# Family Consumption & Asset Ownership Policy Pranayama Provisions – North Shore Estate ## Purpose This policy establishes clear rules governing (i) limited family consumption of agricultural output and (ii) ownership and accounting treatment of capital assets used in agricultural operations. The objective is to preserve arm’s-length integrity between the Owners and the Operating Company (“OpCo”), ensure accurate financial reporting, and reduce tax and governance ambiguity. --- ## 1. Family Consumption of Agricultural Output ### 1.1 General Principle The OpCo operates as a commercial agricultural enterprise. Any consumption of agricultural products by the Owners or their immediate family is not a primary purpose of the business and is treated as incidental personal use subject to explicit accounting. --- ### 1.2 Permitted Consumption Family consumption is permitted under the following constraints: Limited to fresh produce and staple items grown on-site Excludes value-added, branded, or contract-allocated production unless explicitly purchased Must not materially affect commercial supply commitments or revenue plans Family consumption is not guaranteed and may be curtailed during periods of low production or high commercial demand. --- ### 1.3 Valuation & Accounting Treatment All family-consumed agricultural products are accounted for using one of the following methods, applied consistently year to year: Option A — Fair Market Value (Default) Products are recorded as imputed revenue to the OpCo at prevailing local market prices Corresponding personal consumption is treated as a distribution or owner draw Option B — De Minimis Threshold Annual family consumption is capped at a predefined dollar amount Consumption below this threshold is treated as non-material and disclosed but not imputed as revenue The selected method and applicable thresholds are documented annually in the OpCo’s financial records. --- ### 1.4 No Embedded Compensation Family consumption does not substitute for wages, rent, management fees, or other compensation. No implicit discounts, barter arrangements, or undocumented benefits are permitted. --- ### 1.5 Disclosure Family consumption totals are disclosed annually in internal financial statements and are available for review by tax advisors, lenders, or auditors upon request. --- ## 2. Capital Asset Ownership & Use ### 2.1 Ownership Principle All capital assets used in agricultural operations are owned by one clearly defined entity and documented accordingly. Asset ownership determines depreciation, maintenance responsibility, insurance coverage, and disposition rights. --- ### 2.2 Asset Categories & Ownership A. Land & Improvements Owned by the Property Owners Leased to the OpCo under a separate agricultural ground lease Depreciation (if applicable) remains with the Owners B. Agricultural Equipment & Tools Owned by the OpCo unless explicitly designated otherwise Includes machinery, irrigation systems, processing equipment, tools, and vehicles used primarily for farm operations Capitalized and depreciated by the OpCo C. Shared-Use Assets (Exceptional) Assets with mixed residential and agricultural use require written designation Usage allocation must be reasonable, documented, and consistently applied Absent clear documentation, assets default to personal ownership and are not depreciated by the OpCo --- ### 2.3 Capital Expenditures (CapEx) All CapEx decisions follow an annual budget approved by the OpCo Ownership is determined at time of purchase, not retroactively The purchasing entity pays for, insures, maintains, and depreciates the asset No informal reimbursement or post hoc reclassification is permitted --- ### 2.4 No Personal Subsidization Owners do not subsidize OpCo operations through undocumented asset use, free equipment, or unpaid labor. Any personal contributions must be explicitly recorded as: Capital contributions Loans (with documented terms), or Paid services at fair market rates --- ## 3. Governance & Enforcement This policy is reviewed annually and updated as needed Deviations require written approval and documentation Consistent application is required for tax, lender, and investor credibility Failure to adhere to this policy triggers corrective accounting adjustments to preserve arm’s-length integrity. --- ## 4. Summary Statement This policy ensures that limited family benefits and shared resources do not compromise the commercial, tax, or governance integrity of the agricultural enterprise. By clearly separating personal use from business operations and assigning unambiguous asset ownership, the structure supports long-term sustainability, audit defensibility, and scalable growth.