-r 8f;F,rolrQMcGRAW HILL FINAHCIAL

U.S. lnvestment Policy Gommittee NotesJune 10, 2015

Overall Outlook

Like pulling petals from a daisy, investors alternately predict that the market will break down orbreakout, citing Greek debt discussions, equityvaluations, interest rates, stagnant U.S. economicgrowth and the dollar as catalysts for confusion. Just as last Friday's payroll report wasinstrumental to subsequent stock and bond market weakness, tomorrow's retail sales reportcould also help extend or cut short today's equity rally. We are leaning toward the supportiveside, as we see a 1.4% jump in headline sales, versus a gain of 1.2% anticipated by the Street,thanks to a surge in autos sales and firmer gas prices. The ex-auto component should also showstrength, climbing 1.0% in May, versus a gain of only 0.1% last month.

Economic Updale

F0MC Forecast revisions from next week's F0MC meeting will be revealed next Wednesday.0espite the bounce in growth optimism in recent weeks, Action Economics [AE] thinks the F0MCwill likely trim the official GDP estimates for 2015, alongside expected boosts in the 201-5-16 PCEchain price estimates, as energy prices have partly recovered from early-2015 lows. AE expects aO.L%-l.2% downward shift in the 2015 G0P central tendency of 2.3%-2.7%, and a 0.4% boost inthe 2015 PCE chain price central tendency of 0.6%-0.8%, with an additional boost of 0.1% in thelow-end inflation estimates for 2016. The aggressive high-end near-term Fed funds rateestimates should be lowered as views converge toward a September or October start for Fedtightening,

Fundamental Update

SBP Dow Jones lndices, which operates independently of S&P Capital lQ, recently reported thatdespite three years of strong equity market returns, record earnings, and unprecedented levels ofcash on hand, corporate pensions remain severely underfunded and 0PEB [0therPost-Employment Benefits] continue to be reduced or eliminated, especially for future retirees.Pension and oPEB assets set aside for issues in the SEP 500 amounted to $1.75 trillion, a 3.5%increase over the 31.69T held at year-end 2013. 0bligations, however, posted an 11.3% increaseto a record S2.34T from 2013's S2.10T. The change in funding shows how quickly lower interestrates and higher longevity tables can reduce funding levels. Please visit www.spindices.com forthe full report.

Tethnic'al Update

The stock indices are rallying and showing positive signs for a continued advance. The SEP 500 ismoving back toward a test of resistance that begins aI 2LO7 and extends up to 2120. A moveabove 2120 would re-establish the firmly bullish position of this index. A key bullish developmentis that the Russell 2000 has surmounted its resistance zone. lf the Russell is able to move abovel-265, it will be key_to see the SEP 500 move back above 2126, which is the primary level ofupside resistance. The Nasdaq-100 has recovered back above the zone of support at 4435-65and is leading to the gPside, which is also bullish. The key area of resistance extends up to 4526.A move back over {526 would re-establish the bullish bias and clear the way for new highs.

Recommended Moderate Allocation

25%Boods

7M

S&P 500 EPS changes as of06/10/15

EPS Growth %

SEP 5oo Sector -,.'.-qt ^ ,a*" at*2015e 2015eConsumer 0isc. 8.5 6.1 7.O 10.4Consumer Staples 4.2 12 5l q.6 L2Energy [s4 6] [63 4] 0.1 [ss.s]Financials 1,8.3 5.6 3.3 11.9Health Care zl.t) 7.O I4.2 Ll.Slndustrials 8.7 3.7 S.3 6.1lnfoTechnology 9.1 2.5 11.2 4.8Materials t0 71 3.2 5.9 2.4TelecomServices 2.1. 5.8 9.6 7.2Utilities 0.rl t0.rll 7.5 1.3Source: SEP Capital lQ

Targets

l-z-Month SEP 500: 2250SBP500EPS'15E: 5118.57, L6E: S132.87

SEP S00Revenues'14E: +3,5%, 15E: -1.0%SEP Euro 350 EPS'15E: +9.9% ,16E: +12.q%

RealGOPGrowth20l5E: 2.4%,16E: 2.8%Core CPI 2015E: 1.9% ,168: 1,9%

Fed Funds Rate 2015E: 0.3% ,16E: 1.4%I0-YearT-Note2015E: 2.2%,16E: 2.9%Wll/bbl. Avg.'1SE: S50.45 ,16E: 550.43

S&P 500 Sector

SGP Composite 1500s6P 500SEP MidCap 400SBP SmallCap 600

% Change P/Eon'15e l:.:?lr::EPS Grth.

SEP Sector 0ver/UnderEmphasis Weight

Sector %WeightingsYTD 2014

1.60.6

1.qL.0q.2

3.1

10.911.48.2r.l.q

18.3L7.520.s23.s

1.61.51.8L.7

Sector recommendations are market-capweighted, influenced by economic,f undamentaland technical considerations

Consumer DiscretionaryConsumer StaplesEnergyFinancialsHealth Carelndustrialslnformation TechnologyMaterialsTelecommunication ServicesUtilities

t0 6ll2 2)

[1 s]0.5

t1 3lt0 7l[2 3]

tl sl[2 4]

[T S]

q.9

7.8

2,12206

8.012.9

[10 0]13.123.37.5

18.2t4,7

[1 s]24.3

20.01S.728.q14.618.216.316.718.L13.315.7

1.12.5b.z1.r.1

1.61.51.31.q2.O

3.0

12.6s./.1

1.916.515.110.21S.S3.22.32.9

MarketweightMarketweightMarketweightMarketweight0verweiqht0verweight0verweight

UnderweiqhtUnderweightUnderweight

0000

0.300.300.30-0.30-0.30-0.30

Ecott tt rtti c' u nd S tock .l.l a rkct O utloo ks

S&P 500 GICS Sactor PerJbrnrunce unl Reutnmrcndel Sector H 6/9/t 5

Glossary

STARS R.rking syslar trd d.fmltiG:

*tt*** SrARS (Sr.or! Buy):Tohl re6rm is.xpc.t d m outpcrfm th. tolll erm ofa relwdrb€nchm6rt , by s wide I)EAin ov€r the coming 12 months, withshes risins h pnc. on u ab$lut b6is.

***** +sTARs (Buy):Toral rctm is expdted m outpcrfm rhe total .etm ot a relevdrbtuchmart wa O. comins I 2 mnths, with sha6 nsing i, prie

,tJt*** LSTARS (Hold):Tot8l rctm is .xp6ctcd ro clccly lpprcxiEar. rhc toBl .Entm ofarel.vaDt berchflD* ovs the coning I 2 monlhs, with sh@sg.n€rauy nsi.g i, price on tu absolur. basis.

,t Ji *** z-sTARs (s.lt):Total Etm is qpcctcd to udc.Fyfom tn. toral Elrh of arcldut bqlchrut ovq lhc @mitrg l2 rF hs,mdtheEheprir nor edcipaGd to show s sair

***** I-STAR (Stre.E S. ):Total rctm is qpccrcd b ud.rpcrfom th. total rcNm ofarelryet b.tchnErt by . wide l]rain ovd the.onins 12 montts,with sh.B t lin8 in !dic. on e .bsolut. bais.

S&P C.pit l Rxkirg MoiiioD!:

Ovcn.ilbi rarkings ue asisned 1o appbrimt ly the bpqusnileofth. d&lclds.

Mr.L.tr.ight 6ki,gs e NiAned to apprcxi@tcly the seconded third quanih of th. asr cl6s.

Urd.nctghr dkings ee asigned to app.oxi@tely the boitomquanile of the a*l clds.

S&P Crpi.d rQ QErlity R{Lirscm*,trl ud srrbility of eahing.s md dividsds @ dcumd keyelemoir.s iD esrablishirs s&P C.pitll lQ's cminss and dividmdtuldDAr for olmod s1el6, which @ dcigtr€d to capsuliz. ih!naom ofihis rc6rd in a si.gle syn$ol. lt shotrld b€ !ote4howcvd, tha( thc pl1l.* al$ lakes into consideiadon erlainadj6uMrs and modiEatioc dEln.d d6iEble in ebblishingsuch mkiDgs. The final sorc fn each stock is tueued agaiNi ascorif,g matrix dctcmincd by analy6is of$e soios of a lare. andrepcsdLliv. smplc of stcks. Tle tuE€ of scor.s i! th. amy ofthis saDplc ha ben arigncd with the follo*in8 laddd ofranti,g

e. otrerld by SPIAS, which is .ulbuized dd r€sutaEd by iheU.S. Sccurities snd Erchuae Comnisiotr. SPIAS do6 not act sa "fiduciary" or a an "investmdr hdage/, a d€fined undnEmplo),€e Retircm.nr Incom. Seqnty Acl (€RISA), (o anyinvestd MHFRE, is aurhorired dd reg .r€d by rh. FindcialCdduct Aurho.ity in thc U.ited Kingdom Undd rhc Melcls inFinucial Irsrmmrs Dircctiv€ ('MiFID'), MHFRE is mtitl.d ro€r*ise a paspot.iAhr ro pDvidc c.cs bo.d.r inv€sLnent advicclo EtrrcFan Economic AM ( EEA ) stat6. MUFRE hs duly.otfi.d th. Finecial Cond&t Aufisiry in rhE UqitEd Kinsdom ofits incantion ro prcvide clN bo.dn inv6Erdl advicc in EEASrzt6 b .@rdoc. with MiFlD. MHFRE trad6 s S&P c.pilllIQ, dGs tur F@idc *ryic6 to "rctail cliedts" ud only h's"prcf.siooal clio$" .r den!.d ud.r MiFID. In UE Unir.dKinadom 10 ihc exr.nr fte tuatrial is r finmcial promaon it isissucd ed alpNcd by MHFRE. ln Hona Ko!g, advi$ry E.ryiccs@ otrercd by Sranda.d & P@''s lnv6tm6i Advisry Sflicq(HK) Limited ('SPIAS HK'), Enrich is regulatcd by the HongKo.g srcuiti€s dd Futu.s Commision; in sin8aporc, byMccaw Hill Fi,mcial Silgsporc Ptc- Limited C'MHFSPL),which is rcgularcd by the Mon.bry Authonty of Singaporc: inMalaysiB, by sla<lad & Pmr's Malaysia Sdr Bhd C'S&PMalaysi."), vhicb is rc8ular.d by the SaEities Comoission ofMalaysiat ed in ANlialia, by Sland&d & P61s InfomalionSni@s (A6Earia) Ely Lrd ('SPIS'). which is resur.rcd by rheAustralid Seryitics & Invcsir.nts Comission- in Ko.ea,SPIAS holds a msbordd non-di$rctionrry invesrmenr adviserliccns. od it is Esistercd yilh th. ri@cial Supwisory Scrice(FSS). SPIAS, MHFRE, sPIAs tlK, MHFSPL, S&P Malaysia edSPIS. @fi a vholly oMcd subsidiary of McGEw Hill Fin&ci.l.Inc. op.frts ud€r th. CMI b@d-

GMI IAS ofr6 fos br@d qroso.is of i!v6rn6r advic€: (i)po.dolio $nr.gies; (ii) fiDd c@ch ud .ecommmda.ionq (iii)cs.t all@ation; &d (iv) dlaiys of ccrtain U-S. md Europ€mfixcd in.m€ scuiti* Bing its prcpriotary Risk-tcPri.e sodngftlhodology. GMI lAs rodcl portiolios ( model(s)") are .otcouective inve$m r liu.ts. Asseis m aged in accordance withlh. sodels @y lN monoy. GMI IAS is nor Gpdsiblc forcliarsuirabiliry ed or thc arD.opriaten€s of rhe sdice for rhc clicnrAny perfomdce data quot d r.?Itgl! p6r Frform ce. P$ap.rfomrn.. is troa irdiotiv. offirtuE rcir i.

WitI rcdpecr to tho invGtmmt recoMEdatioG @dc by CMIIAS, inv6ro6 should ialiE ftar such inveitmottuohMdations e providsl oaly d a seneml guidclinc. Th@is .o agredot or undeBredi$s *h.rwvs thar cMI IAS willprovid. indivi&alL€d advic. 1o any invetft. cMI IAS is norreErxsible fc cli€nt sirability. OMI IAS d6 nor tako inrolccoul uy irfomano! sboui any invstor or y invGtor's Estswho Fovidiry invGlhdr advice. GMI rAS d6 nor hav. oydisfiai@ary authmity or control -irh r6p€cr ro pwhrsiog or6ellitrB suiri.s in hakitrs orttd iov.srbots. tndividelitrv6lo6 sh@ld ultimt€ly r.ly on rhcii oM judsm.Dt d(yor rh.Judsmot ot a finmcBl advi$r io nEli.E rhek iov.srm.nrd€cisioG. Inv.stnflrs dc subjccr n) itrvestllrt nsks including (hc

possibl. los of th. p.incipal ,mur invesrod. A, invesrnentbss.d upon GMi IAS' invGnn€nt .dvicc shoutd only be mad€efi.. c@sul(ina with a fiaecial ldvisr ud with a uddundinsof the .isks Miatcd wirh ay invcsEml if, $cu.iries, in.tudins,bur nor limired to, Earkct .isk, cMency nsk, inr.rcsr dr€ rist udfor.agn inverrnetu nsk.

SPIAS, MIIFRE ad its affiliaB (coll@rivEly, S&P) and dythird+arty p@vidm, a vell as thei. direcroN, officm,

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Required Disclosues

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