Best Practice Investment Management

2018
BestPracticeInvestmentManagement
FERRELL CAPITAL MANAGEMENT
Risk Allocation / Artificial Intelligence

Why Best Practice Investment Management?
Most desired Investment Behavior
• Optimize returns in flat and appreciated market environments
• Avoid losing asset value in periods of decline
• Compound investment returns

How to Achieve Desired Investment Outcomes
• Use Artificial Intelligence to select security investments
• Invest in Cash as an asset class:
• To avoid losses
• When AI cannot find profitable investment
opportunities
• Implement through Qualified Investment Professionals

Two Ways to Use AI and Cash Strategy
• Beat Index Performance
• Force AI to Select from List of Index Components
• Allocate to Best AI Opportunities
• Use Cash as a “Safe Harbor”
• Disregard Tracking Error
• Create Max Alpha Portfolio
• Invest in highest confidence AI security selections
• Cash as “Safe Harbor”
• Measure against absolute return benchmark

2018 Investment Methodologies
• So-called “traditional” investment methodologies
buy-and-hold
• Relies on picking the right investment vehicles
• Is static in nature
• Modern investment methodologies
• Picks optimum investment vehicles in real-time
• Utilizes Cash as an asset when optimal vehicles are not
available
• Is dynamic in nature

Incorporating Artificial Intelligence
The next step beyond dynamic allocation of assets based on Risk
using advanced mathematical and statistical analysis -- is for the
system to learn and constantly improve its own performance.

The Foundation of an AI Model
Market activity measured with a proven scientific principle of thermodynamics:
• Container = market
• Molecules = securities
• Measure market temperature
• Model price movement and related speed
• Replaces traditional models of volatility and correlation

Best Practice AI Implementation
• Performs daily market observations, learns statistical patterns and
adjusts exposures as necessary.
• Invests in ETFs and equity securities that demonstrate high
pattern recognition accuracy.
• Thermodynamics factor into the decision to remove exposures
when market turmoil threatens.
• Designed to out-perform benchmarks without tracking error
constraints.

CONCERT AI: Tangible Results of Investment
Best Practices
Application to:
• S&P 500
• DOW 30
• EAFE Developed Countries
• Optimal Unconstrained Performance

The CONCERT AI Model
• Combines decades of experience in investment management and
computer science.
• Utilizes four dimensional data representations.
• Height, Width, Depth and Intensity
• Employs Neural Networks.
• Complex Price Behavior Pattern Recognition.
• Multiple layers of analysis and refinement.
• Constantly learning to improve performance accuracy.

CONCERT AI: Scans market for high probability outcomes
Start with 9,000 securities, and ETFs
Each layer is designed to improve accuracy and the ratio of return to maximum drawdown.
Layer 1 - Determines Market ‘Temperature’ - Eliminates securities with predominantly random behavior
leaving over 1,500 with an average outcome accuracy of 58%.
Layer 2 – Eliminates additional securities with low predictability characteristics
leaving 1,000 with an average outcome accuracy of 67%.
Layer 3 – Selects top 60 securities with trading accuracies from 70% to 84%, and
also with high return to maximum drawdown characteristics.
Layer 4 - Selects up to 15 securities which meet liquidity
criteria for exposure.
High Probability Outcomes

Position Management
AI and Cash Model:
• Selects desirable security positions.
• Monitors daily.
• Determines when patterns are complete and exits exposure.
• System may buy and sell the same security multiple times based on pattern recognition.
• Holding period is pattern-dependent.
• System will go to Cash when the market risk is unacceptable.
Example:
Date Company Name Symbol Action Price Date Action Price G/L Days held
12/9/2005 Northrop Grumman NOC buy 53.03 2/21/2006 sell 59.46 12.13% 48
9/11/2006 Northrop Grumman NOC buy 62.51 10/6/2006 sell 62.25 -0.42% 19
10/11/2013 Northrop Grumman NOC buy 97.70 OPEN 302.72 209.85%

CONCERT AI: EAFE
The following chart illustrates CONCERT AI performance enhancement.
• Anticipated market high volatility in 2008 and 2011, going to Cash
and re-entering the market only when conditions were favorable.
• Periods of low volatility generate less pronounced patterns of price
behavior, which at times (e.g. 2014-2015) may reduce the reliability of
profit opportunities.

0
50
100
150
200
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400
450
500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CONCERT AI vs. EAFE
EAFE: 4.8% p.a., CONCERT AI: 13.1% p.a.
0
50
100
Aug 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
VIX

CONCERT AI: S&P 500 and DJIA
The following charts illustrate the prescient response of CONCERT AI to market
conditions as tracked by the VIX, compared to the S&P and Dow Jones
Industrial Average indices.
Note: The flight to Cash often precedes spikes in VIX sentiment, as illustrated in
the chart.

0.00
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600.00
Aug 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CONCERT AI S&P vs. S&P 500
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40
60
80
Aug 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
VIX
S&P 500: 8.4% p.a. CONCERT AI S&P: 13.9% p.a.

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Aug 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CONCERT AI DOW vs. DJIA
DJIA: 6.6% p.a. CONCERT AI DOW: 15.7% p.a.
0
20
40
60
80
Aug 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
VIX

CONCERT AI
When we are not following a predetermined index, and CONCERT
AI is able to select equities with the best model characteristics (and
constrained only by liquidity minimums), we expect considerably
higher levels of performance, as shown in the following chart.

0.00
500.00
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2500.00
Aug 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
CONCERT AI Liquid Selections vs. S&P 500
S&P 500: 8.4% p.a. CONCERT AI Liquid Selections: 28.7% p.a.

What you need to remember…
CONCERT AI works because it is entirely logical and well-constructed
• The process is based on proven scientific principles applied to the world
of finance.
• Price pattern recognition starts with millions of data points fed into
70,000 lines of code
• Ten (10) years of machine learning assures objectivity and continuity in
the Artificial Intelligence process.
• CONCERT AI selects the patterns with the highest projected accuracy
and commits to investments before most investors recognize their
potential for appreciation.
• Results are as unemotional as the process, and speak for themselves.

You may be confident in the CONCERT AI approach because the
professionals running this program are intellectually honest, aspire to high
professional values, and bring decades of relevant experience to the table.
• You may invest in separately managed accounts at any time.
• ETF creation will provide listed opportunities in early 2018.
“Of course, forecasting the sources of future innovations in financial technology is
treacherous business fraught with many half-baked successes and some embarrassing
failures. Perhaps the only reliable prediction is that the innovations of the future are likely
to come from unexpected and under-appreciated sources”.
- A Non-RandomWalk DownWall Street, by Andrew W. Lo and A. Craig MacKinlay

Our Core Values
• Integrity
We demand the highest standards of ourselves and from all with whom we conduct business.
• Client Commitment
We are committed to building and retaining a blue chip client base by focusing on investment performance and
responsiveness to client needs.
• Professional Standards
We encourage every member of our team to use all of their talents to benefit the firm, its clients, and their own
professional growth. Professional respect and trust permeates our firm.
• Intellectual Honesty
We encourage and nurture objectivity, curiosity, and freedom of thought and expression. Every decision is made on the
basis of fairness and objective validity.
• Entrepreneurial Work Ethic
We are dedicated to building our business through hard work, innovation and flexibility. Our business demands
continuing education to enable our firm to always remain abreast of the marketplace and to anticipate change.
• Independence
We understand the risks and freedoms associated with private ownership and thrive on the right of self-determination.
Member interests of Ferrell Capital can only be owned by active employees.

CONCERT AI Team
William G. Ferrell has brought together a dedicated team with
seasoned expertise in the fields of finance, market analysis, computer
science and multimedia to realize CONCERT AI.

CONCERT AI Team: William G. Ferrell
Founder and Chief Investment Officer of FERRELL CAPITAL MANAGEMENT, William
G. Ferrell brings four decades of experience trading securities and derivatives, first as
a financial engineer and manager with Citibank and as a Board Member with Kidder
Peabody.
In 1988, Mr. Ferrell founded FERRELL CAPITAL MANAGEMENT, to offer risk consulting
and risk-managed investments to large financial institutions. This led FERRELL
CAPITAL to develop a comprehensive tool kit of methodologies and measurement
algorithms. From 2000 through 2010 Mr. Ferrell was Chief Investment Officer for a
fund of over one hundred hedge funds.
The FERRELL CONCERT Strategies combine capital allocation experience with the
advantages of ETFs to manage market exposures. Today, Mr. Ferrell leads a team to
take CONCERT to the next level through the application of proven Artificial Intelligence
methods to portfolio selection and risk management optimization.

CONCERT AI Team: Peter C. Pierce
Founder and Chief Financial Consultant of ATLANTIC VENTURE MANAGEMENT, Peter
C. Pierce brings four decades of experience offering strategic and tactical research and
third-party marketing services to early stage technology and financial service firms.
Mr. Pierce’s consulting experience includes partnering with a futures industry expert to
develop a successful consulting service, assisting a Commodity Trading Advisor with
the launch of a Hedge Program utilizing Behavioral Finance methods, and consulting
related to a Neural Stock Index Trading Program – combining big data and predictive
analytics.
Mr. Pierce is founder and editor of AVMAdvisor, a U.S. Equity market trend
identification and fundamental research service.
ATLANTIC VENTURE MANAGEMENT
• Provides research and third-party marketing services to Alternative Investment Managers
• Consults with early-stage companies on marketing and sales-related issues
• Provides manager risk assessment to endowments and large pension plan sponsors

CONCERT AI Team: Craig W. Schulenberg
Craig W. Schulenberg has contributed as a Consultant, Computer Scientist and
Principal Member of Technical Staff for a number of software and aerospace firms,
including Charles Stark Draper Laboratory, MRI Technologies, China Lake Naval
Weapons Center, IBM Federal Systems Division, Intermetrics, Inc., and TRW
Systems.
Mr. Schulenberg has designed and developed compilers and well as flight software for
spacecraft ranging from Project Apollo to the Shuttle, and is now involved with the
Space Launch System program. Craig received the Silver Snoopy Award from NASA
astronauts for technological achievement which promoted their safety in space.
In 2000, Mr. Schulenberg initiated development of an innovative and highly accurate
stock trading system based on physics principles from thermodynamics which have
been proven to accurately model market behavior.
This model utilizes Artificial Intelligence methods: a Neural Net based Expert System,
and is the heart of CONCERT AI.

CONCERT AI Team: John W. Baxter
John W. Baxter has contributed to software design, development and test projects since
the 1970s in medical electronics and broadband communications for SmithKline,
Moberg Medical, Motorola, SeaChange, Xfinity among a broad range of freelance
clients.
John specializes in development and test of the User Experience for embedded and
web-based software systems, as well as web and multimedia production.
John has created FERRELL CAPITAL’s website and will continue to develop social media
outlets to broaden awareness, as well as future CONCERT AI investor apps.

Appendix

Monthly Returns for CONCERT AI
Portfolios

CONCERT AI EAFE
CONCERT AI
EAFE Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2005 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.4% 1.9% 0.2% 2.1% 3.3% 8.0%
2006 6.3% -0.2% 3.1% 1.5% 0.8% 0.0% 0.0% 0.0% 2.8% 3.3% 2.4% 1.6% 23.6%
2007 1.3% -1.3% 0.0% -0.1% 0.3% 0.1% -0.1% 2.5% 5.8% 0.2% 0.0% -0.5% 8.2%
2008 0.7% 1.1% 0.0% 2.9% 1.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 5.9%
2009 0.0% 0.0% 8.0% 13.0% 13.1% 2.2% 3.6% 3.0% 6.0% -4.7% 2.3% -0.2% 55.0%
2010 -2.3% 1.5% 5.8% -1.5% -9.7% -3.4% 14.5% -5.6% 13.3% 4.8% -2.8% 7.8% 21.2%
2011 1.4% 1.1% 1.4% 0.6% 0.7% -0.7% 0.4% 0.0% -3.7% 10.4% -3.5% -4.4% 3.1%
2012 6.4% 4.2% -0.5% -2.5% -11.5% 6.2% 0.3% 3.8% 3.3% 1.6% 2.5% 3.1% 16.8%
2013 4.1% -2.4% 0.3% 5.1% -3.4% -5.6% 6.0% 1.1% 6.0% 3.6% 0.4% 0.5% 16.0%
2014 -5.2% 6.0% -0.3% 1.9% 1.4% -2.2% -2.2% 0.1% -2.1% 0.3% 0.3% -5.9% -8.3%
2015 0.4% 6.4% -1.0% 3.8% 0.3% -4.5% 2.2% -7.4% -3.8% 6.4% -1.0% -1.8% -0.9%
2016 -6.6% -1.6% 8.6% 2.5% -1.9% -5.4% 4.1% 0.6% 2.0% -1.9% -2.8% 2.6% -0.9%
2017 4.2% 0.5% 5.2% 4.1% 4.6% -1.2% 3.9% 0.4% 2.2% 0.8% -1.2% 25.7%

CONCERT AI S&P
CONCERT AI
S&P Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2005 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.4% 1.2% 3.5% 1.0% 6.4%
2006 4.0% -1.19% 0.28% 1.91% 1.5% 0.0% 0.0% 0.0% 1.6% 2.6% 1.5% 0.7% 13.5%
2007 0.7% -0.3% -1.2% 0.1% 0.0% -0.3% 0.1% 1.0% 3.3% 0.0% 0.0% 0.0% 3.5%
2008 -0.7% -1.2% 0.1% 2.8% -0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.7%
2009 0.0% 0.0% 4.9% 11.8% 6.9% 1.0% 4.5% 1.1% 3.8% -4.5% 8.2% 0.8% 44.8%
2010 1.2% 1.0% 5.2% 1.4% -4.5% -3.4% 5.6% -3.1% 6.3% 3.4% 1.7% 6.4% 22.3%
2011 2.6% 1.6% 0.4% 0.2% -0.4% 0.8% 0.3% 0.0% -3.8% 8.3% -0.5% 1.3% 11.1%
2012 3.0% 3.7% 3.9% -0.2% -4.4% 3.4% 1.2% 1.5% 1.9% -1.1% 0.3% -0.3% 13.4%
2013 5.3% 1.7% 4.1% 3.2% 0.6% -1.2% 5.1% -2.1% 2.1% 4.1% 2.1% 1.9% 30.1%
2014 -3.6% 4.6% 0.8% 1.0% 1.6% 1.2% -3.2% 4.4% -2.0% 3.7% 3.7% -0.1% 12.5%
2015 -0.9% 3.8% -1.7% 1.2% 0.6% -3.0% 2.4% -5.7% -2.5% 7.5% -0.5% -2.0% -1.5%
2016 -2.6% -0.1% 6.2% 0.2% 1.4% 1.7% 2.3% -1.4% 0.0% -2.0% 0.8% 1.4% 8.0%
2017 1.8% 3.5% 0.0% 1.0% 1.7% -1.5% 2.2% 0.2% 0.5% 1.9% 1.1% 12.8%

CONCERT AI DOW
CONCERT AI
DOW Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2005 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -0.1% 0.8% 0.7% 3.9% -0.8% 4.6%
2006 2.3% 1.3% 0.6% 0.1% 0.1% 0.0% 0.0% 0.0% 3.3% 3.3% 1.6% 1.2% 14.6%
2007 1.4% -2.0% 0.2% 0.4% 0.6% 0.0% 0.3% 1.3% 3.8% 0.5% 0.5% -0.2% 6.6%
2008 -0.7% 0.2% -0.2% 3.8% 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.7%
2009 0.0% 0.0% 6.0% 12.8% 4.7% 1.5% 6.3% 2.3% 4.8% -0.8% 6.0% -0.1% 52.1%
2010 0.2% 2.4% 6.7% 1.7% -1.4% -3.5% 7.1% -5.5% 8.6% 3.3% 1.7% 5.8% 29.3%
2011 3.0% 2.0% 0.8% 0.0% 0.2% 1.4% 0.2% 0.3% -3.6% 8.8% 0.3% 3.6% 17.0%
2012 3.7% 3.3% 4.1% -0.5% -5.9% 4.0% 0.4% 1.6% 2.2% -2.2% -0.2% -0.4% 10.1%
2013 3.7% 1.4% 3.7% 3.6% 1.9% -0.6% 3.2% -2.2% 2.5% 2.1% 2.7% 3.3% 28.3%
2014 -5.3% 3.6% 1.8% 2.3% 1.5% 1.5% -1.5% 3.9% -1.0% 1.3% 3.7% -1.5% 10.3%
2015 -2.5% 5.8% -2.0% 0.0% 1.5% -2.7% 1.9% -6.4% -0.1% 7.9% 0.0% -0.9% 1.7%
2016 -4.5% -0.1% 6.3% 0.3% 0.0% 1.8% 2.0% -0.7% -1.0% -2.4% 3.7% 2.4% 7.6%
2017 0.1% 3.6% -0.2% 1.9% 0.3% 1.3% 1.5% -0.2% 1.8% 3.2% 0.4% 14.5%

CONCERT AI Liquid Selections
CONCERT AI
Liquid Selections Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
2005 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% -0.3% 5.1% 1.4% 7.3% 2.0% 16.1%
2006 5.7% 1.7% 5.1% 1.9% 5.7% 0.0% 0.0% 0.0% 1.8% 4.1% 1.4% 0.5% 31.2%
2007 5.2% 0.9% 0.1% 5.2% 5.4% 0.4% 1.5% 1.3% 8.6% 4.0% 0.0% 0.7% 38.6%
2008 8.7% 4.0% -0.4% 2.1% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 15.1%
2009 0.0% 0.0% 3.2% 12.0% 0.9% 5.9% 14.6% 3.3% 6.6% -3.8% 10.0% 1.0% 66.5%
2010 0.0% 5.0% 6.9% 2.9% -4.9% -4.5% 5.2% -1.1% 14.3% 5.8% 2.1% 5.4% 42.0%
2011 1.2% 3.7% 4.3% 1.8% 0.7% 0.8% -1.2% -1.0% -5.3% 10.1% 2.3% -0.5% 17.5%
2012 4.5% 2.5% 5.5% 4.1% -2.2% 1.1% 1.5% 0.8% 0.4% -0.3% 2.6% 1.7% 24.2%
2013 2.6% 1.7% 2.1% 4.0% 1.8% -0.1% 3.9% 1.2% 8.0% 5.6% 2.8% 4.5% 45.0%
2014 -3.7% 8.1% -0.3% -1.5% 1.6% 1.1% -2.7% 7.7% -2.3% 2.9% 4.4% -0.4% 15.0%
2015 -0.8% 8.1% -2.3% 0.4% 3.4% -0.4% 3.8% -6.1% -1.7% 9.5% 3.7% -3.2% 14.1%
2016 -6.6% -0.6% 7.3% -0.2% 1.0% 1.4% 2.9% -1.7% -0.1% -0.4% 4.3% 1.4% 8.2%
2017 1.5% 2.9% 1.7% 1.5% 3.7% -1.4% 0.6% 2.6% 2.6% 4.0% 4.7% 26.9%

Disclosure
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual
performance record, simulated results do not represent actual trading. Also, since such trades have not been
executed, the results may have under- or over compensated for the impact, in any, of certain market factors,
such as lack of liquidity, and the results do not represent any net impact of investment management/incentive
or other transaction fees and expenses (including commissions). Simulated trading programs in general are
also subject to the fact that they are designed with the benefit of hindsight. Neither the hypothetical or
simulated performance results included herein nor any other hypothetical or simulated performance result
should be relied upon as an accurate measure of comparison. No representation is being made that any
account or product will, or is likely to, achieve profits or will equal the performance similar to these being
shown. Past performance is not indicative of future performance and simulated hypothetical returns likewise
have no bearing on potential future actual returns.
THESE MATERIALS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY SECURITIES, AND NO PERSON HAS BEEN AUTHORIZED BY FCM TO PROVIDE
ANY INFORMATION OR MAKE ANY REPRESENTATION, ORAL OR WRITTEN, TO THE
CONTRARY. IF ANY SUCH INFORMATION OR REPRESENTATION, ORAL OR WRITTEN, IS GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY FCM. ANY PROJECTIONS OR FORWARD-LOOKING
STATEMENTS OR OPINIONS CONTAINED HEREIN, ARE EXCLUSIVELY ESTIMATES OF FCM. BY
THEIR NATURE, PROJECTIONS, OPINIONS, AND FORWARD-LOOKING STATEMENTS ARE ONLY
ESTIMATES AND COULD BE MATERIALLY DIFFERENT FROM WHAT ACTUALLY OCCURS IN
THE FUTURE.

Contact Information
wferrell@ferrellcapital.com +1 203-862-9500 ferrellcapital.com

Best Practice Investment Management

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