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Defined Risk StrategyDefine Risk, Improve Outcomes – Investing Redefined

For Advisor Use Only

2For Advisor Use Only

I

II

Challenges Facing the 60/40 Portfolio

Hedge Market Risk - Protect Irreplaceable Capital

• The Investor’s Dual Dilemma• 40% creating pressure on the 60%• Forecasted returns for equities and portfolio implications

• Addressing the shortcomings of MPT and asset allocation• Hedging to reduce tail risk and to smooth the ride • The Defined Risk Strategy – Distinct approach with over 20-year history

Unique Challenges for Investors


Challenges Facing the 60/40 Portfolio – Dual DilemmaI

State of Bond Markets Bond bull market appears

out of gas Traditional role of bonds is

in peril Yields low, but appear set

to rise Quantitative easing –

elephant in the room Massive flows into spread

products

State of Equity Markets U.S. & foreign markets near

all time highs Valuations priced for

perfections 2nd-longest bull market in

history Uncertainty regarding Trump Market expectations are low

Investors’ Dual Dilemma:

Between a Rock and a Hard Place

To achieve an 8% average return,

solve for X…

X = 12%

40% Bonds 2% return

4For Advisor Use Only Source: Zephyr StyleADVISOR, wealthcommonsense.com, Swan Global Investments, LLC

The 40% is Creating Pressure on the 60%

Challenges Facing the 60/40 Portfolio – Dual DilemmaI

Forecasted Returns Over Next 5 to 10 Years

Source Organization Equities BondsJohn Bogle (1) Vanguard 4% 3%BlackRock (2) BlackRock 3.6% 1.8%Rob Arnott (3) Research Affiliates 0.4% 2.8%

JP Morgan (4) JP Morgan 5.5% 2.5%

Morningstar Investment Management (5) Morningstar 1.8% 2.5%

“Long-Term Asset Class Forecasts” (6) State Street Global Advisors 5.8% 2.3% – 2.9%

“Ten Year Capital Market Assumptions” (7)BNY Mellon Investment Management

6.3% 2.6%

What Do Experts Say?

5

For Advisor Use Only Source: Information pulled from numerous sources:1. October 2017. http://news.morningstar.com/articlenet/article.aspx?id=842900 Based on U.S. large cap equities and 50% U.S. 10-year Treasury and 50% U.S.

corporate bond index.2. November 2017. https://www.blackrock.com/institutions/en-us/insights/portfolio-design/capital-market-assumptions Based on U.S. large cap equities and

Barclays U.S. Aggregate Bond Index. 3. December 2018. https://www.researchaffiliates.com/en_us/publications/articles/645-cape-fear-why-cape-naysayers-are-wrong.html Based on U.S. large cap

equities and Barclays U.S. Aggregate Bond Index. RA states their returns forecast in real terms. 4. September 2017. https://am.jpmorgan.com/gi/getdoc/1383498280832 Based on U.S. large cap equities and U.S. 30-year bond.5. September 2017. http://news.morningstar.com/articlenet/article.aspx?id=842900 Based on U.S. large cap equities and U.S. bonds.6. June 2017. https://www.ssga.com/market-commentary/forecasts/2017/Q3/long-term-asset-class-forecasts-june-30-2017.pdf Based on U.S. large cap equities and

U.S. bonds (range present includes the forecast for 10+ years for U.S government bonds at 2.3%, U.S. TIPS at 2.4%, to U.S. Investment-Grade bonds at 2.9%).7. 2017. http://www.bnymellonam.jp/wordpress/wp-content/uploads/2_BNY-Mellon-10yr-CapMkt-2017-WP.pdf Based on U.S. large cap equities and U.S. Bond

Aggregate.

Challenges Facing the 60/40 Portfolio – Muted Returns ForecastedI

http://news.morningstar.com/articlenet/article.aspx?id=842900https://www.blackrock.com/institutions/en-us/insights/portfolio-design/capital-market-assumptionshttps://www.researchaffiliates.com/en_us/publications/articles/645-cape-fear-why-cape-naysayers-are-wrong.htmlhttps://am.jpmorgan.com/gi/getdoc/1383498280832http://news.morningstar.com/articlenet/article.aspx?id=842900https://www.ssga.com/market-commentary/forecasts/2017/Q3/long-term-asset-class-forecasts-june-30-2017.pdfhttp://www.bnymellonam.jp/wordpress/wp-content/uploads/2_BNY-Mellon-10yr-CapMkt-2017-WP.pdf

“Because Traditional Asset Allocation is Not Enough.”- Randy Swan

1) Russell 3000 1.00 0.62 0.61 0.52 0.41 -0.08

2) MSCI EAFE Index 0.62 1.00 0.58 0.35 0.35 0.01

3) MSCI Emerging Markets 0.61 0.58 1.00 0.43 0.30 0.04

4) Barclays U.S. Corp High Yield 0.52 0.35 0.43 1.00 0.44 -0.11

5) FTSE Nareit ALL REITs 0.41 0.25 0.30 0.44 1.00 -0.10

6) S&P GSCI -0.08 0.01 0.04 -0.11 -0.10 1.00

Long-Term Correlation Matrix: January 1988 – July 20071 32 4 5 6

Crisis Correlation Matrix: August 2007 – February 2009

1) Russell 3000 1.00 0.92 0.83 0.75 0.86 0.59

2) MSCI EAFE Index 0.92 1.00 0.94 0.73 0.74 0.63

3) MSCI Emerging Markets 0.83 0.94 1.00 0.75 0.62 0.69

4) Barclays U.S. Corp High Yield 0.75 0.73 0.75 1.00 0.70 0.50

5) FTSE Nareit ALL REITs 0.86 0.74 0.62 0.70 1.00 0.41

6) S&P GSCI 0.59 0.63 0.69 0.50 0.41 1.00

1 32 4 5 6

0.49 or Less

0.50 to 0.69

0.70 to 0.79

0.80 to 0.89

0.90 or More

6For Advisor Use Only Source: Zephyr StyleADVISOR, Swan Global Investments, LLC

Hedge Market Risk / Protect Wealth – Shortcomings of MPTII

7For Advisor Use Only Source: Swan Global Investments

By limiting losses during market downtowns, less upside capture is required to outperform ‘buy and hold’.

Gains Needed to Recover from Losses

Gain

Loss

Gain Percent

Loss Percent

11% 25% 43%67%

100%150%

233%

400%

900%

- - - - - - - - --10% -20% -30% -40% -50% -60% -70% -80% -90%

II Hedge Market Risk / Protect Wealth – Avoid Big Losses

The Math Behind Investment Losses

Narrowing the Distribution of ReturnsParametric Monthly Return Distribution Since July 1997

8For Advisor Use Only Source: Morningstar and Swan Global Investments

-22%

-21%

-20%

-19%

-19%

-18%

-17%

-16%

-16%

-15%

-14%

-14%

-13%

-12%

-11%

-11%

-10% -9

%-8

%-8

%-7

%-6

%-5

%-5

%-4

%-3

%-2

%-2

%-1

% 0% 1% 1% 2% 3% 4% 4% 5% 6% 7% 7% 8% 9% 10%

10%

11%

12%

13%

13%

14%

15%

16%

16%

17%

18%

19%

19%

20%

21%

21%

22%

23%

S&P 500 DRS Select CompositeObjective Distribution

II Hedge Market Risk / Protect Wealth – Reduce Tail Risk

$1,809

$2,051

13.37%

Return Comparison

$1,500

Starting Value

Hedge Market Risk / Protect Wealth – Smoothing the RideII

Limiting Downside & Upside Capture

For Advisor Use Only Source: Crestmont Research, 2018, https://www.crestmontresearch.com/docs/Stock-Half-Half.pdf 9

NOTE – Returns based on S&P 500 Price Index, not the Total Return index.

Ending Values

10For Advisor Use Only Source: Zephyr StyleADVISOR and Swan Global Investments. All S&P 500 data based on historical performance of the S&PTotal Return Index. All historical performance of the Swan DRS Select Composite is net of fees. Prior performance is not a guarantee of future results.

The graphs above show an investment of $100,000 over eleven successive, 10-year investment periods. The first period is 1/1998 to 12/2007; the last period is 1/2008 to 12/2017.

Each period contains at least one bull market and one bear market.

Consistency with Reduced Volatility – Timing Not Required

Hedge Market Risk / Protect Wealth – Smoothing the RideII

The Swan DRS Select Composite produced more consistent outcomes over the same 10-year periods.

The S&P 500 Index produced very different outcomes for the successive 10-year periods.


“By actively seeking to not lose big,

we believe that investors will be

better off in the long run.”- Randy Swan, CEO and Lead Portfolio Manager

Defined Risk Strategy – Investment Philosophy

12

Defined Risk Strategy – Investment Philosophy

We believe… Therefore, we…

It is difficult to consistently and successfully execute market-timing strategies

It is difficult to select stocks that will consistently outperform the market

The key to long-term wealth creation is to minimize downside risk

Remain invested at all times

Invest in index-based ETFs

Maintain an actively managed systematic put hedge to seek protection from large market drawdowns


Pursuing investment returns in a variety of market conditions is critical to long-term success

It is important to control risk in every phase of a market cycle

Seek to generate market-neutral income by buying and selling puts and calls

Follow a rules-based approach to remove emotions from process.

13

Defined Risk Strategy - Investment Process

2 Create Hedge

Buy puts on the underlying equity

At or Near-the-Money

Long-term – generally one to two years, initially

3 Harvest Option Premium

Seek to sell shorter-term options

Market-neutral, non-directional trading strategies

1 Establish Equities

Purchase exposure to asset class, such as S&P 500 Russell 2000 EAFE EM

Invested at all times

Transparent Disciplined Repeatable

The Process is

112

2


DRS Investment Process – Step 1: Always Invested

Always Invested – No predictive or market timing methods

1 Establish Equities

14For Advisor Use Only Source: Swan Global Investments and Morningstar; the S&P 500 Index, the Russell 200 Index, the MSCI EAFE Index and the MSCIEmerging Markets Index are unmanaged indexes, and cannot be invested into directly.

U.S. Large Cap Equities

U.S. Small Cap Equities

Foreign Developed Equities

Invest in SPX via SDPR S&P 500 ETFs (equally weighted) SMA qualified accounts use SPY instead of sector ETFs

Invest in iShares Russell 2000 ETFs or basket of stocks that closely represent the Russell 2000 Index

Invest in iShares MSCI EAFE ETFs or basket of stocks that closely represent the MSCI EAFE Index

Emerging Markets Equities Invest in iShares MSCI EM ETFs or basket of stocks that closely represent the MSCI Emerging Markets Index

DRS Investment Process – Step 2: Always Hedged

Always Hedged

2 Create Hedge to Enhance Risk/Return Profile

Longer-term puts are used for their lower average daily cost and stability

Equities stay hedged at all times

Risk Profile of Equity + Hedge

Risk Profile of Underlying Equity

Underlying Equity Return ProfileHedged Equity Return Profile

15

For Advisor Use Only Source: Swan Global Investments and Morningstar; the S&P 500 Index is an unmanaged index, and cannot be invested intodirectly. Swan DRS returns are from the Select Composite, net of all fees. NOTE – this chart is for illustration purposes, not a guarantee of futureperformance. The charts and graphs contained herein should not serve as the sole determining factor for making investment decisions.

DRS Investment Process – Step 2: Always Hedged

2 Advantages of Rolling the Hedge (LEAP)

By rolling the hedge annually:

The portfolio is always hedged;

The DRS is not under duress to seek protection;

The DRS is not exposed to the steeper drop off in value of put option.

16For Advisor Use Only Note: This graphic is for illustrative purposes only to demonstrate the concept of resetting the hedge and does not represent aspecific trade.

DRS Investment Process – Step 3: Always Seeking to Harvest Option Premium

Always seeking returns in a variety of market conditions

3 Harvest Option Premium

Put Option Call Option

Profit or Loss

$

$

0

-$

-$

Systematically seek option premium income to help subsidize the cost of the hedge

Market neutral, rules-based options strategy

Predetermined adjustment and exit triggers

Potential Profit Zone


DRS Investment Process – Step 3: Seek to Harvest Option Premium

3 Implied Volatility vs. Realized Volatility

18For Advisor Use Only Source: Bloomberg and SG Financial Engineering, from 1/2/1990 to 12/29/2017

-140%

-120%

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

0%

20%

40%

60%

80%

100%

120%

140%

Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16

Positive Spread Negative Spread Implied Volatility Realized Volatility

Implied vs. Realized Volatility - Jan 2, 1990 – Dec 29, 2017

Seeking Improved Risk/Return

Targeted Band of Returns for the Defined Risk Strategy

Represents targeted range of returns

Underlying Equity Return Profile Option Premium Trades Create Targeted Return BandHedged Equity Return Profile

19

For Advisor Use Only Source: Swan Global Investments and Morningstar; the S&P 500 Index is an unmanaged index, and cannot be invested intodirectly. Swan DRS returns are from the Select Composite, net of all fees. NOTE – this chart is for illustration purposes, not a guarantee of futureperformance. The charts and graphs contained herein should not serve as the sole determining factor for making investment decisions.

Process Put to the Test

S&P 500 Annual Total Return Option Premium Trades Create Targeted Return BandActual DRS Returns per Year Since Inception Hedged Equity Return Profile

Targeted Return vs. Actual Return

Swan DRS Select Composite - S&P 500

20

For Advisor Use Only Source: Swan Global Investments and Morningstar; the S&P 500 Index is an unmanaged index, and cannot be invested intodirectly. DRS returns are from the Select Composite, net of all fees. NOTE – this chart is for illustration purposes, not a guarantee of future performance.The charts and graphs contained herein should not serve as the sole determining factor for making investment decisions.

Process Put to the Test – Across Global Equities

Annual Returns of Underlying AssetOption Premium Trades Create Targeted Return BandAnnual Returns of Defined Risk U.S. Small Cap Composite vs. U.S. Small Cap (Russell 2000)

Hedged Equity Return Profile

21

Targeted Return vs. Actual Return

Swan DRS - Applied to Multiple Asset Classes

Annual Returns of Defined Risk Emerging Markets Composite vs Emerging Markets (MSCI EM)Annual Returns of Defined Risk Foreign Developed Composite vs Foreign Developed (MSCI EAFE)

For Advisor Use Only Source: Zephyr StyleADVISOR and Swan Global Investments; Indexes are unmanaged and one cannot be invested into directly.Past performance is no guarantee of future results. NOTE – this chart is for illustration purposes, not a guarantee of future performance. The chartsand graphs contained herein should not serve as the sole determining factor for making investment decisions. The results above refer to the DRS U.S.Small Cap Composite, the DRS Foreign Developed Composite, and the DRS Emerging Markets Composite respectively, and include a 1% fee, from theirinception through 6/30/2018. Structures mentioned may not be available within your Broker/Dealer. See disclosures at the end of this presentation formore information about benchmarks and indexes.

Compelling Risk Statistics

Risk / Return Metrics

Swan DRS Select Composite – S&P 500

Retu

rn

Swan DRS – U.S. Large Cap*

S&P 500 Index

60% S&P 500 Index /40% Barclays U.S. Aggregate

Return (%)

Std Dev (%)

Beta vs. Market

Cash-Adj Alpha vs

Market (%)

R-Squared vs Market

(%)

Sharpe Ratio

Max Drawdown (monthly)

Swan DRS Select Composite 8.32 9.37 0.30 6.13 22.39 0.67 -18.56%

S&P 500 Index 7.49 14.82 1.00 0.00 100.00 0.37 -50.95%

60% S&P 500 / 40% Barclays US Agg 6.78 8.91 0.59 2.04 97.70 0.53 -32.54%

Standard Deviation

22

For Advisor Use Only. Source: Swan Global Investments and Morningstar; the Barclays U.S. Aggregate Bond Index and the S&P 500 Index areunmanaged indices, and cannot be invested into directly. Past performance is no guarantee of future results.* Swan DRS results are from the Select Composite, net of fees, as of 6/30/2018. Structures mentioned may not be available within your Broker/Dealer.

July 1997 – June 2018 (Single Computation)

Risk / Return Metrics

Swan DRS - Applied to Multiple Asset Classes

23

For Advisor Use Only. Source: Zephyr StyleADVISOR and Swan Global Investments; the S&P 500 Index, the Russell 2000 Index, the MSCI EAFE Index andthe MSCI Emerging Markets Index are unmanaged indexes, and cannot be invested into directly. Past performance is no guarantee of future results. Theresults above refer to the DRS U.S. Small Cap Composite, the DRS Foreign Developed Composite, and the DRS Emerging Markets Compositerespectively, and include a 1% fee, from their inception through 6/30/2018. Structures mentioned may not be available within your Broker/Dealer.

Compelling Risk Statistics

Return (%) Std Dev (%) Beta vs. MarketSharpe Ratio

Swan DRS – U.S. Small Cap(1/1/2016 – 6/30/2018)

9.46 6.60 0.48 1.30

Russell 2000 Index(1/1/2016 – 6/30/2018)

17.52 12.90 1.00 1.28

Swan DRS – Foreign Developed(1/1/2016 – 6/30/2018)

3.76 5.29 0.44 0.56

MSCI EAFE Index(1/1/2016 – 6/30/2018)

9.16 10.38 1.00 0.80

Swan DRS – Emerging Markets(1/1/2015 – 6/30/2018)

1.88 8.30 0.48 0.16

MSCI EM Index(1/1/2015 – 6/30/2018)

6.03 15.52 1.00 0.35

Swan DRS Select Composite vs. S&P 500 Index vs. 60/40

24

For Advisor Use Only Source: Swan Global Investments and Morningstar; the Barclays U.S. Aggregate Bond Index and the S&P 500 Index areunmanaged indices, and cannot be invested into directly. Past performance is no guarantee of future results. DRS results are from the Swan DefinedRisk Select Composite, net of fees, as of 6/30/2018. Structures mentioned may not be available within your Broker/Dealer.

Proven Ability to Minimize Losses in Bear Markets

30%

20%

10%

0%

-10%

-20%

-30%

-40%

Swan DRS

S&P 500

60/40

40%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD

19.17% 11.55% 12.26% 3.17% 7.46% 12.22% -0.65% 12.28% 7.47% 18.14% 8.81% -4.50% 25.00% 8.10% -5.38% 9.01% 14.34% 6.52% -2.93% 9.59% 10.83% -1.98%

10.58% 28.58% 21.04% -9.10% -11.89% -22.10% 28.68% 10.88% 4.91% 15.79% 5.49% -37.00% 26.46% 15.06% 2.11% 16.00% 32.39% 13.69% 1.38% 11.96% 21.83% 2.65%

9.01% 20.98% 12.00% -0.99% -3.71% -9.82% 18.48% 8.30% 4.00% 11.12% 6.22% -22.06% 18.40% 12.13% 4.69% 11.31% 17.56% 10.62% 1.28% 8.31% 14.21% 1.00%

Process Put to the Test – Hedge Market Risk / Protect Wealth

Rolling Returns are Revealing

Rolling Period S&P 500: July 97-Dec 2017 Swan DRS: July 97-Dec 2017 DRS vs S&P 500

Current Return

Average Rolling Return

Worst Rolling Return

Best Rolling Return

Current Return

Average Rolling Return

Worst Rolling Return

Best Rolling Return

% of Occurrences DRS Outperformed

Rolling 1 Year 21.84% 8.27% -43.32% 53.62% 10.83% 8.31% -6.87% 38.25% 37.87%

Rolling 2 Year 16.79% 6.92% -26.08% 37.22% 10.21% 7.92% -0.80% 23.95% 42.15%

Rolling 3 Year 11.41% 6.11% -16.09% 25.56% 5.64% 7.73% 1.31% 19.18% 50.24%

Rolling 4 Year 11.98% 5.78% -9.76% 22.42% 5.86% 7.75% 3.18% 12.90% 60.80%

Rolling 5 Year 15.79% 5.69% -6.63% 23.00% 7.51% 7.83% 3.50% 12.89% 64.71%

Rolling 6 Year 15.83% 5.73% -1.13% 21.72% 7.75% 7.84% 4.51% 11.14% 72.57%

Rolling 7 Year 13.76% 5.61% -3.85% 17.27% 5.77% 7.96% 5.29% 10.81% 77.30%

Rolling 10 Year 8.50% 4.77% -3.43% 8.53% 6.69% 8.04% 6.24% 10.67% 79.53%

Rolling 15 Year 9.92% 5.55% 3.76% 10.04% 7.47% 7.82% 6.76% 9.38% 88.06%

Since Inception: July 97-Dec 2017 S&P 500 Index Swan DRS

Annualized Return 7.54% 8.64%

25

For Advisor Use Only Source: Swan Global Investments and Zephyr StyleADVISOR. Data based on historic returns of the S&P 500 Total Return Indexand Swan DRS Select Composite net of fees, from 7/1997 to 12/31/2017, and assume no portfolio withdrawals. Results in the table are the best, worst,and average annualized returns, based on month-end returns, for every rolling period listed within the overall time frame of July 1st, 1997 toDecember 31st, 2017. Prior performance is not a guarantee of future results and there can be no assurance, and investors should not assume, thatfuture performance will be comparable to past performance.

Process Put to the Test – Hedge Market Risk / Consistency of Returns

S&P 500 Index vs. Swan DRS Select Composite - Rolling Annualized Returns Since InceptionBased on Month-End Results

Defined Risk Strategy - Implementation

Where Does the Defined Risk Strategy fit?

A core equity complement/supplement

Swan DRS Select Composite outperformed the

S&P 500 Index in 79.53% of rolling 10 year periods*

A fixed income complementSwan DRS Select Composite never lost money in any

3 year period, worst 2 year period loss was -0.80%*

Absolute return/alternativeResearch suggests Swan Defined Risk Strategy may

shift the efficient frontier**

All data above refers to Swan Defined Risk Strategy Select Composite and performance net of fees, since inception in July 1997.

26

For Advisor Use Only Source: Zephyr StyleADVISOR and Swan Global Investments. All data based on historical performance of the S&P Total Return Index and the Swan DRS Select Composite net of fees, as of 12/31/2017. Prior performance is not a guarantee of future results.* See slide 25 for research summary. ** See slide 35 for research summary.

Offering a unique combination of advantages in the marketplace.


Defined Risk Strategy – Distinguishing Characteristics

Always Invested, Always Hedged

Distinct, innovative approach to directly address market risk

Demonstrated ability to minimize losses consistently in bear markets

Time-tested, non-directional options income trading strategies

Transparent, disciplined, repeatable investment process

A full portfolio solution not dependent on fixed income or market timing

Enviable, long-term track record, both on an absolute and risk-adjusted return basis

Addendum


• Founded in 1997 by Randy Swan

• An SEC-registered investment adviser

• Manages over $4.76 billion in assets as of 6/30/18

29

Swan is an asset management firm based in Durango, CO.

Swan Global Investments at a Glance

AUM Overview

For Advisor Use Only. Structures mentioned may not be available within your Broker/Dealer.

• An actively managed, hedged-equity, rules-based process

• Seeks consistent returns over full market cycles

• Designed to hedge against large stock market declines

• Mutual Funds

• Separately Managed Accounts

• Overlay: Customize existing equity portfolio with DRS

• Collective Investment Trusts (CITs) for qualified retirement plans

• LP: Multi-Strategy Fund

Swan developed the Defined Risk Strategy (DRS), inception 7/1/97

Defined Risk Strategy (DRS) is available in the following structures:

Current Structures $ AUM in Millions (as of 6/30/18)

Mutual Funds 3,094

SMA 1,339

Custom Overlay 61

CIT 266

Total AUM $4,76

Prior to Swan:- Flight-test engineer, developing computer

aided design software at Boeing

- Led software development as Dir. of Operations and part owner of Object Publishing Software

Rob Swan

Founder, CEO, Lead Portfolio Manager

Developed the Defined Risk Strategy (DRS)

Oversees and manages the DRS and its implementation across numerous asset classes

Randy SwanPrior to Swan:- Senior manager for KPMG’s Financial

Services Group, primarily working with insurance companies and risk managers

- Developed the DRS to solve the problem of portfolio insurance in market drawdowns

COO & Portfolio Manager

Manages day-to-day operations of the DRS

Oversees investment management, trading, and the development and maintenance of proprietary technology

Portfolio Managers

Swan Investment Management Team

Chris Hausman, CMT®

Portfolio Manager, Chief Risk Officer, Market Technician

Micah Wakefield, CAIA® Marc Odo, CFA®, CAIA®, CIPM®, CFP®

Client Portfolio ManagerPortfolio Manager, Director of Research & Product Development


Swan Defined Risk Strategy Select Composite Net of Fees

31

For Advisor Use Only. Source: Swan Global Investments and Morningstar; the Barclays U.S. Aggregate Bond Index and the S&P 500 Index areunmanaged indices, and cannot be invested into directly. Past performance is no guarantee of future results. Swan DRS results are from the SelectComposite, net of fees, as of 6/30/2018. Structures mentioned may not be available within your Broker/Dealer.

Growth of $100,00 – July 1, 1997 to June 30, 2018

Net Annualized Performance (June 30, 2018)

Swan DRS Select Composite S&P 500 Index 60% S&P 500 Index / 40% Barclays US Agg

YTD -1.98% 2.65% 1.00%3 Year 4.88% 11.93% 7.88%5 Year 6.00% 13.42% 8.97%10 Year 6.40% 10.17% 7.84%Inception (7/97) 8.32% 7.49% 6.78%

$455,551

$536,073

$396,808

Proven Long-Term Track Record Over Full-Market Cycles

32For Advisor Use Only Source: Swan Global Investments and Morningstar; the S&P 500 Index is an unmanaged index, and cannot be invested into directly. Past performance is no guarantee of future results. DRS results are from the Select Composite, net of all fees, from 7/1/1997 to 12/31/2017.

0

10

20

30

40

50

60

70

80

90

-8%

to -6

%

-6%

to -4

%

-4%

to -2

%

-2%

to 0

%

0% to

2%

2% to

4%

4% to

6%

6% to

8%

8% to

10%

10%

to 1

2%

12%

to 1

4%

14%

to 1

6%

16%

to 1

8%

18%

to 2

0%

20%

to 2

2%

22%

to 2

4%

Process Put to the Test – Hedge Market Risk / Reduce Tail Risk

Swan DRS Select Composite – Rolling Distribution of 5-Year Returns

Swan DRS Select Composite (Net of Fees)

S&P 500 Index

Rolling 10-YearRolling 5-Year

Rolling 1-Year Swan DRS Select Composite (Net of Fees)S&P 500

Rolling 3-Year

33For Advisor Only Source: Zephyr StyleADVISOR and Swan Global Investments. All data based on historical performance of the S&P Total Return Index and the Swan DRS Select Composite net of fees, as of 12/31/2017. Prior performance is not a guarantee of future results.

-60%

-40%

-20%

0%

20%

40%

60%

Jun-

98M

ar-9

9De

c-99

Sep-

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n-01

Mar

-02

Dec-

02Se

p-03

Jun-

04M

ar-0

5De

c-05

Sep-

06Ju

n-07

Mar

-08

Dec-

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Jun-

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c-11

Sep-

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n-13

Mar

-14

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7De

c-17

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

Jun-

00M

ar-0

1De

c-01

Sep-

02Ju

n-03

Mar

-04

Dec-

04Se

p-05

Jun-

06M

ar-0

7De

c-07

Sep-

08Ju

n-09

Mar

-10

Dec-

10Se

p-11

Jun-

12M

ar-1

3De

c-13

Sep-

14Ju

n-15

Mar

-16

Dec-

16Se

p-17

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Jun-

07N

ov-0

7Ap

r-08

Sep-

08Fe

b-09

Jul-0

9De

c-09

May

-10

Oct

-10

Mar

-11

Aug-

11Ja

n-12

Jun-

12N

ov-1

2Ap

r-13

Sep-

13Fe

b-14

Jul-1

4De

c-14

May

-15

Oct

-15

Mar

-16

Aug-

16Ja

n-17

Jun-

17N

ov-1

7

-10%

-5%

0%

5%

10%

15%

20%

25%

Jun-

02

Mar

-03

Dec-

03

Sep-

04

Jun-

05

Mar

-06

Dec-

06

Sep-

07

Jun-

08

Mar

-09

Dec-

09

Sep-

10

Jun-

11

Mar

-12

Dec-

12

Sep-

13

Jun-

14

Mar

-15

Dec-

15

Sep-

16

Jun-

17

Rolling Returns are Revealing (continued)

Swan DRS Select Composite (Net of Fees)S&P 500



34For Advisor Use Only Source: Zephyr StyleADVISOR and Swan Global Investments

Up/Down CaptureSince Inception of Swan DRS Select Composite, July 1, 1997 – June 30, 2018

Swan DRS – Risk Management vs. Return Management

Refers to Swan Defined Risk Strategy Select Composite and performance net of fees, since inception in July 1997. All Swan products utilize the Defined Risk Strategy ("DRS"), but may vary by asset class, regulatory offering type, etc. Accordingly, all Swan DRS product offerings will have different performance results due to offering differences and comparing results among the Swan products and composites may be of limited use.

Up Capture - Monthly Up Capture Quarterly Up Capture - Yearly Down Capture -MonthlyDown Capture -

Quarterly Down Capture - Yearly

DRS Select Composite 41.90% 52.80% 56% -22% -15.50% -21.20%S&P 500 100% 100% 100% -100% -100% -100%

-100.00%

-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

Comparing Portfolios Over Time

For Advisor Use Only Sources: Zephyr StyleADVISOR, Morningstar, Mebane Faber, and Swan Global Investments. * Swan DRS results are from the Select Composite, net of fees, as of 12/31/2017.

Portfolio Statistics: July 1, 1997 - December 31, 2017

Annualized Returns

Cumulative Return

Population Standard Deviation

Sharpe Ratio

Worst Period Return

Maximum Drawdown

Alpha vs. Market

Beta vs. Market

Traditional 60% US Equities, 40% US Bonds 7.95% 380.10% 8.79% 0.67 -11.11% -28.70% 3.46% 0.55

60% US Equities, 20% US Bonds, 20% Alts 7.65% 353.47% 9.77% 0.57 -11.56% -33.69% 2.51% 0.64

Permanent Portfolio 6.28% 248.41% 6.03% 0.70 -8.63% -12.78% 4.53% 0.22

Ivy Portfolio 6.65% 274.14% 11.04% 0.42 -19.87% -46.28% 2.14% 0.59

Risk Parity 6.49% 262.91% 5.43% 0.82 -9.06% -15.11% 5.04% 0.18

Swensen 7.29% 322.91% 10.08% 0.52 -16.03% -37.61% 2.37% 0.62

El Erian 6.77% 283.14% 11.65% 0.40 -16.99% -42.04% 1.48% 0.69

Arnott 7.34% 327.39% 8.28% 0.64 -16.31% -29.40% 4.00% 0.42

Tobias 6.77% 283.01% 10.66% 0.44 -15.67% -38.54% 1.60% 0.66

Bernstein "Smart Money" 6.80% 285.06% 9.28% 0.51 -13.02% -34.92% 2.16% 0.58

Ferri "Core Four" 7.44% 335.58% 11.50% 0.47 -18.14% -44.92% 2.19% 0.68

Armstrong "Ideal Index" 6.65% 274.27% 10.60% 0.43 -14.42% -39.07% 1.53% 0.65

Dalio "All Seasons" 7.39% 330.93% 6.65% 0.80 -9.67% -14.42% 5.65% 0.22

60% US Equities, 20% Bonds, 20% Swan DRS Select Composite* 8.08% 391.65% 9.72% 0.62 -11.91% -30.88% 3.01% 0.63

Swan Defined Risk Strategy Select Composite* 8.64% 446.89% 9.40% 0.70 -16.15% -18.56% 6.44% 0.30

S&P 500 7.54% 343.80% 14.90% 0.37 -16.79% -50.95% 0.00% 1.00

35

The Swan Defined Risk Strategy Select Composite demonstrates the performance of non-qualified assets managed by Swan Global Investments, LLC since inception. Itincludes discretionary individual accounts whose account holders seek the upside potential of owning stock, and the desire to eliminate most of the risk associated withowning stock. The Composite relies on LEAPS and other options to manage this risk. Individual accounts own S&P 500 exchange traded funds and LEAPS associated withthe exchange traded funds as well as multiple other option spreads that represent other indices that are widely traded. The Defined Risk Strategy was designed to protectinvestors from substantial market declines, provide income in flat or choppy markets, and to benefit from market appreciation. Stock and options are the primarycomponents of the strategy.

The benchmarks used for the DRS Select Composite are the S&P 500 Index, which consists of approximately 500 large cap stocks, and a 60/40 blended composite,weighted 60% in the aforementioned S&P 500 Index and 40% in the Barclays US Aggregate Bond Index. The 60/40 is rebalanced monthly. The Barclays US AggregateBond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includesTreasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). The S&P 500Index is often used as a proxy for the overall U.S. equity market. Indexes and other benchmarks used herein are generally unmanaged and have no fees or expenses. Aninvestment cannot be made directly in an index or some of these benchmarks. Swan’s investments may consist of securities which vary significantly from those in thebenchmark indexes listed above and performance calculation methods may not be entirely comparable. Accordingly, comparing results shown to those of such indexesand benchmarks may be of limited use.

Disclosures


Swan Defined Risk Strategy Select CompositeS&P 500 - Primary

Benchmark

60% S&P 500 / 40% Barclays Aggregate -

Secondary Benchmark

YearNet-of-Fee

ReturnComposite Dispersion

Composite Assets (No. of Accounts /

AUM in Millions)

Firm Assets in Millions

3-Yr Annualized Standard Deviation

Return


Return


1997 19.17% - 1 / 0.22 0.20 - 10.58% - 9.01% -1998 11.55% - 1 / 0.32 0.31 - 28.58% - 20.98% -1999 12.26% - 1 / 0.72 0.73 - 21.04% - 12.00% -2000 3.17% - 1 / 0.90 0.93 - -9.10% - -0.99% -2001 7.46% - 3 / 1.66 1.59 7.23% -11.89% 17.99% -3.71% 9.99%2002 12.22% - 3 / 1.97 1.92 10.20% -22.10% 18.66% -9.82% 10.77%2003 -0.65% 5.68% 6 / 3.74 3.74 10.11% 28.68% 17.85% 18.48% 10.26%2004 12.28% 5.80% 7 / 4.45 4.66 9.93% 10.88% 16.82% 8.30% 8.49%2005 7.47% 2.66% 7 / 4.76 4.98 6.20% 4.91% 16.01% 4.00% 5.61%2006 18.14% 3.71% 9 / 7.22 7.76 4.68% 15.79% 15.26% 11.12% 4.33%2007 8.81% 3.79% 10 / 8.82 9.40 6.11% 5.49% 14.80% 6.22% 4.56%2008 -4.50% 5.00% 12 / 12.15 15.65 9.55% -37.00% 15.88% -22.06% 9.48%2009 25.00% 11.69% 50 / 47.74 55.79 11.14% 26.46% 16.48% 18.40% 12.40%2010 8.10% 2.13% 71 / 86.09 97.90 10.96% 15.06% 16.65% 12.13% 13.56%2011 -5.38% 3.16% 97 / 46.89 59.44 9.74% 2.11% 16.56% 4.69% 11.28%2012 9.01% 1.73% 276 / 97.52 400.19 7.65% 16.00% 16.24% 11.31% 8.64%2013 14.34% 1.38% 286 / 230.84 1,052.99 6.84% 32.39% 15.94% 17.56% 7.00%2014 6.52% 0.47% 372 / 315.14 1,810.04 4.83% 13.69% 15.60% 10.62% 5.48%2015 -2.93% 0.46% 402 / 305.55 2,446.11 5.88% 1.38% 15.47% 1.28% 6.37%2016 9.59% 0.58% 566 / 379.28 3,620.08 5.46% 11.96% 15.24% 8.31% 6.33%2017 10.83% 0.26% 714 / 552.64 4,975.33 5.01% 21.83% 14.90% 14.21% 5.85%

Swan Global Investments, LLC. is a SEC registered Investment Advisor thatspecializes in managing money using the proprietary Defined Risk Strategy (DRS).Please note that registration of the Advisor does not imply a certain level of skill ortraining. Further information may be obtained by contacting the company directlyat 970-382-8901 or www.swanglobalinvestments.com. Swan Global Investments,LLC, Swan Global Management, LLC, and Swan Capital Management, LLC, and SwanWealth Advisors, LLC are affiliated entities. Sources: Swan Global Investments,Zephyr StyleADVISOR, and Morningstar; all information is provided “as is” withoutwarranty of any kind. Swan assumes no responsibility for typographical errors,inaccuracies or other errors which may occur.

This presentation is for information purposes only and does not constitute anyinvestment advice or tax advice. All Swan products utilize the Defined Risk Strategy("DRS"), but may vary by asset class, regulatory offering type, etc. Accordingly, allSwan DRS product offerings will have different performance results due to offeringdifferences and comparing results among the Swan products and composites maybe of limited use. Economic factors, market conditions, and investment strategieswill affect the performance of any portfolio and there are no assurances that it willmatch or outperform any particular benchmark.

The Swan Defined Risk Strategy or DRS as used in this document refer to the Swan DRS Select Composite.

http://www.swanglobalinvestments.com/Sheet1

Swan Defined Risk Strategy Select CompositeS&P 500 - Primary Benchmark60% S&P 500 / 40% Barclays Aggregate - Secondary Benchmark

YearNet-of-Fee ReturnComposite DispersionComposite Assets (No. of Accounts / AUM in Millions)Firm Assets in Millions3-Yr Annualized Standard DeviationReturn3-Yr Annualized Standard DeviationReturn3-Yr Annualized Standard Deviation

199719.17%-1 / 0.220.20-10.58%-9.01%-

199811.55%-1 / 0.320.31-28.58%-20.98%-

199912.26%-1 / 0.720.73-21.04%-12.00%-

20003.17%-1 / 0.900.93--9.10%--0.99%-

20017.46%-3 / 1.661.597.23%-11.89%17.99%-3.71%9.99%

200212.22%-3 / 1.971.9210.20%-22.10%18.66%-9.82%10.77%

2003-0.65%5.68%6 / 3.743.7410.11%28.68%17.85%18.48%10.26%

200412.28%5.80%7 / 4.454.669.93%10.88%16.82%8.30%8.49%

20057.47%2.66%7 / 4.764.986.20%4.91%16.01%4.00%5.61%

200618.14%3.71%9 / 7.227.764.68%15.79%15.26%11.12%4.33%

20078.81%3.79%10 / 8.829.406.11%5.49%14.80%6.22%4.56%

2008-4.50%5.00%12 / 12.1515.659.55%-37.00%15.88%-22.06%9.48%

200925.00%11.69%50 / 47.7455.7911.14%26.46%16.48%18.40%12.40%

20108.10%2.13%71 / 86.0997.9010.96%15.06%16.65%12.13%13.56%

2011-5.38%3.16%97 / 46.8959.449.74%2.11%16.56%4.69%11.28%

20129.01%1.73%276 / 97.52400.197.65%16.00%16.24%11.31%8.64%

201314.34%1.38%286 / 230.841,052.996.84%32.39%15.94%17.56%7.00%

20146.52%0.47%372 / 315.141,810.044.83%13.69%15.60%10.62%5.48%

2015-2.93%0.46%402 / 305.552,446.115.88%1.38%15.47%1.28%6.37%

20169.59%0.58%566 / 379.283,620.085.46%11.96%15.24%8.31%6.33%

201710.83%0.26%714 / 552.644,975.335.01%21.83%14.90%14.21%5.85%

Swan claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with GIPS. Swan’scompliance with GIPS has been independently verified for the periods July 1, 1997 through December 31, 2017. The Spaulding Group conducted Swan’s verification. Acopy of the verification report is available upon request. To receive copies of the report, please feel free to call (970) 382-8901 or [email protected]. Verification assesses whether (1) the firm has complied with all the composite construction requirements of GIPS on a firm-wide basis, and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with GIPS. Verification does not ensure theaccuracy of any specific composite presentation.

Swan offers and manages The Defined Risk Strategy (“DRS”) for its clients including individuals, institutions and other investment advisor firms. There are eight DRSComposites offered: 1) The DRS Select Composite which includes non-qualified accounts; 2) The DRS IRA Composite which includes qualified accounts; 3) The DRSComposite which combines the DRS Select and DRS IRA Composites; 4) The DRS Institutional Composite which includes high net-worth, non-qualified accounts thatutilize cash-settled, index-based options held at custodians that allow participation in Clearing Member Trade Agreement (CMTA) trades; 5) The Defined Risk FundComposite which includes mutual fund accounts invested in the S&P 500; 6) The DRS Emerging Markets Composite which includes mutual fund accounts invested inemerging markets; 7) The DRS Foreign Developed Composite which includes all research and development account(s), and mutual fund accounts invested in foreigndeveloped markets; 8) The DRS U.S. Small Cap Composite which includes all research and development account(s), and mutual fund accounts invested in U.S. small capissues. Additional information regarding Swan’s policies and procedures for calculating and reporting performance returns is available upon request.

Swan DRS performance results are presented in U.S. dollars and are net-of-actual-fees and trading expenses and reflect the reinvestment of dividends and capital gains.Actual fees may vary based on, among other factors, account size and custodial relationship. No current or prospective client should assume future performance of anyspecific investment strategy will be profitable or equal to past performance levels. All investment strategies have the potential for profit or loss. Changes in investmentstrategies, contributions or withdrawals may cause the performance results of a client’s investment portfolio to differ materially from the reported compositeperformance. Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will either be suitable orprofitable for a client’s investment portfolio. Historical performance results for market indices and/or categories generally do not reflect the deduction of transactionand/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performanceresults. Swan uses options in the DRS. Options carry additional risks and are not suitable for all clients. Clients must read and understand the current options riskdisclosure documents prior to entering into any options or other derivatives transactions. Prior to implementing a call writing program or any of the strategiesdescribed herein, a client should further discuss this investment process with other financial, legal and/or tax advisors. The options risk disclosure document is locatedat: http://optionsclearing.com/about/publications/character-risks.jsp

The charts and graphs contained herein should not serve as the sole determining factor for making investment decisions. To the extent that you have any questionsregarding the applicability of any specific issue presented or discussed, you are encouraged to consult with Swan Global Investments. All information, including thatused to compile charts, is obtained from sources believed to be reliable, but Swan Global Investments does not guarantee its reliability. 313-SGI-073018

Disclosures

For Advisor Use Only PRESO-ADV-Q2-18

http://optionsclearing.com/about/publications/character-risks.jsp

Defined Risk StrategySlide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20Slide Number 21Slide Number 22Slide Number 23Slide Number 24Slide Number 25Slide Number 26Slide Number 27AddendumSlide Number 29Slide Number 30Slide Number 31Slide Number 32Slide Number 33Slide Number 34Slide Number 35Slide Number 36Slide Number 37

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