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Athena Capital Advisors LLC55 Old Bedford RoadSuite 302Lincoln, MA 01773781.274.9300athenacapital.com

Athena Capital AdvisorsSecuritization Revisited

July 2019

Background

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation.

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Loan & CLO RelationshipCLOs comprise about half of the US leveraged loan market and are a meaningful component of the below investment grade ecosystem.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Guggenheim 3

Bank Loans 101CLOs are comprised of senior secured floating rate loans to large below investment grade companies. The loans are typically underwritten by large banks and syndicated to the financial market.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Ares 4

Collateralized Loan Obligations 101A CLO’s underlying assets are a bank loan portfolio that is actively managed by an asset manager. The portfolio is used as collateral for CLO debt and equity securities issued by the CLO manager to investors. CLO debt consists of tranches with different credit ratings representing varying risk characteristics. Cash flows from the underlying loan pool are allotted sequentially from senior to junior CLO tranches. Overcollateralization and interest coverage tests set thresholds at which cash flows will be diverted away from junior tranches to pay senior tranches. The equity CLO holder has exposure to the residual value of the loan pool after all liabilities have been paid; this is the riskiest part of the capital structure.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Voya Capital 5

Residential Mortgage-Backed Securities 101Government agencies Fannie Mae, Freddie Mac, and Ginnie Mae began to securitize conforming residential mortgages into RMBS in the 1980s. The RMBS priority of payment structure is similar to that of CLOs. In the 1990s, a distinct market was created for loans that did not fit the agencies’ strict standards, which led to the development and expansion of the subprime lending market in the 2000s. As housing was considered a safe asset and investors sought higher yields, banks repackaged the junior tranche of RMBS securities into CDOs and repackaged those again into CDO squared. Poor underwriting combined with extreme leverage, low transparency, and complex structuring led to significant losses as defaults rose.

For a thorough examination of the role securitization played in the GFC, we recommend “Understanding the Boom and Bust in Nonprime Mortgage Lending” by the Joint Center for Housing Studies at Harvard University.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Citigroup 6

RMBS

CDO

CDO Squared

Summary

To compare the collateralized loan obligation (CLO) market to pre-2008 RMBS CDOs (“RMBS”), Athena performed primary research and held calls with our structured credit mangers One William Street, DoubleLine, and Shenkman. All originate CLOs or invest in secondary CLOs. One William Street and DoubleLine are also RMBS market veterans who successfully navigated through the Global Financial Crisis (GFC) and the legacy RMBS opportunity that followed.

In summary, our research and manager conversations indicate that - while there are high-level similarities between CLOs and pre-2008 RMBS - the base case is that the CLO market does not pose a systemic risk due to: Significantly lower leverage across issuers, investors, and the US banking sector overall Higher collateral quality, transparency, and due diligence Superior capital structures and investor segmentation by risk profile

We do not think that broad exposure to par loans and junior debt/equity CLO exposure is attractive at this time amid late cycle risks. There may be material price volatility in loan and CLO markets and there is significant uncertainty over how the next distressed cycle will unfold. We are more confident in exposure accessed through selective credit managers but would also prefer to adjust our exposure tactically based on the market opportunity. In particular, we think secondary CLO exposure may present an attractive value opportunity during a market dislocation as CLO capital structures tend to reprice quickly in changing market conditions such as the 2015 energy market crash.


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CLO & RMBS SimilaritiesThe primary similarities between current CLOs and pre-GFC RMBS are:

• Securitized and levered structures• Significant floating rate underlying collateral• Subprime RMBS and loans have comparable growth and total market size of about $1 trillion• High investor demand due to yield-seeking behavior in a benign market environment• Loan terms are considered borrower-friendly and lenders receive fewer safeguards like covenants• Rising corporate leverage, though other fundamental characteristics like interest coverage remain high• Issuers have little to no skin in the game following an exemption for CLOs from Dodd-Frank Risk Retention rules in Feb. 2018 • Low regulatory oversight, though a range of regulators have recently examined the loan and CLO markets

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Bank of England 8

Contrasting CLO & RMBSThe primary differences between the current CLO market and pre-GFC RMBS are the lower use of leverage and higher underwriting standards.


RisksWhile we do not think one can extrapolate the RMBS experience onto the CLO market, there are risks to be aware of in the loan and CLO markets. The leveraged loan market has become less disciplined and more borrower-friendly. Highly leveraged loan deals with debt/EBITDA >5x now exceed 2007 levels as a share of new issuance. Financial statements have increasingly used adjustments to paint a rosier picture, especially for M&A deals. An increasing use of EBITDA add-banks means leverage may be higher than indicated.

Caveat emptor. Athena does not recommend having broad loan market exposure, but we are more sanguine on our conservative and selective managers. We think leveraged credit is likely to experience volatility but do not expect the next downturn to look like 2008; below are some unique characteristics to be aware of:

• CLOs survived the GFC because their capital is locked up; they are unlikely to become forced sellers that exacerbate existinglosses as RMBS did in 2008. However, retail-oriented bank loan mutual funds and ETFs (which comprise about 15% of the loan market) have an asset/liability mismatch and could face headwinds in a down market. For example, outflows in 4Q18 resulted in the worst performance for loan funds since 2008 despite a low default rate. We envision some funds may struggle to fund redemptions and may even have to gate outflows.

• CLOs benefitted from the 2009 V-shaped recovery in risk assets as central banks become aggressively accommodative. The Federal Reserve’s ability to stem the next cycle may be hindered by already low interest rates and the Fed’s sizeable balancesheet. Persistently elevated defaults would be a material headwind for CLOs.

• Lender protections have weakened with the popularity of covenant lite issuance and the ability to tack on incremental pari passudebt. Market participants expect the effect to be a lower default rate as companies have fewer covenants to break but ultimately a lower recovery rate than the ~70% rate of the past. The borrower-friendly environment puts the onus on investors to be selective in their loan exposure.

• Most CLOs are rated by a single credit rating agency compared to at least two pre-GFC. The different methodologies pursued by Moody’s and S&P may incentivize issuers to “ratings shop.” However, the risk of inaccurate ratings is mitigated by the fact that most loan and CLO investors perform fundamental due diligence.

• Loan market sector composition has shifted such that the technology industry now comprises 15% of the JP Morgan Loan Index. Technology companies, many of which are PE-backed, are not a traditional bank loan investment due to their growth orientation and low collateral.

• Balance sheet CLOs backed by small, private loans to middle market enterprises are a small ($7 billion as of 2018) but potentially riskier part of the market. This is partly mitigated by the continuation of risk retention for these CLOs. Direct lending strategies have become popular as post-GFC regulations impeded lending by traditional banks.

Source: FT, IMF, DoubleLine 10

Leverage


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Lower Leverage in Loan SystemThe financial system today is very different from 2008. In 2008, mortgage defaults spread into a financial crisis partly due to high systemic leverage and opaque links within the financial sector. When the problems surfaced, credit markets froze over fears of further losses. Per the Economist, “the problem with that $1 trillion of subprime debt was not its mere size; it was the way in which it was financed.”

The current market also has significantly lower leverage; there is low bridge risk and limited investor exposure to total return swap lines. Also only about a third of outstanding bank loans are securitized compared to 80% of 2006 US subprime mortgages. Lastly, synthetic securitizations and securitizations of securitizations (CDO squared) are uncommon now whereas they accounted for about 10% ofsubprime securitizations.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Athena Capital Advisors 12

Lower Leverage in Banking SystemAccording to the Federal Reserve “leverage at financial firms is low relative to historical standards, in part because of regulatory reforms enacted since the financial crisis. In particular, regulators require that banks--especially the largest banks--meet much higher standards in the amount and quality of capital on their balance sheets and in the ways they assess and manage their financial risks. A greater amount and a higher quality of capital improve the ability of banks to bear losses while continuing to lend and support the economy. Capital levels at broker-dealers have also increased substantially relative to pre-crisis levels, and major insurance companies have strengthened their financial positions since the crisis.”

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Federal Reserve 13

* BHC denotes Bank Holding Company

**

Higher Corporate Debt OutstandingLower financial market leverage is partly offset by the growth of corporate debt following the GFC, including higher recent issuance of riskier bank loans with leverage multiples over 5x. Increases in corporate debt and leverage warrant concern as they tend to coincide with default cycles. We anticipate there will be corporate dislocation and technical pressure, though borrower-friendly loan terms, high interest coverage, and low interest rates may help soften the blow of an economic downturn.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: IMF, Shenkman, The Economist 14

Underwriting & Collateral


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Poor RMBS Underwriting Led to Low Collateral QualityBesides having different underlying asset class exposure, RMBS and CLO collateral differs dramatically in quality. Over 50% of subprime mortgages were originated by non-bank lenders with no regulatory oversight whose “originate to distribute” model resulted in poor underwriting. As a result, low quality subprime collateral accounted for almost half of RMBS collateral (reaching as high as 90% for some structures) during the mortgage boom according to Moody’s. In contrast, post-GFC bank loan issuance has been led by highly regulated banks who have mainly underwritten mid-level credit quality loans with only about 1% annual issuance of lower quality CCC loans. The rise of covenant lite issuance has been controversial, but market participants expect that such terms will reduce the default rate, though recoveries will also likely decline.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Moody’s, JP Morgan 16

Loan Issuance Mostly Used for RefinancingWhile higher loan issuance has been a source of concern, post-2008 new loan issuance has primarily been used for the conservative purpose of refinancing existing debt. More aggressive uses of proceeds such as acquisitions and dividend payouts comprised a smaller share of issuance at 36% and 4%, respectively, in 2018. Issuance of loans with high leverage above 6x has increased, which is why Athena prefers selective active management over broad market exposure in bank loans.

“The 2010s have been a rosier time for firms than for households; they can afford more debt, and a world of low interest rates makes doing so attractive. Moreover the firms are not borrowing the money for risky investments…in aggregate they have just given money back to shareholders. Through a combination of buy-backs and takeovers non-financial corporations have retired a net $2.9 trillion of equity since 2012—roughly the same amount as they have raised in new debt.” – The Economist


Transparency Improved Since GFCA typical CLO has 100-200 underlying loans, which are publicly syndicated assets with high disclosure. Loan issuers regularly release financial statements that are vetted by auditors and scrutinized by institutional investors who actively manage CLOs. In contrast, RMBS investors were not able to conduct asset-level due diligence since there were thousands of underlying loans with low financial transparency (often due to mortgage originator negligence or fraud) that were packaged and repackaged in layers of securitization. According to the Economist, “big publicly traded companies are much less inscrutable…Their debt does not look remotely as worrying, even if some firms are overextended.”

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Harvard University 18

Performance


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Not All Structured Credit is Made AlikeAverage historical default rates in global structured finance (including RMBS, CMBS, ABS, CDOs and CLOs) have varied significantly by structure, which indicates that structured credit is not homogenous. Rather, performance is meaningfully differentiated by variables including structure, credit rating, and vintage.

“The rare losses in U.S. CLOs were mainly driven by exposure to high-yield (HY) bonds in pre-2002 vintage CLOs, which saw lower recovery and higher default rates than secured loans. Note that very few U.S. CLOs issued after 2014 include HY bond exposure—hence they are 100% loan collateral—leading us to believe that the structure will be even more resilient in the next downturn.” - Voya


RMBS & CLO Defaults Over TimeDefault rates in RMBS and CLOs have diverged meaningfully, including during the GFC.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: S&P, SIFMA 21

* Top chart references RMBS rather than RMBS CDO, which S&P does not break out as a separate category.

CLOs Had Lower Losses than Bank Loans in GFCAccording to Moody’s, IG US CLO tranches experienced a significantly lower loss rate than leveraged loans due to imbedded creditenhancement and better collateral performance via active management.


Stress-Tested PerformanceCLOs have a positive precedent of performance through a credit crisis. Though CLOs experienced mark to market volatility, credit losses were relatively benign compared to other credit instruments. Senior AAA and AA-rated CLO tranches have never experienced a default. 2007 vintage CLOs meaningfully outperformed similar vintage mortgage-backed structured products.

While this does not indicate that CLOs are insulated from default or recession risk, their past performance highlights their contrast versus RMBS.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Bain Capital Credit 23

Evolution of Securitization


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CLO & RMBS Securitization Process SimilarCLO issues start from an agreement on key terms between a manager, arranging bank, and anchor equity investor. The bank then secures a lead AAA tranche investor, which is typically a sophisticated institutional investor, and distributes the remaining debt exposure.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Aegon Asset Management 25

Warehouses Now More ConservativeWhile over 90% of CLOs use warehouse capital, they are significantly smaller than in the pre-GFC era. Today’s warehouses are typically approximately 50% of a CLO’s target size. Typical warehouse leverage levels of 4-5x are also meaningfully lower than in the pre-GFC era. Warehouses are also typically capitalized by CLO issuers and third party investors rather than banks, which reduces the systemic risk associated with warehouses. A drawback of the warehouse structure is that it is marked to market. CLO managers typically absorb the first losses on assets held during the warehouse period and remaining losses are typically borne by arranging banks.


RMBS Used Complex Layers of SecuritizationCLOs and RMBS both have tranches with a priority of payments “waterfall” that seeks to sort investors based on expected risk andreturn characteristics. However, pre-GFC RMBS was subject to two layers of securitization; firstly at the level where mortgages were pooled into RMBS and again when junior RMBS tranches were pooled into RMBS CDOs. This process grew subprime loan exposure, increased leverage, and created an opaque system where investors had limited insight into underlying exposures and risks. The layers of securitization also created operational complexity that may have hindered the recovery of the assets. In contrast, CLOs have a relatively simple waterfall structure based on exposure to a single corporation.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: IMF, Guggenheim 27

CLOs Have a More Reasonable Capital StructurePre-GFC RMBS securities were aggressively structured with significant leverage because originators and investors did not envision broad declines in housing prices. As a result RMBS structures had small junior and equity tranches of about 5% that did not provide appropriate support for more senior tranches as defaults rose. However, similar vintage CLOs had larger subordinated debt and equity tranches (typically about 30% of the capital structure pre-GFC) so senior debt investors had more safeguards against credit losses.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: DoubleLine 28

Pre-GFC RMBS Capital Structure Pre-GFC CLO Capital Structure

CLO Structure EvolutionCLO structures evolved following the GFC to fit enhanced rating agency methodologies and comply with new regulations. According to DoubleLine, post-GFC CLOs have better investor protections via lower structural leverage, higher credit enhancement, shorter reinvestment periods (which should allow for faster deleveraging), and more restricted collateral exposure (lower CCC and second lien threshold, must be entirely bank loans).


CLO Supply/Demand Dynamics


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Supply: Dominated by Big BanksCLO league tables indicate that issuance is led by large, sophisticated financial institutions including GSO, Carlyle, and Credit Suisse. Many issuers are private credit firms, credit arms of private equity institutions, or credit hedge funds. Many issuers are experienced credit managers that expanded their bank loan investing function into CLO management as that structure gained popularity.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Creditflux 31

Supply: CLO Quality DispersionInvestor appetite for yield and the reversal of risk-retention rules have allowed smaller and/or less experienced CLO managers to gain traction. However, the largest issuers tend to be more conservative, as seen by their lower exposure to CCC loans and lower defaults.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: JP Morgan 32

Demand: CLOs Have a Diverse Holder BaseThe CLO holder base is bifurcated between investor types based on their risk tolerance. The majority of the capital structure (senior debt rated AAA and AA) is held by banks and insurance companies. CLO equity, the riskiest part of the capital structure, is primarily held by investors with a high risk tolerance and long investment horizon such as hedge funds, credit funds, and CLO managers/risk retention vehicles.

In a stress case, CLOs are unlikely to become forced sellers of loans since they have locked up capital. However, open-ended funds present a potential risk given the asset/liability mismatch between their daily liquidity and the less liquid secondary market for CLOs. Mutual fund forced selling could pressure the CLO secondary market.


Senior Debt

Equity

Demand: Japan Concentrated Buyer of CLO AAAThere has been significant demand from banks for CLO exposure, but they are typically limited to the highest quality AAA-rated tranche. Japanese banks account for about 10% of the global CLO market according to an estimate by the Bank of England and US banks also hold about $90 billion in CLO exposure according to the Federal Reserve. UBS estimates that Japanese banks account for 50%-75% of AAA CLO demand. Of these, Norinchukin Bank is the largest CLO buyer with over $62 billion in exposure. Seeking to safeguard the banking system, in March 2019 the Japanese Financial Services Agency issued a law that will penalize Japanese banks who purchaseCLOs in which the issuers do not hold a portion of the deal risk. A slowdown in demand from Japanese buyers may widen AAA CLO spreads, curtail CLO issuance, and ultimately dent the bank loan market.

The CLO equity holder base is opaque, consisting mainly of hedge funds, credit investors, and the CLO managers (Citigroup estimates that about $11 billion is held in specific risk retention funds). The dispersed nature of the CLO equity holder base, which is the most exposed to losses, may help mitigate contagion risk from a potential decline in the corporate debt market.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Reuters 34

Appendix: Bank Loan Market Characteristics

Source: JP Morgan 35

JP Morgan Leveraged Loan Index Top Borrowers

Appendix: Bank Loan Fundamentals

Source: Shenkman Capital, IMF 36

Appendix: Bank Loan, RMBS & CLO Market Size

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: The Economist, Federal Reserve 37

Appendix: Bank Loan & CLO IssuanceUS CLOs account for 50% of the loan market today and will likely be $700 billion ($820 billion globally) or 52% of a $1.3 trillion loan market by the end of 2019, which is within the historical range since 2001 according to JP Morgan.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: JP Morgan, DoubleLine 38

Appendix: Bank Loan Historical Default & Recovery


Appendix: CLO Performance

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Anchorage Capital 40

Appendix: CLO Relative Value“While CLO debt spreads have tightened across the CLO capital structure on a year-to-date basis, they continue to be much wider as compared to this time in 2018 (see the table below). The estimated yields with respect to mezzanine CLO debt tranches compare favorably to most high yield bonds with the yield-to-worst on the Barclays High Yield Index having declined to 6.3%. We continue to prefer new issue CLO double-B debt supported by higher-quality underlying loan portfolios and with an estimated YTM of 9.0% or more. On the other hand, at this point in the credit cycle, we believe CLO debt investors need to be acutely aware of the increasing tail risk in certain CLO portfolios and be more defensive in terms of credit selection. According to Morgan Stanley research, 7.3% of US CLO 2.0 portfolio loans were trading below $90 in April (as compared to 7.2% in the prior month). In addition, 27.5% of US CLO 2.0 portfolio loans were trading at or above par in April (as compared to 2.8% in the prior month). In April, the median CLO 2.0 equity tranche NAV was roughly 57% (as compared to 47% in the prior month). We continue to believe that new issue CLO equity will be the most interesting opportunity in the CLO market during 2019. For a CLO equity investor, the ability to source long-term, low-cost CLO financing that is not subject to market value based margin calls is particularly valuable, especially this late in the credit cycle. To the extent an investor believes the credit cycle will turn during the next 2-3 years, we believe new issue CLO equity with a longer reinvestment period will be an attractive way to take advantage of the market volatility that will occur at that time.” – Greywolf Capital

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Greywolf Capital 41

Appendix: CLO Cash Flow


Appendix: Non-Agency RMBS Market


Appendix: Structural ProtectionsIn order to improve their credit ratings, RMBS used internal credit enhancements such as a subordination, overcollateralization, and reserve funds as well as external credit enhancements such as a third party financial guarantees. CLOs and RMBS both utilizeovercollateralization tests and interest coverage tests. A test failure is meant to turn off cash flows to junior investors to protect value for senior investors. However, in 2005 some RMBS structures began to use an aggressive pro rata waterfall that allocated losses across the capital structure rather than the sequential waterfall previously used. The sequential waterfall, which CLOs use, better segments investors based on risk tolerance.

CLO structures have also become more stringent following 2008. Market value CLOs, whose mark to market provision can triggerforced selling of loans in a down market, are no longer issued. Most loans are now held in traditional CLOs, which have locked up capital and cash exposure limits.

Athena Capital Advisors LLC Proprietary and Confidential. Not to be copied or distributed without express written permission.Please see important disclosures and disclaimers at the end of this presentation. Source: Deloitte 44

Disclosures and Disclaimers


Athena Capital Advisors LLC (“Athena”) prepared this document solely for the person to whom it has been given for informational and discussion purposes only. This document and the information contained herein are strictly confidential and may not be reproduced, distributed or communicated to any third party without the express written approval of Athena. Athena reserves the right at any time to amend or change the contents of this document without notice. The information and opinions herein reflect the views and opinions of Athena as of the date hereof and not as of any future date. All forecasts are speculative, subject to change at any time and may not come to pass due to economic and market conditions.

This document and the information contained shall not constitute an offer, solicitation or recommendation to sell or an offer to purchase any securities, investment products or investment advisory services. The material contained herein has not been based on a consideration of any individual client circumstances and is not investment advice, or should it be construed in any way as tax, accounting, legal or regulatory advice. An investment with Athena involves substantial risks and there can be no assurance that the investment objectives described herein will be achieved.Athena believes that the research used in this presentation is based on accurate sources (including but not limited to economic and market data from various government and private sources and reputable external databases), but we have not independently verified those sources, and we therefore do not guarantee their accuracy. The opinions, projections and estimates contained herein reflect the views of Athena only and should not be construed as absolute statements and are subject to change without notice.

In considering the performance information contained herein, recipients should bear in mind that past and present performance is not necessarily indicative of future results, nor does it ensure that investors will not incur a loss with respect to their investment. Current performance may be higher or lower than the performance data quoted. Certain performance numbers in this presentation may be unaudited, preliminary and based on estimates. Final reported and audited performance numbers may vary considerably from these estimates due to many factors. Estimated gross and net performance numbers could change materially as final performance figures and underlying investment costs and fees are determined and allocated. Certain information contained herein constitutes “forward-looking statements” which can be identified by the use of terms such as “may”, “will”, “should”, “seek”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue”, “target” or “believe” (or the negatives thereof) or other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results or actual performance may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making their investment decisions. No representation or warranty is made as to future performance or such forward-looking statements.

Benchmarks are shown for illustrative purposes only and are provided for the purpose of making general market data available as a point of reference only. Such benchmarks may not be available for direct investment, may be unmanaged, assume reinvestment of income, do not reflect the impact of any trading commissions and costs, management or performance fees and have limitations when used for comparison or other purposes because they, among other reasons, may have different trading strategy, volatility, credit, or other material characteristics (such as limitations on the number and types of securities or instruments). No representation is made that any benchmark or index is an appropriate measure for comparison.

Historical index performance results for all historical benchmark indices do not reflect the deduction of transaction and custodial charges, or the deduction of an investment manager fee, the incurrence of which would have the effect of decreasing indicated historical performance results. The historical performance results for all indices are provided exclusively for comparison purposes only, so as to provide general comparative information to assist in determining whether Athena’s performance meets, or continues to meet, your investment objective(s). Comparative indices may be more or less volatile than Athena portfolios. Athena performance results reflect the reinvestment of dividends and other account earnings, and are net of applicable account transaction charges. It should not be assumed that Athena account holdings will correspond directly to any such comparative benchmark index.

Any description of tax consequences set forth herein is not intended as a substitute for careful tax planning. Recipients of this material are advised to consult tax counsel for advice specifically related to any and all tax consequences of an investment made with or through Athena. The information provided herein is not intended to, nor does it specifically advise on, tax matters pertaining to federal, state, estate, local, foreign or other tax consequences of an investment. The recipient is solely responsible for all tax consequences with respect to any investment made with or through Athena.

Athena believes that the research used in this presentation is based on accurate sources (including but not limited to economic and market data from various government and private sources and reputable external databases), but we have not independently verified those sources, and we therefore do not guarantee their accuracy. The opinions, projections and estimates contained herein reflect the views of Athena only and should not be construed as absolute statements and are subject to change without notice.

The investment examples contained herein are for informational and illustrative purposes only and should not be construed as a guarantee of actual or future performance results. Individual investment results may vary considerably based on various factors such as fees, expenses and the timing of capital contributions. To see specific performance results, gross and net, please contact Athena.

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