1. An Evolutionary Money Management System
Introducing
EVO
An Evolutionary Money Management System
Potomac Advisors Inc.
Presented by Rich Paul

2. Today’s Agenda 1 2 Who I am, What I do & How I do it My performance
Hello!
Today’s Agenda
Who I am, What I do & How I do it 1
30-years of registered, investment advisory experience. 2
My performance
GIPS compliant, and GIPS and Theta Research verified track record.

3. Rich Paul Career Highlights: EVO1 Historical Performance: 21.86%
INTRODUCING
Career Highlights:
25 year tenure as an electrical engineer/weapons system analyst.
30 year tenure as a registered investment advisor.
Founder of Potomac Fund Management, CEO from
Co-founding member of NAAIM - authored NAAIM’s first performance measurement standards while serving as Chairman of the committee.
Co-authored landmark JPM article: “Market Timing Works, Where it Matters Most… In the Real World.”
EVO1 Historical Performance:
21.86%
3 yr
$1000M
7 yr
18.55%
$1000M
10 yr
18.51%
Inception
17.25%
performance calculations from June 1, 2002 through July 31st, (gross - not including advisory fees)

4. ev·o·lu·tion-ary (ĕv′ə-lo͞o′shə-nĕr′ē): A gradual process in which
ABOUT US
ev·o·lu·tion-ary  (ĕv′ə-lo͞o′shə-nĕr′ē):
A gradual process in which
something changes into a different and usually
more complex or better form.
EVO:
AN EVOLUTIONARY MONEY MANAGEMENT SYSTEM

5. “Academic research indicates that
ABOUT US
“Academic research indicates that
when multiple trading systems are aggregated the noise and errors will tend to diversify away, while the signal remains,
and is stronger.”
THE KEY
TO EVO’S STRATEGY

6. How signals are created
ABOUT EVO
How signals are created
EVO is a mechanical system, by which all signals are generated based on algorithmic rules using technical analysis. This eliminates all subjective biases and emotion from trading decisions.
■ Systems divided into long-term filters & short-term triggers
■Original composite of eight trading systems left many missed opportunities
■Added or modified systems to enhance performance and/or reduce risk
■Currently, EVO has over 20 trading systems
Validated Combinations are included in a Single EVO Composite
Select from a Universe of
120+ Individual Trading Systems
New Combinations
Continually Evaluated for Inclusion
Creates Thousands of Combinations

7. ABOUT EVO
Evolved from a composite of 8 to over 20+ multiple trading systems
Trading systems are divided into long-term filters & short-term triggers.
Buy / Sell / Short / Hold decisions plus protective stops
EVO 1 trades are executed in Rydex S&P 500 index funds
Long Positions: Rydex Nova Fund, an S&P X Leveraged mutual fund
Short Positons: Rydex Inverse S&P 500 Fund = Inverse 1.0X S&P 500:
Trades ~20 round trips per year (1 RT = 1 buy & 1 sell. Projection is based on current model)
“ All In,” i.e., 100% invested on each trade
EVO’S
SYSTEM
PROFILE

8. Performance “a posse ad esse”

9. =
ABOUT EVO
EVO’s evolution: June 2002 – March 2015
THE ORIGINAL EVO1
EVO1
17.30%
-26.20%
5.40%
As EVO evolved from 8 to 18 systems, we see performance improve with little change to risk & volatility.
Actual Results
By using forward-testing, we can see how the original 8 system would have performed if never changed. VS
Forward-tested
13.22%
ANNUALIZED
RATE OF
RETURN
-23.90%
MAX DRAWDOWN
6.20%
ULCER INDEX

10. 14+ Year Performance Results
June 1, 2002 through July 31, (gross of fees)
Metric
EVO1
S&P 500
% of Time Invested Long
51.1%
100%
% of Time Invested Short
0.4%
N/A
# Winning Trades 90
# Losing Trades 57
% of Winning Trades
61.2%
Average Gain of Winning Trades
4.07%
Average Loss of of Losing Trades
-2.33%
Ratio Avg. Winning Trade to Avg. Losing Trade
1.75

11. Historical Performance
June 1, 2002 through July 31, (gross of fees)
Calendar Year Returns (* = partial year)
Summary Statistics
Metric
EVO1
S&P 500
Annualized Rate of Return
17.25%
7.31%
Cumulative Return
854%
172%
Standard Deviation (mo.)
4.14%
4.20%
Loss Standard Deviation (mo.)
2.81%
3.71%
Sortino Ratio RF (Citi 3 mo. TB)
1.93
0.58
Calmar Ratio
0.72
0.14
Maximum Drawdown
-23.9%
-51.0%
Up Capture vs. Market
89.8%
100%
Down Capture vs. Market
37.0%
Alpha Vs. Market
13.9% 0%
Beta vs. Market
0.39
1.00
R-Squared vs. Market
0.15
Year
EVO1
S&P500
+ / -
YTD
10.10%
7.66%
+2.44%
2015
12.18%
1.38%
+10.80%
2014
23.61%
13.69%
+9.92%
2013
50.90%
32.39%
+18.51%
2012
24.78%
16.00%
+8.78%
2011
5.24%
2.11%
+3.13%
2010
-0.08%
15.06%
-15.14%
2009
20.05%
26.46%
-6.41%
2008
19.88%
-37.00%
+56.88%
2007
19.17%
5.49%
+13.68%
2006
15.59%
15.79%
-0.20%
2005
-1.04%
4.91%
-5.95%
2004
19.10%
10.88%
+8.22%
2003
35.49%
28.68%
+6.81%
2002*
-0.34%
-16.69%
+16.35%

12. Growth of a Hypothetical $100,000 Investment
YOUR MONEY
Growth of a Hypothetical $100,000 Investment

13. REAL-TIME PERFORMANCE; STELAR RESULTS
Consistent performance, nearly positive absolute returns
Maximum calendar year loss only -1%
Strategy was up +20% in 2008: S&P down -37%
Program outperformed S&P 500 TR by 10% with half the risk
System evolution produced continuously improving results
Actual results better than the if original composite were used
Current model projects better than the actual results (based on backtests)
Over a recent 10-year period, the program beat every single actively managed mutual fund, ETF, and all but one index (on a gross of fees basis)
292 signals (146 round trips) over 14 years demonstrate statistically significant results
PEROMANCE
REAL-TIME
PERFORMANCE;
STELAR RESULTS

14. The EVO competitive advantage
CLOSING THOUGHTS
The EVO competitive advantage
Real-time
Superior performance, beats on risk and return. 6
Stellar 1
All results are actual. No hypotheticals or back-tested results.
EVO went live May 31, 2002, over 14 years ago. 2
History 7
Consistency
The only strategy ranked in the top four in performance in all seven time periods from one to 10 years as tracked by Theta Research. (July 2016)
Ranking Highlights:
Three #1 rankings
Three #2 rankings
Ranked #1 or #2 on a risk adjusted basis for all time periods from three to 10 years. (Theta’s Ulcers Performance Index)
GIPS verified track record through June Theta Research provides ongoing verification. 3
Verified

15. Potomac Advisors Inc. REGISTERED INVESTMENT ADVISOR
Thank You!
The EVO Strategy is offered through
Potomac Advisors Inc. REGISTERED INVESTMENT ADVISOR

16. GIPS VERIFICATION

18. Potomac Advisors Performance Disclosure
EVO composite performance is based on actual accounts and comprises all accounts in the composite. Composite returns are time-weighted total returns that reflect the reinvestment of dividends and capital gain distributions. Composite returns are net of the underlying mutual fund management fees and other fund (administrative) expenses. No redemption or 12(b)1 (fund marketing) fees were charged for these composites. Composite returns are shown gross of fees, thus no adjustment for fees has been made, neither for income taxes. Performance for other composites in other investment programs offered may differ materially (more or less) from the performance of this composite. The volatility of the market indices may materially differ (more or less) from that of this composite. Benchmark returns such as the S&P 500 are total returns and reflect the reinvestment of dividends. It should not be assumed that future recommendations will be profitable or equal past performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when sold or redeemed, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. This material is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any security. Such offers can only be made where lawful under applicable law. 
This presentation is for use by investment professionals only. It is not intended to be distributed to the public and such use is prohibited. It is intended to demonstrate to advisers the performance of the manager, not the actual performance after fees which may different for licensees of the EVO system.