QUARTERLY MARKET OUTLOOKTHIRD QUARTER 2017

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• How did the markets perform?• How did CLS portfolios perform? • What is CLS thinking moving forward?• What is CLS doing with portfolios?• CLS Investment Themes• CLS Monthly Perspectives

Contents

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Market Outlook Stocks: stay global

• We expect below-average returns from U.S. equities• We expect better returns from international equities

Bonds: be flexible• Return expectations are also tempered• Bonds still have a role, but investors need to be active with bond positioning

CLS Investment Themes Global Value: emphasize securities with lower valuations than the overall market Smart Beta: emphasize smart beta ETFs Creative Diversification: active management of fixed income; use of alternatives

CLS Resource: CLS Monthly Perspectives

Summary

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Market Review: Performance Q2 2017

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Source: Morningstar Direct Performance as of 6/30/2017

What Worked in Q2 2017

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What Didn’t Work in Q2 2017

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What Worked in 2017

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What Didn’t Work in 2017

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Stocks: U.S. Earnings Growth

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S&P 500 Earnings Growth Monthly Data 3/31/1927 to 5/31/2017

Copyright 2017 Ned Davis Research, Inc. Further distribution prohibited without permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.

• Reported earnings were negative for most of 2016, but the data is improving• Earnings are forecasted to grow at an increasingly faster pace throughout 2017

Stocks: Emerging Markets Earnings Growth

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Copyright 2017 Ned Davis Research, Inc. Further distribution prohibited without permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/.

• Emerging market earnings growth is really starting to pick up momentum• It recently crossed 5% which has historically been positive for market performance

Emerging Markets Year-Over-Year Earnings Growth Monthly Data 4/30/1997 to 5/31/2017

Y/Y Earnings Growth: % Gain/Annum % of Time

Above 20% 0.56 29.48

Between 5% and 20% 14.70 18.28

Between -20% and 5% 3.11 40.61

-20% and Below 18.01 11.63

Domestic Stocks: Not on Sale

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• The U.S. market is at high relative valuations as compared to most international markets• Currently expensive, trading at a premium of 17% to the world

Stock Market Outlook: CLS Forecast

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Chart Source: Morningstar, Bloomberg, Ned Davis Research, Affiliates, and MSCI, as of 5/31/2017For a complete explanation of the “CLS Score”, please see page 70 of this Reference Guide.

CLS Scores for Broad Asset Classes

• Return expectations based on risk premium, valuations, technical, and various adjustments• Expected returns for international markets are 2-7% higher than those for the U.S.

U.S. Stock Market Valuations Still at elevated relative levels Relative valuation levels usually means to expect below-average U.S. market

returns CLS emphasizes international equities

Global Debt Levels Historically high levels, which are still rising High debt levels have been associated with lower overall economic growth CLS emphasizes emerging market equities, which tend to have higher growth

and lower debt levels

Investor Expectations and Emotions Increased volatility and potentially below-average domestic returns This increases the need for financial advisors and money managers to set

realistic expectations and coach investors through difficult times CLS emphasizes the importance of staying balanced and globally diversified

Top Three Investment Concerns at CLS

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CLS Investment Themes

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Global Value Smart Beta Creative Diversification

• We currently favor value stocks more than growth stocks. In a global economic environment that is improving, value stocks generally perform better.

CLS Investment Themes: Global Value

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Global Value

CLS Investment Themes: Global Value

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• Emerging markets are on sale and are currently trading at a significant discount to the world• Within the U.S., valuations for financials look relatively attractive

• CLS emphasizes factor-based ETFs, known as smart beta ETFs

• Smart beta ETFs have a rules-based approach to building a portfolio, which emphasizes a factor, such as value, dividend yield, or high quality.

• Smart beta captures the essence of active management, but at a fraction of the cost.

CLS Investment Themes: Smart Beta

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Smart Beta

7 Key Factors of Smart Beta

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An important subset of smart beta is factors, which are broad, persistentdrivers of risk and return. The seven factors CLS tends to emphasize are:

Factors Work - Equity

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Source: Morningstar Direct as of 5/31/2017. MSCI All Country World Factor Indexes relative to the MSCI All Country World Index (Gross Returns).

Excess Returns vs. MSCI ACWI

• Strong bias toward positive relative returns• Even stronger bias when factors are equal weighted• Strongest bias when stock market is down

Factors Work - Fixed Income

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Source: Morningstar Direct as of 5/31/2017. IA SBBI US LT Govt TR USD Index and BofAML US HY Master II TR USD Index relative to the BBgBarcUS Treasury Bill 1-3 Mon TR USD Index.

Excess Returns vs. Cash

• Cyclicality of returns is apparent like with equity factors• Strong bias toward positive relative returns• Even stronger bias when factors are equal-weighted

• CLS applies creative diversification by utilizing investments that are not correlated to stocks and bonds in order to offset equity-dominated portfolios

• This theme focuses on actively-managed bond, liquid alternative (managed futures), and actively-managed commodity exposure

CLS Investment Themes: Creative Diversification

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Creative Diversification

• How does CLS creatively diversify fixed income? CLS uses actively-managed ETFs, selects attractively-valued fixed

income sectors, and manages factor sensitivities

• What does CLS consider alternatives?

CLS Investment Themes: Creative Diversification

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CLS Monthly Perspectives: Investment Continuums

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as of 5/31/2017 – for our most recent continuums download out Monthly Perspectives piece at CLSinvest.com/monthlyperspectives *The active weights shown are versus a blended index composed of 60% equity and 40% international equity

Within our Risk-Budgeted strategies, the CLS Investment Team actively adjusts exposure to these ten continuums below and other areas of the market.

CLS Monthly Perspectives: Investment Continuums Commentary

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as of 5/31/2017 – for our most recent continuums download out Monthly Perspectives piece at CLSinvest.com/monthlyperspectives

CLS Monthly Perspectives: Investment Continuums Commentary

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as of 5/31/2017 – for our most recent continuums download out Monthly Perspectives piece at CLSinvest.com/monthlyperspectives

CLS Monthly Perspectives:Equity Sector Outlook

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1Sector performance relative to the broad domestic market (as measured by the Russell 3000 Index) measured over 3- and 12-month periods. Outperforming sectors are marked with a (+), underperforming sectors are marked with a (–).2Weightings are as of 5/31/17 and are based on current allocations to CLS’s proprietary funds relative to the broad domestic market (Russell 3000 Index).3Relative valuation uses a sector price multiple composite (equal weighted average of P/E, P/B, P/CF, P/S and P/D for Morningstar Sectors relative to the Russell 3000 Index) as of 5/31/2017 compared to the historical monthly composite measures since the year 2001. We rank the current measures as a percentile of their historic ranges and deem a sector overvalued if 75th or higher percentile (–), fairly valued between 26th and 74th percentiles (=), and undervalued if 25th percentile or below (+).For our most recent equity sector outlook, download our Monthly Perspectives piece at CLSinvest.com/monthlyperspectives

CLS Monthly Perspectives:Fixed Income Sector Outlook

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1Sector performance relative to the broad domestic market (as measured by the Russell 3000 Index) measured over 3- and 12-month periods. Outperforming sectors are marked with a (+), underperforming sectors are marked with a (–).2Weightings and performance are as of 5/31/17 and are based on current allocations to CLS’s proprietary funds versus an internal asset allocation benchmark (Neutral View Portfolio). The benchmark includes 45% Barclays Capital Aggregate Bond, 15% Barclays Capital High Yield, 10% 30-Day U.S. Treasury Bill, 10% Barclays Capital TIPs, 10% International Barclays Capital Global Treasury Ex-U.S. Capped, 10% Barclays Capital Emerging Market Bonds.3Relative valuation uses 10-year muni ratio for municipal bonds, 10 year breakeven rate for TIPS, current yield for Treasuries, and option adjusted spread for the other segments as of the end of the reporting month compared to the historical levels going back 10 years. We rank the current measures as a percentile of their historic ranges and deem a sector overvalued if 75th or higher percentile (–), fairly valued between 26th and 74th percentiles (=), and undervalued if 25th

percentile or below (+).For our most recent fixed income sector outlook, download our Monthly Perspectives piece at CLSinvest.com/monthlyperspectives

► Founded: 1989► Corporate Headquarters: Omaha, NE► Assets Under Management: $7.5B► Employees: 80+► Active Broker-Dealer Partners: 400+► Approved CLS Advisors: 2,700+► CLS Investors: 35,000+ (institutional investors include several state 529

plans and several prominent university endowment funds)► Portfolio Managers & Analysts: 12► Portfolio Management Credentials: 6 Chartered Financial Analyst (CFA®) Holders 1 Chartered Market Technician (CMT®) 1 Certified Investment Management Analyst (CIMA®) 1 Chartered Alternative Investment Analyst (CAIA)

► Industry Veterans: Experienced team from Fidelity Management & Research, Goldman Sachs, Russell Investments, E*Trade, Charles Schwab, and TD Ameritrade

About CLS

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► 2016 wealthmanagement.com ETF Strategist of the Year Winner*

► 2017 Finalist for wealthmanagement.com ETF Strategist of the Year*

► 3-Time Finalist for ETF.com ETF Strategist of the Year*► Social Media: Over 2,000 “followers” across platforms ► Rusty Vanneman, CFA, CMT: One of the 2017 Top Ten Portfolio Managers to

Watch by Money Management Executive*

► Paula Wieck, CFA: Money Management Executive’s 2017 Top 10 Women in Asset Management Award*

► CLS is Among the Top 10 shareholders in 56 ETFs► We Eat Our Own Cooking:

► 100% of CLS Portfolio Managers on the AdvisorOne management team own shares (industry average for asset managers is 44%)

► Investment Team bonuses are performance based versus benchmarks and peer groups over one- and three-year time frames

Awards and Accolades

2708-CLS-7/11/2017*PLEASE REFERENCE SLIDES 37 & 38 for AWARD INFORMATION

Additional Management Options & Partnerships

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*CLS partners with many other variable annuity providers, qualified retirement plans, broker-dealers, and more. Ask a sales representative for more information.

To receive the CLS Monthly Perspectives, Quarterly Market Outlook and more, visit

clsinvest.com/email-subscriptions

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CLS Published Whitepapers

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Contact Us

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Contact Us

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The views expressed herein are exclusively those of CLS Investments, LLC, and are not meant as investment advice and are subject to change. No part of this report may be reproduced in any manner without the express written permission of CLS Investments, LLC. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed here and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not a guide to future performance. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.

Disclosures

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The Russell 3000 Index is an unmanaged index considered representative of the U.S. stock market. The index is composed of the 3,000 largest U.S. stocks. The S&P 500® Index is an unmanaged composite of 500-large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. The Russell 2000® is an index comprised of the 2,000 smallest companies on the Russell 3000 list and offers investors access to small‐cap companies. It is a widely recognized indicator of small capitalization company performance. The MSCI All-Countries World Index, excluding U.S. (ACWI ex US) is an index considered representative of stock markets of developed and emerging markets, excluding those of the US. The MSCI EAFE Index is a composite index which tracks performance of international equity securities in 21 developed countries in Europe, Australia, Asia, and the Far East. The MSCI Emerging Markets Index is a composite index which tracks performance of large and mid-cap firms across 21 countries classified as emerging market countries. The Barclay’s Capital U.S. Aggregate Bond® Index measures the performance of the total United States investment-grade bond market. The Barclay’s Capital 1-3 Month U.S. Treasury Bill® Index includes all publicly issued zero-coupon U.S. Treasury Bills that have a remaining maturity of less than 3 months and more than 1 month, are rated investment grade, and have $250 million or more of outstanding face value. The Bloomberg Commodity Index is made up of 22 exchange-traded futures on physical commodities and represents 20 commodities that are weighted to account for economic significant and market liquidity. An index is an unmanaged group of stocks considered to be representative of different segments of the stock market in general. You cannot invest directly in an index.

The graphs and charts contained in this work are for informational purposes only. No graph or chart should be regarded as a guide to investing.

Disclosures

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Wealthmanagement.com & ETF.com Awards

CLS Investments, LLC (“CLS”) was selected as a winner for WealthManagement.com’s 2016 Industry Awards in the category, Asset Managers- ETF Strategist. The WealthManagement.com Industry Awards program is an unbiased, third-party organization seeking to recognize companies that support financial advisors. Nominations for the WealthManagement.com Industry Awards were based on a submission from the company describing how it helps financial advisors work with clients. The award goes to the company selected by a Judges Panel made up of ten industry professionals. Winners of the award for each category were announced September 29, 2016. WealthManagement.com is not affiliated with CLS. Ratings and awards may not be representative of any one client’s experience and are not indicative of CLS’s future performance.

CLS Investments, LLC is a finalist for ETF.com’s ETF Strategist of the Year – 2016. ETF.com is an unbiased, third-party organization which specializes in providing resources on Exchange Traded Funds. ETF.com Award winners are selected in a three-part process. The process begins with open nominations where interested parties were invited to submit nominations. Self-nominations were accepted. Then the ETF.com Awards Nominating Committee – made up of senior leaders at ETF.com and senior members of the FactSet ETF team – voted for up to five finalists in each category. The winners are selected from these finalists by a majority vote of the ETF.com Awards Selection Committee, which is a group of independent ETF experts. Committee members recuse themselves from voting in any category in which their firm is named as finalist. ETF.com is not affiliated with CLS. Ratings and awards may not be representative of any one client’s experience and are not indicative of CLS’s future performance.

Award Disclosures

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Rusty Vanneman Money Management Executive Award

CLS Investment, LLC (“CLS”) Chief Investment Officer, Rusty Vanneman, CFA, CMT, was selected as a “Top 10 Fund Managers to Watch” in 2017 by Money Management Executive. Money Management Executive is an unbiased, third-[arty publication covering the asset management industry. Money Management Executive chose the list of managers to watch by screening Morningstar data from funds with a single manager, ranked as having the best three-year annualized returns in their respective categories. The list of managers was published March 27, 2017. Money Management Executive is not affiliated with CLS. Ratings and awards may not be representative of any one client’s experience and are not indicative of CLS’s future performance.

Paula Wieck Money Management Executive Award

CLS Investments, LLC (“CLS”) Portfolio Manager, Paula Wieck, CFA, was included in a “Top Women in Asset Management” in 2017 selected by Money Management Executive. Money Management Executive is an unbiased, third-party publication covering the asset management industry. Money Management Executive editors chose the list of women from nominations that discussed their roles at their asset management company, as well as any community service programs in which they may be involved. The list of managers was published May 1, 2017. Money Management Executive is not affiliated with CLS. Ratings and awards may not be representative of any one client’s experience and are not indicative of CLS’s future performance.

Award Disclosures

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