1. Marko Papic Chief Strategist Geopolitical Strategy BCA Dialogue March – April 2013 Webcast March 26, 2013 Ian MacFarlane Chief Strategist Global Asset Allocation

2. TAIL RISK COMPRESSION AT THE COST OF GERMAN ANGST 2 © BCA Research 2013 3.5 3.0 2.5 2.0 1.5 1.0.5 20112012 3.5 3.0 2.5 2.0 1.5 1.0.5 JANJULJANJULJAN EURO BOND SPREAD EURO AREA* VS. U.S. EURO AREA* VS. U.K. * EXCLUDES LUXEMBURG, CYPRUS, SLOVAKIA AND SLOVENIA. 50 40 30 20 06081012 50 40 30 20 GERMANY: PERCENT OF RESPONDENTS WHO TEND TO NOT TRUST THE ECB % SOURCE: EU COMMISSION. LTRO rally “Whatever it takes” rally German distrust of Euro institutions

3. 3 © BCA Research 2013 MONITORING DEPOSITS IN LIGHT OF CYPRUS 1100 1050 1000 950 081012 950 900 850 TOTAL RETAIL AND CORPORATE DEPOSITS: ITALY (LS) SPAIN (RS) Bn Euro NOTE: SHADING DENOTES AUTUMN 2011 EURO BREAK-UP RISK. Bn Euro 70 60 50 06081012 70 60 50 PERCENT OF RESPONDENTS IN FAVOR OF THE EURO: ITALY CYPRUS % % SOURCE: EU COMMISSION. Autumn 2011 euro breakup risk Cypriots are not wild about the euro

4. 4 PERIPHERY AND OFFICIAL SECTOR CONTROL (MORE) OF EUROPE’S FATE © BCA Research 2013 ITALY*SPAIN** 30% 6% 21% 3% 40% 3% 54%31% 10% 2% REST OF THE WORLD CENTRAL BANKS BANKS INVESTMENT FUNDS OTHER REST OF THE WORLD NON-FINANCIAL CORPORATIONS GENERAL GOVERNMENT HOUSEHOLDS & NON-PROFIT INSTITUTIONS FINANCIAL INSTITUTIONS * AS OF AUGUST 2012. ** AS OF Q3 2012. SOURCE: NATIONAL BANKS. Foreign holdings down from 50%

5. 5 WILL GEOPOLITICS SPOIL THE PARTY? © BCA Research 2013 100 80 60 40 20 2012 10 0 -10 -20 JANAPRJULOCTJAN GOOGLE IRAN REFERENCES* (LS) BRENT PRICE DEVIATION FROM FAIR VALUE MODEL** (RS) USD * INDICATOR REPRESENTS NUMBER OF GOOGLE SEARCHES OF "ISRAEL ATTACK IRAN" RELATIVE TO PAST SEARCHES OF THE TERM. THE INDICATOR IS NORMALIZED AND MEASURED ON A 0-100 SCALE. ** BCA FAIR VALUE PROPRIETARY MODEL BASED ON GLOBAL INDUSTRIAL PRODUCTION, GLOBAL OIL CONSUMPTION, AND INVENTORIES. 2000 1900 1800 1700 1600 2010 2000 1900 1800 1700 1600 JANAPRJULOCT SOUTH KOREA: KOSPI INDEX NOTE: FIRST ATTACK OCCURRED ON MARCH 26, 2010, WHEN NORTH KOREA SUNK THE ROKS CHEONAN. AND THE SECOND ATTACK OCCURRED ON NOVEMBER 23, 2010, WHEN THE NORTH KOREAN MILITARY BOMBARDED YEONPYEONG ISLAND. Recent military skirmishes IRAN - ISRAELNORTH KOREA

6. 6 VALUATION EROSION IS OCCURRING 1 0 -2 85909520000510 1 0 -2 BCA GLOBAL EQUITY VALUE INDICATOR Inexpensive Expensive Fair SOURCE: BCA CALCULATION. © BCA Research 2013

7. 7 LIQUIDITY: POSITIVE TRENDS SLOWING 400 300 200 100 0809101112 400 300 200 100 CENTRAL BANK BALANCE SHEET: TOTAL ASSETS* U.S. U.K. EURO AREA JAPAN * REBASED TO JANUARY 2008 = 100; LOCAL CURRENCY. © BCA Research 2013

8. 8 ON THE CUSP OF A SECULAR BULL… 350 300 250 200 150 100 50 350 300 250 200 150 100 50 U.S. REAL S&P 500 TOTAL RETURN* JAN 1909 - DEC 1929 SEPT 1929 - AUG 1949** NOV 1968 - OCT 1988** AUG 2000 - TODAY * DEFLATED BY CPI. ALL SERIES REBASED TO STARTING POINT = 100. ** ADVANCED IN ORDER TO MATCH UP STARTING POINTS. © BCA Research 2013

9. 9 …BUT INTEREST RATE NORMALIZATION TO COME 20 10 0 -10 60801900204060802000 20 10 0 -10 U.S. REAL* 10-YEAR GOVERNMENT BOND YIELDS % *DEFLATED BY CONSUMER PRICE INFLATION; SOURCE: THOMSON REUTERS, BCA CALCULATIONS. © BCA Research 2013

10. 10 RETAIL SECTOR IS APPEARING 10 0 92962000040812 10 0 20 10 0 -10 20 10 0 -10 40 20 0 -20 -40 40 20 0 -20 -40 NET SALES OF GOVERNMENT & GNMA BOND FUNDS 12-MONTH MOVING AVERAGE Bil.$ NET SALES OF CORPORATE BOND FUNDS 12-MONTH MOVING AVERAGE Bil.$ U.S.: NET SALES OF DOMESTIC EQUITY MUTUAL FUNDS 12-MONTH MOVING AVERAGE Bil.$ NOTE: MONTHLY DATA. © BCA Research 2013