard deviation of returns over specific time periods, sector and style analysis ▪ the fund, sub-advisor, fee structure Qualitative criteria used in recommending mutual funds include the investment objectives and/or management style and philosophy of a mutual fund; a mutual fund’s consistency of investment style; and employee turnover and efficiency and capacity. Avocet will discuss relevant quantitative and qualitative factors pertaining to its recommendations with clients prior to a client’s determination to retain a mutual fund. Quantitative and qualitative criteria related to mutual funds are reviewed by Avocet on a quarterly basis or such other interval as mutually agreed upon by the client and Avocet. In addition, mutual funds are reviewed to determine the extent to which their investments reflect efforts to time the market, or evidence style drift such that their portfolios no longer accurately reflect the particular asset category attributed to the mutual fund by Avocet (both of which are negative factors in implementing an asset allocation structure). Based on its review, Avocet will make recommendations to clients regarding the retention or discharge of a mutual fund. Avocet may negotiate reduced account minimum balances and reduced fees with mutual funds under various circumstances (for example, for clients with minimum level of assets committed to the manager for specific periods of time, etc.). There can be no assurance that clients will receive any reduced account minimum balances or fees, or that all clients, even if apparently similarly situated, will receive any reduced account minimum balances or fees available to some other clients. Also, account minimum balances and fees may significantly differ between clients. Each client’s individual needs and circumstances will determine portfolio weighting, which can have an impact on fees given the mutual funds utilized. Avocet will endeavor to obtain equal treatment for its clients with mutual funds, but cannot assure equal treatment. Material Risks of Investment Instruments Avocet typically invests in equity securities, corporate debt instruments, municipal fixed income instruments, government securities including asset-backed securities, and options on securities as detailed below: ▪ Equity securities ▪ Warrants and rights ▪ Mutual fund securities ▪ Exchange-traded funds ▪ Corporate debt securities, commercial paper, and certificates of deposit ▪ Municipal securities ▪ U.S. government securities ▪ Private placements ▪ Option contracts on securities Page 12 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss ▪ Government and agency mortgage-backed securities ▪ Corporate debt obligations ▪ Mortgage-backed securities ▪ Collateralized obligations Equity Securities Investing in individual companies involves inherent risk. The major risks relate to the company’s capitalization, quality of the company’s management, quality and cost of the company’s services, the company’s ability to manage costs, efficiencies in the manufacturing or service delivery process, management of litigation risk, and the company’s ability to create shareholder value (i.e., increase the value of the company’s stock price). Foreign securities, in addition to the general risks of equity securities, have geopolitical risk, financial transparency risk, currency risk, regulatory risk and liquidity risk. Warrants and Rights Warrants are securities, typically issued with preferred stock or bonds, that give the holder the right to purchase a given number of shares of common stock at a specified price and time. The price of the warrant usually represents a premium over the applicable market value of the common stock at the time of the warrant’s issuance. Warrants have no voting rights with respect to the common stock, receive no dividends and have no rights with respect to the assets of the issuer. Investments in warrants and rights involve certain risks, including the possible lack of a liquid market for the resale of the warrants and rights, potential price fluctuations due to adverse market conditions or other factors and failure of the price of the common stock to rise. If the warrant is not exercised within the specified time period, it becomes worthless. Mutual Fund Securities Investing in mutual funds carries inherent risk. The major risks of investing in a mutual fund include the quality and experience of the portfolio management team and its ability to create fund value by investing in securities that have positive growth, the amount of individual company diversification, the type and amount of industry diversification, and the type and amount of sector diversification within specific industries. In addition, mutual funds tend to be tax inefficient and therefore investors may pay capital gains taxes on fund investments while not having yet sold the fund. Exchange-Traded Funds (“ETFs”) ETFs are investment companies whose shares are bought and sold on a securities exchange. An ETF holds a portfolio of securities designed to track a particular market segment or index. Some examples of ETFs are SPDRs®, streetTRACKS®, DIAMONDSSM, NASDAQ 100 Index Tracking StockSM (“QQQs SM”), iShares® and VIPERs®. The funds could purchase an ETF to gain exposure to a portion of the U.S. or foreign market. The funds, as a shareholder of another investment company, will bear their pro-rata portion of the other investment company’s advisory fee and other expenses, in addition to their own expenses. Investing in ETFs involves risk. Specifically, ETFs, depending on the underlying portfolio and its size, can have wide price (bid and ask) spreads, thus diluting or negating any upward price movement of the ETF or enhancing any downward price movement. Also, ETFs require more frequent portfolio reporting by regulators and are thereby more susceptible to actions by hedge funds that could have a negative Page 13 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss impact on the price of the ETF. Certain ETFs may employ leverage, which creates additional volatility and price risk depending on the amount of leverage utilized, the collateral and the liquidity of the supporting collateral. Further, the use of leverage (i.e., employ the use of margin) generally results in additional interest costs to the ETF. Certain ETFs are highly leveraged and therefore have additional volatility and liquidity risk. Volatility and liquidity can severely and negatively impact the price of the ETF’s underlying portfolio securities, thereby causing significant price fluctuations of the ETF. Corporate Debt, Commercial Paper, and Certificates of Deposit Fixed income securities carry additional risks than those of equity securities described above. These risks include the company’s ability to retire its debt at maturity, the current interest rate environment, the coupon interest rate promised to bondholders, legal constraints, jurisdictional risk (U.S or foreign) and currency risk. If bonds have maturities of ten years or greater, they will likely have greater price swings when interest rates move up or down. The shorter the maturity the less volatile the price swings. Foreign bonds also have liquidity and currency risk. Commercial paper and certificates of deposit are generally considered safe instruments, although they are subject to the level of general interest rates, the credit quality of the issuing bank and the length of maturity. With respect to certificates of deposit, depending on the length of maturity there can be pre- payment penalties if the client needs to convert the certificate of deposit to cash prior to maturity. Municipal Securities Municipal securities carry additional risks than those of corporate and bank-sponsored debt securities described above. These risks include the municipality’s ability to raise additional tax revenue or other revenue (in the event the bonds are revenue bonds) to pay interest on its debt and to retire its debt at maturity. Municipal bonds are generally tax free at the federal level, but may be taxable in individual states other than the state in which both the investor and municipal issuer is domiciled. U.S. Government Securities U.S. government securities include securities issued by the U.S. Treasury and by U.S. government agencies and instrumentalities. U.S. government securities may be supported by the full faith and credit of the United States. Private Placements Private placements carry significant risk in that companies using the private placement market conduct securities offerings that are exempt from registration under the federal securities laws, which means that investors do not have access to public information and such investors are not provided with the same amount of information that they would receive if the securities offering was a public offering. Moreover, many companies using private placements do so to raise equity capital in the start-up phase of their business, or require additional capital to complete another phase in their growth objective. In addition, the securities issued in connection with private placements are restricted securities, which means that they are not traded on a secondary market, such as a stock exchange, and they are thus illiquid and cannot be readily converted to cash. Options on Securities A call option is a contract under which the purchaser of the call option, in return for a premium paid, has the right to buy the security (or index) underlying the option at a specified price at any time during Page 14 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss the term of the option. The writer of the call option, who receives the premium, has the obligation upon exercise of the option to deliver the underlying security against payment of the exercise price. A put option gives its purchaser, in return for a premium, the right to sell the underlying security at a specified price during the term of the option. The writer of the put, who receives the premium, has the obligation to buy, upon exercise of the option, the underlying security (or a cash amount equal to the value of the index) at the exercise price. The amount of a premium received or paid for an option is based upon certain factors including the market price of the underlying security, the relationship of the exercise price to the market price, the historical price volatility of the underlying security, the option period and interest rates. Government and Agency Mortgage-Backed Securities The principal issuers or guarantors of mortgage-backed securities are the Government National Mortgage Association (“GNMA”), Fannie Mae (“FNMA”) and the Federal Home Loan Mortgage Corporation (“FHLMC”). GNMA, a wholly owned U.S. government corporation within the Department of Housing and Urban Development (“HUD”), creates pass-through securities from pools of government- guaranteed (Farmers’ Home Administration, Federal Housing Authority or Veterans Administration) mortgages. The principal and interest on GNMA pass-through securities are backed by the full faith and credit of the U.S. government. FNMA, which is a U.S. government-sponsored corporation owned entirely by private stockholders that is subject to regulation by the secretary of HUD, and FHLMC, a corporate instrumentality of the U.S. government, issue pass-through securities from pools of conventional and federally insured and/or guaranteed residential mortgages. FNMA guarantees full and timely payment of all interest and principal, and FHMLC guarantees timely payment of interest and ultimate collection of principal of its pass-through securities. Mortgage-backed securities from FNMA and FHLMC are not backed by the full faith and credit of the U.S. government. Corporate Debt Obligations Corporate debt obligations include corporate bonds, debentures, notes, commercial paper and other similar corporate debt instruments. Companies use these instruments to borrow money from investors. The issuer pays the investor a fixed or variable rate of interest and must repay the amount borrowed at maturity. Commercial paper (short-term unsecured promissory notes) is issued by companies to finance their current obligations and normally has a maturity of less than nine months. In addition, Avocet may also invest in corporate debt securities registered and sold in the United States by foreign issuers (Yankee bonds) and those sold outside the U.S. by foreign or U.S. issuers (Eurobonds). Mortgage-Backed Securities Mortgage-backed securities represent interests in a pool of mortgage loans originated by lenders such as commercial banks, savings associations, and mortgage bankers and brokers. Mortgage-backed securities may be issued by governmental or government-related entities, or by non-governmental entities such as special-purpose trusts created by commercial lenders. Pools of mortgages consist of whole mortgage loans or participations in mortgage loans. The majority of these loans are made to purchasers of between one and four family homes. The terms and characteristics of the mortgage instruments are generally uniform within a pool but may vary among pools. For example, in addition to fixed-rate, fixed-term mortgages, Avocet may purchase pools of adjustable-rate mortgages, growing equity mortgages, graduated payment mortgages and other types. Mortgage poolers apply qualification standards to lending institutions, which originate mortgages for Page 15 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss the pools as well as credit standards and underwriting criteria for individual mortgages included in the pools. In addition, many mortgages included in pools are insured through private mortgage insurance companies. Mortgage-backed securities differ from other forms of fixed income securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or on specified call dates. Most mortgage-backed securities, however, are pass-through securities, which means that investors receive payments consisting of a pro rata share of both principal and interest (less servicing and other fees), as well as unscheduled prepayments as loans in the underlying mortgage pool are paid off by the borrowers. Additional prepayments to holders of these securities are caused by prepayments resulting from the sale or foreclosure of the underlying property or refinancing of the underlying loans. As prepayment rates of individual pools of mortgage loans vary widely, it is not possible to accurately predict the average life of a particular mortgage-backed security. Although mortgage-backed securities are issued with stated maturities of up to 40 years, unscheduled or early payments of principal and interest on the mortgages may shorten considerably the securities’ effective maturities. Collateralized Obligations Collateralized mortgage obligations (“CMOs”) are collateralized by mortgage-backed securities issued by GNMA, FHLMC or FNMA (“mortgage assets”). CMOs are multiple-class debt obligations. Payments of principal and interest on the mortgage assets are passed through to the holders of the CMOs as they are received, although certain classes (often referred to as “tranches”) of CMOs have priority over other classes with respect to the receipt of mortgage prepayments. Each tranche is issued at a specific or floating coupon rate and has a stated maturity or final distribution date. Interest is paid or accrues in all tranches on a monthly, quarterly or semi-annual basis. Payments of principal and interest on mortgage assets are commonly applied to the tranches in the order of their respective maturities or final distribution dates, so that generally no payment of principal will be made on any tranche until all other tranches with earlier stated maturity or distribution dates have been paid in full. Collateralized debt obligations ("CDOs") include collateralized bond obligations ("CBOs"), collateralized loan obligations ("CLOs") and other similarly structured securities. CBOs and CLOs are types of asset- backed securities. A CBO is a trust that is backed by a diversified pool of high-risk, below-investment- grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. B. Investment Strategy and Method of Analysis Material Risks Leverage Although Avocet, as a general business practice, does not utilize leverage, there may be instances in which exchange-traded funds, other separate account managers and, in very limited circumstances, Avocet will utilize leverage. In this regard please review the following: The use of leverage enhances the overall risk of investment gain and loss to the client’s investment portfolio. For example, investors are able to control $2 of a security for $1. So if the price of a security rises by $1, the investor earns a 100% return on their investment. Conversely, if the security declines by $.50, then the investor loses 50% of their investment. The use of leverage entails borrowing, which results in additional interest costs to the investor. Page 16 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss Broker-dealers who carry customer accounts have a minimum equity requirement when clients utilize leverage. The minimum equity requirement is stated as a percentage of the value of the underlying collateral security with an absolute minimum dollar requirement. For example, if the price of a security declines in value to the point where the excess equity used to satisfy the minimum requirement dissipates, the broker-dealer will require the client to deposit additional collateral to the account in the form of cash or marketable securities. A deposit of securities to the account will require a larger deposit, as the security being deposited is included in the computation of the minimum equity requirement. In addition, when leverage is utilized and the client needs to satisfy a margin deposit or withdraw cash, the client must sell a disproportionate amount of collateral securities to release enough cash to satisfy the withdrawal amount based upon similar reasoning as cited above. Regulations concerning the use of leverage are established by the Federal Reserve Board and vary if the client’s account is held at a broker-dealer versus a bank custodian. Broker-dealers and bank custodians may apply more stringent rules as they deem necessary. Short-Term Trading Although Avocet, as a general business practice, does not utilize short-term trading, there may be instances in which short-term trading may be necessary or an appropriate strategy. In this regard, please read the following: There is an inherent risk for clients who trade frequently in that high-frequency trading creates substantial transaction costs that in the aggregate could negatively impact account performance. Short Selling Avocet generally does not engage in short selling but reserves the right to do so in the exercise of its sole judgment. Short selling involves the sale of a security that is borrowed rather than owned. When a short sale is effected, the investor is expecting the price of the security to decline in value so that a purchase or closeout of the short sale can be effected at a significantly lower price. The primary risks of effecting short sales is the availability to borrow the stock, the unlimited potential for loss, and the requirement to fund any difference between the short credit balance and the market value of the security. Option Strategies Various option strategies give the holder the right to acquire or sell underlying securities at the contract strike price up until expiration of the option. Each contract is worth 100 shares of the underlying security. Options entail greater risk but allow an investor to have market exposure to a particular security or group of securities without the capital commitment required to purchase the underlying security or groups of securities. In addition, options allow investors to hedge security positions held in the portfolio. For detailed information on the use of options and option strategies, please contact the Options Clearing Corporation for the current Options Risk Disclosure Statement. Avocet as part of its investment strategy may employ the following option strategies: ▪ Covered call writing ▪ Long call options purchases ▪ Long put options purchases ▪ Option spreading ▪ Short call option strategy ▪ Short put option strategy Page 17 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss ▪ Equity collars ▪ Long and short straddles ▪ Short strangles Covered Call Writing Covered call writing is the sale of in-, at-, or out-of-the money call option against a long security position held in the client portfolio. This type of transaction is used to generate income. It also serves to create downside protection in the event the security position declines in value. Income is received from the proceeds of the option sale. Such income may be reduced to the extent it is necessary to buy back the option position prior to its expiration. This strategy may involve a degree of trading velocity, transaction costs and significant losses if the underlying security has volatile price movement. Covered call strategies are generally suited for companies with little price volatility. Long Call Option Purchases Long call option purchases allow the option holder to be exposed to the general market characteristics of a security without the outlay of capital necessary to own the security. Options are wasting assets and expire (usually within nine months of issuance), and as a result can expose the investor to significant loss. Long Put Option Purchases Long put option purchases allow the option holder to sell or “put” the underlying security at the contract strike price at a future date. If the price of the underlying security declines in value, the value of the long put option increases. In this way long puts are often used to hedge a long stock position. Options are wasting assets and expire (usually within nine months of issuance), and as a result can expose the investor to significant loss. Option Spreading Option spreading usually involves the purchase of a call option and the sale of a call option at a higher contract strike price, both having the same expiration month. The purpose of this type of transaction is to allow the holder to be exposed to the general market characteristics of a security without the outlay of capital to own the security, and to offset the cost by selling the call option with a higher contract strike price. In this type of transaction, the spread holder “locks in” a maximum profit, defined as the difference in contract prices reduced by the net cost of implementing the spread. There are many variations of option spreading strategies; please contact the Options Clearing Corporation for a current Options Risk Disclosure Statement that discusses each of these strategies. Short Call Option Strategy Short call option strategy is highly speculative and has theoretical potential for unlimited loss. The seller (writer) of the call option receives proceeds (premium) from the sale of the option. The expectation is that the value of the underlying security will remain below the contract strike price and the option will expire worthless, allowing the option writer to keep the entire amount of the sale proceeds (premium). Should the value of the underlying security increase above the contract strike price, then the option writer can either purchase the call option at a loss, or through a process of exercise and assignment be forced to sell the stock at the contract strike price. If this happens, the option writer will have to go in the open market and buy an equivalent amount of stock to cover the sale at prices that can be materially higher than the amount received from the sale. Page 18 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss Short Put Option Strategy Short put option strategy is highly speculative and has theoretical potential for significant loss. The seller (writer) of the put option receives proceeds (premium) from the sale of the option. The expectation is that the value of the underlying security will remain above the contract strike price and the option will expire worthless, allowing the option writer to keep the entire amount of the sale proceeds (premium). Should the value of the underlying security decrease below the contract strike price, the option writer can either purchase the put option at a loss, or through a process of exercise and assignment be forced to buy the stock at the contract strike price. If this happens, the option writer will be purchasing the underlying security at a price potentially well above its then-current market value, exposing the investor to potential loss. Equity Collar A collar combines both a cap and a floor. A cap gives the purchaser of the cap the right (for a premium payment), but not the obligation, to receive the difference in the cost on some amount when a specified index rises above the specified “cap rate.” A floor is the opposite of a cap—it gives the purchaser of the floor the right (for a premium payment), but not the obligation, to receive the difference in interest payable on an amount when a specified index falls below the specified “floor rate.” A collar involving stock is called an “equity collar.” In a collar transaction, the buyer of the collar purchases a cap while selling a floor indexed to the same rate or asset. A zero-cost collar results when the premium earned by selling a floor exactly offsets the cap premium. Long and Short Straddles A long straddle is the purchase of a long call and a long put with the same underlying security, expiration date and strike price. This is a speculative trade that may be profitable when volatility is high and will result in a loss when prices of the underlying security are relatively stable. A short straddle is the sale of a call and a sale of a put with the same underlying security, expiration date and strike price. This is a speculative trade that is most profitable when the strike price is close to the underlying price of the security, that is, at or near the money upon expiration. Short Strangle Similar to a short straddle, a short strangle is the sale of a call and a sale of a put with the same underlying security and expiration date, but at different strike prices. This is a speculative trade that is most profitable when the underlying security price is between the two strike prices at the expiration of the option. C. Security-Specific Material Risks There is an inherent risk for clients whose investment portfolios lack diversification—that is, they have their investment portfolios heavily weighted in one security, one industry or industry sector, one geographic location, one investment manager, one type of investment instrument (equities versus fixed income). Clients who have diversified portfolios, as a general rule, incur less volatility and therefore less fluctuation in portfolio value than those who have concentrated holdings. Concentrated holdings may offer the potential for higher gain, but also offer the potential for significant loss. Avocet invests in a diversified portfolio of equity and fixed income securities. Please refer to Item 8.A. (above). Page 19 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 9: Disciplinary Information Item 9: Disciplinary Information A. Criminal or Civil Actions There is nothing to report on this item. B. Administrative Enforcement Proceedings There is nothing to report on this item. C. Self-Regulatory Organization Enforcement Proceedings There is nothing to report on this item. Page 20 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 10: Other Financial Industry Activities and Affiliations Item 10: Other Financial Industry Activities and Affiliations A. Broker-Dealer or Representative Registration Neither Avocet nor its affiliates are registered broker-dealers and do not have an application to register pending. B. Futures or Commodity Registration Neither Avocet nor its affiliates are registered as a commodity firm, futures commission merchant, commodity pool operator, or commodity trading adviser and do not have an application to register pending. C. Material Relationships Maintained by this Advisory Business and Conflicts of Interest There is nothing to report for this item. D. Recommendation or Selection of Other Investment Advisors and Conflicts of Interest Avocet does not recommend investment products in which it receives any form of compensation from the separate account manager or investment product sponsor. Page 21 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 11: Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading Item 11: Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading A. Code of Ethics Description Avocet has a Code of Ethics that its sole individual member is required to follow. The Code of Ethics outlines proper conduct related to all services provided to clients. The firm's chief compliance officer regularly evaluates his performance to ensure compliance with the code of ethics. In general, the Code of Ethics consists of the following core principles: 1. The interests of clients will be placed ahead of the firm's or the sole individual member's own investment interests. 2. The sole individual member is expected to conduct his personal securities transactions in accordance with the firm's Personal Trading Policy and will strive to avoid any actual or perceived conflict of interest with the clients. 3. The sole individual member will not take inappropriate advantage of his position with the firm. 4. The sole individual member is expected to act in the best interest of each of the firm's clients. 5. The sole individual member is expected to comply with state and federal securities laws. A copy of the Code of Ethics is available to any client or prospective client upon request. B. Investment Recommendations Involving a Material Financial Interest and Conflicts of Interest Avocet does not engage in principal trading (i.e., the practice of selling stock to advisory clients from a firm’s inventory or buying stocks from advisory clients into a firm’s inventory). In addition, Avocet does not recommend any securities to advisory clients in which it has some proprietary or ownership interest. C. Advisory Firm Purchase or Sale of Same Securities Recommended to Clients and Conflicts of Interest Avocet, its affiliates, employees and their families, trusts, estates, charitable organizations, and retirement plans established by it may purchase or sell the same securities as are purchased or sold for clients in accordance with its Code of Ethics policies and procedures. The personal securities transactions by advisory representatives and employees may raise potential conflicts of interest when they trade in a security that is: ▪ owned by the client, or ▪ considered for purchase or sale for the client. Such conflict generally refers to the practice of front-running (trading ahead of the client), which Avocet specifically prohibits. Avocet has adopted policies and procedures that are intended to address these conflicts of interest. These policies and procedures: ▪ require our advisory representatives and employees to act in the client’s best interest ▪ prohibit fraudulent conduct in connection with the trading of securities in a client account Page 22 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 11: Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading ▪ prohibit employees from personally benefitting by causing a client to act, or fail to act in making investment decisions ▪ prohibit the firm or its employees from profiting or causing others to profit on knowledge of completed or contemplated client transactions ▪ allocate investment opportunities in a fair and equitable manner ▪ provide for the review of transactions to discover and correct any trades that result in an advisory representative or employee benefitting at the expense of a client. Advisory representatives and employees must follow Avocet’s procedures when purchasing or selling the same securities purchased or sold for the client. D. Client Securities Recommendations or Trades and Concurrent Advisory Firm Securities Transactions and Conflicts of Interest Avocet, its affiliates, employees and their families, trusts, estates, charitable organizations, and retirement plans established by it may effect securities transactions for their own accounts that differ from those recommended or effected for other Avocet clients. Avocet will make a reasonable attempt to trade securities in client accounts at or prior to trading the securities in its affiliate, corporate, employee, or employee-related accounts. Trades executed the same day will likely be subject to an average pricing calculation. It is the policy of Avocet to place the client's interests above those of Avocet and its employees. Page 23 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 12: Brokerage Practices Item 12: Brokerage Practices A. Factors Used to Select Broker-Dealers for Client Transactions Custodian Recommendations Avocet may recommend that clients establish brokerage accounts with Fidelity Institutional division of Fidelity Investments (“Fidelity” or “custodian”), a FINRA registered broker-dealer, member SIPC, to maintain custody of clients’ assets and to effect trades for their accounts. Although Avocet may recommend that clients establish accounts at the custodian, it is the client’s decision to custody assets with the custodian. Avocet is independently owned and operated and not affiliated with custodian. For Avocet-managed advisory accounts, the custodian generally does not charge separately for custody services but is compensated by account holders through commissions and other transaction-related or asset-based fees for securities trades that are executed through the custodian or that settle into custodian accounts. Avocet considers the financial strength, reputation, operational efficiency, cost, execution capability, level of customer service, and related factors in recommending broker-dealers or custodians to advisory clients. In certain instances and subject to approval by Avocet, Avocet will recommend to clients certain broker- dealers and/or custodians based on the needs of the individual client, taking into consideration the nature of the services required, the experience of the broker-dealer or custodian, the cost and quality of the services, and the reputation of the broker-dealer or custodian. The final determination to engage a broker-dealer or custodian recommended by Avocet shall be made by and in the sole discretion of the client. The client recognizes that broker-dealers and/or custodians have different cost and fee structures and trade execution capabilities. As a result, there may be disparities with respect to the cost of services and/or the transaction prices for securities transactions executed on behalf of the client. Clients are responsible for assessing the commissions and other costs charged by broker-dealers and/or custodians. How We Select Brokers/Custodians to Recommend Avocet seeks to recommend a custodian/broker who will hold client assets and execute transactions on terms that are overall most advantageous when compared to other available providers and their services. We consider a wide range of factors, including, among others, the following: ▪ combination of transaction execution services along with asset custody services (generally without a separate fee for custody) ▪ capability to execute, clear, and settle trades (buy and sell securities for client accounts) ▪ capabilities to facilitate transfers and payments to and from accounts (wire transfers, check requests, bill payment, etc.) ▪ breadth of investment products made available (stocks, bonds, mutual funds, exchange-traded funds (ETFs), etc.) ▪ availability of investment research and tools that assist us in making investment decisions ▪ quality of services ▪ competitiveness of the price of those services (commission rates, margin interest rates, other fees, etc.) and willingness to negotiate them ▪ reputation, financial strength, and stability of the provider ▪ their prior service to us and our other clients Page 24 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 12: Brokerage Practices ▪ availability of other products and services that benefit us, as discussed below Soft Dollar Arrangements Avocet does not utilize soft dollar arrangements. Avocet does not direct brokerage transactions to executing brokers for research and brokerage services. Institutional Trading and Custody Services The custodian provides Avocet with access to its institutional trading and custody services, which are typically not available to the custodian’s retail investors. These services generally are available to independent investment advisors on an unsolicited basis, at no charge to them so long as a certain minimum amount of the advisor’s clients’ assets are maintained in accounts at a particular custodian. The custodian’s brokerage services include the execution of securities transactions, custody, research, and access to mutual funds and other investments that are otherwise generally available only to institutional investors or would require a significantly higher minimum initial investment. Other Products and Services Custodian also makes available to Avocet other products and services that benefit Avocet but may not directly benefit its clients’ accounts. Many of these products and services may be used to service all or some substantial number of Avocet's accounts, including accounts not maintained at custodian. The custodian may also make available to Avocet software and other technology that ▪ provide access to client account data (such as trade confirmations and account statements) ▪ facilitate trade execution and allocate aggregated trade orders for multiple client accounts ▪ provide research, pricing and other market data ▪ facilitate payment of Avocet’s fees from its clients’ accounts ▪ assist with back-office functions, recordkeeping and client reporting The custodian may also offer other services intended to help Avocet manage and further develop its business enterprise. These services may include ▪ compliance, legal and business consulting ▪ publications and conferences on practice management and business succession ▪ access to employee benefits providers, human capital consultants and insurance providers The custodian may also provide other benefits such as educational events or occasional business entertainment of Avocet personnel. In evaluating whether to recommend that clients custody their assets at the custodian, Avocet may take into account the availability of some of the foregoing products and services and other arrangements as part of the total mix of factors it considers, and not solely the nature, cost or quality of custody and brokerage services provided by the custodian, which creates a conflict of interest. Independent Third Parties The custodian may make available, arrange, and/or pay third-party vendors for the types of services rendered to Avocet. The custodian may discount or waive fees it would otherwise charge for some of these services or all or a part of the fees of a third party providing these services to Avocet. Page 25 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 12: Brokerage Practices Additional Compensation Received from Custodians Avocet may participate in institutional customer programs sponsored by broker-dealers or custodians. Avocet may recommend these broker-dealers or custodians to clients for custody and brokerage services. There is no direct link between Avocet’s participation in such programs and the investment advice it gives to its clients, although Avocet receives economic benefits through its participation in the programs that are typically not available to retail investors. These benefits may include the following products and services (provided without cost or at a discount): ▪ Receipt of duplicate client statements and confirmations ▪ Research-related products and tools ▪ Consulting services ▪ Access to a trading desk serving Avocet participants ▪ Access to block trading (which provides the ability to aggregate securities transactions for execution and then allocate the appropriate shares to client accounts) ▪ The ability to have advisory fees deducted directly from client accounts ▪ Access to an electronic communications network for client order entry and account information ▪ Access to mutual funds with no transaction fees and to certain institutional money managers ▪ Discounts on compliance, marketing, research, technology, and practice management products or services provided to Avocet by third-party vendors The custodian may also pay for business consulting and professional services received by Avocet’s related persons, and may pay or reimburse expenses (including client transition expenses, travel, lodging, meals and entertainment expenses for Avocet’s personnel to attend conferences). Some of the products and services made available by such custodian through its institutional customer programs may benefit Avocet but may not benefit its client accounts. These products or services may assist Avocet in managing and administering client accounts, including accounts not maintained at the custodian as applicable. Other services made available through the programs are intended to help Avocet manage and further develop its business enterprise. The benefits received by Avocet or its personnel through participation in these programs do not depend on the amount of brokerage transactions directed to the broker-dealer. Avocet also participates in similar institutional advisor programs offered by other independent broker- dealers or trust companies, and its continued participation may require Avocet to maintain a predetermined level of assets at such firms. In connection with its participation in such programs, Avocet will typically receive benefits similar to those listed above, including research, payments for business consulting and professional services received by Avocet’s related persons, and reimbursement of expenses (including travel, lodging, meals and entertainment expenses for Avocet’s personnel to attend conferences sponsored by the broker-dealer or trust company). As part of its fiduciary duties to clients, Avocet endeavors at all times to put the interests of its clients first. Clients should be aware, however, that the receipt of economic benefits by Avocet or its related persons in and of itself creates a conflict of interest and indirectly influences Avocet’s recommendation of broker-dealers for custody and brokerage services. The Firm’s Interest in Custodian’s Services The availability of these services from the custodian benefits the firm because the firm does not have to produce or purchase them. The firm does not have to pay for the custodian’s services so long as a certain minimum of client assets is kept in accounts at the custodian. Custodian’s services give the firm Page 26 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 12: Brokerage Practices an incentive to recommend that clients maintain their accounts with the custodian based on the firm’s interest in receiving the custodian’s services that benefit the firm’s business rather than based on the client’s interest in receiving the best value in custody services and the most favorable execution of client transactions. This is a conflict of interest. The firm believes, however, that the selection of the custodian as custodian and broker is in the best interest of clients. It is primarily supported by the scope, quality, and price of the custodian’s services and not the custodian’s services that benefit only the firm. Brokerage for Client Referrals Avocet does not engage in the practice of directing brokerage commissions in exchange for the referral of advisory clients. Directed Brokerage Avocet Recommendations Avocet typically recommends Fidelity as custodian for clients’ funds and securities and to execute securities transactions on its clients’ behalf. Client-Directed Brokerage Occasionally, clients may direct Avocet to use a particular broker-dealer to execute portfolio transactions for their accounts or request that certain types of securities not be purchased for their accounts. Clients who designate the use of a particular broker-dealer should be aware that they will lose any possible advantage Avocet derives from aggregating transactions. Such client trades are typically effected after the trades of clients who have not directed the use of a particular broker-dealer. Avocet loses the ability to aggregate trades with other Avocet advisory clients, potentially subjecting the client to inferior trade execution prices as well as higher commissions. B. Trading Practices Best Execution Avocet, pursuant to the terms of its investment advisory agreement with clients, has discretionary authority to determine which securities are to be bought and sold and the amount of such securities. Avocet recognizes that the analysis of execution quality involves a number of factors, both qualitative and quantitative. Avocet will follow a process in an attempt to ensure that it is seeking to obtain the most favorable execution under the prevailing circumstances when placing client orders. These factors include but are not limited to the following: ▪ The financial strength, reputation, and stability of the broker ▪ The efficiency with which the transaction is effected ▪ The ability to effect prompt and reliable executions at favorable prices (including the applicable dealer spread or commission, if any) ▪ The availability of the broker to stand ready to effect transactions of varying degrees of difficulty in the future ▪ The efficiency of error resolution, clearance, and settlement ▪ Block trading and positioning capabilities ▪ Performance measurement Page 27 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 12: Brokerage Practices ▪ Online access to computerized data regarding customer accounts ▪ Availability, comprehensiveness, and frequency of brokerage and research services ▪ Commission rates ▪ The economic benefit to the client ▪ Related matters involved in the receipt of brokerage services Security Allocation Since Avocet may be managing accounts with similar investment objectives, Avocet may aggregate orders for securities for such accounts. In such event, allocation of the securities so purchased or sold, as well as expenses incurred in the transaction, is made by Avocet in the manner it considers to be the most equitable and consistent with its fiduciary obligations to such accounts. Such aggregate orders may include transactions for accounts for employee benefit plans and private investment vehicles, such as limited partnerships or limited liability companies in which Avocet, its affiliates, principals, or employees are among the investors. Avocet’s allocation procedures seek to allocate investment opportunities among clients in the fairest possible way, taking into account clients’ best interests. Avocet will follow procedures to ensure that allocations do not involve a practice of favoring or discriminating against any client or group of clients. Account performance is never a factor in trade allocations. Avocet’s advice to certain clients and entities and the action of Avocet for those and other clients are frequently premised not only on the merits of a particular investment but also on the suitability of that investment for the particular client in light of his or her applicable investment objective, guidelines, and circumstances. Thus, any action of Avocet with respect to a particular investment may, for a particular client, differ or be opposed to the recommendation, advice, or actions of Avocet to or on behalf of other clients. Order Aggregation Orders for the same security entered on behalf of more than one client will generally be aggregated (i.e., blocked or bunched) subject to the aggregation being in the best interests of all participating clients. Subsequent orders for the same security entered during the same trading day may be aggregated with any previously unfilled orders. Subsequent orders may also be aggregated with filled orders if the market price for the security has not materially changed and the aggregation does not cause any unintended duration exposure. All clients participating in each aggregated order will receive the average price and, subject to minimum ticket charges and possible step outs, pay a pro rata portion of commissions. To minimize performance dispersion, “strategy” trades should be aggregated and average priced. However, when a trade is to be executed for an individual account and the trade is not in the best interests of other accounts, then the trade will only be performed for that account. This is true even if Avocet believes that a larger size block trade would lead to best overall price for the security being transacted. Allocation of Trades All allocations will be made prior to the close of business on the trade date. In the event an order is “partially filled,” the allocation will be made in the best interests of all the clients in the order, taking into account all relevant factors including, but not limited to, the size of each client’s allocation, clients’ liquidity needs, and previous allocations. In most cases, accounts will get a pro forma allocation based on the initial allocation. This policy also applies if an order is “over-filled.” Page 28 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 12: Brokerage Practices Avocet acts in accordance with its duty to seek best price and execution and will not continue any arrangements if Avocet determines that such arrangements are no longer in the best interest of its clients. Page 29 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 13: Review of Accounts Item 13: Review of Accounts A. Schedule for Periodic Review of Client Accounts or Financial Plans and Advisory Persons Involved Accounts are reviewed by Avocet’s manager, Alan Loewy. The frequency of reviews is determined based on the client’s investment objectives, but reviews are conducted no less frequently than semi-annually. More frequent reviews may also be triggered by a change in the client’s investment objectives, tax considerations, large deposits or withdrawals, large purchases or sales, loss of confidence in the underlying investment, or changes in macro-economic climate. Financial planning clients receive their financial plans and recommendations at the time service is completed. There are no post-plan reviews unless engaged to do so by the client. B. Review of Client Accounts on Non-Periodic Basis Avocet may perform ad hoc reviews on an as-needed basis if there have been material changes in the client’s investment objectives or risk tolerance, or a material change in how Avocet formulates investment advice. C. Content of Client-Provided Reports and Frequency All investment advisory clients receive customized performance reports of their accounts as well as comparative performance of underlying benchmark market indices and of their benchmark composite index on a quarterly basis. Investment advisory clients also receive standard account statements from the custodian of their accounts on a monthly basis, but no less frequently than quarterly. Financial planning clients do not normally receive investment reports. There are no post-plan reviews unless engaged to do so by the client. Page 30 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 14: Client Referrals and Other Compensation Item 14: Client Referrals and Other Compensation A. Economic Benefits Provided to the Advisory Firm from External Sources and Conflicts of Interest Other than what is disclosed in Item 12 regarding benefits the firm receives from its custodian(s), Avocet does not receive economic benefits for referring clients to third-party service providers. B. Advisory Firm Payments for Client Referrals Avocet does not make payment for client referrals. Page 31 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 15: Custody Item 15: Custody Avocet is considered to have custody of client assets for purposes of the Advisers Act for the following reasons: ▪ The client authorizes us to instruct their custodian to deduct our advisory fees directly from the client’s account. The custodian maintains actual custody of clients’ assets. ▪ Our authority to direct client requests, utilizing standing instructions, for wire transfer of funds for first-party money movement and third-party money movement (checks and/or journals, ACH, Fed-wires). The firm has elected to meet the SEC’s seven conditions to avoid the surprise custody exam, as outlined below: 1. The client provides an instruction to the qualified custodian, in writing, that includes the client’s signature, the third party’s name, and either the third party’s address or the third party’s account number at a custodian to which the transfer should be directed. 2. The client authorizes the investment adviser, in writing, either on the qualified custodian’s form or separately, to direct transfers to the third party either on a specified schedule or from time to time. 3. The client’s qualified custodian performs appropriate verification of the instruction, such as a signature review or other method to verify the client’s authorization, and provides a transfer of funds notice to the client promptly after each transfer. 4. The client has the ability to terminate or change the instruction to the client’s qualified custodian. 5. The investment adviser has no authority or ability to designate or change the identity of the third party, the address, or any other information about the third party contained in the client’s instruction. 6. The investment adviser maintains records showing that the third party is not a related party of the investment adviser or located at the same address as the investment adviser. 7. The client’s qualified custodian sends the client, in writing, an initial notice confirming the instruction and an annual notice reconfirming the instruction. Individual advisory clients will receive at least quarterly account statements directly from their custodian containing a description of all activity, cash balances, and portfolio holdings in their accounts. Clients are urged to compare the account balance(s) shown on their account statements to the quarter-end balance(s) on their custodian's monthly statement. The custodian’s statement is the official record of the account. Page 32 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 16: Investment Discretion Item 16: Investment Discretion Clients may grant a limited power of attorney to Avocet with respect to trading activity in their accounts by signing the appropriate custodian limited power of attorney form. In those cases, Avocet will exercise full discretion as to the nature and type of securities to be purchased and sold, and the amount of securities for such transactions. Investment limitations may be designated by the client as outlined in the investment advisory agreement. Page 33 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 17: Voting Client Securities Item 17: Voting Client Securities Avocet does not take discretion with respect to voting proxies on behalf of its clients. All proxy material will be forwarded to the client by the client’s custodian for the client’s review and action. Clients may contact the firm with questions regarding proxies they have received. Except as required by applicable law, Avocet will not be obligated to render advice or take any action on behalf of clients with respect to assets presently or formerly held in their accounts that become the subject of any legal proceedings, including bankruptcies. From time to time, securities held in the accounts of clients will be the subject of class action lawsuits. Avocet has no obligation to determine if securities held by the client are subject to a pending or resolved class action lawsuit. Avocet also has no duty to evaluate a client’s eligibility or to submit a claim to participate in the proceeds of a securities class action settlement or verdict. Furthermore, Avocet has no obligation or responsibility to initiate litigation to recover damages on behalf of clients who may have been injured as a result of actions, misconduct, or negligence by corporate management of issuers whose securities are held by clients. Where Avocet receives written or electronic notice of a class action lawsuit, settlement, or verdict affecting securities owned by a client, it will forward all notices, proof of claim forms, and other materials to the client. Electronic mail is acceptable where appropriate and where the client has authorized contact in this manner. Page 34 Part 2A of Form ADV: Avocet Capital Management Brochure  Item 19: Requirements for State-Registered Advisors Item 18: Financial Information A. Balance Sheet Avocet does not require the prepayment of fees of $1,200 or more, six months or more in advance, and as such is not required to file a balance sheet. B. Financial Conditions Reasonably Likely to Impair Advisory Firm’s Ability to Meet Commitments to Clients Avocet does not have any financial issues that would impair its ability to provide services to clients. C. Bankruptcy Petitions During the Past Ten Years There is nothing to report on this item. Page 35 Part 2A of Form ADV: Avocet Capital Management Brochure