Risk-Based Portfolios

Navigator Fixed Income

For the fourth quarter of 2014 the Navigator Fixed Income portfolio gained 0.08% (net of fees*) compared to a 0.89% gain for the Barclay’s Capital Intermediate Government and Credit Index. The portfolio continues to emphasize credit risk over interest rate risk, and in 2014 that emphasis left the fund trailing its benchmark. High quality government bonds outperformed across the globe as deflation in Europe and Japan and massive drops in commodity prices drove interest rates to very low levels. More than a few European nations saw negative short-term interest rates. In aggregate, the taxable fixed income core portfolio was slightly lower quality than its benchmark, with a composite credit rating of A+ versus AA for its benchmark. The portfolio was underweight high quality and U.S. Treasuries and overweight non-rated and BBB debt. As 10-year Treasury yields have fallen below 2%, we continue to believe that the long-term risk-reward relationship for U.S. Treasury investors is unattractive. Investors now must assess the risk of a proxy for the 10-year Treasury, the iShares Barclays 7-10 Year Treasury ETF (IEF), that has a yield of below 2%, but a three-year standard deviation of 5.0% and a 10-year standard deviation of 6.4%. We feel that an investment with volatility that is two-and-a-half or three times greater than potential return over the long-term is disproportionately risky, and thus we continue to avoid having too much Treasury bond exposure. The portfolio’s detractors, Navigator Duration Neutral Bond Fund (NDNIX) and the Legg Mason Western Asset Total Return Unconstrained Bond Fund (WAARX), were both avoiding interest rate risk. The portfolio’s top contributors were BlackRock U.S. Mortgage Portfolio (MSUMX) and the Loomis Sayles Investment Grade Bond Fund (LSIIX).

Navigator Capital Preservation with Sentry

For the fourth quarter of 2014 the Navigator Capital Preservation with Sentry gained 0.28% (net of fees*) compared to a 0.82% return for the Dow Jones Conservative Portfolio Index. The tactical fixed income portion of the portfolio exited high yield bonds for most of the quarter and was cautious towards credit in general. The core fixed income portion of the portfolio continues to favor corporate bonds and spread contraction plays in general; while the strategy experienced short-term weakness, we continue to believe in its risk-reward ratio longer term. Within the alternative sphere we underweighted commodities and focused on large-cap equity and credit spread narrowing plays. In the portfolio’s core equity portion, small cap stocks experienced a solid rebound, while international equities continue to lag due to weakness in Europe and a soaring dollar.

Looking forward into 2015, our strategy and tactics towards managing volatility changed during the fourth quarter, and we believe for the better. The core of our protection strategy will be using S&P 500 put spreads, usually putting on spread trades that are 2% and 7% or 3% and 8% below the S&P 500’s price level at the time of execution. By both owning puts and then writing puts at a lower level, we are able to greatly reduce the cost of equity portfolio protection During the fourth quarter, we then moved in and out of these put spread trades, attempting to cash in on what are most often fleeting gains in volatility. Our policy in this section of the portfolio continues to be at all times to maintain a core protective position for client assets, and we intend to use put spreads as this protective vehicle going forward. We continue to be mildly bullish on U.S. markets over the intermediate to longer term and would anticipate maintaining a normal, modest hedge, while maintaining a focus on lowering the costs of that hedge.

Navigator Conservative Growth with Sentry

For the fourth quarter of 2014, the Navigator Conservative Growth with Sentry returned 1.11% (net of fees*) compared to a 1.30% return for the Dow Jones Moderately Conservative Portfolio Index. The tactical fixed income portion of the portfolio exited high yield bonds for most of the quarter and was cautious towards credit in general. The core fixed income portion of the portfolio continues to favor corporate bonds and spread contraction plays in general; while the strategy experienced short-term weakness, we continue to believe in its risk-reward ratio longer term. Within U.S. equity styles, the portfolio focused on large cap and growth stocks. Within U.S. equity sectors, Health Care and Technology were substantial overweights. We avoided energy stocks amidst an oil price collapse. Among international equities, the portfolio avoided Europe and focused on China, India, and the U.S.

Looking forward into 2015, our strategy and tactics towards managing volatility changed during the fourth quarter, and we believe for the better. The core of our protection strategy will be using S&P 500 put spreads, usually putting on spread trades that are 2% and 7% or 3% and 8% below the S&P 500’s price level at the time of execution. By both owning puts and then writing puts at a lower level, we are able to greatly reduce the cost of equity portfolio protection During the fourth quarter we then moved in and out of these put spread trades, attempting to cash in on what are most often fleeting gains in volatility. Our policy in this section of the portfolio continues to be at all times to maintain a core protective position for client assets, and we intend to use put spreads as this protective vehicle going forward. We continue to be mildly bullish on U.S. markets over the intermediate to longer-term and would anticipate maintaining a normal, modest hedge, while maintaining a focus on lowering the costs of that hedge.

Navigator Moderate Growth with Sentry

For the fourth quarter of 2014 the Navigator Moderate Growth with Sentry returned 1.73% (net of fees*) compared to a 1.77% return for the Dow Jones Moderate Portfolio Index. The core equity portion of the portfolio enjoyed strong performance from high quality and lower volatility, dividend-oriented stocks, while small cap stocks also rebounded with a strong quarter. International equities and mid cap value stocks were laggards. Relative strength analysis drives the tactical equity portion of the portfolio. Within U.S. equity styles, the portfolio focused on large cap and growth stocks. Within U.S. equity sectors, Health Care and Technology were substantial overweights. We avoided energy stocks amidst an oil price collapse. Among international equities, the portfolio avoided Europe and focused on China, India, and the U.S.

Looking forward into 2015, our strategy and tactics towards managing volatility changed during the fourth quarter, and we believe for the better. The core of our protection strategy will be using S&P 500 put spreads, usually putting on spread trades that are 2% and 7% or 3% and 8% below the S&P 500’s price level at the time of execution. By both owning puts and then writing puts at a lower level, we are able to greatly reduce the cost of equity portfolio protection During the quarter we then moved in and out of these put spread trades, attempting to cash in on what are most often fleeting gains in volatility. Our policy in this section of the portfolio continues to be at all times to maintain a core protective position for client assets, and we intend to use put spreads as this protective vehicle going forward. We continue to be mildly bullish on U.S. markets over the intermediate to longer term and would anticipate maintaining a normal, modest hedge, while maintaining a focus on lowering the costs of that hedge.

Navigator Growth

For the fourth quarter of 2014 the Navigator Growth portfolio returned 1.37% (net of fees*) compared to a 2.25% return for the Dow Jones Moderately Aggressive Portfolio Index. The core equity portion of the portfolio enjoyed strong performance from high quality and lower volatility, dividend-oriented stocks, while small cap stocks also rebounded with a strong quarter. International equities and mid cap value stocks were laggards. Relative strength analysis drives the tactical equity portion of the portfolio. Within U.S. equity styles, the portfolio focused on large cap and growth stocks. Within U.S. equity sectors, Health Care and Technology were substantial overweights. We avoided energy stocks amid an oil price collapse. Among international equities, the portfolio avoided Europe and focused on China, India, and the U.S.

Looking forward into 2015, we continue to expect U.S. markets to follow an upward path, and volatility internationally and among currencies will remain major stories. We continue to note that it has been since 2011 that markets have endured a 10% correction. However, this long period of low volatility in the markets does not mean a correction is imminent. Either way, we would view a correction during 2015 as an opportunity to add exposure to risk assets. While we are constantly watchful for deteriorating conditions and are ready to take a more defensive stance, we remain cautiously optimistic about the next few months.

Navigator Aggressive Growth

For the fourth quarter of 2014 the Navigator Aggressive Growth portfolio returned 1.84% (net of fees*) compared to a 2.73% return for the Dow Jones Aggressive Global Index. The core equity portion of the portfolio enjoyed strong performance from high quality and lower volatility, dividend-oriented stocks, while small cap stocks also rebounded with a strong quarter. International equities and mid cap value stocks were laggards. Relative strength analysis drives the tactical equity portion of the portfolio. Within U.S. equity styles, the portfolio focused on large cap and growth stocks. Within U.S. equity sectors, Health Care and Technology were substantial overweights. We avoided energy stocks amidst an oil price collapse. Among international equities, the portfolio avoided Europe and focused on China, India, and the U.S.

Looking forward into 2015, we continue to expect U.S. markets to follow an upward path, and volatility internationally and among currencies to remain major stories. We continue to note that is has been since 2011 that markets have endured a 10% correction. However, this long period of low volatility in the markets does not mean a correction is imminent. Either way, we would view a correction during 2015 as an opportunity to add exposure to risk assets. While we are constantly watchful for deteriorating conditions and are ready to take a more defensive stance, we remain cautiously optimistic about the next few months.

Strategist Portfolios

Navigator Fixed Income Total Return

For the fourth quarter of 2014, the Navigator Fixed Income Total Return portfolio returned -2.26% (net of fees*) compared to a -1.00% return for the Barclays U.S. Corporate High Yield Index. Weakness in the fixed income credit markets that began to manifest in the third quarter continued into the fourth quarter. On October 10th the Fixed Income Total Return (FITR) model became fully defensive, and the portfolio has taken a generally defensive stance since then amidst some increased market volatility. Overall, we feel the defensive stance has served investors well as two-thirds of the portfolio has been in U.S. Treasuries or cash since October. Since our exit of high yield bonds on October 10th, high yield prices have continued to weaken amid volatility, largely due to the collapse in oil prices and fears about the fiscal capacity of energy companies. The portfolio took an overall cautious stance because it never saw enough sustained high yield price strength, and thus we watched largely from the sidelines. However, one-third of the portfolio did alternate between U.S. Treasuries and high yield bonds, moving into U.S. Treasuries and then back to high yield bonds twice during the quarter. Certainly our portfolio team was concerned with the FITR model struggling with volatility during the fourth quarter, moving a portion of the portfolio in and out of high yield more than has been its usual pattern. We were reassured, however, that the portfolio remained at least two-thirds out of the high yield bonds for most of the quarter during a time when volatility was elevated. The primary goal of the Fixed Income Total Return model has always been to capture and/or avoid large moves in relative strength between high yield bonds, U.S. Treasuries, and cash. A generally defensive stance during the quarter certainly appears justified, and thus we believe that our model is successfully fulfilling its mission.

Navigator Global Equity ETF

For the fourth quarter of 2014 the Navigator Global Equity ETF portfolio returned 1.75% (net of fees*) compared to a 1.01% return for the MSCI World Index. The portfolio uses relative strength analysis to allocate to equities within the U.S. style, U.S. sector, and international equity spheres. Within U.S. equity styles, the portfolio maintained a focus on large cap and growth stocks, along with a minimum volatility ETF. Very few sector ETFs could beat the S&P 500, forcing us to allocate to the S&P 500 itself in substantial size during the quarter. Health Care and Technology remained the large sector allocations. The portfolio entirely avoided the damage done to energy, as it was pummeled by a collapse in oil prices. Among international equities, our focus has shifted away from Europe and towards both the U.S. and emerging markets, both of which display relative strength. China, India, and the U.S. were the largest country allocations.

High Dividend Equity Portfolio

Market Milestones
In 2014 investors benefited from defensive market attributes such as dividends, high quality and lower volatility, which are characteristics of the High Dividend Equity portfolio. There were several market milestones starting with the S&P 500 Index which posted its third consecutive year of double digit gains. The last time the S&P 500 increased over 10% for more than three years in a row was during the five-year rally from 1995-1999. Additionally, for the first time in its 118 year history, the Dow Jones Industrial Average broke through 18,000, closing only slightly lower for the year at 17,823. Persistent low bond yields continued to fuel dividend-paying stocks producing the first year since 1998 that long term Treasuries (+29.38%) and the S&P 500 (+13.69%) both rose by at least 10%. When rates begin to rise there may be short term volatility on the highest yielding stocks in sectors such as Utilities and REITs. Our focus among large cap stocks will continue to emphasize long-term earnings per share growth and dividend growth which should experience continued strength into 2015.

Sectors
In the fourth quarter, Utilities posted the highest return moving up +12.22% — the opposite of energy which was the lowest, down -11.26%. The Staple, Healthcare, Financial and Industrial sectors increased +6 to 8% while the lowest sector returns were in Energy, Materials, Telecommunications and Technology ranging from -11.26% to +4.86%. In the High Dividend Equity portfolio some of the strongest returns for the year were Microsoft at +27.54%, Intel +44.30% and Home Depot +30.25 versus the lowest returns of Chevron -10.1%, ConocoPhillips -2.25% and LyondellBasell -1.11%.

HDE

Source: Ned Davis Research

Going forward, sectors that benefit from a rising dollar, have strong earnings per share growth and hold high cash positions such as Technology, Healthcare and Staples, may continue to perform well. After having the worst year since 2008, large cap well-diversified energy stocks with strong balance sheets and global diversification could present an excellent dividend investment opportunity once the sector stabilizes.

Sources: FactSet, McGraw Hill Financial, Ned Davis.

Past performance is not indicative of future results. This is not a recommendation to buy or sell a particular security. Please see attached disclosures.

*The net performance shown is based on the CL 5 shares.  Your investment may have higher or lower fees than the CL 5 shares.  Please contact your representative for additional information about the performance of other classes of shares available for investment.

The opinions expressed are those of the Clark Capital Management Group Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. There are no guarantee of the future performance of any Clark Capital Investments portfolio. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, other investments or to adopt any investment strategy or strategies. For educational use only. This information is not intended to serve as investment advice. This material is not intended to be relied upon as a forecast or research. The Investment or strategy discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Past performance does not guarantee future results.

The Dow Jones Industrial Average is a stock market index that shows how 30 large publicly owned companies based in the U.S. have traded during a standard trading session in the stock market.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performers of developed markets outside the U.S. and Canada.

The MSCI Emerging Markets Index is a freefloat-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.

The Barclays U.S. Government and Credit Bond Index measures the performance of U.S. dollar denominated U.S. Treasuries, government-related, and investment grade U.S. corporate securities that have a remaining maturity of greater than 1 year. In addition, the securities have $250 million or more of outstanding face value, and must be fixed rate and non-convertible.

The Barclays U.S. Corporate High-Yield Index covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below.

The Dow Jones Aggressive Portfolio Index measures aggressive stocks, bonds, and cash which are represented by multiple subindexes and is quoted in U.S. dollars.

The Dow Jones Moderately Aggressive Portfolio Index measures moderately aggressive stocks, bonds, and cash which are represented by multiple subindexes and is quoted in U.S. dollars.

The Dow Jones Moderate Portfolio Index measures stocks with moderate risk, bonds, and cash which are represented by multiple subindexes and is quoted in U.S. dollars.

The Dow Jones Moderately Conservative Portfolio Index measures moderately conservative stocks, bonds, and cash which are represented by multiple subindexes and is quoted in U.S. dollars.

The Dow Jones Conservative Portfolio Index measures conservative stocks, bonds, and cash which are represented by multiple subindexes and is quoted in U.S. dollars.

MSCI World Index measures large and mid cap representation across 23 developed markets countries and covers approximately 85% of the free float-adjusted market capitalization in each country.

Index returns include the reinvestment of income and dividends. The returns for these unmanaged indexes do not include any transaction costs, management fees or other costs. It is not possible to make an investment directly in any index.

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For each separate account with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a separate account’s monthly performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of separate accounts in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The Overall Morningstar Rating for a separate account is derived from a weighted average of the performance figures associated with its three-, five- and ten-year Morningstar Rating metrics.

The relative strength measure is based on historical information and should not be considered a guaranteed prediction of market activity. It is one of many indicators that may be used to analyze market data for investing purposes. The relative strength measure has certain limitations such as the calculation results being impacted by an extreme change in a security price.

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Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. Not every client’s account will have these exact characteristics. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment.

Clark Capital Management Group, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security, sector or industry. There is no assurance that any securities, sectors or industries discussed herein will be included in an account’s portfolio. Asset allocation will vary and the samples shown may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices and which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk. The S&P 500 measures the performance of the 500 leading companies in leading industries of the U.S. economy, capturing 75% of U.S. equities. The Barclays Capital U.S. Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds, and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreign bonds traded in U.S. The Barclays Capital Aggregate Bond Index is an intermediate term index.

The volatility (beta) of a client’s portfolio may be greater or less than its respective benchmark. It is not possible to invest in these indices.

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CCM-676

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