Kestrel Advisors Marketing Rule Review

**Owner:** Kestrel Advisors CCO **Applies to:** All personnel of Kestrel Advisors, LLC, and any third party acting as a solicitor, endorser, or marketer for Kestrel Advisors.

1. Scope

This Policy governs advertisements and solicitations disseminated by Kestrel Advisors under 17 CFR 275.206(4)-1 (the "Marketing Rule"), which took effect on May 4, 2021, with a compliance date of November 4, 2022. The Marketing Rule replaced the prior 17 CFR 275.206(4)-3 cash-solicitation rule and the prior advertising rule; this Policy accordingly supersedes Kestrel's 2019 Advertising Policy.

The Policy does not govern broker-dealer advertising by Kestrel Securities, which is covered by `Kestrel-WSP-Retail` under FINRA Rule 2210.

2. What counts as an "advertisement"

An advertisement, for purposes of this Policy, is:

1. Any direct or indirect communication Kestrel Advisors makes to more than one person (or to one or more persons if the communication includes hypothetical performance) that offers or promotes the firm's investment advisory services to prospective clients or investors, or new services to existing clients; and 2. Any endorsement or testimonial for which Kestrel Advisors provides cash or non-cash compensation (directly or indirectly).

Excluded: extemporaneous live oral communications, information in statutory or regulatory filings, and one-on-one written communications that do not include hypothetical performance.

3. Pre-use review and approval

Every advertisement must be reviewed and approved by the CCO or a designated reviewer before first use. The review checklist confirms:

- No untrue statements of material fact or misleading omissions (17 CFR 275.206(4)-1(a)(1)); - Every material statement of fact is substantiable on demand by the Commission (17 CFR 275.206(4)-1(a)(2)); - Potential benefits are presented with fair and balanced treatment of associated risks and limitations (17 CFR 275.206(4)-1(a)(4)); - Any specific investment advice referenced is presented in a fair and balanced manner (17 CFR 275.206(4)-1(a)(5)); - Performance results or time periods are not presented in a manner that is not fair and balanced (17 CFR 275.206(4)-1(a)(6)).

Approvals, including the reviewer's identity and date of approval, are recorded in the Advertisement Approval Log, maintained for at least five years under 17 CFR 275.204-2(a)(11).

4. Performance advertising

4.1 Gross and net performance

Any advertisement that presents gross performance must also present net performance with at least equal prominence, in a format designed to facilitate comparison, and calculated over the same time period using the same methodology (17 CFR 275.206(4)-1(d)(1)).

4.2 Prescribed time periods

Advertisements presenting performance results for composites other than private funds must include performance for one-, five-, and ten-year periods, each with equal prominence, ending on a date no less recent than the most recent calendar year-end.

4.3 Related performance

If an advertisement includes "related performance" — the performance of one or more composites sufficiently similar to the service being offered — the advertisement must include the performance of all related portfolios, subject to the narrow exclusion permitted where the exclusion would not result in materially higher performance.

4.4 Extracted performance

Extracted performance (performance of a subset of investments from a single portfolio) may be included only if the advertisement provides, or offers to promptly provide on request, the performance of the total portfolio from which the extracted performance was derived.

4.5 Hypothetical performance

Advertisements that include hypothetical performance (backtested, projected, model, or target) require the firm to have:

- Policies and procedures reasonably designed to ensure the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience; - Sufficient disclosure of the criteria used and assumptions made; and - Sufficient information to allow the intended audience to understand the risks and limitations of relying on the hypothetical performance.

Hypothetical performance is not used in advertisements directed to retail investors at Kestrel Advisors, other than model-portfolio returns for the firm's own managed strategies, which are treated as model performance and are subject to the hypothetical-performance requirements of 17 CFR 275.206(4)-1(d)(5).

5. Testimonials and endorsements

5.1 Required disclosures

Any testimonial or endorsement must clearly and prominently disclose:

- Whether the person giving the testimonial or endorsement is a current client (testimonial) or is not a current client (endorsement); - That cash or non-cash compensation has been provided, if applicable; and - A brief statement of any material conflicts of interest on the part of the person giving the testimonial or endorsement (17 CFR 275.206(4)-1(b)(1)).

5.2 Written agreements

For testimonials and endorsements compensated in excess of the de minimis threshold ($1,000 over the preceding 12 months, or the threshold set by the Commission), Kestrel Advisors enters into a written agreement that describes the scope of the activities and the terms of the compensation (17 CFR 275.206(4)-1(b)(2)). Agreements with affiliates are permitted subject to reduced formality under the affiliate rule in the Commission's adopting release.

5.3 Ineligible persons

Kestrel Advisors conducts annual diligence on each compensated testimonial-giver or endorser to confirm that the person is not an "ineligible person" under 17 CFR 275.206(4)-1(b)(3). Diligence consists of a review of BrokerCheck, IAPD, and FINRA Disciplinary Actions records, plus a signed self-certification.

6. Third-party ratings

Any use of a third-party rating in an advertisement requires:

- A reasonable basis for believing that the survey or questionnaire underlying the rating is structured to make favorable and unfavorable responses equally easy to provide and is not designed to produce a predetermined result; - Clear and prominent disclosure of the date of the rating and the period on which the rating was based, the identity of the third party that created and tabulated the rating, and, if applicable, any cash or non-cash compensation provided by or on behalf of Kestrel Advisors to obtain or use the rating.

7. Solicitors

Kestrel Advisors engages a small number of third-party solicitors to refer retail clients. Each solicitor agreement satisfies the written- agreement requirements of the Marketing Rule and is subject to an annual diligence review. The predecessor cash-solicitation rule, 17 CFR 275.206(4)-3, was rescinded concurrent with the Marketing Rule's adoption; solicitor disclosures are now delivered as endorsements under 17 CFR 275.206(4)-1(b).

8. Form ADV updates

Item 5.L of Form ADV Part 1 is updated at least annually (and upon amendment) to identify the types of performance, the types of testimonials and endorsements, and the compensation arrangements that appear in Kestrel Advisors' advertisements.

9. Recordkeeping

All advertisements, the supporting calculations and substantiation, approval records, testimonial and endorsement agreements, solicitor diligence files, and third-party-rating supporting materials are preserved for at least five years under 17 CFR 275.204-2.

10. References

- 17 CFR 275.206(4)-1 (`17 CFR 275.206(4)-1 and 275.206(4)-2`) - Predecessor rule 17 CFR 275.206(4)-3 (rescinded) — superseded - 17 CFR 275.204-2 - Kestrel-Code-of-Ethics - Kestrel-Information-Barriers