Equity and Quant Strategy

Equity and Quant Strategy | United States 11 June 2013 S&P 500 relative value cheat sheet

Savita Subramanian Equity & Quant Strategist MLPF&S „ The multiple swap: yield compressing, cyclicals expanding Last month, valuation multiples expanded across most sectors, but for the more Dan Suzuki, CFA defensive and higher yielding Staples, Telecom and Utilities sectors, we saw a Equity Strategist MLPF&S reversal from earlier this year as P/E’s contracted amid concerns of Fed actions. On relative forward P/E, Utilities is still the most stretched versus its historical average, Alex Makedon but the sector’s premium to the market has fallen to only 6%, compared to an all- Quantitative Strategist time high of 23% in mid-2012. Additionally, amid last month’s sell-off from these MLPF&S bond-proxy sectors, Financials has now surpassed Telecom as the second most overvalued sector vs. history on relative forward P/E (see Table 1 inside). Other Jill Carey high-yielding industries, such as Tobacco and REITs, also saw multiple Equity Strategist MLPF&S compression in May, though they remain among the most expensive industries

overall compared to where they have traded historically relative to the S&P. We recently highlighted that the low beta bubble could be beginning to deflate, and advise investors avoid the expensive, high yielding low beta sectors in favor of An historical guide to sector & inexpensive cyclicals with low “fundamental betas” (earnings stability). industry valuation Globally exposed cyclical sectors still cheap For those interested in examining relative value Despite the run-up in May, most globally-oriented cyclical industries remain across and within sectors, we provide a “cheat attractively valued. Tech offers the most implied upside on relative forward P/E and sheet” that includes Price to Book (P/B), Price to P/OCF, and Energy remains inexpensive across all three relative metrics we track Operating Cash Flow (P/OCF), and Price to Fwd. (P/E, P/OCF, and P/B). Within Industrials and Materials, which both appear fairly Earnings (P/E) of each sector and industry. valued on relative forward P/E, Industrials Conglomerates, Airlines, Metals & Mining, and Paper & Forest products all offer implied upside vs. history. In contrast, the We present these as relative multiples (vs. the more domestically-oriented cyclicals (Consumer Discretionary and Financials) S&P 500), and calculate implied upside based on appear expensive across most of their industries, Media being the notable where the sector/industry trades relative to its exception. Health Care is the only defensive sector trading at a discount vs. all three historical average. We also provide charts of of its historical average relative multiples. sectors’ absolute and relative multiples over time. Chart of the month: the multiple swap

As highlighted above, Chart 1 below shows the discount (premium) to history on relative forward P/E for the globally-oriented cyclical sectors of Industrials and See page 13 for a breakout of S&P Tech vs. the high-yielding defensive sectors of Telecom and Utilities, and how the stocks in each industry. premium/discount has changed over the past month.

Chart 1: Discount (premium ) to history on relative forward P/E: Last month vs. now

40% 30% Apr-13 May-13 20% 10% 0% -10% -20%

Discount (premium) to history to (premium) Discount -30% Industrials Tech Telecom Utilities

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

c58da9b710df662c BofA Merrill Lynch does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Refer to important disclosures on page 15 to 16. Link to Definitions on page 14. 11284392 Equity and Quant Strategy 11 June 2013

Relative valuation by sector Note: On the following pages, industries with less than 10 years of valuation data history are excluded. Boxes highlight sectors/industries with the highest implied upside and greatest implied downside. Implied upside is based on comparison between current relative multiple and historical average relative multiple.

Table 1: Relative valuation (vs. S&P 500) by sector (based on data from 1986-5/31/13) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Sector Current Average Implied upside Current Average Implied upside Current Average Implied upside S&P 500 (absolute metrics) 2.46 2.88 17% 10.42 10.36 -1% 14.24 15.10 6% Consumer Discretionary 1.67 1.00 -40% 1.25 0.91 -27% 1.20 1.08 -10% Consumer Staples 1.77 1.75 -1% 1.29 1.30 1% 1.14 1.11 -3% Energy 0.78 0.91 16% 0.68 0.76 12% 0.85 0.99 17% Financials 0.51 0.64 26% N/A N/A N/A 0.92 0.77 -16% Health Care 1.33 1.81 36% 1.36 1.73 28% 1.05 1.14 8% Industrials 1.27 1.04 -18% 1.08 0.99 -8% 1.02 1.01 -1% Information Technology 1.39 1.37 -1% 1.05 1.38 32% 0.93 1.23 32% Materials 1.12 0.87 -22% 1.03 0.89 -14% 0.98 0.99 1% Telecommunication Services 1.07 0.92 -14% 0.46 0.65 44% 1.22 1.05 -14% Utilities 0.65 0.60 -6% 0.62 0.64 5% 1.06 0.86 -19% *P/OCF excludes Financials Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Definitions of valuation metrics „ Price/Book: Month-end market cap divided by total common equity as of the most recent fiscal quarter

„ Price/Operating Cash Flow: Month-end market cap divided by the last twelve months cash flow from operations as of the most recent fiscal quarter. Note: All industries’ multiples are relative to the S&P 500 ex. Financials for P/OCF.

„ Forward Price/Earnings: Month-end market cap dividend by I/B/E/S consensus next twelve months earnings

2 Equity and Quant Strategy 11 June 2013

Consumer Discretionary Table 2: Relative Valuation (vs. S&P 500) for Consumer Discretionary industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Consumer Discretionary (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Auto Components (4) 1.27 0.81 -36% 1.05 0.74 -30% 0.81 0.82 1% Automobiles (2) 1.53 0.87 -43% 0.92 0.26 -72% 0.77 0.73 -5% Distributors (1) 1.61 1.08 -33% 1.37 1.32 -4% 1.17 1.05 -11% Hotels Restaurants & Leisure (11) 2.05 1.28 -38% 1.24 1.13 -9% 1.30 1.17 -10% Household Durables (8) 1.07 0.78 -27% 3.13 1.03 -67% 1.06 0.89 -16% Internet & Catalog Retail (5) 4.93 2.88 -42% 2.50 2.57 3% 3.41 2.91 -15% Leisure Equipment & Products (2) 1.92 1.06 -45% 1.29 0.89 -31% 1.06 0.89 -16% Media (16) 1.25 0.87 -30% 1.05 1.19 13% 1.08 1.61 48% Multiline Retail (9) 1.23 1.00 -19% 1.01 1.07 6% 1.07 1.07 0% Specialty Retail (18) 2.17 1.31 -40% 1.29 1.36 6% 1.21 1.15 -5% Textiles Apparel & Luxury Goods (5) 1.93 1.02 -47% 1.60 1.24 -23% 1.24 0.93 -25% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 2: Consumer Discretionary P/B and Relative P/B, 1986-May 2013

1.8x 6.0x Current P/B: 4.1x 1.6x M in: 1.4x 5.0x Max: 5.0x 1.4x A vg: 2.7x 4.0x 1.2x 3.0x 1.0x 0.8x 2.0x 0.6x 1.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Consumer Discretionary Relativ e P/B (lhs) Consumer Discretionary P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy Chart 3: Consumer Discretionary P/OCF and Relative P/OCF, 1986-May 2013

1.4x C urrent P /OC F : 13.0x 15.0x M in: 5.0x 1.2x M ax: 13.9x 13.0x A vg: 9.1x 1.0x 11.0x 0.8x 9.0x 0.6x 0.4x 7.0x 0.2x 5.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Consumer Discretionary Relativ e P/OCF (lhs) Consumer Discretionary P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy Chart 4: Consumer Discretionary Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

2.0x C urrent F wd. P /E: 17.1x 32.0x M in: 8.0x 1.8x M ax: 29.2x 28.0x A v g: 16.3x 1.6x 24.0x 1.4x 20.0x 1.2x 1.0x 16.0x 0.8x 12.0x 0.6x 8.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Consumer Discretionary Relativ e Fw d. P/E (lhs) Consumer Discretionary Fw d. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

3 Equity and Quant Strategy 11 June 2013

Consumer Staples

Table 3: Relative Valuation (vs. S&P 500) for Consumer Staples industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Consumer Staples (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Beverages (9) 2.01 2.01 0% 1.45 1.53 6% 1.25 1.28 3% Food & Staples Retailing (8) 1.21 1.27 5% 1.00 1.04 4% 1.02 1.09 7% Food Products (15) 1.30 1.63 26% 1.23 1.25 1% 1.19 1.10 -7% Household Products (4) 1.80 1.80 0% 1.44 1.38 -5% 1.26 1.15 -8% Personal Products (2) 3.43 3.14 -8% 2.13 1.76 -18% 1.53 1.31 -14% Tobacco (4) 41.72 1.68 -96% 1.65 0.93 -44% 1.05 0.72 -31% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 5: Consumer Staples P/B and Relative P/B, 1986-May 2013

2.4x 10.0x Current P/B: 4.4x 2.2x M in: 2.4x Max: 9.5x 8.0x 2.0x A vg: 5.0x 1.8x 6.0x 1.6x 4.0x 1.4x 1.2x 2.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Consumer Staples Relativ e P/B (lhs) Consumer Staples P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 6: Consumer Staples P/OCF and Relative P/OCF, 1986-May 2013

2.0x Current P/OCF: 13.4x 22.0x 1.8x M in: 6.9x 20.0x M ax: 21.1x 1.6x Avg: 13.1x 18.0x 1.4x 16.0x 1.2x 14.0x 1.0x 12.0x 0.8x 10.0x 0.6x 8.0x 0.4x 6.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Consumer Staples Relativ e P/OCF (lhs) Consumer Staples P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 7: Consumer Staples Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

Current Fwd. P/E: 16.3x 1.4x M in: 11.2x 26.0x M ax: 26.0x 1.3x A vg: 16.5x 1.2x 22.0x 1.1x 18.0x 1.0x 0.9x 14.0x 0.8x 0.7x 10.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Consumer Staples Relativ e Fw d. P/E (lhs) Consumer Staples Fw d. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

4 Equity and Quant Strategy 11 June 2013

Energy

Table 4: Relative Valuation (vs. S&P 500) for Energy industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Energy (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Energy Equipment & Services (12) 0.79 1.00 26% 1.13 1.57 39% 0.91 1.32 46% Oil Gas & Consumable Fuels (31) 0.78 0.87 12% 0.63 0.69 10% 0.84 0.91 9% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 8: Energy P/B and Relative P/B, 1986-May 2013

1.4x 6.0x Current P/B: 1.9x M in: 1.0x 5.0x 1.2x M ax: 5.7x Avg: 2.6x 4.0x 1.0x 3.0x 0.8x 2.0x

0.6x 1.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Energy Relativ e P/B (lhs) Energy P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 9: Energy P/OCF and Relative P/OCF, 1986-May 2013

1.1x Current P/OCF: 7.1x 18.0x M in: 2.8x 1.0x M ax: 17.5x 15.0x 0.9x Avg: 7.9x 0.8x 12.0x 0.7x 9.0x 0.6x 6.0x 0.5x 0.4x 3.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Energy Relativ e P/OCF (lhs) Energy P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 10: Energy Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

1.6x 35.0x Current Fwd. P/E: 12.0x 1.4x M in: 7.0x 30.0x M ax: 89.7x 25.0x 1.2x Avg: 14.9x 20.0x 1.0x 15.0x 0.8x 10.0x 0.6x 5.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Energy Relativ e Fw d. P/E (lhs) Energy Fw d. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

5 Equity and Quant Strategy 11 June 2013

Financials

Table 5: Relative Valuation (vs. S&P 500) for Financials industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Financials (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Commercial Banks (13) 0.54 0.60 12% N/A N/A N/A 0.78 0.71 -9% Diversified Financial Services (9) 0.38 0.63 67% N/A N/A N/A 0.78 0.75 -3% Insurance (22) 0.45 0.56 24% N/A N/A N/A 0.88 0.78 -11% Real Estate Investment Trusts (REITs) (16) 1.20 0.84 -30% N/A N/A N/A 2.74 2.17 -21% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 11: Financials P/B and Relative P/B, 1986-May 2013

0.9x Current P/B: 1.3x 4.5x M in: 0.6x 0.8x M ax: 4.0x Avg: 1.9x 3.5x 0.7x 0.6x 2.5x 0.5x 1.5x 0.4x 0.3x 0.5x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Financials Relativ e P/B (lhs) Financials P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 12: Financials Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

1.2x 20.0x Current Fwd. P/E: 13.0x 1.1x M in: 5.7x 17.0x 1.0x M ax: 17.7x Av g : 11. 5 x 0.9x 14.0x 0.8x 11.0x 0.7x 8.0x 0.6x 0.5x 5.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Financials Relativ e Fw d. P/E (lhs) Financials Fw d. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Note: we exclude Price to Operating Cash Flow for Financials because it is not comparable with that for the broader market.

6 Equity and Quant Strategy 11 June 2013

Health Care

Table 6: Relative Valuation (vs. S&P 500) for Health Care industries (based on data from 1986-5/31/2013 Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Health Care (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Biotechnology (5) 2.85 1.94 -32% 2.25 1.90 -16% 1.44 1.32 -8% Health Care Equipment & Supplies (15) 1.26 1.39 10% 1.09 1.66 52% 1.10 1.22 11% Health Care Providors & Services (15) 0.85 1.11 31% 1.19 1.22 2% 0.84 0.94 12% Pharmaceuticals (11) 1.38 1.84 34% 1.32 1.62 22% 1.01 1.09 8% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 13: Health Care P/B and Relative P/B, 1986-May 2013

3.0x 12.0x Current P/B: 3.3x 2.6x M in: 2.2x 10.0x M a x : 11. 2 x 2.2x Avg: 5.2x 8.0x

1.8x 6.0x

1.4x 4.0x

1.0x 2.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Health Care Relative P/B (lhs) Health Care P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 14: Health Care P/OCF and Relative P/OCF, 1986-May 2013

2.5x 36.0x Current P/OCF: 14.1x 2.2x M in: 8.5x 30.0x M ax: 37.9x 1.9x Avg: 17.9x 24.0x

1.6x 18.0x

1.3x 12.0x

1.0x 6.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Health Care Relativ e P/OCF (lhs) Health Care P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 15: Health Care Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

1.5x 35.0x Current Fwd. P/E: 15.0x M in: 9.6x 30.0x 1.3x M ax: 32.0x Avg: 17.2x 25.0x 1.1x 20.0x 0.9x 15.0x

0.7x 10.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Health Care Relative Fwd. P/E (lhs) Health Care Fw d. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

7 Equity and Quant Strategy 11 June 2013

Industrials Table 7: Relative Valuation (vs. S&P 500) for Industrials industries (based on data from 1986-5/31/2013 Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Industrials (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Aerospace & Defense (11) 1.62 0.88 -46% 1.15 0.96 -17% 0.96 0.85 -12% Air Freight & Logistics (4) 2.23 0.88 -61% 1.02 0.58 -43% 1.10 1.03 -7% Airlines (1) 0.60 0.61 1% 0.54 0.52 -5% 0.88 1.20 37% Building Products (1) 10.66 1.23 -88% 2.98 0.97 -67% 1.78 0.93 -48% Commercial Services & Supplies (9) 1.18 1.20 2% 0.85 1.04 23% 1.28 1.12 -13% Construction & Engineering (3) 0.86 0.81 -6% 1.77 1.33 -25% 1.11 0.82 -26% Electrical Equipment (4) 1.26 1.11 -12% 1.36 1.28 -6% 1.07 1.06 -1% Industrial Conglomerates (3) 0.92 1.13 23% 0.91 0.92 1% 1.01 1.09 8% Machinery (15) 1.23 0.92 -25% 1.28 1.04 -19% 0.93 0.91 -2% Road & Rail (4) 1.27 0.60 -52% 0.94 0.68 -27% 1.04 0.85 -19% Trading Companies & Distributors (2) 2.87 0.92 -68% 2.47 1.31 -47% 1.69 1.00 -41% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy Chart 16: Industrials P/B and Relative P/B, 1986-May 2013

1.4x 6.0x Current P/B: 3.1x 1.3x Min: 1.6x 5.0x M ax: 5.2x 1.2x A vg: 3.0x 4.0x 1.1x 3.0x 1.0x 0.9x 2.0x 0.8x 1.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Industrials R elativ e P/B (lhs) Health Care P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy Chart 17: Industrials P/OCF and Relative P/OCF, 1986-May 2013

1.4x C urrent P /OC F : 11.2x 18.0x M in: 4.5x Max: 16.8x 16.0x 1.2x A vg: 10.0x 14.0x 12.0x 1.0x 10.0x 0.8x 8.0x 6.0x 0.6x 4.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Industrials Relativ e P/OCF (lhs) Industrials P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy Chart 18: Industrials Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

1.2x Current Fwd. P/E: 14.5x 23.0x M in: 8.9x 1.1x M ax: 22.5x 20.0x A vg: 15.2x 1.0x 17.0x

0.9x 14.0x

0.8x 11.0x

0.7x 8.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Industrials Relativ e Fw d. P/E (lhs) Industrials Fw d. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

8 Equity and Quant Strategy 11 June 2013

Information Technology Table 8: Relative Valuation (vs. S&P 500) for Information Technology industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Information Technology (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Communication Equipment (7) 1.07 1.19 11% 1.27 1.67 32% 0.88 1.26 43% Computers & Peripherals (8) 1.15 1.11 -4% 0.67 1.04 54% 0.71 1.04 46% Electronic Equip. Instruments & Components (6) 0.72 0.90 25% 0.87 1.49 71% 0.92 1.10 20% Internet Software & Services (5) 1.47 1.96 33% 1.82 2.64 44% 1.27 2.27 79% IT Services (14) 2.69 1.26 -53% 1.59 1.08 -32% 1.08 1.10 1% Office Electronics (1) 0.40 0.68 71% 0.43 0.76 77% 0.55 0.79 45% Semiconductors & Semiconductor Equipment (17) 1.07 1.22 14% 0.84 1.19 41% 1.06 1.20 14% Software (12) 1.58 1.91 21% 1.06 1.79 69% 0.89 1.33 49% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 19: Tech P/B and Relative P/B, 1986-May 2013

3.0x 15.0x 2.6x Current P/B: 3.4x M in: 1.4x 12.0x 2.2x M ax: 14.8x 9.0x Avg: 4.1x 1.8x 6.0x 1.4x 1.0x 3.0x 0.6x 0.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Tech Relative P/B (lhs) Tech P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy Chart 20: Tech P/OCF and Relative P/OCF, 1986-May 2013

3.0x 55.0x Current P /OCF: 10.9x 2.5x M in: 6.5x 45.0x Max: 55.6x 2.0x Avg: 15.2x 35.0x

1.5x 25.0x

1.0x 15.0x

0.5x 5.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Tech Relative P/OCF (lhs) Tech P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy Chart 21: Tech Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

2.4x 60.0x 2.2x Current Fwd. P /E: 13.2x 50.0x 2.0x M in: 9.3x Max: 53.5x 1.8x Avg: 19.3x 40.0x 1.6x 1.4x 30.0x 1.2x 20.0x 1.0x 0.8x 10.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Tech Relative Fwd. P/E (lhs) Tech Fwd. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

9 Equity and Quant Strategy 11 June 2013

Materials

Table 9: Relative Valuation (vs. S&P 500) for Materials industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Materials (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Chemicals (16) 1.47 1.05 -28% 1.16 0.91 -21% 1.04 0.97 -7% Construction Materials (1) 0.76 0.80 5% 3.41 1.07 -69% 13.60 1.34 -90% Containers & Packaging (4) 1.28 0.75 -41% 1.04 0.78 -25% 1.01 0.90 -11% Metals & Mining (7) 0.50 0.67 32% 0.71 0.83 17% 0.77 0.93 21% Paper & Forest Products (2) 1.23 0.55 -55% 0.68 0.66 -3% 0.79 0.99 25% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 22: Materials P/B and Relative P/B, 1986-May 2013

1.5x 4.0x Current P/B: 2.7x 1.3x M in: 1.2x 3.5x Max: 3.4x 1.1x Avg: 2.4x 3.0x 0.9x 2.5x 0.7x 2.0x 0.5x 1.5x 0.3x 1.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Materials Relativ e P/B (lhs) Materials P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 23: Materials P/OCF and Relative P/OCF, 1986-May 2013

1.3x Current P /OCF: 10.8x 14.0x M in: 4.2x 1.1x Max: 12.8x 12.0x Avg: 8.9x 0.9x 10.0x

0.7x 8.0x

0.5x 6.0x

0.3x 4.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Materials Relative P/OCF (lhs) Materials P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 24: Materials Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

1.6x Current Fwd. P/E: 14.0x 26.0x M in: 7.2x 1.4x Max: 25.4x 22.0x Avg: 14.8x 1.2x 18.0x 1.0x 14.0x 0.8x 0.6x 10.0x 0.4x 6.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Materials Relativ e Fw d. P/E (lhs) Materials Fwd. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

10 Equity and Quant Strategy 11 June 2013

Telecom Services

Table 10: Relative Valuation (vs. S&P 500) for Telecom Services industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Telecom (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Diversified Telecommunication Services (5) 1.01 0.88 -14% 0.43 0.60 40% 1.02 0.96 -5% Wireless Telecommunication Services (3) 1.85 0.82 -56% 1.07 0.85 -20% -1.75 -22.07 NM Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 25: Telecom P/B and Relative P/B, 1986-May 2013

1.6x 8.0x Current P/B: 2.6x 1.4x M in: 1.4x M ax: 7.3x 6.0x 1.2x Avg: 2.6x 1.0x 4.0x 0.8x 2.0x 0.6x 0.4x 0.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Telecom Relativ e P/B (lhs) Telecom P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 26: Telecom P/OCF and Relative P/OCF, 1986-May 2013

1.2x 22.0x Current P/OCF: 4.7x 1.0x M in: 3.5x 18.0x Max: 19.6x 0.8x Avg: 6.8x 14.0x

0.6x 10.0x

0.4x 6.0x

0.2x 2.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Telecom Relativ e P/OCF (lhs) Telecom P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 27: Telecom Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

1.8x 30.0x Current Fwd. P/E: 17.4x M in: 9.4x 1.6x M ax: 28.7x 25.0x Avg: 15.7x 1.4x 20.0x 1.2x 15.0x 1.0x

0.8x 10.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Telecom Relativ e Fw d. P/E (lhs) Telecom Fwd. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

11 Equity and Quant Strategy 11 June 2013

Utilities

Table 11: Relative Valuation (vs. S&P 500) for Utilities industries (based on data from 1986-5/31/2013) Price to Book (Relative) Price to Operating Cash Flow (Relative) Forward P/E (Relative) Utilities (# of co's) Current Average Implied upside Current Average Implied upside Current Average Implied upside Electric Utilities (13) 0.60 0.55 -8% 0.63 0.59 -6% 1.01 0.79 -21% Gas Utilities (2) 1.04 0.72 -31% 0.67 0.70 5% 1.40 0.98 -30% Multi-Utilities (14) 0.72 0.59 -18% 0.63 0.66 5% 1.13 0.88 -22% Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 28: Utilities P/B and Relative P/B, 1986-May 2013

0.9x 3.0x Current P/B: 1.6x 0.8x M i n : 1. 1x M ax: 2.8x 2.5x 0.7x Avg: 1.7x 0.6x 2.0x 0.5x 1.5x 0.4x 0.3x 1.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Utilities Relativ e P/B (lhs) Utilities P/B (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 29: Utilities P/OCF and Relative P/OCF, 1986-May 2013

1.5x 12.0x Current P/OCF: 6.4x 1.3x M in: 4.0x Max: 11.2x 10.0x 1.1x Avg: 6.4x 0.9x 8.0x 0.7x 6.0x 0.5x 0.3x 4.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Utilities Relative P/OCF (lhs) Utilities P/OCF (rhs)

Source: Compustat, BofA Merrill Lynch US Equity & US Quant Strategy

Chart 30: Utilities Fwd. P/E and Relative Fwd. P/E, 1986-May 2013

1.4x Current Fwd. P/E: 15.0x 20.0x M in: 8.3x 18.0x 1.2x M ax: 18.2x Avg: 12.6x 16.0x 1.0x 14.0x 0.8x 12.0x 0.6x 10.0x 0.4x 8.0x 86 88 90 92 94 96 98 00 02 04 06 08 10 12 Utilities Relativ e Fw d. P/E (lhs) Utilities Fw d. P/E (rhs)

Source: Compustat, First Call, BofA Merrill Lynch US Equity & US Quant Strategy

12 Equity and Quant Strategy 11 June 2013

Table 12: Company Distribution of S&P 500 by MSCITM-S&P Sector/Industry Classifications as of 05/31/2013

CONSUMER DISCRETIONARY 11.81% BEVERAGES 2.34% BLACKROCK INC 0.24% HEALTH EQUIP & SUPPLIES 2.13% GENERAL ELECTRIC CO 1.67% SOFTWARE 3.54% AUTO COMPONENTS 0.36% BEAM INC 0.07% E*TRADE FINANCIAL CORP 0.02% ABBOTT LABORATORIES 0.40% MACHINERY 1.79% ADOBE SYSTEMS INC 0.15% BORGWARNER INC 0.06% BROWN-FORMAN CORP B 0.07% FRANKLIN RESOURCES INC 0.15% BARD C.R. INC 0.05% CATERPILLAR INC 0.39% AUTODESK INC 0.06% DELPHI AUTOMOTIVE PLC 0.10% COCA-COLA CO 1.05% GOLDMAN SACHS GROUP INC 0.49% BAXTER INTL INC 0.26% CUMMINS INC 0.15% BMC SOFTWARE INC 0.04% GOODYEAR TIRE & RUBBER 0.03% COCA-COLA ENTERPRISES 0.07% INVESCO LTD 0.10% BECTON DICKINSON & CO 0.13% DEERE & CO 0.23% CA INC 0.06% JOHNSON CONTROLS INC 0.18% CONSTELLATION BRANDS IN 0.06% LEGG MASON INC 0.03% BOSTON SCIENTIFIC CORP 0.09% DOVER CORP 0.09% CITRIX SYSTEMS INC 0.08% AUTOMOBILES 0.51% DR PEPPER SNAPPLE GROU 0.06% MORGAN STANLEY 0.24% CAREFUSION CORP. 0.06% FLOWSERVE CORP 0.06% ELECTRONIC ARTS 0.05% FORD MOTOR CO 0.42% MOLSON COORS BREWING 0.05% NORTHERN TRUST CORP (IL) 0.09% COVIDIEN PLC 0.21% ILLINOIS TOOL WORKS INC 0.20% INTUIT INC 0.11% HARLEY-DAVIDSON INC 0.08% MONSTER BEVERAGE CORP 0.05% SCHWAB CHARLES CORP 0.15% DENTSPLY INTL 0.04% INGERSOLL-RAND PLC 0.11% MICROSOFT CORP 1.81% DISTRIBUTORS 0.08% PEPSICO INC 0.86% STATE STREET CORP 0.21% EDWARDS LIFESCIENCES CORP 0.05% JOY GLOBAL INC 0.04% ORACLE CORP 0.86% GENUINE PARTS CO 0.08% FOOD & STAPLES RETAILING 2.37% T ROWE PRICE GROUP INC 0.13% INTUITIVE SURGICAL INC 0.14% PACCAR INC 0.13% RED HAT INC 0.06% DIVERSIFIED CON. SVS 0.07% COSTCO WHOLESALE CORP 0.33% THE BANK OF NEW YORK MELL 0.24% MEDTRONIC INC 0.35% PALL CORP 0.05% SALESFORCE.COM 0.16% APOLLO GROUP INC 0.01% CVS CAREMARK CORP. 0.49% COMMERCIAL BANKS 2.86% ST JUDE MEDICAL INC 0.08% PARKER-HANNIFIN CORP 0.10% SYMANTEC CORP 0.11% BLOCK H & R INC 0.05% KROGER CO 0.12% BB&T CORP 0.16% STRYKER CORP 0.13% PENTAIR LTD. 0.08% MATERIALS 3.38% HOTELS REST LEIS 1.75% SAFEWAY INC 0.04% COMERICA INC (MI) 0.05% VARIAN MEDICAL SYSTEMS INC 0.05% SNAP ON INC 0.04% CHEMICALS 2.46% CARNIVAL CORP 0.10% SYSCO CORP 0.14% FIFTH THIRD BANCORP (OH) 0.11% ZIMMER HOLDINGS INC 0.09% STANLEY BLACK & DECKER 0.09% AIR PRODUCTS & CHEMICALS IN 0.13% CHIPOTLE MEXICAN GRILL IN 0.08% WALGREEN CO 0.28% FIRST HORIZON NATIONAL COR 0.02% HEALTH PROVIDERS & SVS 1.97% XYLEM INC 0.04% AIRGAS INC 0.05% DARDEN RESTAURANTS INC 0.05% WAL-MART STORES 0.86% HUNTINGTON BANCSHARES (O 0.04% AETNA INC 0.16% PROFESSIONAL SERVICES 0.11% CF INDUSTRIES HOLDINGS 0.08% INTL GAME TECHNOLOGY 0.03% WHOLE FOODS MARKET INC 0.12% KEYCORP 0.07% AMERISOURCEBERGEN CORP 0.09% DUN & BRADSTREET CORP 0.03% DOW CHEMICAL 0.28% MARRIOTT INTL A 0.07% FOOD PRODUCTS 1.78% M&T BANK CORP 0.09% CARDINAL HEALTH INC 0.11% EQUIFAX INC 0.05% E. I. DU PONT DE NEMOURS AN 0.36% MCDONALD'S CORP 0.66% ARCHER-DANIELS-MIDLAND 0.15% PNC FINL SERVICES GROUP 0.26% CIGNA CORPORATION 0.13% ROBERT HALF INTL INC 0.03% EASTMAN CHEMICAL CO 0.08% STARBUCKS CORP 0.32% CAMPBELL SOUP CO 0.05% REGIONS FINANCIAL CORP 0.09% DAVITA HEALTHCARE PARTNERS INC 0.07% ROAD & RAIL 0.95% ECOLAB INC 0.15% STARWOOD HOTEL & RESOR 0.09% CONAGRA FOODS INC 0.10% SUNTRUST BANKS INC (GA) 0.12% EXPRESS SCRIPTS HOLDING CO. 0.35% CSX CORP 0.18% FMC CORP 0.06% WYNDHAM WORLDWIDE COR 0.05% GENERAL MILLS INC 0.21% US BANCORP 0.45% HUMANA INC 0.09% KANSAS CITY SOUTHERN IN 0.08% INTL FLAVORS & FRAGRANCES 0.04% WYNN RESORTS LTD 0.07% HEINZ H.J. CO 0.16% WELLS FARGO & CO 1.36% LAB CORP OF AMERICA HLDGS 0.06% NORFOLK SOUTHERN CORP 0.17% LYONDELLBASELL INDUSTRIES 0.17% YUM! BRANDS INC 0.21% HERSHEY FOODS CORP 0.09% ZIONS BANCORP (UT) 0.04% MCKESSON CORP 0.18% RYDER SYSTEM INC 0.02% MONSANTO CO. 0.37% HOUSEHOLD DURABLES 0.35% HORMEL FOODS CORP 0.04% CONSUMER FINANCE 0.98% PATTERSON COS INC 0.02% UNION PACIFIC CORP 0.50% MOSAIC CO 0.12% GARMIN LTD 0.03% KELLOGG CO 0.11% AMERICAN EXPRESS CO 0.50% QUEST DIAGNOSTICS 0.07% TRADING CO. & DISTR 0.20% PPG INDUSTRIES INC 0.15% HARMAN INTL INDUSTRIES IN 0.02% KRAFT FOODS GROUP INC. 0.22% CAPITAL ONE FINANCIAL 0.24% TENET HEALTHCARE 0.03% FASTENAL CO 0.10% PRAXAIR INC 0.23% HORTON D.R. INC 0.05% MCCORMICK & CO 0.06% DISCOVER FINANCIAL SERVICE 0.16% UNITEDHEALTH GROUP INC 0.44% GRAINGER W.W. INC 0.11% SHERWIN-WILLIAMS CO 0.11% LEGGETT & PLATT 0.03% MEAD JOHNSON NUTRITION 0.11% SLM CORP 0.07% WELLPOINT INC 0.16% INFORMATION TECHNOLOGY 18.18% SIGMA-ALDRICH CORP 0.07% LENNAR CORP 0.04% MONDELEZ INTERNATIONAL 0.36% DIVERSIFIED FINANCIAL SVS 4.11% HEALTH CARE TECH 0.10% COMMUNICATIONS EQUIP 1.91% CONSTRUCTION MATERIALS 0.05% NEWELL RUBBERMAID INC 0.05% SMUCKER J.M. CO 0.07% BANK OF AMERICA CORP 1.01% CERNER CORP 0.10% CISCO SYSTEMS INC 0.88% VULCAN MATERIALS CO 0.05% PULTE GROUP INC 0.05% TYSON FOODS INC A 0.05% CITIGROUP INC 1.08% LIFE SCIENCES TOOLS 0.49% F5 NETWORKS INC 0.04% CONTAINERS & PACKAGING 0.18% WHIRLPOOL CORP 0.07% HOUSEHOLD PRODUCTS 2.12% CME GROUP INC 0.14% AGILENT TECHNOLOGIES INC 0.11% HARRIS CORP 0.04% BALL CORP 0.04% INTERNET & CATALOG RETAIL 1.13% CLOROX CO 0.07% INTERCONTINENTALEXCHANGE 0.09% LIFE TECHNOLOGIES CORP 0.09% JDS UNIPHASE CORP 0.02% BEMIS CO INC 0.03% AMAZON.COM INC 0.67% COLGATE-PALMOLIVE CO 0.35% JP MORGAN CHASE & CO 1.43% PERKINELMER INC 0.02% JUNIPER NETWORKS INC 0.06% MEADWESTVACO CORP 0.04% EXPEDIA 0.04% KIMBERLY-CLARK 0.26% LEUCADIA NATIONAL CORP (NY 0.06% THERMO FISHER SCIENTIFIC 0.22% MOTOROLA SOLUTIONS INC 0.11% OWENS-ILLINOIS INC 0.03% NETFLIX INC 0.09% PROCTER & GAMBLE 1.44% MCGRAW HILL FINANCIAL INC 0.11% WATERS CORP 0.06% QUALCOMM INC 0.75% SEALED AIR CORP 0.03% PRICELINE.COM INC 0.29% PERSONAL PRODUCTS 0.18% MOODY'S CORP 0.09% PHARMACEUTICALS 5.85% COMPUTERS & PERIPHERALS 4.10% METALS & MINING 0.55% TRIPADVISOR INC. 0.05% AVON PRODUCTS 0.07% NASDAQ OMX GROUP/THE 0.03% ABBVIE INC. 0.46% APPLE INC. 2.90% ALCOA INC 0.06% LEISURE EQUIP & PRODUCTS 0.14% ESTEE LAUDER COS. 0.11% NYSE EURONEXT 0.07% ACTAVIS INC 0.11% DELL INC 0.13% ALLEGHENY TECHNOLOGIES IN 0.02% HASBRO INC 0.03% TOBACCO 1.74% INSURANCE 4.33% ALLERGAN INC 0.21% EMC CORP 0.36% CLIFFS NATURAL RESOURCES 0.02% MATTEL INC 0.11% ALTRIA GROUP INC 0.50% ACE LIMITED 0.21% BRISTOL-MYERS SQUIBB 0.52% HEWLETT-PACKARD CO 0.33% FREEPORT MCMORAN COPPER 0.22% MEDIA 3.56% LORILLARD INC 0.11% AFLAC INC 0.18% FOREST LABORATORIES 0.06% NETAPP INC 0.09% NEWMONT MINING CORP 0.12% CABLEVISION SYSTEMS CO A 0.02% PHILIP MORRIS INTERNATIO 1.03% ALLSTATE CORP 0.16% HOSPIRA INC 0.04% SANDISK CORP 0.10% NUCOR CORP 0.10% CBS CORP B 0.20% REYNOLDS AMERICAN INC 0.11% AMERICAN INTL GROUP INC 0.45% JOHNSON & JOHNSON 1.62% SEAGATE TECHNOLOGY 0.09% UNITED STATES STEEL CORP 0.02% COMCAST CORP 0.73% ENERGY 10.59% AON PLC 0.14% LILLY ELI & CO 0.36% WESTERN DIGITAL CORP 0.09% PAPER & FOREST PRODUCT 0.14% DIRECTV 0.24% ENERGY EQUIP & SVS 1.77% ASSURANT INC 0.03% MERCK & CO INC 0.97% ELECTRONIC EQUIP, INSTR & C 0.45% INTL PAPER CO 0.14% DISCOVERY COMMUNICATIO 0.13% BAKER HUGHES INC 0.14% BERKSHIRE HATHAWAY B 1.43% MYLAN INC. 0.08% AMPHENOL CORP A 0.09% TELECOMMUNICATION SERVICES 2.77% GANNETT CO INC 0.03% CAMERON INTERNATIONAL 0.10% CHUBB CORP 0.16% PERRIGO CO 0.07% CORNING INC 0.16% DIVERSIFIED TELECOM 2.48% INTERPUBLIC GROUP COS 0.04% DIAMOND OFFSHORE DRILL 0.03% CINCINNATI FINANCIAL CORP 0.05% PFIZER INC 1.34% FLIR SYSTEMS INC 0.02% AT&T INC 1.32% NEWS CORPORATION 0.44% ENSCO PLC - CL A 0.10% GENWORTH FINANCIAL INC 0.04% INDUSTRIALS 10.15% JABIL CIRCUIT INC 0.03% CENTURYLINK INC 0.15% OMNICOM GROUP 0.11% FMC TECHNOLOGIES INC 0.09% HARTFORD FINL SERVICES GR 0.09% AEROSPACE & DEFENSE 2.47% MOLEX INC 0.03% FRONTIER COMMUNICATIONS C 0.03% SCRIPPS NETWORKS INTERA 0.04% HALLIBURTON CO 0.27% LINCOLN NATIONAL CORP 0.07% BOEING CO 0.46% TE CONNECTIVITY LTD. 0.13% VERIZON COMMUNICATIONS INC 0.95% TIME WARNER CABLE INC 0.19% HELMERICH & PAYNE INC 0.05% LOEWS CORP 0.10% GENERAL DYNAMICS 0.18% INTERNET SOFTWARE & SVS 2.31% WINDSTREAM CORP 0.03% TIME WARNER INC 0.37% NABORS INDUSTRIES LTD 0.03% MARSH & MCLENNAN COMPAN 0.15% HONEYWELL INTL INC 0.42% AKAMAI TECHNOLOGIES INC 0.06% WIRELESS TELECOM 0.29% VIACOM INC B 0.21% NATIONAL OILWELL VARCO 0.21% METLIFE INC 0.33% L-3 COMMUNICATIONS HOLDINGS 0.05% EBAY INC. 0.43% CROWN CASTLE INTL CORP 0.14% WALT DISNEY CO 0.78% NOBLE CORP 0.07% PRINCIPAL FINANCIAL GROUP 0.07% LOCKHEED MARTIN 0.19% GOOGLE INC 1.60% SPRINT NEXTEL CORP 0.15% WASHINGTON POST CO B 0.01% ROWAN COS PLC 0.03% PROGRESSIVE CORP 0.10% NORTHROP GRUMMAN CORP 0.13% VERISIGN INC 0.05% UTILITIES 3.23% MULTILINE RETAIL 0.82% SCHLUMBERGER LTD 0.67% PRUDENTIAL FINANCIAL INC 0.22% PRECISION CASTPARTS CORP 0.22% YAHOO INC 0.18% ELECTRIC UTILITIES 1.82% DOLLAR GENERAL CORP 0.11% OIL GAS & CONSUMABLE FUE 8.82% TORCHMARK CORP 0.04% RAYTHEON CO 0.15% IT SVS 3.75% AMERICAN ELECTRIC POWER 0.15% DOLLAR TREE INC 0.07% ANADARKO PETROLEUM CO 0.30% TRAVELERS COS INC 0.22% ROCKWELL COLLINS 0.06% ACCENTURE PLC 0.36% DUKE ENERGY CORP 0.32% FAMILY DOLLAR STORES INC 0.04% APACHE CORP 0.22% UNUM GROUP 0.05% TEXTRON INC 0.05% AUTOMATIC DATA PROCESS 0.23% EDISON INTL 0.10% KOHL'S CORP 0.07% CABOT OIL & GAS A 0.10% XL GROUP PLC 0.06% UNITED TECHNOLOGIES CORP 0.55% COGNIZANT TECH SOLUTIO 0.13% ENTERGY CORP 0.08% MACY'S INC 0.13% CHESAPEAKE ENERGY COR 0.08% REITS 2.12% AIR FREIGHT & LOGISTICS 0.73% COMPUTER SCIENCES 0.05% EXELON CORP 0.18% NORDSTROM INC 0.06% CHEVRON CORP 1.64% AMERICAN TOWER CORP A 0.21% CH ROBINSON WORLDWIDE INC 0.06% FIDELITY NATIONAL INFORM 0.09% FIRSTENERGY CORP 0.11% PENNEY J.C. INC 0.02% CONOCOPHILLIPS 0.51% APARTMENT INVESTMENT & M 0.03% EXPEDITORS INTL OF WA INC 0.06% FISERV INC 0.08% NEXTERA ENERGY INC 0.22% TARGET CORP 0.31% CONSOL ENERGY INC 0.05% AVALONBAY COMMUNITIES INC 0.11% FEDEX CORP 0.19% INTL BUSINESS MACHINES C 1.50% NORTHEAST UTILITIES 0.09% SPECIALTY RETAIL 2.34% DENBURY RESOURCES INC 0.05% BOSTON PROPERTIES INC 0.11% UNITED PARCEL SERVICE INC B 0.42% MASTERCARD INC A 0.41% PEPCO HOLDINGS INC 0.04% ABERCROMBIE & FITCH COM 0.03% DEVON ENERGY CORP 0.15% EQUITY RESIDENTIAL 0.12% AIRLINES 0.07% PAYCHEX INC 0.08% PINNACLE WEST CAPITAL (AZ) 0.04% AUTONATION INC 0.01% EOG RESOURCES 0.24% HCP INC 0.15% SOUTHWEST AIRLINES CO 0.07% SAIC INC 0.03% PPL CORP 0.12% AUTOZONE INC 0.10% EQT CORPORATION 0.08% HEALTH CARE REIT INC 0.13% BUILDING PRODUCTS 0.05% TERADATA CORP 0.06% SOUTHERN CO 0.26% BED BATH & BEYOND INC 0.11% EXXON MOBIL CORP 2.78% HOST HOTELS & RESORTS INC 0.09% MASCO CORP 0.05% TOTAL SYSTEM SERVICES I 0.03% XCEL ENERGY INC 0.10% BEST BUY CO INC 0.05% HESS CORP 0.14% KIMCO REALTY CORP 0.06% COMMERCIAL SVS 0.55% VISA INC 0.63% GAS UTILITIES 0.10% CARMAX INC 0.07% KINDER MORGAN INC 0.16% MACERICH CO 0.06% AVERY DENNISON CORP 0.03% WESTERN UNION CO 0.06% AGL RESOURCES 0.03% GAMESTOP CORP A 0.03% MARATHON OIL CORP 0.17% PLUM CREEK TIMBER CO 0.05% CINTAS CORP 0.03% OFFICE ELECTRONICS 0.07% ONEOK INC 0.06% GAP INC 0.08% MARATHON PETROLEUM CO 0.19% PROLOGIS INC 0.14% IRON MOUNTAIN INC 0.04% XEROX CORP 0.07% INDEPENDENT POWER 0.11% HOME DEPOT INC 0.81% MURPHY OIL CORP 0.08% PUBLIC STORAGE 0.15% PITNEY BOWES INC 0.02% SEMICONDUCTORS 2.05% AES CORP 0.05% L BRANDS INC 0.08% NEWFIELD EXPLORATION C 0.02% SIMON PROPERTY GROUP 0.36% REPUBLIC SERVICES INC 0.07% ADVANCED MICRO DEVICES 0.02% NRG ENERGY 0.06% LOWE'S COS INC 0.32% NOBLE ENERGY INC 0.14% VENTAS INC 0.14% STERICYCLE INC 0.06% ALTERA CORP 0.07% MULTI-UTILITIES 1.20% O'REILLY AUTOMOTIVE 0.08% OCCIDENTAL PETROLEUM 0.51% VORNADO REALTY TRUST 0.09% THE ADT CORP. 0.06% ANALOG DEVICES INC 0.10% AMEREN CORP 0.06% PETSMART INC 0.05% PEABODY ENERGY CORP 0.04% WEYERHAEUSER CO 0.11% TYCO INTL 0.11% APPLIED MATERIALS INC 0.13% CENTERPOINT ENERGY INC 0.07% ROSS STORES INC 0.10% PHILLIPS 66 0.28% REAL ESTATE M&D 0.05% WASTE MANAGEMENT INC 0.13% BROADCOM CORP A 0.13% CMS ENERGY CORP 0.05% STAPLES INC 0.07% PIONEER NATURAL RESOUR 0.13% CBRE GROUP INC. 0.05% CONSTR & ENGINEERING 0.16% FIRST SOLAR INC 0.02% CONSOLIDATED EDISON INC 0.11% TIFFANY & CO 0.06% QEP RESOURCES 0.03% THRIFTS & MORTGAGE 0.06% FLUOR CORP 0.07% INTEL CORP 0.82% DOMINION RESOURCES INC 0.22% TJX COS INC 0.25% RANGE RESOURCES CORP 0.08% HUDSON CITY BANCORP 0.03% JACOBS ENGINEERING GROUP INC 0.05% KLA-TENCOR CORPORATION 0.06% DTE ENERGY CO 0.08% URBAN OUTFITTERS 0.03% SOUTHWESTERN ENERGY C 0.09% PEOPLE'S UNITED FINANCIAL IN 0.03% QUANTA SERVICES INC 0.04% LAM RESEARCH CORP 0.05% INTEGRYS ENERGY GROUP INC 0.03% TEXTILES APPAREL & LUX 0.70% SPECTRA ENERGY CORP 0.14% HEALTH CARE 12.63% ELECTRICAL EQUIP 0.67% LINEAR TECHNOLOGY CORP 0.06% NISOURCE INC 0.06% COACH INC 0.11% TESORO CORP 0.06% BIOTECHNOLOGY 2.08% EATON CORP PLC 0.21% LSI CORPORATION 0.03% PG&E CORPORATION 0.14% FOSSIL INC 0.04% THE WILLIAMS COMPANIES 0.16% ALEXION PHARMACEUTICALS I 0.13% EMERSON ELECTRIC CO 0.28% MICROCHIP TECHNOLOGY IN 0.05% PUBLIC SERVICE ENTERPRISE G 0.11% NIKE INC B 0.31% VALERO ENERGY CORP 0.15% AMGEN INC 0.52% ROCKWELL AUTOMATION INC 0.08% MICRON TECHNOLOGY INC 0.08% SCANA CORP 0.05% PVH CORP 0.06% WPX ENERGY INC. 0.03% BIOGEN IDEC INC 0.39% ROPER INDUSTRIES INC 0.08% NVIDIA CORP 0.06% SEMPRA ENERGY 0.13% RALPH LAUREN CORP 0.07% FINANCIALS 16.72% CELGENE CORP 0.36% IND CONGLOMERATES 2.39% TERADYNE INC 0.02% TECO ENERGY INC 0.02% VF CORP 0.11% CAPITAL MARKETS 2.21% GILEAD SCIENCES INC 0.57% 3M CO 0.48% TEXAS INSTRUMENTS INC 0.27% WISCONSIN ENERGY CORP 0.06% CONSUMER STAPLES 10.55% AMERIPRISE FINANCIAL INC 0.11% REGENERON PHARMACEUTICA 0.13% DANAHER CORP 0.25% XILINX INC 0.07% Source: BofA Merrill Lynch US Equity & Quant Strategy

f

13 Equity and Quant Strategy 11 June 2013

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14 Equity and Quant Strategy 11 June 2013

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