Founded in 1993 by Dr. James Breech, utilizing the discipline of - PowerPoint PPT Presentation

� Founded in 1993 by Dr. James Breech, utilizing the discipline of downside risk management . � The degree of risk involved in any financial decision depends on the rate of return that must be earned at a minimum to accomplish one’s goal. Returns below the goal ( “Minimal Acceptable Compound Return” or MAR ) incur the risk of not accomplishing the goal. � This approach has strong applicability to the needs of ordinary investors who require a specific rate of return in order to accomplish their financial objectives. � Cougar Global is experienced in global tactical asset allocation. 2

� The goal of investing is to generate compound annualized returns to fulfill the client’s investment needs. � The primary means of achieving compound annual growth rates is to avoid losing money . � Cougar Global strives to participate in bull markets and to mitigate loss in bear markets . � Global Capital Market Outlook is updated monthly using a one‐ year forecast horizon. � The asset mix will go to cash/bonds if dictated by Cougar Global’s Outlook. 3

Investment Risk Investment Model Positioning Theme Mandate Objective Risk Aware MAR 6 Income with Moderate Clients who want to make regular Growth withdrawals & want to protect Growth with Income against downside risk. Capital MAR 8 Growth with Income Client require less frequent Appreciation Income with Moderate withdrawals, but willing to accept Growth more risk in order to attempt to achieve moderate investment returns. Capital MAR 10 Growth Clients who have a longer time Appreciation Aggressive Growth horizon who want to accumulate and grow. Opportunistic MAR 12 Aggressive Growth More aggressive investors, with a Growth long time horizon and making ongoing contributions. *A “MAR” is a goal. It is used to define risk. Returns are not guaranteed. See slide 13 for a description of the Investment Objectives. 4

� Cougar Global’s proprietary process uses “ Multiple macro ­ Economic Scenario analysis ” (“MES”) to model capital market behavior. � The MES keys off the U.S. economy, the world’s largest and most influential on capital market behavior. � MES evaluates the probability of the world’s economies experiencing growth, inflation , recession , stagnation or chaos (“black swans”). 5

The five macroeconomic scenarios are: 1. GROWTH ‐ US Real GDP greater to or equal to 2.7% with low inflation; 2. RECESSION ‐ Defined as negative US GDP quarter over quarter, annualized; 3. STAGNATION ‐ Defined as US GDP less than 2.7% 4. INFLATION ‐ Greater than 2.7% as measured by the Consumer Price Index; 5. CHAOS ‐ A high impact, low probability event (“Black Swans”). 6

� The first step in the process is to assess the probabilities that the consensus (popular belief) attaches to each scenario. � Next, Cougar Global establishes its own probabilities for each scenario, based on independent research, obtained from global macro‐economic and geopolitical research services. � The third step is to use data on the quarterly returns of global asset classes and “bootstrap” – where the computer randomly samples – the data for each scenario. 7

� In running the models, the randomly sampled data is weighted according to Cougar Global’s Multiple Economic Scenario Analysis. This provides Cougar Global with a measure for how these asset classes could behave under the forecast scenarios. � Random data is used, because t he future does not repeat the past . � Using portfolio optimizing software, the results of the analysis are used to generate the optimal asset mix for each mandate, for that month. � Portfolios are rebalanced* monthly if the expected returns and downside risk for the current mix have shifted. *Rebalancing may involve tax consequences 8

� Each mandate is constrained to have exposure at a specific level of downside risk. � The higher the MAR, the more the constraint on downside risk is relaxed. Portfolio Constraint MAR 6 95% probability of positive returns MAR 8 90% probability of positive returns MAR 10 85% probability of positive returns MAR 12 80% probability of positive returns Returns are not guaranteed. Past performance is no guarantee of future results. These portfolios may change at any time 9

MAR 6 MAR 8 MAR 10 MAR 12 Previous Previous Previous Previous Asset Class Symbol (IMG/GWI) Allocation (IMG/GWI) Allocation (AG/G) Allocation (G/AG) Allocation IWM Russell 2000 0.00 0.00 5.00 0.00 5.00 5.00 10.00 10.00 Canadian Equities EWC 0.00 0.00 0.00 5.00 5.00 5.00 8.00 8.00 Australia, HK, Singapore EPP 0.00 0.00 6.00 5.00 11.00 8.00 11.00 9.00 Emg. Market Equities VWO 0.00 0.00 5.00 0.00 7.00 7.00 13.00 13.00 Russell 1000 IWB 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 VGK European Equities 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5.00 TOTAL EQUITIES 0.00 0.00 16.00 10.00 28.00 25.00 42.00 45.00 US 1 ­ 3 year Treasury SHY 15.00 15.00 0.00 0.00 0.00 0.00 0.00 0.00 US Treasury 7 ­ 10 yr IEF 10.00 10.00 14.00 5.00 8.00 8.00 5.00 5.00 US Treasury 20+ TLT 0.00 0.00 0.00 0.00 5.00 5.00 5.00 5.00 Inv. Corp. Grade LQD 10.00 10.00 14.00 25.00 5.00 8.00 5.00 5.00 HYG US High Yield Corp. 10.00 10.00 20.00 20.00 17.00 17.00 11.00 10.00 EMB JP Morgan EMBI Global 0.00 0.00 0.00 0.00 7.00 7.00 6.00 5.00 CASH Cash 48.00 48.00 11.00 15.00 3.00 3.00 3.00 3.00 TOTAL FIXED INCOME 93.00 93.00 59.00 65.00 45.00 48.00 35.00 33.00 TOTAL COMMODITIES GLD 7.00 7.00 25.00 25.00 27.00 27.00 23.00 22.00 The cash portion of this portfolio is represented by money market instruments. Asset Classes subject to change. Please see slide 14 for performance disclosures. 10

MAR 6 MAR 8 MAR 10 BENCHMARK Inception Date – 12/31/1999 Inception Date – 10/31/2001 Inception Date 11/30/2000 End Date 7/31/2010 Net of Gross of Net of Net of 40% Citigroup Gross of Gross of Gov’t/Corp Bond Index Maximum Maximum Maximum Fees Fees Fees 50% S&P 500, 10% MSCI LPL MWP LPL MWP LPL MWP All Country World Program Fees 1 Program Fees 1 Program Fees 1 Equities ex U.S. 1 ­ year 3.5% 0.9% 4.4% 1.8% 2.5% 0.3% 4.7% 3 ­ year 5.6% 3.0% 4.7% 2.1% 1.6% ‐0.7% ‐1.3% 5 ­ year 7.0% 4.4% 7.4% 4.7% 6.4% 3.9% 3.0% 10 ­ year 10.1% 7.3% N/A N/A N/A N/A 6.8% Since 8.1% 5.4% 11.0% 8.3% 6.5% 3.9% See note below Inception 1 Assumes maximum LPL Model Wealth Portfolio Advisory fee of 2.5%. NOTE: Compound Benchmark returns since inception are 2.9% for MAR 6, 4.6% for MAR 8 and 2.2% for MAR 10. The volatility of the index benchmark used to compare performance is materially different from that of the portfolio. Past performance is no guarantee of future results. For performance disclosures, please see slide 14 11

MAR 6 MAR 8 MAR 10 BENCHMARK Inception Date – 12/31/1999 Inception Date – 10/31/2001 Inception Date 11/30/2000 End Date 07/31/2010 Net of Gross of Net of Net of 40% Citigroup Gross of Gross of Gov’t/Corp Bond Index Maximum Maximum Maximum Fees Fees Fees 50% S&P 500, 10% LPL MWP LPL MWP LPL MWP MSCI All Country Program Fees 1 Program Fees 1 Program Fees 1 World Equities ex U.S. 2000 ‐9.9% ‐12.1% ‐ ‐ ‐ ‐ ‐1.8% 2001 ‐6.3% ‐8.6% ‐ ‐ ‐9.4% ‐11.7% ‐4.7% 2002 6.6% 4.0% ‐2.0% ‐4.4% ‐4.9% ‐7.3% ‐9.0% 2003 27.0% 23.9% 26.3% 23.3% 28.8% 25.7% 19.4% 2004 17.0% 14.2% 15.6% 12.8% 15.2% 12.4% 9.0% 2005 25.1% 22.1% 27.0% 23.9% 28.5% 25.4% 4.9% 2006 8.5% 5.9% 11.9% 9.0% 11.7% 9.0% 11.7% 2007 9.7% 7.0% 11.1% 8.4% 9.1% 6.4% 7.2% 2008 2.8% 0.3% ‐1.7% ‐4.2% ‐0.5% ‐3.0% ‐23.0% 2009 9.7% 7.0% 9.7% 7.0% 9.7% 7.0% 18.7% YTD 3.5% 0.9% 4.4% 1.8% 1.1% ‐0.4% 4.7% 2010 1 Assumes maximum LPL Model Wealth Portfolios Advisory fee of 2.5%. The volatility of the index benchmark used to compare performance is materially different from that of the portfolio. Past performance is no guarantee of future results. For performance disclosures, please see slide 14. 12