STEMBROOK ASSET MANAGEMENT, LLC

Stembrook Asset Management, LLC 212 Maple Avenue, Suite 201 Red Bank, NJ 07701 Telephone: (201) 484-0063 Facsimile: (201) 484-0070 www.stembrook.com March 25, 2025 FORM ADV PART 2A BROCHURE This brochure provides information about the qualifications and business practices of Stembrook Asset Management, LLC. If you have any questions about the contents of this brochure, please contact us at (201) 484-0063 or via e-mail at thomas.kosinski@stembrook.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. Additional information about Stembrook Asset Management, LLC. is also available on the SEC's website at www.adviserinfo.sec.gov. The searchable IARD/CRD number for Stembrook Asset Management, LLC. is 144116. Stembrook Asset Management, LLC. is a registered investment adviser. Registration with the United States Securities and Exchange Commission or any state securities authority does not imply a certain level of skill or training. 1  Item 2 Summary of Material Changes Form ADV Part 2 requires registered investment advisers to amend their brochure when information becomes materially inaccurate. If there are any material changes to an adviser's disclosure brochure, the adviser is required to notify you and provide you with a description of the material changes. Since the filing of our last annual updating amendment dated March 12, 2024, we have the following material changes to report: • We have changed our registration from state to registration with the U.S. Securities and Exchange Commission. • Item 5-Fees and Compensation We charge a fixed fee for financial planning and consulting services which generally ranges between $5,000 and $20,000 and is negotiable depending upon the complexity and scope of the plan, services, your financial situation, and your objectives. A deposit of 50% of the total estimated fee will be due in advance, and the remainder will be due upon completion of the services rendered. Refer to Item 5- Fees and Compensation for further information. • Item 12 Brokerage Practices and Item 14 Client Referrals and Other Compensation We recommend the brokerage and custodial services of Charles Schwab & Co., Inc. ("Schwab"). Additional disclosure language was added regarding our relationship with Schwab. Refer to Item 12 Brokerage Practices and Item 14 Client Referrals and Other Compensation for further information. 2  Item 3 Table Of Contents Item 1 Cover Page Item 2 Summary of Material Changes Item 3 Table Of Contents Item 4 Advisory Business Item 5 Fees and Compensation Item 6 Performance-Based Fees and Side-By-Side Management Item 7 Types of Clients Item 8 Methods of Analysis, Investment Strategies and Risk of Loss Item 9 Disciplinary Information Item 10 Other Financial Industry Activities and Affiliations Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading Item 12 Brokerage Practices Item 13 Review of Accounts Item 14 Client Referrals and Other Compensation Item 15 Custody Item 16 Investment Discretion Item 17 Voting Client Securities Item 18 Financial Information Item 19 Requirements for State Registered Advisers Item 20 Additional Information Page 1 Page 2 Page 3 Page 4 Page 6 Page 8 Page 8 Page 8 Page 11 Page 11 Page 12 Page 12 Page 16 Page 16 Page 17 Page 17 Page 18 Page 18 Page 18 Page 19 3  Item 4 Advisory Business Description of Services and Fees Stembrook Asset Management, LLC is a registered investment adviser primarily based in Red Bank, New Jersey. We are organized as a limited liability company under the laws of the State of New Jersey. We have been providing investment advisory services since 2007. Peter D. D'Agati, CFA, is our principal owner. Currently, we offer the following investment advisory services, which are personalized to each individual client: • Portfolio Management Services • Selection of Other Advisers • Financial Planning and Consulting Services The following paragraphs describe our services and fees. Please refer to the description of each investment advisory service listed below for information on how we tailor our advisory services to your individual needs. As used in this brochure, the words "we", "our" and "us" refer to Stembrook Asset Management, LLC and the words "you", "your" and "client" refer to you as either a client or prospective client of our firm. Also, you may see the term Associated Person throughout this brochure. As used in this brochure, our Associated Persons are our firm's officers, employees, and all individuals providing investment advice on behalf of our firm. Portfolio Management Services We provide discretionary portfolio management services where the investment advice provided is custom tailored to meet your needs and investment objectives. Subject to any written guidelines which you may provide, we will be granted discretion and authority to manage the account. Accordingly, we are authorized to perform various functions, at your expense, without further approval from you. Such functions include the determination of securities to be purchased/sold and the amount of securities to be purchased/sold. Once the portfolio is constructed, we provide continuous supervision and rebalancing of the portfolio as changes in market conditions and your circumstances may require. If you participate in our discretionary portfolio management services, we require you to grant our firm discretionary authority to manage your account. Discretionary authorization will allow our firm to determine the specific securities, and the amount of securities, to be purchased or sold for your account without your approval prior to each transaction. Discretionary authority is typically granted by the investment advisory agreement you sign with our firm, a power of attorney, or trading authorization forms. You may limit our discretionary authority (for example, limiting the types of securities that can be purchased for your account) by providing our firm with your restrictions and guidelines in writing. As part of our portfolio management services, we may use one or more sub-advisers to manage a portion of your account on a discretionary basis. The sub-adviser(s) may use one or more of their model portfolios to manage your account. We will regularly monitor the performance of your accounts managed by sub-adviser(s), and may hire and fire any sub-adviser without your prior approval. Our ability to hire and fire sub-advisers on your behalf is based on you granting our firm discretionary authority, which is typically granted by the investment advisory agreement you sign with our firm, a power of attorney, or trading authority forms. Fees charged by sub-advisors will be charged to your account. 4  Financial Planning and Consulting Services We engage in modular and consultative financial planning and consulting services. Such advice will typically involve providing a variety of services, principally advisory in nature, to you regarding the management of your financial resources based upon an analysis of your individual needs. Financial plans will be limited to specific, targeted areas of concern such as retirement planning and educational planning. The process typically begins with an initial consultation. During or after the initial consultation, if you decide to engage us for financial planning or consulting services, pertinent information about your personal and financial circumstances and objectives is collected. As required, we will conduct follow up interviews for the purpose of reviewing and/or collecting financial data. Once such information has been studied and analyzed, a written financial plan - designed to achieve your expressed financial goals and objectives - will be produced and presented to you. Financial plans are based on your financial situation at the time the plan is presented and on the financial information disclosed by you to us. We make certain assumptions with respect to interest and inflation rates and also consider past trends and performance of the market and economy. Past performance is in no way an indication of future performance. We cannot offer any guarantees or promises that your financial goals and objectives will be met. As your financial situation, goals, objectives, or needs change, you must notify us promptly. Types of Investments We primarily offer advice on equity securities, municipal securities, investment company securities, options contracts on securities and commodities, and interest in partnerships investing in real estate, oil and gas interests, and others. Additionally, we may advise you on any type of investment that we deem appropriate based on your stated goals and objectives. We may also provide advice on any type of investment held in your portfolio at the inception of our advisory relationship. You may request that we refrain from investing in particular securities or certain types of securities. You must provide these restrictions to our firm in writing. Selection of Other Advisers As part of our investment advisory services, we may recommend that you use the services of a third- party investment adviser ("TPA") to manage your entire, or a portion of, your investment portfolio. After gathering information about your financial situation and objectives, we will recommend that you engage a specific TPA or investment program. Factors that we take into consideration when making our recommendation(s) include, but are not limited to, the following: the TPA's performance, methods of analysis, fees, your financial needs, investment goals, risk tolerance, and investment objectives. We will periodically monitor the TPA(s)' performance to ensure its management and investment style remains aligned with your investment goals and objectives. The TPA(s) will actively manage your portfolio and will assume discretionary investment authority over your account. We will assume discretionary authority to hire and fire TPA(s) and/or reallocate your assets to other TPA(s) where we deem such action appropriate. IRA Rollover Recommendations Effective December 20, 2021 (or such later date as the US Department of Labor ("DOL") Field Assistance Bulletin 2018-02 ceases to be in effect), for purposes of complying with the DOL's Prohibited Transaction Exemption 2020-02 ("PTE 2020-02") where applicable, we are providing the following acknowledgment to you. 5  When we provide investment advice to you regarding your retirement plan account or individual retirement account, we are fiduciaries within the meaning of Title I of the Employee Retirement Income Security Act and/or the Internal Revenue Code, as applicable, which are laws governing retirement accounts. The way we make money creates some conflicts with your interests, so we operate under a special rule that requires us to act in your best interest and not put our interest ahead of yours. Under this special rule's provisions, we must: • Meet a professional standard of care when making investment recommendations (give prudent advice); • Never put our financial interests ahead of yours when making recommendations (give loyal advice); • Avoid misleading statements about conflicts of interest, fees, and investments; • Follow policies and procedures designed to ensure that we give advice that is in your best interest; • Charge no more than is reasonable for our services; and • Give you basic information about conflicts of interest. We benefit financially from the rollover of your assets from a retirement account to an account that we manage or provide investment advice, because the assets increase our assets under management and, in turn, our advisory fees. As a fiduciary, we only recommend a rollover when we believe it is in your best interest. Assets Under Management As of December 31, 2024, we provide continuous management services for $127,625,470 in client assets managed on a discretionary basis. We do not manage assets on a non-discretionary basis. Item 5 Fees and Compensation Portfolio Management Services The annual fee for portfolio management services is billed quarterly in arrears based on the last business day of the previous calendar quarter. Fees will be assessed pro rata in the event the portfolio management agreement is executed at any time other than the first day of a calendar quarter. On an annualized basis, our fees for portfolio management services, subject to negotiation, are based on the following fee schedule: Assets Under Management First $2,000,000 Next $3,000,000 Over $5,000,000 Annualized Fee 1.00% 0.80% 0.50% At our discretion, we may allow accounts of members of the same household to be aggregated for purposes of determining the advisory fee. We may allow such aggregation, for example, where we service accounts on behalf of your minor children, individual and joint accounts for a spouse, and other types of related accounts. This consolidation practice is designed to allow you the benefit of an increased asset total, which could potentially cause the accounts to be assessed a reduced advisory fee based on the breakpoints available in our fee schedule as stated above. We will either invoice you directly for the payment of management fees or payment of fees will be made by the custodian holding your funds and securities provided that the following requirements are met: 6  • You provide written authorization permitting the fees to be paid directly from your account held by the custodian. We do not have access to your funds for payment of fees without your written consent. • The custodian agrees to send you a statement, at least quarterly, indicating all amounts disbursed from the account including the amount of the advisory fee paid directly to us. If this disclosure brochure is not delivered to you within 48 hours prior to you entering into the investment management agreement, you may terminate the agreement within five business days of the date of acceptance without penalty. If you received the disclosure documents 48 hours in advance or if the five-day grace period has expired, either party may terminate the agreement upon 30 days' written notice to the other party. The management fee will be pro-rated for the quarter in which the cancellation notice was given and any unearned fees will be deducted from your final bill. Selection of Other Advisers Advisory fees charged by Third Party Investment Advisers ("TPA") are separate and apart from our advisory fees. Assets managed by TPAs will be included in calculating our advisory fee, which is based on the fee schedule set forth in the "Portfolio Management Services" section in this brochure. Advisory fees that you pay to the TPA are established and payable in accordance with the brochure provided by each TPA to whom you are referred. These fees may or may not be negotiable. You should review the recommended TPA's brochure and take into consideration the TPA's fees along with our fees to determine the total amount of fees associated with this program. Our recommendations to use third party investment advisers are included in our portfolio management fee. We do not charge you a separate fee for the selection of other advisers nor will we share in the advisory fee you pay directly to the TPA. Advisory fees that you pay to the TPA are established and payable in accordance with the Form ADV Part II or other equivalent disclosure document provided by each TPA to whom you are referred. These fees may or may not be negotiable. You should review the recommended TPA's brochure for information on its fees and services. You will be required to sign an agreement directly with the recommended TPA(s). You may terminate your advisory relationship with the TPA according to the terms of your agreement with the TPA. You should review each TPA's brochure for specific information on how you may terminate your advisory relationship with the TPA and how you may receive a refund, if applicable. You should contact the TPA directly for questions regarding your advisory agreement with the TPA. Financial Planning and Consulting Services We charge a fixed fee for financial planning and consulting services which generally ranges between $5,000 and $20,000 and is negotiable depending upon the complexity and scope of the plan, services, your financial situation, and your objectives. An estimate of the total cost is determined at the start of the advisory relationship. In some circumstances the cost/time could potentially exceed the initial estimate. In such cases, we will notify you and may request that you approve the additional fee. A deposit of 50% of the total estimated fee will be due in advance and the remainder will be due upon completion of the services rendered. If this disclosure brochure is not delivered to you within 48 hours prior to you entering into the financial planning agreement, you may terminate the agreement within five business days of the date of acceptance without penalty. If you received the disclosure documents 48 hours in advance or if the five-day grace period has expired, either party may terminate the agreement upon written notice to the other party. In the event there are any prepaid unearned fees at the time of termination, we will promptly refund a pro rata share to you. With respect to fixed fees, earned fees will be based on the number of hours spent on the plan at the time of termination calculated at the current hourly rate. The amount of fee collected exceeding the earned value will be considered unearned. 7  Additional Fees and Expenses As part of our investment advisory services to you, we may invest, or recommend that you invest in mutual funds and exchange traded funds. The fees that you pay to our firm for investment advisory services are separate and distinct from the fees and expenses charged by mutual funds or exchange traded funds (described in each fund's prospectus) to their shareholders. These fees will generally include a management fee and other fund expenses. You will also incur transaction charges and/or brokerage fees when purchasing or selling securities. These charges and fees are typically imposed by the broker-dealer or custodian through whom your account transactions are executed. We do not share in any portion of the brokerage fees/transaction charges imposed by the broker-dealer or custodian. To fully understand the total cost you will incur, you should review all the fees charged by mutual funds, exchange traded funds, our firm, and others. For information on our brokerage practices, please refer to the "Brokerage Practices" section of this brochure. Item 6 Performance-Based Fees and Side-By-Side Management We do not accept performance-based fees or participate in side-by-side management. Side-by-side management refers to the practice of managing accounts that are charged performance-based fees while at the same time managing accounts that are not charged performance-based fees. Performance-based fees are fees that are based on a share of capital gains or capital appreciation of a client's account. Our fees are calculated as described in the Advisory Business section above, and are not charged on the basis of a share of capital gains upon, or capital appreciation of, the funds in your advisory account. Item 7 Types of Clients We offer investment advisory services to individuals, trusts, estates, charitable organizations, corporations, and other business entities. In general, we do not require a minimum dollar amount to open and maintain an advisory account. Item 8 Methods of Analysis, Investment Strategies and Risk of Loss Our Methods of Analysis and Investment Strategies We may use one or more of the following methods of analysis or investment strategies when providing investment advice to you : • Fundamental Analysis - involves analyzing individual companies and their industry groups, such as a company's financial statements, details regarding the company's product line, the experience and expertise of the company's management, and the outlook for the company's industry. The resulting data is used to measure the true value of the company's stock compared to the current market value. The risk of fundamental analysis is that information obtained may be incorrect and the analysis may not provide an accurate estimate of earnings, which may be the basis for a stock's value. If securities prices adjust rapidly to new information, utilizing fundamental analysis may not result in favorable performance. • Technical Analysis - involves studying past price patterns and trends in the financial markets to predict the direction of both the overall market and specific stocks. The risk of market timing based on technical analysis is that this method may not accurately predict future price movements. Current prices of securities may reflect all information known about the security and day to day changes in market prices of securities may follow random patterns and may not be predictable with any reliable degree of accuracy 8  • Cyclical Analysis - a type of technical analysis that involves evaluating recurring price patterns and trends. Economic/business cycles may not be predictable and may have many fluctuations between long term expansions and contractions. The lengths of economic cycles may be difficult to predict with accuracy and therefore the risk of cyclical analysis is the difficulty in predicting economic trends and consequently the changing value of securities that would be affected by these changing trends. • Long Term Purchases - securities purchased with the expectation that the value of those securities will grow over a relatively long period of time, generally greater than one year. • Short Term Purchases - securities purchased with the expectation that they will be sold within a relatively short period of time, generally less than one year, to take advantage of the securities' short-term price fluctuations. We may use short-term trading (in general, selling securities within 30 days of purchasing the same securities) as an investment strategy when managing your account(s). Short-term trading is not a fundamental part of our overall investment strategy, but we may use this strategy occasionally when we determine that it is suitable given your stated investment objectives and tolerance for risk. • Option Transactions - Options are complex securities that involve risks and are not suitable for everyone. Option trading can be speculative in nature and carry substantial risk of loss. It is generally recommended that you only invest in options with risk capital. An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date (the "expiration date"). The two types of options are calls and puts: A call gives the holder the right to buy an asset at a certain price within a specific period of time. Calls are similar to having a long position on a stock. Buyers of calls hope that the price of the stock will increase substantially before the option expires. A put gives the holder the right to sell an asset at a certain price within a specific period of time. Puts are very similar to having a short position on a stock. Buyers of puts hope that the price of the stock will fall before the option expires. Risks that are not specific to options trading include: market risk, sector risk and individual stock risk. Option trading risks are closely related to stock risks as stock options are a derivative of stocks. Our investment strategies and advice may vary depending upon each client's specific financial situation. As such, we determine investments and allocations based upon your predefined objectives, risk tolerance, time horizon, financial horizon, financial information, liquidity needs, and other various suitability factors. Your restrictions and guidelines may affect the composition of your portfolio. Third-party advisers and sub-advisers are reviewed for their overall quality as well as their appropriateness in light of your objectives. Factors such as manager experience, philosophy and process and historical performance are considered in the research process. Our strategies and investments may have unique and significant tax implications. However, unless we specifically agree otherwise, and in writing, tax efficiency, while a factor, is not our primary consideration in the management of your assets. Regardless of your account size or any other factors, we strongly recommend that you continuously consult with a tax professional prior to and throughout the investing of your assets. Custodians and broker dealers must report the cost basis of equities acquired in client accounts. We will instruct your custodian to default to the Tax Lot Optimizer™ accounting method for calculating the cost basis of your investments. You are responsible for contacting your tax advisor to determine if this accounting method is the right choice for you. If your tax advisor believes another accounting method 9  is more advantageous, provide written notice to our firm immediately and we will alert your account custodian of your individually selected accounting method. Decisions about cost basis accounting methods will need to be made before trades settle, as the cost basis method cannot be changed after settlement. Risk of Loss Investing in securities involves risk of loss that you should be prepared to bear. We do not represent or guarantee that our services or methods of analysis can or will predict future results, successfully identify market tops or bottoms, or insulate clients from losses due to market corrections or declines. We cannot offer any guarantees or promises that your financial goals and objectives will be met. Past performance is in no way an indication of future performance. Recommendation of Particular Types of Securities As disclosed under the "Advisory Business" section in this Brochure, we primarily recommend equity securities, municipal securities, investment company securities, options contracts on securities and commodities, and interest in partnerships investing in real estate, oil and gas interests, and others. However, we may recommend other types of investments as appropriate for you since each client has different needs and different tolerance for risk. Each type of security has its own unique set of risks associated with it and it would not be possible to list here all of the specific risks of every type of investment. Even within the same type of investment, risks can vary widely. However, in very general terms, the higher the anticipated return of an investment, the higher the risk of loss associated with it. We have included risks for cryptocurrency/digital assets below as this is a new type of investment utilized by the Advisors and warrants a more detailed explanation. Digital Assets: Digital Assets generally refers to an asset that is issued and/or transferred using distributed ledger or blockchain technology, including, "virtual currencies" (also known as cryptocurrencies), "coins", and "tokens". We may invest client accounts in and/or advise clients on the purchase or sale of digital assets. This advice or investment may be in actual digital coins/tokens/currencies or via investment vehicles such as exchange traded funds (ETFs) or separately managed accounts (SMAs). The investment characteristics of Digital Assets generally differ from those of traditional securities or currencies. Digital Assets are not backed by a central bank or a national, or an international organization, any hard assets, human capital, or other form of credit and are relatively new to the marketplace. Rather, Digital Assets are market-based: a Digital Asset's value is determined by (and fluctuates often, according to) supply and demand factors, its adoption in the traditional commerce channels, and/or the value that various market participants place on it through their mutual agreement or transactions. The lack of history to these types of investments entail certain unknown risks. They should be considered as very speculative and not appropriate for all investors. • Price Volatility of Digital Assets Risk: A principal risk in trading Digital Assets is the rapid fluctuation of market price. The value of client portfolios relates in part to the value of the Digital Assets held in the client portfolio and fluctuations in the price of Digital Assets could adversely affect the value of a client's portfolio. There is no guarantee that a client will be able to achieve a better than average market price for Digital Assets or will purchase Digital Assets at the most favorable price available. The price of Digital Assets achieved by a client may be affected generally by a wide variety of complex factors such as supply and demand; availability and access to Digital Asset service providers (such as payment processors), exchanges, miners or other Digital Asset users and market participants; perceived or actual security vulnerability; and traditional risk factors including inflation levels; fiscal policy; interest rates; and political, natural and economic events. • Digital Asset Service Providers Risk: Service providers that support Digital Assets and the Digital Asset marketplace(s) may not be subject to the same regulatory and professional 10  oversight as traditional securities service providers. Further, there is no assurance that the availability of and access to virtual currency service providers will not be negatively affected by government regulation or supply and demand of Digital Assets. Accordingly, companies or financial institutions that currently support virtual currency may not do so in the future. • Custody of Digital Assets Risk: Under the Advisers Act, SEC registered investment advisers are required to hold securities with "qualified custodians," among other requirements. Certain Digital Assets may be deemed to be securities. Many Digital Assets do not currently fall under the SEC definition of security and therefore many of the companies providing Digital Assets custodial services fall outside of the SEC's definition of "qualified custodian". Accordingly, clients seeking to purchase actual digital coins/tokens/currencies may need to use nonqualified custodians to hold all or a portion of their Digital Assets. • Government Oversight of Digital Assets Risk: Regulatory agencies and/or the constructs responsible for oversight of Digital Assets or a Digital Asset network may not be fully developed and subject to change. Regulators may adopt laws, regulations, policies or rules directly or indirectly affecting Digital Assets and their treatment, transacting, custody, and valuation. Item 9 Disciplinary Information Stembrook Asset Management, LLC has been registered and providing investment advisory services since 2007. Neither our firm nor any of our Associated Persons has any reportable disciplinary information. Item 10 Other Financial Industry Activities and Affiliations We have not provided information on other financial industry activities and affiliations because we do not have any relationship or arrangement that is material to our advisory business or to our clients with any of the types of entities listed below. 1. broker-dealer, municipal securities dealer, or government securities dealer or broker 2. investment company or other pooled investment vehicle (including a mutual fund, closed-end investment company, unit investment trust, private investment company or "hedge fund," and offshore fund) 3. other investment adviser or financial planner 4. futures commission merchant, commodity pool operator, or commodity trading advisor 5. banking or thrift institution 6. accountant or accounting firm 7. lawyer or law firm 8. insurance company or agency 9. pension consultant 10.real estate broker or dealer 11.sponsor or syndicator of limited partnerships Recommendation of Other Advisers We may recommend that you use a third-party adviser ("TPA") based on your needs and suitability. We will not receive compensation from the TPA for recommending that you use their services. 11  Item 11 Code of Ethics, Participation or Interest in Client Transactions and Personal Trading Description of Our Code of Ethics We strive to comply with applicable laws and regulations governing our practices. Therefore, our Code of Ethics includes guidelines for professional standards of conduct for our Associated Persons. Our goal is to protect your interests at all times and to demonstrate our commitment to our fiduciary duties of honesty, good faith, and fair dealing with you. All of our Associated Persons are expected to adhere strictly to these guidelines. Our Code of Ethics also requires that certain persons associated with our firm submit reports of their personal account holdings and transactions to a qualified representative of our firm who will review these reports on a periodic basis. Persons associated with our firm are also required to report any violations of our Code of Ethics. Additionally, we maintain and enforce written policies reasonably designed to prevent the misuse or dissemination of material, non-public information about you or your account holdings by persons associated with our firm. Clients or prospective clients may obtain a copy of our Code of Ethics by contacting us at the telephone number on the cover page of this brochure. Participation or Interest in Client Transactions Neither our firm nor any of our Associated Persons has any material financial interest in client transactions beyond the provision of investment advisory services as disclosed in this brochure. Personal Trading Practices Our firm or persons associated with our firm may buy or sell the same securities that we recommend to you or securities in which you are already invested. A potential conflict of interest exists in such cases because we have the ability to trade ahead of you and potentially receive more favorable prices than you will receive. To eliminate this conflict of interest, it is our policy that neither our Associated Persons nor we shall have priority over your account in the purchase or sale of securities. Item 12 Brokerage Practices We recommend the brokerage and custodial services of Charles Schwab (whether one or more, a "Custodian"). Your assets must be maintained in an account at a "qualified custodian," generally a broker-dealer or bank. In recognition of the value of the services the Custodian provides, you may pay higher commissions and/or trading costs than those that may be available elsewhere. Our selection of a Custodian is based on many factors, including the level of services provided, the Custodian's financial stability, and the cost of services provided by the Custodian to our clients, which includes the yield on cash sweep choices, commissions, custody fees and other fees or expenses. We seek to recommend a custodian/broker that will hold your assets and execute transactions on terms that are, overall, the most favorable compared to other available providers and their services. We consider various factors, including: • Capability to buy and sell securities for your account itself or to facilitate such services. • The likelihood that your trades will be executed. • Availability of investment research and tools. • Overall quality of services. • Competitiveness of price. • Reputation, financial strength, and stability. • Existing relationship with our firm and our other clients. 12  Research and Other Soft Dollar Benefits We do not receive soft dollar benefits from any broker-dealer. Economic Benefits As a registered investment adviser, we have access to the institutional platform of your account custodian. As such, we will also have access to research products and services from your account custodian and/or other brokerage firm. These products may include financial publications, information about particular companies and industries, research software, and other products or services that provide lawful and appropriate assistance to our firm in the performance of our investment decision- making responsibilities. Such research products and services are provided to all investment advisers that utilize the institutional services platforms of these firms, and are not considered to be paid for with soft dollars. However, you should be aware that the commissions charged by a particular broker for a particular transaction or set of transactions may be greater than the amounts another broker who did not provide research services or products might charge. The custodian and brokers we use We do not maintain custody of your assets that we manage, although we may be deemed to have custody of your assets if you give us authority to withdraw assets from your account (see Item 15— Custody, below). Your assets must be maintained in an account at a "qualified custodian," generally a broker-dealer or bank. We recommend that our clients use Charles Schwab & Co., Inc. (Schwab), a registered broker- dealer, member SIPC, as the qualified custodian. We are independently owned and operated and are not affiliated with Schwab. Schwab will hold your assets in a brokerage account and buy and sell securities when we instruct them to. While we recommend that you use Schwab as custodian/broker, you will decide whether to do so and will open your account with Schwab by entering into an account agreement directly with them. Conflicts of interest associated with this arrangement are described below as well as in Item 14 (Client referrals and other compensation). You should consider these conflicts of interest when selecting your custodian. How we select brokers/custodians We recommend a custodian/broker that will hold your assets and execute transactions. When considering whether the terms that Schwab provides are, overall, most advantageous to you when compared with other available providers and their services, we consider a wide range of factors, including: • Combination of transaction execution services and asset custody services (generally without a separate fee for custody) • Capability to execute, clear, and settle trades (buy and sell securities for your account) • Capability to facilitate transfers and payments to and from accounts (wire transfers, check requests, bill payment, etc.) • Breadth of available investment products (stocks, bonds, mutual 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 the prices • Reputation, financial strength, security, and stability • Prior service to us and our clients • Availability of other products and services that benefit us, as discussed below (see "Products and services available to us from Schwab") 13  Your Custody and Brokerage Costs For our clients' accounts that Schwab maintains, Schwab generally does not charge you separately for custody services but is compensated by charging you commissions or other fees on trades that it executes or that settle into your Schwab account. Certain trades (for example, many mutual funds and ETFs) may not incur Schwab commissions or transaction fees. Schwab is also compensated by earning interest on the uninvested cash in your account in Schwab's Cash Features Program. Schwab charges you a flat dollar amount as a "prime broker" or "trade away" fee for each trade that we have executed by a different broker-dealer but where the securities bought or the funds from the securities sold are deposited (settled) into your Schwab account. These fees are in addition to the commissions or other compensation you pay the executing broker-dealer. Because of this, in order to minimize your trading costs, we have Schwab execute most trades for your account. We are not required to select the broker or dealer that charges the lowest transaction cost, even if that broker provides execution quality comparable to other brokers or dealers. Although we are not required to execute all trades through Schwab, we have determined that having Schwab execute most trades is consistent with our duty to seek "best execution" of your trades. Best execution means the most favorable terms for a transaction based on all relevant factors, including those listed above (see "How we select brokers/custodians"). By using another broker or dealer you may pay lower transaction costs. Products and services available to us from Schwab Schwab Advisor Services™ is Schwab's business serving independent investment advisory firms like us. They provide us and our clients with access to their institutional brokerage services (trading, custody, reporting, and related services), many of which are not typically available to Schwab retail customers. However, certain retail investors may be able to get institutional brokerage services from Schwab without going through us. Schwab also makes available various support services. Some of those services help us manage or administer our clients' accounts, while others help us manage and grow our business. Schwab's support services are generally available on an unsolicited basis (we don't have to request them) and at no charge to us. Following is a more detailed description of Schwab's support services: Services that benefit you. Schwab's institutional brokerage services include access to a broad range of investment products, execution of securities transactions, and custody of client assets. The investment products available through Schwab include some to which we might not otherwise have access or that would require a significantly higher minimum initial investment by our clients. Schwab's services described in this paragraph generally benefit you and your account. Services that do not directly benefit you. Schwab also makes available to us other products and services that benefit us but do not directly benefit you or your account. These products and services assist us in managing and administering our clients' accounts and operating our firm. They include investment research, both Schwab's own and that of third parties. We use this research to service all or a substantial number of our clients' accounts, including accounts not maintained at Schwab. In addition to investment research, Schwab also makes available software and other technology that: • Provide access to client account data (such as duplicate trade confirmations and account statements) • Facilitate trade execution and allocate aggregated trade orders for multiple client accounts • Provide pricing and other market data • Facilitate payment of our fees from our clients' accounts 14  • Assist with back-office functions, recordkeeping, and client reporting Services that generally benefit only us. Schwab also offers other services intended to help us manage and further develop our business enterprise. These services include: • Educational conferences and events • Consulting on technology and business needs • Consulting on legal and related compliance needs • Publications and conferences on practice management and business succession • Access to employee benefits providers, human capital consultants, and insurance providers • Marketing consulting and support Schwab provides some of these services itself. In other cases, it will arrange for third-party vendors to provide the services to us. Schwab also discounts or waives its fees for some of these services or pays all or a part of a third party's fees. Schwab also provides us with other benefits, such as occasional business entertainment of our personnel. If you did not maintain your account with Schwab, we would be required to pay for these services from our own resources. The availability of these services from Schwab benefits us because we do not have to produce or purchase them. We don't have to pay for Schwab's services. These services are not contingent upon us committing any specific amount of business to Schwab in trading commissions or assets in custody. The fact that we receive these benefits from Schwab is an incentive for us to recommend the use of Schwab rather than making such a decision based exclusively on your interest in receiving the best value in custody services and the most favorable execution of your transactions. This is a conflict of interest. We believe, however, that taken in the aggregate, our recommendation of Schwab as custodian and broker is in the best interests of our clients. Our selection is primarily supported by the scope, quality, and price of Schwab's services (see "How we select brokers/ custodians") and not Schwab's services that benefit only us. Brokerage for Client Referrals We do not receive client referrals from broker-dealers in exchange for cash or other compensation, such as brokerage services or research. Directed Brokerage We routinely recommend that you direct our firm to execute transactions through one of the broker- dealers with whom we have a relationship. As such, we may be unable to achieve the most favorable execution of your transactions and you may pay higher brokerage commissions than you might otherwise pay through another broker-dealer that offers the same types of services. Not all advisers require their clients to direct brokerage. In limited circumstances, and at our discretion, some clients may instruct our firm to use one or more particular brokers for the transactions in their accounts. If you choose to direct our firm to use a particular broker, you should understand that this might prevent us from effectively negotiating brokerage commissions on your behalf. This practice may also prevent our firm from obtaining favorable net price and execution. Thus, when directing brokerage business, you should consider whether the commission expenses, execution, clearance, and settlement capabilities that you will obtain through your broker are adequately favorable in comparison to those that we would otherwise obtain for you. Held Away Accounts 15  Stembrook Asset Management may use Pontera, a third-party service provider, for accounts not directly held with our recommended custodian. Stembrook Asset Management will leverage Pontera's platform to directly manage 401(k) accounts, 403(b) accounts, 529 plans, and other accounts not held with our recommended custodian. Stembrook Asset Management does not have access to client credentials, client assets, or the ability to withdraw/transfer funds and therefore we do not have custody. We will periodically review these accounts and make changes on behalf of our clients in accordance with our investment policy statement. We will provide our clients with reporting on these accounts on a quarterly basis. The client does not pay an additional fee for Pontera. Fees will be based upon your negotiated fee in accordance to our portfolio management fee schedule and your Agreement. Refer to Item 5 - Fees and Compensation, Item 13- Review of Accounts and Item 15- Custody for further information. Block Trades Transactions for each client generally will be effected independently, unless we decide to purchase or sell the same securities for several clients at approximately the same time. We may, but are not obligated to, combine multiple orders for shares of the same securities purchased for advisory accounts we manage (this practice is commonly referred to as "block trading"). We will then distribute a portion of the shares to participating accounts in a fair and equitable manner. The distribution of the shares purchased is typically proportionate to the size of the account, but it is not based on account performance or the amount or structure of management fees. Subject to our discretion regarding factual and market conditions, when we combine orders, each participating account pays an average price per share for all transactions and pays a proportionate share of all transaction costs on any given day. Accounts owned by our firm or persons associated with our firm may participate in block trading with your accounts; however, they will not be given preferential treatment. Item 13 Review of Accounts The Stembrook team will monitor your accounts on a continuous basis and will conduct account reviews at least annually to ensure the advisory services provided to you and/or that the portfolio mix are consistent with your stated investment needs and objectives. Additional reviews may be conducted based on various circumstances, including, but not limited to: • contributions and withdrawals, • year-end tax planning, • market moving events, • security specific events, and/or, • changes in your risk/return objectives. The Firm will provide Clients with periodic performance reports. Clients will also receive statements directly from their account custodian(s) on a quarterly basis. Item 14 Client Referrals and Other Compensation Charles Schwab & Co., Inc - Institutional We receive an economic benefit from Schwab in the form of the support products and services it makes available to us and other independent investment advisors whose clients maintain their accounts at Schwab. We benefit from the products and services provided because the cost of these services would otherwise be borne directly by us, and this creates a conflict. You should consider these conflicts of interest when selecting a custodian. These products and services, how they benefit us, and the related conflicts of interest are described above (see Item 12—Brokerage Practices). 16  We directly compensate non-employee (outside) consultants, individuals, and/or entities (promoters) for client referrals. In order to receive a cash referral fee from us, promoters must comply with the requirements of the jurisdictions in which they operate. If you were referred to us by a promoter, you should have received a copy of this brochure along with the promoter's disclosure statement at the time of the referral. If you become a client, the promoter that referred you to us will receive a percentage of the advisory fee you pay us for as long as you are our client, or until such time as our agreement with the promoter expires. You will not pay additional fees because of this referral arrangement. Referral fees paid to a promoter are contingent upon your entering into an advisory agreement with us. Therefore, a solicitor has a financial incentive to recommend us to you for advisory services. This creates a conflict of interest; however, you are not obligated to retain us for advisory services. Comparable services and/or lower fees may be available through other firms. Promoters that refer business to more than one investment adviser may have a financial incentive to recommend advisers with more favorable compensation arrangements. We request that our promoters disclose to you whether multiple referral relationships exist and that comparable services may be available from other advisers for lower fees and/or where the promoter's compensation is less favorable. Item 15 Custody As paying agent for our firm, your independent custodian will directly debit your account(s) for the payment of our advisory fees. This ability to deduct our advisory fees from your accounts causes our firm to exercise limited custody over your funds or securities. We do not have physical custody of any of your funds and/or securities. Your funds and securities will be held with a bank, broker-dealer, or other independent, qualified custodian. You will receive account statements from the independent, qualified custodian(s) holding your funds and securities at least quarterly. The account statements from your custodian(s) will indicate the amount of our advisory fees deducted from your account(s) each billing period. You should carefully review account statements for accuracy. We will also provide statements to you reflecting the amount of advisory fee deducted from your account. You should compare our statements with the statements from your account custodian(s) to reconcile the information reflected on each statement. If you have a question regarding your account statement, or if you did not receive a statement from your custodian, please contact us directly at the telephone number on the cover page of this brochure. Item 16 Investment Discretion Before we can buy or sell securities on your behalf, you must first sign our discretionary management agreement, a power of attorney, and/or trading authorization forms. You may grant our firm discretion over the selection and amount of securities to be purchased or sold for your account(s) without obtaining your consent or approval prior to each transaction. You may specify investment objectives, guidelines, and/or impose certain conditions or investment parameters for your account(s). For example, you may specify that the investment in any particular stock or industry should not exceed specified percentages of the value of the portfolio and/or restrictions or prohibitions of transactions in the securities of a specific industry or security. Please refer to the "Advisory Business" section in this brochure for more information on our discretionary management services. 17  Item 17 Voting Client Securities Proxy Voting We will determine how to vote proxies based on our reasonable judgment of the vote most likely to produce favorable financial results for you. Proxy votes generally will be cast in favor of proposals that maintain or strengthen the shared interests of shareholders and management, increase shareholder value, maintain or increase shareholder influence over the issuer's board of directors and management, and maintain or increase the rights of shareholders. Generally, proxy votes will be cast against proposals having the opposite effect. However, we will consider both sides of each proxy issue. For the sake of clarity, the Manager may use its discretion to determine that there is insufficient benefit to voting the proxy, or that the Manager has insufficient information to adequately assess the merits of a proposal and may refrain from voting, accordingly. This may include but is not limited to cases where the Manager holds a security for client-specific purposes. Except in the case of a conflict of interest as described below, we do not accept direction from you on voting a particular proxy. Conflicts of interest between you and our firm, or a principal of our firm, regarding certain proxy issues could arise. If we determine that a material conflict of interest exists, we will take the necessary steps to resolve the conflict before voting the proxies. For example, we may disclose the existence and nature of the conflict to you, and seek direction from you as to how to vote on a particular issue; we may abstain from voting, particularly if there are conflicting interests for you (for example, where your account(s) hold different securities in a competitive merger situation); or, we will take other necessary steps designed to ensure that a decision to vote is in your best interest and was not the product of the conflict. We keep certain records required by applicable law in connection with our proxy voting activities. You may obtain information on how we voted proxies and/or obtain a full copy of our proxy voting policies and procedures by making a written or oral request to our firm. Item 18 Financial Information We are not required to provide financial information to our clients because we do not: require the prepayment of more than $1200 in fees and six or more months in advance, or take custody of client funds or securities, or • • • have a financial condition that is reasonably likely to impair our ability to meet our commitments to you. Moreover, we have never been the subject of a bankruptcy petition. Item 19 Requirements for State Registered Advisers We are a federally registered investment adviser; therefore, we are not required to respond to this item. 18  Item 20 Additional Information Your Privacy We view protecting your private information as a top priority. Pursuant to applicable privacy requirements, we have instituted policies and procedures to ensure that we keep your personal information private and secure. We do not disclose any nonpublic personal information about you to any nonaffiliated third parties, except as permitted by law. In the course of servicing your account, we may share some information with our service providers, such as transfer agents, custodians, broker-dealers, accountants, consultants, and attorneys. We restrict internal access to nonpublic personal information about you to employees who need that information in order to provide products or services to you. We maintain physical and procedural safeguards that comply with regulatory standards to guard your nonpublic personal information and to ensure our integrity and confidentiality. We will not sell information about you or your accounts to anyone. We do not share your information unless it is required to process a transaction, at your request, or required by law. You will receive a copy of our privacy notice prior to or at the time you sign an advisory agreement with our firm. Thereafter, we will deliver a copy of the current privacy policy notice to you on an annual basis. Please contact our main office at the telephone number on the cover page of this brochure if you have any questions regarding this policy. Trade Errors In the event a trading error occurs in your account, our policy is to restore your account to the position it should have been in had the trading error not occurred. Depending on the circumstances, corrective actions may include canceling the trade, adjusting an allocation, and/or reimbursing the account. If a trade error results in a profit, you will keep the profit. Class Action Lawsuits We do not determine if securities held by you are the subject of a class action lawsuit or whether you are eligible to participate in class action settlements or litigation nor do we initiate or participate in litigation to recover damages on your behalf for injuries as a result of actions, misconduct, or negligence by issuers of securities held by you. 19