Clark Capital Management Group

Clark Capital Management Group, Inc.1

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Clark Capital Management Group

Sean Clark, CFAChief Investment Officer

Clark Capital Management Group


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About Clark Capital

Philadelphia Based RIA$2.0 Billion in AUMFamily and Employee OwnedInstitutional Asset Management Firm11 Investment Professionals 5 CFAs on Staff Average 20+ Years Experience


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Modern Portfolio Theory

Dr. Harry Markowiz published “Portfolio Selection: The Efficient Diversification of Investments” in the Journal of Finance in 1952.

Markowtiz postulated that an “efficient frontier” shows that securities can be blended within portfolios to minimize risk at various levels of (expected) return.

Based upon 3 assumptions: Normally distributed variability of returns (Normal

Distribution) Markets follow a random walk pattern Diversification can be properly quantified by correlation


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Problems with Efficient Frontier

Efficient Frontier Is Based upon Historical Inputs That Are by Definition Not Stable: Returns Change Standard Deviations (risk) Change Correlation Change

You Need Stable Inputs to Create A Future Efficient Frontier to Manage Risk!


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“Any plan conceived in moderation, must fail when

circumstances are set in extremes.”

Prince Metternick


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nly Based on Normal (Bell Shaped) Distribution

Commute Time Minutes

90 80 70 60 50 40 30

Example for illustrative purposes only. The presenter did not track commute times.

Commute-Time Model


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35384144475053565962656871747780838689929598101

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Commute Time

Frequency

Theoretical (Normal Distribution)Actual Experience

Snow Model breaks down

Nice Weather Model Works

Example for illustrative purposes only. The presenter did not track commute times.

909 Commutesfrom 1/1/2006 to 12/31/2009


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January 1991 - March 2010

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cent

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of M

onth

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)

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5

10

15

20

25

Returns Range (%)

< -17 -17 to -15 -15 to -13 -13 to -11 -11 to -9 -9 to -7 -7 to -5 -5 to -3 -3 to -1 -1 to 1 1 to 3 3 to 5 5 to 7 7 to 9 9 to 11 > 11

S&P 500

S&P 500 Tail Risk


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Snow for Asset Classes

Source: PSN/Informa Investment Solutions

Monthly Returns for Asset Classes 1/98 to 3/09

MetricBarclay

AggregateML High

Yield S&P 500 REITSMSCI EAFE

MSCI Emerging Mkts.

DJ AIG Comm-odity

Mean Monthly Return 0.5 0.3 0.1 0.3 0.2 0.8 0.7Monthly Standard Deviation 1.1 2.8 4.7 6.4 5.0 7.6 5.9

100 Year Monthly Loss (Normal Distribution) -2.9 -8.4 -14.8 -19.8 -15.4 -23.0 -17.8

Worst 4 out of 135 Months1st Worst Month -3.4 -16.3 -16.8 -32.7 -20.2 -28.9 -29.92nd Worst Month -2.6 -8.4 -14.5 -24.7 -14.4 -27.4 -15.53rd Worst Month -2.4 -8.3 -10.9 -21.7 -12.4 -17.5 -12.64th Worst Month -1.8 -7.1 -10.6 -18.2 -10.7 -15.5 -9.0

Years between extreme monthly lossthat should occur based upon normal distribution

1st Worst Month 428 71,649,687

464 633,762

4,265 1,891 918,716

2nd Worst Month 37 97 79 1,742 53 820 293rd Worst Month 19 88 8 285 15 10 74th Worst Month 4 22 7 42 6 5 2


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Snow for Asset Classes


Monthly Returns for Asset Classes 1/98 to 3/09

Metric ML High Yield S&P 500

Mean Monthly Return 0.3 0.1Monthly Standard Deviation 2.8 4.7100 Year Monthly Loss (Normal Distribution) -8.4 -14.8

1st Worst Month -16.3 -16.82nd Worst Month -8.4 -14.53rd Worst Month -8.3 -10.94th Worst Month -7.1 -10.6

1st Worst Month 71,649,687 4642nd Worst Month 97 793rd Worst Month 88 84th Worst Month 22 7


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-20 -15 -10 -5 0 5 10 15

-30

-25

-20

-15

-10

-5

0

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20

9/08 + 10/08

10/08 + 11/08

8/98 + 9/98

8/01 + 9/01

12/08 + 1/09

Monthly Return + Next Month (Snow Tomorrow)

Mon

thly

Ret

urn

(Sno

w T

oday

)S&P 500 Index 1/98 to 12/09 Serial Correlation

Snow Today

Snow Tomorrow

Snow Today/Snow Tomorrow



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Negative Annual S&P Returns

Calendar Year

S&P 500 Index

Return

Probability of Event based on

Normal Distribution

1929 -8 111930 -25 1241931 -43 6,8291932 -8 101937 -35 9351940 -10 131941 -12 161946 -8 101953 -1 < 10-year event1957 -11 141962 -9 11

Calendar Year

S&P 500

Index Return

Probability of Event based on

Normal Distribution

1966 -10 131969 -8 111973 -15 241974 -26 1661977 -7 < 10-year event1981 -5 < 10-year event1990 -3 < 10-year event2000 -9 122001 -12 172002 -22 762008 -37 1,473???


Snow Today/Snow Tomorrow


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Source: Ned Davis Research, Inc – The Anatomy of Standard & Poor’s 500 Stock Index Declines 1/03/1928 to 6/29/2005

The Frequency of Market Declines

S&P 500 Declines

Occurences Per Year

Frequency Average

Probability of Decline Moving to Next Stage

-5% or more 3.4 Every 14 weeks 34%

-10% or more 1.1 Every Year 44%

-15% or more 0.5 Every 2 years 61%

-20% or more 0.3 Every 3 years N/A


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Correlation1/1998 to 10/2007 S&P 500

Barclay Aggregat

eML High

Yield REITSMSCI EAFE

MSCI Emerging Markets

DJ AIG Commodity

S&P 500 1.00 .18 .49 .41 .62 .58 -.02Barclay Aggregate 1.00 .28 .13 .06 -.05 .20

ML High Yield 1.00 .41 .36 .42 .01REITS 1.00 .28 .34 -.02

MSCI EAFE 1.00 .58 .05MSCI Emerging Markets 1.00 .11

DJ AIG Commodity 1.00Correlation10/2007 to

3/2009 S&P 500

Barclay Aggregat

eML High



DJ AIG Commodity

S&P 500 1.00 .38 .73 .83 .91 .79 .47Barclay Aggregate 1.00 .37 .34 .52 .40 .42

ML High Yield 1.00 .68 .76 .80 .61REITS 1.00 .72 .60 .39

MSCI EAFE 1.00 .94 .61MSCI Emerging Markets 1.00 .66

DJ AIG Commodity 1.00Source: PSN/Informa Investment Solutions

Normal vs. Extreme Conditions


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CorrelationIncrease %

S&P 500

Barclay Aggregat

eML High



DJ AIG Commodity

S&P 500 1 111% 49% 102% 47% 36% 4600%Barclay Aggregate 1 86% 323% 483% -420% 230%

ML High Yield 1 51% 128% 107% 2200%

REITS 1 143% 112% 6000%

MSCI EAFE 1 45% 760%

MSCI Emerging Markets 1 509%

DJ AIG Commodity 1

Percentage Increase in Correlation

1/1998 to 10/2007 compared to 10/2007 to 3/2009

Normal vs. Extreme Conditions



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Correlation of the S&P 500 vs. Other Asset Classes

Source: Ned Davis Research

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Monthly Data 1/31/1976 - 3/31/2010

Median = 0.024

Correlation of the S&P 500 vs. Other Asset Classes

76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Average of the 60-Month Correlation of Monthly Changes in theS&P 500 with the Monthly Changes of:

MSCI EAFE IndexMSCI Emerging Markets Index (starting 12/31/1992)

CRB IndexSpot Gold

Copper Perpetual Futures (starting 1/31/1984)10-Yr. T-Bond Yield3-Mo. T-Bill Yield

Euro (starting 4/30/1977)

10-0.14-0.12-0.10-0.08-0.06-0.04-0.020.000.020.040.060.080.100.120.140.160.180.200.220.240.260.280.300.320.340.360.380.400.420.440.460.48


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Modern Portfolio Theory’sCruel Joke

Good Times Bad Times

Low Correlation High Correlations

Low Volatility High Volatility

High Returns Low Returns

“Any plan conceived in moderation, must fail when

circumstances are set in extremes.” Prince Metternick


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What Is Your Plan?


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Investment Philosophy

Provide Superior Risk Adjusted Returns through a Disciplined Process Focused on Meaningful Diversification, Risk Management and Opportunistic Asset Allocation.


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Traditional Risk Management Tools

Fixed Income

Alternative Asset Classes

Tactical Management (forecasting)


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Innovative Risk Management Tools

Meaningful Diversification Significant alternative asset class

exposure through target allocations to specific commodities, currencies, precious metals and hedge strategies.

Opportunistic Core & Explore Asset Allocation

Core allocation for targeted beta exposure complimented by Explore allocations for targeted alpha opportunities.

Navigator Sentry Option Innovative institutional-level strategy

for portfolio protection that utilizes put options in an effort to prevent considerable portfolio losses due to severe market setbacks.


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Expanding the Efficient Frontier with Alternative

Asset ClassesAlternative Asset Classes serve as a powerful diversification agents in a portfolio and tend to result in lower portfolio volatility and improved risk-adjusted returns.


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Meaningful Diversification through Alternative Asset

Classes

Targeted Alternative ExposureCommoditiesCurrenciesReal Estate Hedge/Absolute Return StrategiesLong/Short OpportunitiesInverse StrategiesEquity and Fixed Income Special OpportunitiesSentry Strategy


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Navigator Sentry Option Innovative institutional-level

strategy for portfolio protection that utilizes put options in an effort to prevent considerable portfolio losses due to severe market setbacks.


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nlyCore & Explore


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What Is Core Structure?

Goal to Provide Stability in The Portfolio (Beta Exposure)Utilizes:

Institutional Separate Account Managers

Institutional Mutual Funds

Exchange Traded FundsCustomization

Active Core Passive Core


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What Is Explore Structure?

Goal to Provide Alpha - Excess ReturnConsists of ETFs Style ETFs – value/growth, small/mid/large cap

Sector ETFs – Energy, financials, healthcare, technology, etc

International ETFs – Europe, Asia, Latin America

Fixed income – US, international, municipal tax free, government securities, high yield, etc.

Alternative – commodities, real estate, currencies, options, hedge funds

ExploreAllocations


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Why Explore Structure?

Dynamic Quantitative Disciplined ProcessMajor Emphasis on Proven Relative Strength MethodologyUnemotional Actively Managed StrategyFlexibility is the key to AlphaMarket Direction Does Not MatterAvoid Areas of Disaster Financials, Home Builders, etc..


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Navigator Unified SolutionExplore Components

2009 2008 2 Year

Navigator U.S. Sector Explore 34.87 -39.67 -18.63

Navigator U.S. Style Explore 31.18 -35.50 -15.39

Navigator International Explore 43.11 -43.66 -19.37

Navigator Fixed Income Explore 41.32 4.14 47.17

Navigator Alternative 22.22 -19.39 -1.48S&P 500 with Dividends 26.45 -37.00 -20.34

Barclay Capital Governmentand Credit Bond Index 3.09 5.09 8.34

MSCI EAFE 31.63 -38.95 -19.64

Net of Fees. As of 12/31/2009

Navigator Unified Solutions results combine actual and hypothetical and do not represent individual client accounts. See important disclosure at the end of presentation.


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Why Core and Explore?

Multiple Methodologies to Work through All Market Environments FlexibilityBuilt in Opportunistic AllocationsTax-Aware StructureLower Tracking Error Possibility Less Unexpected Consequences


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How They Work Together


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Navigator Sentry Option Innovative institutional-level

strategy for portfolio protection that utilizes put options in an effort to prevent considerable portfolio losses due to severe market setbacks.


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Protective Put Hedge Strategy

S&P 500

S&P 500 Put

Option

Down Market

S&P 500

S&P 500 Put

Option

Up Market

Consistent Negative Correlation


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Protective Put Strategy


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Navigator Sentry Objectives

Reduce equity volatilityPrevent large portfolio losses through systematic portfolio put option protectionProvide consistent negative correlation in all market environmentsProvide systematic risk management without forecasting or market timing influenceProvide confidence in the expected outcome in all market environmentsProvide continuous protection from event driven declines (i.e. natural disaster, terrorist attacks)


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S&P 500 index puts9 to 18 months in duration5 to 10% out of the moneyConsistently applied to cover 100% of equity exposure in a portfolioTargeting 3 to 7% allocation over market cycle

Navigator Sentry Implementation


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Sentry Put Trades

Date Action Position Gain/Loss

02/06/08 SellBuy

June ’08 1325*Dec. ’08 1300 24.13%

06/27/08 SellBuy

Dec. ’08 1300Mar. ’09 1275 -13.50%

09/15/08 SellBuy

Mar. ’09 1275Dec. ’09 1200 13.73%

10/06/08 SellBuy

Dec. ’09 1200Dec. ’09 1100 98.21%

10/10/08SellBuy

Dec. ’09 1100Dec. ’09 900 48.32%

01/15/09 SellBuy

Dec. ’09 900Dec. ’09 800 25.72%

03/05/09 SellBuy

Dec. ’09 800June ’10 700 -0.001%

Cumulative Return 351.33%


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Level 5 with Sentry vs. 60/40

Since Inception Versus S&P 500

Portfolio Beta

Level 5 with Sentry .4960% S&P 500 /40% BCGC .58

What’s the cost of 40% in Bonds compared to 10% in Sentry?


Composite Active Core Portfolios. Net of Fees. As of 3/31/2010

*Inception Date 10/1/2000.

UpsideCapture

67.6

63.3

DownsideCapture

35.3

55.9


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Navigator Unified SolutionPortfolio Performance

2009 2008 2 Year

Level I with Sentry 19.59 -3.50 15.40

Level II with Sentry 16.91 -14.38 0.10

Level III with Sentry 19.75 -19.46 -3.55

Level IV with Sentry 19.83 -22.75 -7.43

Level V with Sentry 21.16 -23.45 -7.25

S&P 500 with Dividends 26.45 -37.00 -20.34





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1Year

3Year

5Year

SinceIncep.

StdDev* Beta* Alpha*

Level I with Sentry 22.76 6.36 6.07 8.37 7.74 0.00 6.03

Level II with Sentry 23.24 2.55 4.72 6.34 7.71 0.19 4.30

Level III with Sentry 27.01

1.81

5.01 6.35 9.98 0.49 4.81

Level IV with Sentry 27.20 0.73 4.51 6.32 11.06 0.53 4.94

Level V with Sentry 27.21 0.17 3.95 5.66 10.55 0.49 4.22

S&P 500 with Dividends 49.74

-4.17

1.90 -0.31 18.09 1.00 0.00





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1Year

3Year

5Year

SinceIncep.

StdDev* Beta* Alpha*

Level I with Sentry 22.76 6.36 6.07 8.37 7.74 0.00 6.03

Level II with Sentry 23.24 2.55 4.72 6.34 7.71 0.19 4.30

Level III with Sentry 27.01 1.81 5.01 6.35 9.98 0.49 4.81

Level IV with Sentry 27.20 0.73 4.51 6.32 11.06 0.53 4.94

Level V with Sentry 27.21 0.17 3.95 5.66 10.55 0.49 4.22

S&P 500 with Dividends 49.74

-4.17

1.90 -0.31 18.09 1.00 0.00





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Upside Capture

Downside Capture

SharpeRatio

Level I with Sentry 31.08 -26.95 0.77

Level II with Sentry 42.28 2.99 0.51

Level III with Sentry 72.06 35.04 0.40

Level IV with Sentry 76.48 39.58 0.36

Level V with Sentry 67.63 35.34 0.31

S&P 500 with dividends 100.00 100.00 -0.15





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Winning by Not Losing

Fund Name10/9/2007 to 12/31/2009

Approx %Gain Neededto Recapture

Loss

Oppenheimer Cap. Appr. (OPTFX) -24.18 32%T-Rowe Price Large-Cap Value (TRVLX) -19.23 24%American Funds New World (NEWFX) -13.22 15%American Gr. Fund of America (AGTHX) -18.53 23%

Level 3 with Sentry -1.12 1%

Level 4 with Sentry -4.80 5%

ETF Explore with Sentry -5.93 6%

S&P 500 Index -20.87 26%

Source: Morningstar for Funds. See Disclosure for CCMG Portfolios

Net of fees. Actual Performance results. See important disclosures at end of presentation.

10/9/2007 to 3/31/2010



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$1,789,300

$970,943

$500,000

$1,000,000

$1,500,000

$2,000,000

$2,500,000

10/1/00 3Q-01 3Q-02 3Q-03 3Q-04 3Q-05 3Q-06 3Q-07 3Q-08 3Q-09

14.19% gain/year for 5 years required for S&P 500 to catch up to the Sentry portfolio today

Navigator Unified Solutions Accumulation Phase

Avg. Annual Beta Std Dev

Level IV with Sentry 6.32% 0.53 11.06S&P 500 with Dividends -0.31% 1.00 18.09





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$914,788

$496,399

$250,000

$500,000

$750,000

$1,000,000

$1,250,000

$1,500,000

10/1/00 3Q-01 3Q-02 3Q-03 3Q-04 3Q-05 3Q-06 3Q-07 3Q-08 3Q-09

Navigator Unified Soultion Level IV withSentry with 6% Distribution

S&P 500 with 6% Distribution

15.81% gain/year for 5 years required for S&P

500 with 6% Distribution to catch up to the Sentry portfolio

today

Navigator Unified Solutions Distribution Phase

$535,755 Withdrawn

$330,573Withdrawn

Level IV with Sentry with 6% DistributionS&P 500 with Dividends with 6% Distribution





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Prospect Questions

What are you or your current advisor doing to

manage risk?How has that worked for

you?


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What Are Clients Thinking?

How can you help me prevent this from happening again?How can I recapture some of these losses without taking the full risk of equity exposure?


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What Are Advisors Thinking?

How can I get my clients/ prospects off the sidelines?

How can I protect my revenue stream against

future market downturns?


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DisclosureThe performance for the above Navigator Unified Solution Portfolios combines actual composite results with hypothetical results as described below. Actual Navigator Unified Solutions Portfolio performance is calculated using an asset weighted average performance of all actual, fully discretionary accounts under management within a specified Level, including those accounts no longer with the firm. All dividends and interest income is re-invested. Within the specified Level, account performance is calculated according to industry standards using the daily valuation methodology. A complete list and description of assets comprising the composites will be furnished upon request.

The hypothetical performance was calculated by compiling the actual performance of a static group of sub-advisors, mutual funds, and exchange traded funds in a target allocation for the period of 10/1/2000 through the below inception dates. Portfolio allocations were rebalanced annually to target allocation. In certain cases the advisor’s performance is both model and hypothetical. The time period commencing 10/01/00 has been selected by Clark Capital in its sole discretion as it is the earliest common date that data is available for the sub-advisors, mutual funds, exchange traded funds and which coincides with the advisor’s models. Performance results will vary for other periods.

The inception dates of Navigator Unified Portfolios Portfolio composites are as follows: 10/1/07 - Level III, Level III with Sentry, Level IV, Level IV with Sentry, and Level V; 12/31/07 - Level II and Level V with Sentry; 4/1/08 - Level I ; 7/1/08 - Level II Sentry

Hypothetical results do not represent actual trading in client accounts nor do they reflect client-specific activities such as contributions, withdrawals or restrictions. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, such results may not reflect the impact that material economic and market factors might have had if accounts had actually been managed by Clark Capital during the entire period portrayed. Neither past actual nor hypothetical performance guarantees future results. Clients should not rely solely on this performance or any other performance illustrations when making investment decisions. The Sentry Strategy allocation cannot guarantee against market loss, but has the potential to limit risk. It is possible that your investment, when redeemed, may be less than the original amount invested. Actual client results may differ materially.

S&P 500 index performance was obtained from Bloomberg. It is not possible to make a direct investment in any particular index. Index returns do not reflect any fee deductions and include the re-investment of dividends. The S&P 500 is an unmanaged market capitalization weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. It represents approximately 75% of the U.S. equities market.

Performance data for the portfolios reflect the maximum Investment Advisory Fee from the below table and the maximum Referring Investment Consultant Fee of 1.25%, debited quarterly. Actual client fees may be lower than fees used in this presentation. All dividends and interest income is re-invested. The Referring Investment Consultant can charge between 0% and 1.25%. If a lower Referring Investment Consultant Fee were reflected in the performance data, returns would be higher. Actual fees also may differ from the fees used in this presentation depending upon account size, investments and agreement with client. See Clark Capital’s Schedule H for Navigator Unified Solutions for a full description of management fees. See Clark Capital's ADV Schedule H for additional information about management fees.

Documents

Clark Capital Management Group