This chart illustrates the amount of relative risk typically associated with a variety of asset classes. Note the
overlap areas where certain stocks assume lower risk than some bonds.
•CLS Allocation Changes
•Changes in Asset Class Risk
•Consistent Risk Level Associated with CLS Portfolio
•CLS Performance Versus Our Benchmark
The CLS Portfolio Allocation and performance represents the allocation and performance of model portfolios managed identically to the actual profiles of clients in the managed accounts
participants’ program with a risk budget of 83 to 87. The results assume reinvestment of interest, dividend and capital gains distributions. The returns are calculated gross of performance fees
and then modified to reflect the maximum quarterly fee a client would pay (0.375%). Actual account holdings and performance for individual clients may vary. Past performance is not indicative
of future results. Investment in mutual funds and variable annuities are not guaranteed and will fluctuate, so that when redeemed, may be worth more or less than their original cost.
Benchmark Return Composition: 75% S&P 500 Index / 25% Lehman 1-5 Year Government Credit Index. The Standard & Poor’s 500 Index is a market-capitalization-weighted index of 500
widely held stocks often used as a proxy for the stock market. The returns presented for the S&P 500 Index are total returns, including the reinvestment of dividends each month. The Lehman
1-5 Year Government Credit Index represents a combination of the Government and Corporate Bond indices for bonds with maturities between one and five years. The returns for the index
are total returns, which include reinvestment of dividends. The volatility of the indices may be materially different from the individual performance attained by a specific investor. In addition,
portfolio holdings may differ significantly from the securities that comprise the indices. The indices have not been selected to represent an appropriate benchmark to compare an investor’s
performance, but rather are disclosed to allow for comparison of the investor’s performance to that of certain well-known and widely recognized indices. You cannot invest directly in an index.
In February 2003, CLS’ proprietary funds became available in the Nationwide Resource program. At that time, CLS began to offer a Customized Portfolio Management program, CPM, in which
client accounts hold 65%-75% CLS proprietary funds, and have the remainder invested in nonproprietary funds. CLS continues to offer the Individualized Account Management program, IAM,
within the Nationwide Resource Program, consisting entirely of non-proprietary funds. CLS’ investment methodology and philosophy remain consistent in both programs. Beginning in the
second quarter of 2003, CLS Nationwide Resource performance numbers are calculated with a combination of CPM and IAM performance, weighted by using a ratio based on the assets
under management in each program at the end of each calendar quarter.
The definitions of asset classes noted in the CLS Allocations are as follows: Large-Cap Growth - funds that consist primarily of common stocks or related securities of larger companies with
the objective of long-term growth through capital appreciation. Large-Cap Value - funds that invest in larger companies that appear to be overlooked or out of favor with the objective of capital
appreciation with some income. Small/Mid-Cap Growth – funds that invest in companies with a market capitalization of between $300 million and $10 billion and reinvest their earnings into
expansion, acquisitions, and/or research and development. The funds’ objective is capital appreciation. Small/Mid-Cap Value – funds that invest in companies with a market capitalization of
between $300 million and $10 billion and reinvest their earnings into expansion, acquisitions, and/or research and development. The funds’ objective is capital appreciation with some income.
International - seeks capital appreciation by investing heavily in foreign equity securities; US stocks may or may not be held. Aggressive International - seeks capital appreciation by investing
primarily in equity securities issued in emerging markets worldwide and/or small companies worldwide. The majority of the dollars in these funds are in foreign securities. Long-Term to
Intermediate Bonds – bonds that seek income by investing in a blend of government and/or corporate securities with an average maturity of generally more than 2 years. Short-Term Bonds
and Cash – bonds that seek income by investing in a blend of government and/or corporate securities with an average maturity of generally less than 3 years or assets that can be converted
into cash immediately. High-Yield Bonds - seek income by generally investing 80% or more of its assets in bonds rated below BBB. High-yield bond funds function neither quite like taxable
bond funds nor like equity funds.
The risk associated with each asset class on the “Asset Class Risk” charts is the risk of the asset class after adjustment for CLS proprietary risk indicators relative to the five-year volatility of
the S&P 500. The indices on the chart are as follows: Barra Large-Cap Growth – represents the universe of large capitalization companies in the US equity market. This index targets for
inclusion 300 companies. Barra Large Cap-Value - represents the universe of large capitalization companies in the US equity market. This index targets for inclusion 300 companies. CSFB
High Yield - designed to mirror the investible universe of the US-denominated high-yield debt market. Lehman Brothers Aggregate Bond - a broad representation of the investment-grade
fixed income market in the US including government and corporate debt securities, mortgage- and asset-backed securities, and international US dollar denominated bonds. MSCI EAFE –
free-float-adjusted market-capitalization index that is designed to measure developed market equity performance, excluding the US and Canada. Standard and Poor’s 500 - The S&P 500
Index is an unmanaged composite of 500 large-capitalization companies. Wilshire REIT – designed to provide measures of real estate securities that serve as proxies for direct real estate
investing. Small/Mid Value - Russell Midcap® Value Index measures the performance of Russell Midcap companies with lower price-to-book ratios and lower forecasted growth values. The
stocks are also members of the Russell 1000 Value index. Russell 2000® Value Index - measures the performance of the 2,000 smallest companies in the Russell 3000 Index with lower
price-to-book ratios and lower forecasted growth values. MSCI Emerging Markets Index – a free float-adjusted market capitalization index that is designed to measure equity market
performance in the global emerging markets. 3 Month T-Bill – a short-term debt obligation backed by the U.S. government with a maturity of 3 months. Small/Mid Growth – Russell 2000
Growth -The Russell 2000 Growth Index offers investors access to the small-cap growth segment of the U.S. equity universe. The Russell 2000 Growth is constructed to provide a
comprehensive and unbiased barometer of the small-cap growth market. Based on ongoing empirical research of investment manager behavior, the methodology used to determine growth
probability approximates the aggregate small-cap growth manager's opportunity set. Russell Mid Cap Growth - e Fund invests primarily in medium sized companies such as those that
comprise the S&P Mid-Cap 400 Index. Typically, the Fund will hold 30 to 50 stocks issued by what are believed to be among the fastest growing corporations in America as measured by
growth of revenue.
On April 10, 2003, Clarke Lanzen Skalla Investment Firm, Inc. changed its form of organization from a corporation to a limited liability company. It is now known as CLS Investment Firm, LLC.
CLS Investment Firm, LLC relies on the performance data of its predecessor. Portfolio Inception Date – 12/31/01