2015 Investment Commentary...2015 Investment Commentary Summer Update 1 Table of Contents:...

2015 Investment CommentarySummer Update

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Table of Contents:

Objectivity² Portfolios: Overview & Strategy

The Next 5 Years…Getting & Staying Ahead of the Curve An Update on our Thoughts

What’s Next?

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O² Low Volatility AllocationOur goal with this portfolio is steady growth of capital with a primary focus on capital

preservation and risk mitigation. We view this portfolio as an investment alternative

to low yielding CDs and short term bonds, for our clients’ most conservative pools of

capital.

Target Allocation

20% Equity, 20% Fixed, 50% Strategic, 10% Cash Alternatives

Current Allocation

20% Equity, 20% Fixed, 50% Strategic, 10% Cash Alternatives

Custom Benchmark Allocation

20% Equity (14% S&P 500, 4% MSCI EAFE, 2% MSCI Emerging)

80% Fixed Income (80% Barclays Aggregate Bond Index)

Performance Objectives (over a 5 year period & net of fees):

• 3-5% Target Return Annualized over 5 Year Market Cycle

• CPI + 1%

• Returns in line with Custom Benchmark with Lower Volatility

• Provide daily liquidity

O² Low Volatility 2015 Trades

May

Removed Blackrock Equity Dividendfrom 7.5% to 0%

Added Henderson Int’l Opportunitiesfrom 0% to 5%

Increase US Minimum Volatility ETF (USMV)from 12.5% to 15%

January

Reduced WF/GMO Absolute Return Advantage Fund from 30% to 20%

Decreased Cash Alternatives from 15% to 10%

Increased Alliance Bernstein Select Long Short Fund from 5% to 15%

Increased Blackrock Global Long Short Equity Fund from 10% to 15%

Please be advised that there is no assurance that these objectives will be met. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Past performance is not indicative of future results. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. Please keep in mind that CDs offer FDIC or FSLIC insurance and a fixed rate of return whereas both principal and yield of investment securities will fluctuate with changes in market conditions.

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O² Moderate AllocationThis portfolio is built to balance our views on capital preservation and growth, and

is an alternative to the traditional “60/40 Balanced” portfolio you will see on many

investment platforms at other advisory firms.

Target Allocation

50% Equity, 15% Fixed, 34% Strategic, 1% Cash

Current Allocation






• 5-7% Target Return Annualized over 5 year Market Cycle

• CPI + 3%


O² Moderate 2015 Trades

May


Added Henderson Int’l Opportunitiesfrom 0% to 5%

January


Removed Mainstay Marketfield Fundfrom 7.5% to 0%

Increased Alliance Bernstein Select Long/Short Fund from 7.5% to 15%

Added US Minimum Volatility ETF (USMV) from 0% to 6%

Please be advised that there is no assurance that these objectives will be met. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Past performance is not indicative of future results. Investing always involves risk and you may incur a profit or loss. No investment strategy can guarantee success. International investing involves additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability.These risks are greater in emerging markets.

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O² Growth AllocationThis allocation is built to provide our client’s with the most growth opportunities, while

still adhering to our risk management philosophies.

Target Allocation


Current Allocation






• 7-9% Target Return Annualized over a 5 Year Market Cycle

• CPI + 5%


O² Growth 2015 Trades

May


Added Nuveen Int’l Growthfrom 0% to 7.5%

January


Removed Mainstay Marketfield Fund from 7.5% to 0%

Increased Alliance Bernstein Select Long Short Fund from 8.5% to 15%

Added Nuveen Large Cap Core Plus (NLPIX)from 0% to 5.5%


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O² All Equity AllocationThis allocation is built to provide our client’s with an opportunity to seek returns in

excess of the S&P 500 and MSCI World indices, with a goal of providing less volatility

Target Allocation


Current Allocation





• Return in Excess of S&P 500 & MSCI World Market Indices

• Returns in Excess of Custom Benchmark with Lower Volatility

O² All Equity 2015 Trades

May


Added Nuveen Int’l Growthfrom 0% to 11.75%

January

Removed Mainstay Marketfield Fund from 11.75% to 0%

Added Nuveen Large Cap Core Plus (NLPIX)from 0% to 11.75%


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The Next Five Years….Getting & Staying Ahead of the Herd (A Mid-Year Update)

The Fed Embarks on a New Course (January 2015)

The Fed’s current Dot Plot projection calls for a cumulative 275 basis point increase in the funds rate through the end of 2016. If the Fed raises by 25 bps every meeting, as it did back in the last tightening cycle in 2004, it would take 11 moves that would start in July of next year. One must note the difference between an interest rate policy aimed at fighting an overheated economy, inflationary pressures or a bubble, is far different than a policy aimed at realigning rates for a durable, positive growth environment.

Bonds sell off as interest rates begin to rise (minimize Fixed Income exposures)

It has been our thesis, since May 2013, that fixed income had hit its peak and thus the risk/reward of owning traditional bonds had been greatly diminished. In addition, we have concerns about the liquidity in the fixed income markets and what transpires if we get increased selling pressure thru an exit door that has become more narrow.

Our benchmark for Fixed Income, the Barclay’s Aggregate Bond Index ETF (AGG), finished the first half of the year in negative territory , down -0.1%

The 20 Year Treasury ETF (TLT) finished the first six months down -5.29%

Our Fixed Income manager is positive YTD and has outperformed the index thru active duration and credit management, by 90 bps.

Being underweight fixed income, across all allocations, has been additive to performance

A Prudent Fed

The market currently assigns around a 40% probability to

a 25bp hike in September, but slightly less than a 1-in-3

probability of 50bp cumulative hikes by the end of this

year.

Our US Economics team has changed its central

expectation on the timing of the first hike, which it now

expects in December. From there, they expect the

FOMC to raise rates by 100bp per annum, with the Fed

Funds target range reaching 1.25-1.50% at the end of

2016 and 2.25-2.50% at the end of 2017 – roughly half

way between the dots and the forwards.

We maintain our forecast for TY10 reaching 2.75% at the

end of this year, which is 35bp above the forwards.

Goldman Sachs Global Market Daily

June 18th, 2015

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The Next Five Years….Getting & Staying Ahead of the Herd

Stocks continue to move higher despite having more volatility than the previous 5 years and returns are muted due to current valuations (January 2015)

Stocks are no longer cheap but relative to everything else, they aren’t expensive either

Stocks at 17x earnings look reasonable relative to 10 year US Treasury bonds trading at an equivalent of 42x, investment grade bonds at 28x and high yield bonds at 19x

Own both passive indexes that can provide pure beta exposure alongside active managers that are flexible, nimble enough to be tactical and unconstrained to a benchmark like return.

Thus far the call for higher volatility & muted returns has proven accurate

The All Equity Portfolio (the equity sleeve of our Growth portfolio) has outperformed the S&P 500 benchmark for the first 6 months of the year

The first half of 2015 saw more volatility, as measured by days the S&P moved by +/- 1%, than we saw in the first halves of 2013 and 2014 combined

While returns on the S&P have been roughly flat YTD, we still anticipate mid to high single digit returns for 2015

Bob Doll on Markets During Rising Rates:

• Equity markets generally outperformed Treasuries and corporate bonds.

• Large cap equities outperformed small caps. Larger companies tend to have more stable earnings trends, and earnings become increasingly important in the second half of economic cycles.

• Global equities outperformed U.S. equities. U.S. stock prices usually become more volatile and experience a downturn sometime during rate increase cycles. Since many regions of the world are still in a monetary policy easing mode, we expect some near-term outperformance by non-U.S. markets. However, we continue our favorable long-term view toward U.S. equities.

Opinions expressed are those of Bob Doll and not necessarily Raymond James. Bob Doll is not affiliated with Raymond James.

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The Next Five Years….Getting & Staying Ahead of the Herd

Here are our thoughts on the next 3-5 years and why we maintain our current positioning:

We remain overweight Strategic Managers that are benchmark agnostic and long/short beta managers which can provide reasonable upside while providing adequate hedges in more severe market dislocations. Consider the following: (January 2015)

Where you start is an important aspect of your return; For example history tells us that investors who have a five year time frame, dipping your toes in the equity market when the trailing P/E multiple is in 10x-14x range generates an average price return (7.1%) that is double what an investor typically garners when she begins with a multiple north of 16x. In fact, between 18x and 20x, the mean return is less than 3% at an annual rate over a five year time interval.

We view our strategic allocations as an alternative to fixed income in this rising rate environment. We began decreasing fixed income exposure in May of 2013 and utilizing those dollars to increase our allocations to Strategic Managers.

The Strategic allocations of all three models have outperformed the Barclay’s Aggregate Bond Index (symbol: AGG) YTD. Individually the returns are the following:

Our Core Absolute Return Manager (WABIX) outperformed by 102 bps

Our Global Macro Long/Short Manager (BDMIX) underperformed 90 bps

Our Domestic Long Short Manager (ASYLX) outperformed by 10 bps

This report is not a replacement for the official customer account statements from Raymond James. Invidvidual performance may vary. Past performance does not guarantee future returns. Investment advisory fees (if applicable) may or may not have been deducted in performance calculations. The returns of various indexes are provided as bench marks for comparison purposes. This data is furnished to you as a courtesy and for information purposes only.

Since the May 2013 low in interest rates, our

Strategic Managers have significantly

outperformed the Barclay’s Aggregate Bond

Index:

• Core Absolute Return (WABIX) by 460 bps

• Global Macro Long/Short (ASYLX) by 1130 bps

• Domestic Long/Short (BDMIX) by 1960 bps

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What’s Next?

There are two major themes we have going into the 2nd half of the year,

which we provide support for in the following charts and outline below:

There’s much concern about when The Fed begins to raise rates and

what the impacts are to the equity markets. While this might create

volatility and the potential for a long anticipated 10% correction, we

would view this as an opportunity to add equity exposure across all

of our portfolios. From our internal research, it appears that while

equities may go through a period of muted returns & higher volatility,

the first several moves by the Fed have simply not derailed equity

market returns over the past 30 years. All in all, this continues to

support our thesis that stocks look more attractive than bonds/cash

over the next 3-5 years.

International Markets (particularly Europe and Japan) seem to be

more attractively valued from a risk/return perspective than the US

and are also in periods of strong government intervention and

support (a period we are thankfully ending here in the US). Given the

cyclicality of domestic vs foreign outperformance, we believe that

International markets have shifted into the lead (beginning this year)

and could be at the start of a cycle that typically lasts 3-10 years.

• Since 1983, the S&P has had the following performance averages after the first rate move to increase rates by the Federal Reserve:

• 250 Days after first increase +2.6%

• 500 Days after first increase +14.4%

• Global Equity Markets, as measured by the MSCI All World Index, have averaged 9.1% since 1970. In the 14 time periods during that span where the 10 Year Treasury has risen, by at least 100 bps, the average return of global stocks has been 17.2%.

• The S&P and MSCI EAFE typically go in 2 to 10 year cycles of outperforming each other. The S&P outperformed from November 2007 thru December 2014 by 63.5%. We believe this cycle has shifted in favor of International stocks, which have outperformed by 500 bps YTD vs. the S&P, and could be the start of a multi-year trend.

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| 28USSMID Value CS 1Q15

As of March 31, 2015An investor cannot invest directly in an index and its performance does not reflect the performance of any AB portfolio. The unmanaged index does not reflect fees and expenses associated with the active management of a portfolio.*Total percentage-point change in nominal 10-year US Treasury bond yield†Average annualized global stock returns from January 1, 1970, through March 31, 2015Source: Bloomberg, MSCI, S&P Dow Jones and AB

Annualized Global Stock Returns in Periods when Yields Rose

Stocks Have Usually Done Well when Bond Yields Have Risen

15.5

31.731.2

14.818.7

30.1

10.310.1

3.0

(2.8)

21.9

41.5

20.3

9.9

2.2

7/12

–3/1

5

8/10

–3/1

1

12/0

8–12

/09

9/02

–6/0

6

10/0

1–3/

02

9/98

–1/0

0

11/9

6–3/

97

12/9

5–8/

96

9/93

–11/

94

7/89

–4/9

0

2/88

–2/8

9

8/86

–9/8

7

10/8

2–6/

84

12/7

6–10

/81

1/71

–9/7

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Rising-RateCycles

Change inTreasury Yields(Pct. Pts.)* 2.4 7.8 3.1 2.7 1.1 1.2 2.5 1.4 0.9 2.2 1.2 1.5 1.6 1.0 0.5

9.1

17.2

Avg. Long-Term

Return†

Avg. Rising-Rate

Return

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Europe: EAFE vs S&P 500 outperformance Start date End date Outperformer Excess Return

April 30, 1971 March 30, 1973 MSCI EAFE 62.2%

March 30, 1973 October 31, 1976 S&P 500 30.5%

October 31, 1976 October 31, 1980 MSCI EAFE 90.0%

October 31, 1980 October 31, 1982 S&P 500 34.1%

October 31, 1982 February 28, 1989 MSCI EAFE 409.4%

February 28, 1989 August 31, 2000 S&P 500 490.6%

August 31, 2000 November 30, 2007 MSCI EAFE 60.5%

November 30, 2007

December 31, 2015 S&P 500 63.5%

December 31, 2014 February 28, 2015 MSCI EAFE 3.95%

Source: Henderson, Bloomberg as of 2/28/15 Past performance is not a guarantee of future results. Please refer to the final slide for important risk information.

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Portfolio Strategy Market Outlook

© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.

International Headquarters:The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 5

Executive Summary

Struggles to run appreciably higher in the near term due to:

o Lingering effects of Greece o Interest rates are moving higher o Focus on the Fed—uncertainty could hold stocks back o Dollar and the impact on earnings o Valuations are not cheap; profit margins are high and

productivity is down- tough to expand the multiple absent some change in the above

o Q3 historically the weakest quarter of the year (see chart)

Ripe for pullback (2%-9.9%) or correction 10%+

o Odds favor the pullback over correction (if it develops) o ~1940: worst case downside (16.5x; -5.9% from 2063) o More likely somewhere near 2000 -4.4%; ~17% T12

numbers using estimates for Q2

Higher high expected this year:

o Greece will finally have some sort of outcome (for now) o U.S. economy set to improve o Europe—economy ok (at a low rate) o China’s economy—not sure, but they are stimulating o Lenient central banks—ECB, BOJ, and PBOC- the Fed will

"crawl" o Dollar & crude stabilize; earnings improve o 2016 election year—expect government spending to pick

up

1st Q 2nd Q 3rd Q 4th Q Full Year

3.3% 3.2%

0.4%

4.5%

12.1%

1.8%

5.2%

1.1%

4.9%

13.7%

1.0% 0.3%1.2%

S&P 500 Quarterly Total Returnssince 1970

Historical Average Last Year (2014) Current Year (2015)

Q3 most challenginghistorically

18-Month Fair Value Ranges: (downside apply current T12M; upside apply 2016E- (using 2016 $125 instead of $133 consensus)

o Base: P/E 16.5-18x: 1940-2250 (-5.9% to +9% before 2% yield- 2062-6/30/15)

o Bull: P/E 17-19x: 1996- 2375 (-3.2% to +15%) o Bear: P/E 15.5-17x: 1822-2125 (-11.6% to +3%)

Source: FactSet; Raymond James Equity Portfolio & Technical Strategy.

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Portfolio Strategy Market Outlook

© 2015 Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. All rights reserved.

International Headquarters:The Raymond James Financial Center | 880 Carillon Parkway | St. Petersburg, Florida 33716 | 800-248-8863 17

Global Asset Class Returns

Data Thru 6/30/15

Indices Close Q2 '15 YTD 12 Mo

S&P 500 2063.11 -0.23% 0.20% 5.25%

Dow Jones 17619.51 -0.88% -1.14% 4.71%

NASDAQ Composite 4986.87 1.75% 5.30% 13.13%

Russell 2000 1253.95 0.09% 4.09% 5.11%

NYSE Alerian MLP 396.93 -7.45% -13.60% -24.28%

MSCI U.S. REIT 1030.08 -11.28% -7.85% 0.01%

Barclays Int. G/C Bond 110.57 -1.10% -0.07% -0.29%

MSCI The World 1735.61 -0.30% 1.52% -0.45%

MSCI EAFE (Developed) 1842.46 -0.37% 3.81% -6.57%

MSCI Emerging Markets 972.25 -0.24% 1.67% -7.47%

Euro Stoxx 3424.30 -3.92% 0.21% -13.68%

Japan Nikkei 225 20235.73 3.26% 13.62% 10.49%Commodities

Crude Oil ($/bbl) 59.47 24.94% 11.64% -43.56%

Natural Gas ($/btu) 2.83 7.27% -2.21% -36.22%

Gold ($/ozt) 1171.80 -0.96% -1.04% -11.36%Currencies

Euro per US $ 0.90 -3.61% 8.60% 22.88%

Japanese Yen per US $ 122.37 2.03% 2.06% 20.79%Sovereign Bond Yields Current

U.S. 10-Year Treasury 2.33

S&P 500 Metrics Current

Dividend Yield 2.14

P/E Ratio - Next 12 Mo. 16.41

P/E Ratio - Last 12 Mo. 17.67

Price Change

10 Yr Avg

3.21

15 Yr Avg

17.22

15.52

1.98

Source: FactSet; Raymond James Equity Portfolio & Technical Strategy

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Global Asset Class ReturnsLast 12 Months

-4.0%

-2.0%

0.0%

2.0%

4.0%

Global Asset Class ReturnsQ2 2015

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DisclaimersThe views in this commentary do not take into account the particular investment objectives, financialsituations, or needs of every individual client.

Investments are subject to market risk, including possible loss of principal. International investing involvesadditional risks such as currency fluctuations, differing financial accounting standards, and possible politicaland economic instability. These risk are greater in emerging markets.

Links are being provided for information purposes only. Raymond James is not affiliated with and does notendorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is notresponsible for the content of any website or the collection or use of the information regarding any web site’susers and/or members.

Commodities are volatile investments and should only form a small part of a diversified portfolio. There maybe sharp fluctuations even during periods when prices are rising overall. The price of gold has been subject todramatic price movements over short periods of time and may be affected by elements such as currencydevaluations or revaluations, economic conditions within an individual country, trade imbalances, or trade orcurrency restrictions between countries. As a result, the market prices of securities of companies mining orprocessing gold may also be affected.

The S&P 500 is an unmanaged index of 500 widely held stocks. It is not possible to invest directly in anindex.

Dividends are not guaranteed and can fluctuate.

Past performance does not guarantee future results. There is no assurance that these trends will continue.

Raymond James & Associates, Inc. member New York Stock Exchange/SIPC

Views expressed in this newsletter are the current opinion of the author and are subject to change withoutnotice.

Raymond James &Associates is not affiliated with Gluskin Sheff, Legg Mason, or Marketfield.

There is an inverse relationship between interest rate movements and bond prices. Generally, when interestrates rise, bond prices fall and when interest rates fall, bond prices rise.

The MSCI World Index is designed to measure the equity market performance of developed markets. Ittracks 23 countries including the Unites States.

The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally consideredrepresentative of the international stock market. These international securities involve additional risks suchas currency fluctuations, differing financial accounting standards and possible political and economicinstability.

Keep in mind that indexes are unmanaged and individuals cannot invest directly in any index. Index performance does not include transaction costs or other fees, which will affect the actual investment performance. Individual investor results will vary.

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DisclaimersU.S. Treasury securities are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value.

Material is provided for informational purposes only and does not constitute a recommendation. It has been obtained from sources believed to be reliable, but accuracy is not guaranteed.

Alternative investment strategies involve greater risks and are only appropriate for the most sophisticated, knowledgeable and wealthiest of investors.

Technical Analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume.

Technical analysts do not attempt to measure a security’s intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

Asset allocation and diversification do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal.

The Consumer Price Index (CPI) is a measure of the average change in consumer prices over time of goods and services purchased by households; it is determined monthly by the U.S. Bureau of Labor Statistics. Investors cannot invest directly in an index.

P/E is the price of the stock divided by its earnings per share.

Alpha compares a fund’s actual returns with those that would be expected by its beta. A positive alpha means that for the given amount of volatility, the fund returned more than expected when compared to the benchmark index. Alpha and beta measures are historical.

Beta compares volatility of a security with an index, such as the S&P 500. A beta of one means the security has volatility equal to that of an index.

Standard deviation is a risk statistic used to measure the amount of volatility of the return observations around the portfolio’s average return.

VIX is the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a widely used measure of market risk. Gross Domestic Product (GDP) is the annual total market value of all final goods and services produced domestically by the U.S. The charts above are for illustrative purposes only.

Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC360 Concord St., Ste 210Charleston, SC 29401843-720-3527

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