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Key Points

The backdrop for financial markets entering 2020 looks like the polar opposite of conditions this time last year.

Whereas 2019 began with severely negative expectations embedded into asset prices, we begin 2020 with a much more optimistic feel to the consensus narrative.

A year ago investors sold stocks aggressively leading into the new year in response to weakening economic data, tightening monetary policy, escalating trade frictions, Brexit uncertainty, and forward guidance from the Fed implying three more interest rate hikes were likely in 2019.

Instead, the Fed lowered interest rates three times in 2019, economic signals stabilized, and trade frictions eventually eased with the so called “phase-one” trade deal between the U.S. and China, passage of the USMCA trade agreement between the U.S., Mexico and Canada, and a British election that seems to have reduced the odds of a chaotic Brexit materially.

The question facing investors now is whether the positive surprises of 2019 laid the foundation for a new stage in the bull market, or the final innings of a monster relief rally.

We believe there is room for stocks to add a bit to their recent gains if the current consensus expectation for stable interest rates and rising corporate profits materializes in 2020.

We also caution that there may be a lot of good news baked into asset prices already, leaving markets vulnerable to any developments that threaten the current consensus view.

We expect geopolitics to play a predominant role in the markets in 2020, headlined by the U.S. elections in November.

We believe these conditions call for a balanced approach to portfolio construction that positions portfolios for multiple potential outcomes and allows flexibility to react to new developments.

QUARTERLY OVERVIEW Fourth Quarter 2019

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Last Year Was Great…Now What? Most of the major risks facing investors in early 2019 broke positively at some point during the year. Global asset markets rallied appropriately as each of these uncertainties turned for the better. The year began with a sharp reversal in interest rate expectations when the Fed signaled a pivot away from its higher interest rate policy in January. Concerns that the economy might slip into recession faded slowly throughout the year as a steady stream of “good enough” economic data eventually pulled investors away from the recession narrative. And the year concluded with a flurry of better news on the trade front, including the declaration of a truce (for now) in the U.S./China trade war, passage of the USMCA, and a de-risking of the “messy Brexit” possibility. As we look toward the new year it is hard to identify a comparable inventory of risk factors that might serve as a similar “wall of worry” for stocks to climb. The market seems to have already priced in a favorable environment for stocks, so these expectations will need to be met in order to build on the gains that were achieved last year. Even so, we would not characterize the current environment as euphoric, or overdone. Assuming interest rates do not misbehave to the upside and the economy continues to advance, we believe the stock market can be productive in 2020, albeit modestly so. A total return for stocks in the 5%-8% range would reflect likely earnings growth for the year, while providing a reasonable premium over safer investments in the fixed income markets. We believe the wild card in 2020 will be geopolitics. Have You Heard it’s an Election Year? The most visible geopolitical uncertainty in 2020 is the U.S. elections in November. We need not add to the endless supply of commentary on the U.S. elections beyond the following observations that relate specifically to our approach with your investments:

We believe the stock market is likely to respond more favorably to a Trump re-election than a democratic turnover in the white house (this is not a political statement – we believe investors would assume higher taxes and tighter regulatory oversite with a democratic administration, both of which factor negatively into business valuation).

We expect the U.S. treatment of China as its primary geopolitical rival will continue regardless of the outcome of the November elections.

We expect increasing government involvement in the technology and communications sectors, regardless of the outcome of the November elections.

We suspect the energy and healthcare sectors might be particularly volatile this year due to their prominence in the political posturing of both parties.

We suspect the majority of the full-year change in the stock market – in either direction – might take place after the November elections, with plenty of ups and downs along the way.

Most importantly, we expect our nation to continue innovating and advancing, as it has for nearly 250 years, regardless of who occupies the oval office after November.

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Other Geopolitical Considerations The U.S. presidential election is by no means the only geopolitical consideration we are tracking. We are particularly interested in potential policy actions related to trade, technology and fiscal stimulus. Trade We suspect the trend toward greater tension in global trade relations has structural roots beyond the Trump administration, and we expect this dynamic to continue beyond his term in office. We note that the idea of confronting China on issues of fair trade and human rights receives support from people of diverse political backgrounds in the U.S. and beyond. There may be differences among the political parties regarding priorities and tactics, but the era of passive coexistence with China seems to be over. Other near-term flash points we are watching include the recent defanging of the World Trade Organization (WTO) and the ongoing unrest in Hong Kong. The U.S. effort to demobilize the WTO by denying sufficient appellate judges to hear disputes might incentivize more countries to pursue aggressive trade tactics in the near-term. The concern in Hong Kong is the potential for a particularly controversial event to prompt a reaction from Washington that escalates tension with China, or worse, triggers a political miscalculation by one side or the other. Either scenario would damage investor confidence and cast doubt on the prevailing expectation that the U.S. and China will strike a deal “eventually.” Technology We believe the growing global competition for technological development serves to intensify international political battles and increase government involvement in high-tech industries. Due to its position at the intersection of national security, personal privacy and business interests, the regulatory oversite of many technology and communications companies seems likely to escalate out of necessity. The U.S. treatment of Chinese telecom equipment company, Huawei Technologies may be informative on this front in the near-term, as will regulatory developments surrounding personal privacy rights in the U.S. and abroad. For investors, this dynamic implies continued disruption of global supply chains, tighter limits on business activities, and higher costs for complying with evolving regulatory requirements. Fiscal Policy The most recent signaling from central bankers in the U.S., Europe and Japan suggests monetary policy will remain on hold for the foreseeable future in all three regions. Moreover, the recent narrative from many observers reflects a growing consensus that monetary stimulus may have reached its useful limit following 10-plus years of zero, or negative interest rates throughout the developed world.

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On the other hand, fiscal policy initiatives are being debated and approved with increasing frequency. For example, Britain, France, and Japan have already approved tax cuts and/or new government spending programs; the Italian government has been promising a more expansionary budget policy; and even Germany – the lone penny-pincher in Europe – has begun to publicly question the logic of its balanced budget obsession in the face of recent economic struggles.1 We believe a handoff from monetary to fiscal stimulus policies, if it develops, might prompt a shift in stock market leadership from growth stocks to more economically sensitive value stocks. At the macro level, monetary stimulus supported rising price-to-earnings multiples (P/E) to drive returns from stocks, whereas fiscal policy may encourage a greater emphasis on earnings growth to push stocks higher. This dynamic may have contributed to the reversal in leadership from growth stocks to value stocks toward the end of last year, and we suspect this dynamic might persist in 2020. Current Design of Our Investment Strategies2 The remainder of this report addresses the current positioning of each of our investment strategies. To the extent possible within the structure of each strategy, we have positioned these portfolios for the following broad perspectives:

1) We believe the stock market can build upon its recent strong gains, but our expectations are modest because a lot of good news may already be reflected in asset prices.

2) We believe a balanced approach to portfolio construction is necessary to prepare for multiple potential outcomes and allow flexibility to react to new developments.

3) We suspect investor attention will finally move beyond its decade-long obsession with central bankers and their policy experiments, while focusing instead on global political issues and potential fiscal programs.

4) The 2020 presidential election will be charged with emotion on both sides of the aisle, but we expect the most pressing structural developments of the moment to endure regardless of the outcome – specifically greater political rivalry globally and increased government involvement/intrusion into the technology and communications sectors.

Managed Equity Strategies The Managed Equity Growth strategy (after fees were removed) outperformed the broader equity market (the S&P 500 Total Return Index) by well over 3% in 20193. Portfolio balance helped the risk-adjusted return to be even better. According to Bloomberg, the strategy’s risk-adjusted performance ranked #9 among its closet 100 peer funds and #2 among its closet 254.

1 Source: Bloomberg; Bank of England; France recently enacted tax rate reductions; Britain boosted fiscal spending plans materially in September; Japan announced a 26 trillion yen stimulus package in December 2 The portfolio strategy discussions in this section are supplemental to a compliant presentation. A complete list of Capital Advisors’ portfolio models and compliant presentations are available by contacting Capital Advisors. 3 Source: Bloomberg, Junxure 4 Based upon Sharpe ratio, which adjusts total return by the volatility of returns throughout the year.

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The Managed Equity Dividend strategy gained double digits in 2019, generated a gross cash yield near 5%, and expanded the amount of cash received by over 10% versus the prior year, due largely to corporate dividend increases.5 The strategy’s goal, over time, is to maintain a yield over 4% and increase the cash received by 4%-5% annually. We achieved these results through a disciplined investment process together with a keen focus on risk management and flexibility. Portfolio balance and risk management remain the key focus. Through 2020, we will continue to look for opportunities to reduce exposure to more highly-valued, very large-cap companies, and diversify to a more forward-thinking set of opportunities. Following are three examples of similar moves we made over the past year:

Early on we targeted rising geopolitical tensions as a key investment theme and added Aerospace & Defense positions to our Growth and Dividend strategies. While Lockheed Martin (LMT: ~$399) maintains one of the Dividend strategy’s lowest-paying yields, we believe the portfolio balance it helps provide carries relatively high value.

In November, we took some profits in the Growth strategy’s very large Consumer Staples stocks – which we believe had ascended close to full valuation – and diversified into a much lower valuation Staples opportunity where we believe investors understand the company’s challenges far better than its opportunities. We also picked up a low-multiple semiconductor stock that has leadership positions in 5G, electric and autonomous vehicles. Both positions nicely outperformed the broader market throughout the rest of the year, and we believe continue to play an important portfolio diversification role.

We expect some large Technology and “FANG”6 companies to remain under a global regulatory cloud as the competitive landscape evolves with emerging competitors. In 2019, we diversified FANG exposure into the following areas:

- Gene editing technologies - Internet of Things (IoT) - Robotics - Geopolitical Uncertainty - Regulatory complexity - Rapid economic change

Broadly stated, the Managed Equity Growth strategy has four primary segments:

Emerging Franchises: Companies that are pioneering what we believe could become very large markets.

Core Innovators: Companies that should continue leading large, attractive markets, and could enter and disrupt additional markets. We believe these management teams can innovate at a pace that helps these companies shape the development of multiple markets.

Core Operators: Companies that have proven abilities to lead large, attractive markets through economic cycles. These are companies we believe can not only endure economic

5 Source: Capital Advisors, Inc. based upon a representative account 6 The “FANG” acronym is commonly used in reference to leading technology companies like Facebook, Apple, Amazon, Netflix and Google.

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challenges but also emerge in stronger positions, for instance by acquiring troubled companies that have attractive assets.

Strategic Opportunities: We believe these companies are temporarily undervalued due to either an overreaction to a recent negative event, or under-appreciation of potential future developments.

Near-term capital flows typically rotate among the above categories as global market conditions change. We link that framework into our market outlook to further manage risk while targeting expected, longer-term returns. Portfolio balance helps manage near-term volatility and prevent over-exposure to any narrow group. Among the core holdings in this strategy, we seek to identify companies that are helping shape the development of highly attractive markets. The leading companies and industries of tomorrow are frequently different from those of the past – a key difference between passive and active investing. While we actively manage exposure to these positions to keep the strategy in balance given our market outlook, we tend to give these companies a longer leash to build wealth over time. The Managed Equity Growth strategy currently includes dedicated exposure to the following mega-trends:

- Artificial Intelligence: The next stage of the computing revolution, including data analytics, self-driving cars, intelligent homes, and smart utility grids.

- Robotics: The next leg of the industrial revolution’s use of machines to make tasks more efficient. At present, we view medical robotics as the highest-value segment.

- Biotechnology: At the center in the fight against suffering and death - the knowledge, equipment, and treatments that are sparking advances in cancer, heart disease, diabetes, arthritis, including…

Gene & Cell Therapy: Treating DNA strands and cells to eliminate or treat the root cause of diseases. Immuno-Oncology: Supercharging the body’s immune system to fight cancer.

- Cloud Services: Involves businesses shifting their technology and information assets to the cloud for better capture and analytics...technology is not Wal-Mart’s core.

- 5G: Wireless capabilities that could impact the way people interact with each other, their homes, their cars.... The next wave of “connected mobility”

- Electric/Autonomous Vehicles: A transformation of vehicle transport with key implications for energy, the environment and “connected mobility”

- Electronic-Payments: The shift from cash to card to button. E-payments can enable new business models and help make established ones become more efficient.

- New Retail: Technology is transforming the shopping experience. Use a phone (or ask Alexa) to have food delivered to your doorstep in two hours; select items and check out of a store without stopping at the cashier; try on a blue item at a store and order a red one from the online kiosk...we believe technology has just scratched the surface of its potential impact on the shopping experience and profitability of "new retail" companies.

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- Social Change: The aging global population; the impact of connectivity technologies; the rise of two-income families; increasing financial power among women; changing generational expectations....

- Emerging Market Consumer: In Asia alone, 525 million already in the middle class - more than the total population of the European Union. Over the next 20 years, the middle class could expand another 3 billion, almost exclusively from the emerging world.7

The Managed Equity Dividend strategy retains exposure to some (not all) of the above trends. It maintains a cash yield of 4%-5% and an active focus on relatively lower-risk, higher-quality balance sheets.8 During the second half of 2019 we added to aerospace & defense, global telecommunications, 5G, consumer staples, energy, and alternative investments. We are looking to further balance the strategy in the near term. The most recent approximation of the strategy’s beta versus the S&P 500 Index is 0.73.9 Beta represents the amount of a portfolio’s movement that is explained by (directly related to) the overall stock market over the past year. Prices can move significantly due to factors not directly related to the market. That said, beta is one of the statistics we can use to get a sense of strategy risk levels. All else equal, a higher beta, above 1.0 say, is typically associated with more risk. Fixed Income In October, the Fed cut its interest rate target for the third and final time in 2019, as the Fed Funds range now sits at 1.50%-1.75%. The futures market is now pricing in only about a 50% chance of another rate cut by the end of 2020.10 With the Committee’s neutral bias towards rates, and in conjunction with U.S.-China trade fears waning, Treasury market yields rose in Q4, steepening out the yield curve and removing the narrative of “curve inversion” from doomsayers. We suspect the shorter end of the yield curve may remain relatively unchanged in 2020 around current levels until the Fed pivots one way or the other. Projected moves in intermediate-to-longer-term market rates are more difficult to project with several factors, including economic data (inflation/growth prints), election hedging and supply/demand imbalances associated with asset class rebalancing all impacting the resting point for Treasuries. Our individually managed taxable (corporate focus) and tax-exempt (municipal focus) bond portfolios are customized according to three broad priorities – Liquidity, Income or an Aggregate of the two. A Liquidity portfolio invests exclusively in high credit quality securities and short-term maturities to ensure stability of principal and ready access to capital. An Income portfolio extends further out on the yield curve and includes a broader range of credit quality to generate a higher level of income. The Aggregate approach incorporates elements of both designs for a “core” exposure to the fixed income asset class. We continue to prefer an “up-in-quality” bias across all bond portfolios.

7 Source: Ernst & Young, “Middle class growth in emerging markets: Hitting The Sweet Spot,” April 23, 2015 8 Source: Capital Advisors Inc., Junxure 9 Source: Capital Advisors Inc., calculated as the sum of each position times its aggregate holding weight 10 Source: Bloomberg as of January 2. 2020

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By structuring bond portfolios in a “ladder” with maturities typically contained within the 1-to-10-year range, the cost of being wrong should be minimal unless rates rise significantly. If interest rates rise, the ability to reinvest nearer-term bond maturities into a higher rate environment helps to offset the negative price change among the longer-term bonds in the ladder (over time….not month-to-month). When interest rates trend lower, price gains at the long end of the ladder serve to offset the lower reinvestment rate from maturing bonds, and the portfolio is supported by higher cash flows among the longer-dated bonds in the ladder. We seek to enhance the benefit of the laddered portfolio structure with active management. By deliberately emphasizing certain maturities, and diversifying across different sub-sectors and credit profiles, we hope to optimize the risk and return profile of our fixed income strategies. In all cases we will not reach for yield unless the merits of the underlying strategy prove worthwhile relative to the risk. With the continued rally in rates, we have positioned most of our clients’ individual managed bond portfolios neutral to slightly lower duration (sensitivity to a change in interest rates) relative to their respective benchmark durations to manage risk. Within our Aggregate Bond (ETF) strategy, we continue to emphasize “defined maturity”, investment-grade corporate bond ETFs. These funds include all the features of a traditional fixed income ETF with one important difference: a specific maturity date. These funds are populated with bonds that all mature in the same calendar year. During that year the ETF terminates, and the fund’s net assets are distributed to shareholders as cash, similar to what happens when an individual bond matures. Within our Income Bond (ETF) strategy, we continue to focus on maximizing cash flows within the construct of “balancing risks”. Specifically, in the fourth quarter, we took advantage of the lasting tightening in credit spreads by reducing our corporate bond exposure to ~50% of the model, while increasing the allocation to “AAA-rated”, government-guaranteed mortgage bonds to ~35%. After taking advantage of higher yields at the beginning of 2019 through the purchase of longer maturity ETFs, we have allowed each models’ average duration to ratchet lower commiserate with the move down in rates to get slightly more defensive. Tactical Dynamic Allocation The Tactical Dynamic Allocation strategy may be particularly helpful in 2020 by enabling flexibility to react to changing market conditions. By systematically responding to a quantitative indicator called a “moving average,” this strategy is likely to be mostly exposed to risk assets when the recent trend in these markets has been positive, and mostly out when the recent trend has been negative. While we share the consensus view for stable interest rates and expanding corporate profits in 2020, there are plenty of possibilities for this constructive outlook to be derailed. The Dynamic Allocation strategy provides a non-emotional mechanism for responding to any negative deviations from the consensus view, if/when they unfold.

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The strategy entered the new year in a relatively bullish posture, with four of its five risk markets included in the allocation, including Domestic Equity (40%), International Equity (24%) Emerging Markets (15%) and Natural Resources (10%). The remaining 11% of the portfolio is set aside in short-term U.S. Treasury securities and cash reserves.

Tactical Global Growth The Tactical Global Growth strategy entered the new year in a state of balance, absent of any particular theme such as over/under-weight domestic vs. international, or large-cap vs. small-cap. We would expect the personality of the portfolio to shift in favor of any market trend that might develop in 2020 due to the strategy’s discipline of systematically tilting its sector weightings toward relative strength. This approach incorporates a momentum effect into the overall portfolio. One possibility for this strategy in 2020 would be a shift toward greater emphasis on international markets. We suspect this might occur if the recent improvement in the relative performance of value stocks vs. growth stocks continues in the new year. This is because the major international benchmarks are more heavily weighted in value sectors like financials and industrials compared to U.S. benchmarks that favor growth sectors like technology and communications.

Tactical DynamicPortfolio Allocation

as of 1-6-20

Fixed Income & Cash

Domestic Equity

International Equity

Emerging Markets

Natural Resources

Real Estate

10%Natural

Res.

11%FixedIncome

40% Domestic Equity24%

International

15% Emerging Mkts.

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For now, the portfolio is well balanced as follows:

Tactical Global Growth Sector Allocations

1-6-2020

Asset Class Current Weighting

Large-Cap Growth Overweight (16%)

Real Estate Overweight (16%)

Mid-Cap Overweight (16%)

Large-Cap Value Neutral Weight (10%)

Small-Cap Neutral Weight (10%)

International Neutral Weight (10%)

International Small-Cap Neutral Weight (10%)

Emerging Markets Underweight (4%)

Natural Resources Underweight (4%)

High-Yield Credit Underweight (4%)

International Focus The International Focus strategy delivers broad exposure to the global equity markets outside the United States. The strategy seeks to capture a return premium relative to common international equity benchmarks through disciplined exposure to three market factors that have demonstrated a long-term history of producing attractive risk-reward characteristics – value, momentum and low market capitalization, or “small-cap.” International equities have under-performed the U.S. stock market for the vast majority of the past decade. At this point there is a fairly wide valuation gap between the two global regions, implying a potential catch-up opportunity for international equities. Unfortunately, valuation is nearly worthless as a tool for market timing. Investors seeking to participate in a potential improvement in the relative performance of non-U.S. equities should be willing to make a long-term commitment to these markets. International equities also offer diversification benefits to a balanced portfolio. These markets can be particularly helpful during periods of weakness for the U.S. dollar exchange rate.

1-6-20

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DISCLOSURES This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. This presentation may not be construed as investment advice and does not give investment recommendations. Any opinion included in this report constitutes the judgment of Capital Advisors, Inc. as of the date of this report, and are subject to change without notice. This commentary does not purport to be a statement of all material facts relating to the securities mentioned. The information contained herein, while not guaranteed as to accuracy or completeness, has been obtained from sources believed to be reliable. Opinions expressed herein are subject to change without notice. The investment return and principal value of an investment will fluctuate so that an investor’s portfolio may be worth more or less than its original cost at any given time. Due to differences in portfolio timing and position weightings, the returns for any individual portfolio managed by Capital Advisors may be lower or higher than any performance quoted. The S&P 500 Index is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor's. The index is calculated on a total return basis with dividends reinvested and is not assessed a management fee.

Estimated portfolio yield represents the 12-month run-rate of interest and/or dividend payments in a strategy divided by the market value of the securities and cash reserves invested in the strategy. Estimated interest/dividend payments and market values are calculated by a portfolio accounting system from Orion using a single client portfolio that Capital Advisors believes to be representative of clients’ portfolios invested in the same strategy. The actual portfolio yield for any single client portfolio may be lower or higher than the yield quoted. The underlying holdings of any presented portfolio are not federally or FDIC-insured and are not deposits or obligations of, or guaranteed by, any financial institution. Security Recommendations: The investments presented are examples of the securities held, bought and/or sold in the Capital Advisors strategies during the last 12 months. These investments may not be representative of the current or future investments of those strategies. You should not assume that investments in the securities identified in this presentation were or will be profitable. We will furnish, upon your request, a list of all securities purchased, sold or held in the strategies during the 12 months preceding the date of this presentation. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of securities identified in this presentation. Capital Advisors, Inc., or one or more of its officers or employees, may have a position in the securities presented, and may purchase or sell such securities from time to time. Items of Note Regarding Exchange Traded Funds: An Exchange Traded Fund (ETF) is an investment company that typically has an investment objective of striving to achieve a similar return as a particular market index. The ETF will invest in either all, or a representative sample of the securities included in the index it is seeking to imitate. Like closed-end funds, ETFs can be traded on a secondary market and thus have a market price that may be higher or lower that its net asset value (NAV). If these shares trade at a price above their NAV they are said to be trading at a premium. Conversely, if they are trading at a price below their NAV, they are said to be trading at a discount. The information provided is supplemental to a fully compliant presentation. A complete list of Capital Advisor’s portfolio models and compliant presentations are available by contacting Capital Advisors at the number listed below. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Additional information, including management fees and expenses, is provided on Capital Advisors’ Form ADV Part 2. As with any investment strategy, there is potential for profit as well as the possibility of loss. Capital does not guarantee any minimum level of investment performance or the success of any portfolio or investment strategy. All investments involve risk (the amount of which may vary significantly) and investment recommendations will not always be profitable. The investment return and principal value of an investment will fluctuate so that an investor’s portfolio may be worth more or less than its original cost at any given time. Past performance is not a guarantee of future results. Capital Advisors, Inc. does not provide tax or legal advice and recommends you consult with your tax and/or legal adviser for such guidance. Presentation is prepared by: Capital Advisors, Inc. Contact Capital Advisors for a list and description of all firm composites and/or copy of our most recent Form ADV Part 2: 1-866-230-5879

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2020.01.06R

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