BoyarMiller Breakfast Forum: The Current State of the Capital Markets 2012

www.boyarmiller.com
The Current State
of the
Capital Markets
Breakfast Forum
September 12, 2012

This presentation is provided by AllianceBernstein L.P. Bernstein Global Wealth Management is a unit of AllianceBernstein L.P. This presentation booklet has been provided to you
for use in a private and confidential meeting to discuss a potential or existing investment advisory relationship. This presentation is not an advertisement and is not intended for
public use or distribution beyond our private meeting. Bernstein does not provide tax, legal or accounting advice. In considering this material, you should discuss your individual
circumstances with professionals in those areas before making any decisions.
Michael U. Ellington, Jr.
Senior Vice President
Senior Manager Director
Equity and the Public Markets

Bernstein Adv_All 4Q11_PRINTBernstein.com
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One business: investment research and management
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 Client Confidentiality
 Integrity and Honesty
 Best-in-Class Research
 Success Is Meeting Your Goals

FAGC 2Q 2012Bernstein.com
(30)
0
30
60
90
Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12
Percent
89%
25%
36%
(16)
%
(23)
%
(13)
%
(24)
%
Cumulative Returns
2009–2012: 48.5%
YTD 2012: 5.7%
Stocks Are Up Despite Shifting Sentiment…
Past performance does not guarantee future results.
*Total returns represented by the MSCI All Country World Index (in USD)
Source: FactSet and AllianceBernstein
Global Stock Returns*

37
20
16
1
(12)
(29)
…But Investors Prefer Safety Above All Else
Price/Earnings Change*
Since Jan 2011
+41%
+30%
+10%
(41)%
(20)%
(25)%
*12-month forward earnings
Source: FactSet, S&P and AllianceBernstein
YoY Earnings Growth
Percent
Telecom
Utilities
Healthcare
Consumer
Discretionary
Technology
Energy

2012 Cap MarketsBernstein.com
…As Anxieties Keep Rates Near Generational Lows
As of August 17, 2012
Source: Bloomberg, US Department of the Treasury and AllianceBernstein
10-Year US Treasury Yields
0
6
12
18
60 65 70 75 80 85 90 95 00 05 10
Percent
1.8%

4.9%
2.9%
2.5%
2.4%
0.0%
(0.5)%
Emerging
Markets
Japan
US
Global
UK
Global Economic Growth Remains Slow and Faces
Challenges
As of June 30, 2012
Source: AllianceBernstein
AllianceBernstein 2012 Real GDP Growth Forecasts
 No near-term resolution
 Austerity measures impede growth
 Strong consumer/corporate balance
sheets
 Mixed economic signals
 Slowdown in China and Brazil
Euro Area

Regional
 Austerity/growth balance
 Need for deeper fiscal
integration
 Debt monetization/eurobonds
European Sovereign-Debt Crisis: No Quick Solution
GDP Growth Forecast 2012E: Consensus (%)
(1.8)
(1.6)
(0.9)
(0.4)
0.3
0.9
Spain
Italy
0
2
4
6
8
08 09 10 11 12
Percent
Italy
Sovereign 10-Year Bond Yields
Spain
Germany
Euro Area
 The situation in the euro area has many
aspects and requires significant policy action to
resolve
 The economic picture varies country by
country
 Fears persist in sovereign bond markets
France
Germany
Netherlands
As of June 30, 2012
Source: Bloomberg and AllianceBernstein
Country Specific
 Bloated deficit and debt levels
 Uncompetitive labor force
 Hostile economic environments

AllianceBernstein.com
US Consumers Have Reduced Debt Burdens
Household Financial Obligations
Ratio
15
16
17
18
19
91 93 95 97 99 01 03 05 07 09 11
Ratio(×)
The amount of disposable income used for financial payments; through June 30, 2011
Source: Haver Analytics, McGraw-Hill Construction, US Bureau of Labor Statistics, US Federal Reserve and AllianceBernstein

Job Creation Rising After Slow Recovery
Employment growth through February 29, 2012; financial obligations ratio through December 31, 2011.
Source: Haver Analytics, McGraw-Hill Construction, US Bureau of Labor Statistics, US Federal Reserve and AllianceBernstein
Household Employment
Rolling Six-Month Total
(6)
(3)
0
3
91 94 97 00 03 06 09 12
MillionsofJobs

2
4
6
8
10
12
14
82 86 90 94 98 02 06 10
Percent
Strong Balance Sheets: Potential for Shareholder Friendly
Uses
US cash/assets as of December 31, 2011
S&P 500 Index ex-financials
Source: FactSet, Standard & Poor’s and AllianceBernstein
US Cash/Assets
Uses of Cash:
 Increased
dividends
 Share buybacks
 Capital investment
 M&A

Earnings Growth Slowing but Still Positive
Earnings per share data as of July 31, 2012
Consensus earnings estimates 1Q:2012 through 1Q:2013
Source: FactSet, Standard & Poor’s and AllianceBernstein
S&P 500 Quarterly Earnings Per Share*
USD
(30)
(20)
(10)
0
10
20
30
Mar 07 Mar 09 Mar 11 Mar 13
2Q:
2012
Estimates

As of July 31, 2012
Data do not represent past performance and are not a promise of actual future results or a range of future results. Based on 10,000 simulated trials using the Bernstein
Capital Markets Engine; Bonds are represented by 60% global investment-grade bonds and 40% global sovereign bonds; stocks are represented by a universe similar to the MSCI
World Index. Both are reported in and hedged into US dollars.
Source: Barclays Capital, Bloomberg, MSCI and AllianceBernstein
Estimated Annual Return Premium: Stocks over Bonds
5.1%
2.5%
July 31, 2012
Normal
Stocks Have High Expected Returns Relative to
Bonds
Next 10 Years

We’ve Seen This Before
THE DEATH
OF EQUTIES
“How inflation
is destroying
the stock
market”
August 13, 1979

AllianceBernstein.com 2012 Cap Markets
Average: 5.8%
(1.6)%
(3.8)%
(4.9)%
(4.1)%
(2.4)%
(3.0)%
(1.4)%
(2.5)% (2.2)%
(0.3)% (0.3)%
5.4%
6.9%
4.5%
6.3%
11.2%
6.8%
4.1%
4.8% 5.1%
4.7%
4.0%
1932 1937 1938 1939 1940 1974 1975 1977 1978 1979 1982
Stocks Roared Back After Each Decade that They
Lagged
S&P 500 Return Minus 10-Year Treasury
Return
Includes all 10-year rolling periods when the S&P 500 lagged 10-year Treasury bonds from 1901 through the beginning of the 2008 credit crunch; the average is for the green bars
Source: Global Financial Data, Standard & Poor’s, and AllianceBernstein
Past 10 Years
Next 10 Years

SIO_Individuals_2011_PRINTBernstein.com
94 96 98 00 02 04 06 08 10
Chasing Performance Leads to Bad Decisions
US Equity Example
1994–2011
1Q:2000
+$142 Bil.
3Q:2002
$(72) Bil.
As of December 31, 2011
Past performance does not guarantee future results.
Fund flows represented by total net new cash flow into US equity funds.
Source: BusinessWeek, Investment Company Institute, Standard & Poor’s and AllianceBernstein
Growth of $1
Mil.
Average Quarterly
Fund Flows:
$23.8 Bil. 4Q:2008
$(109) Bil.
3Q:2011
$(74) Bil.

SIO_Individuals_2011_PRINTBernstein.com
9.1%
Index Return
Annualized Returns
1991–2010
Inflation: 2.6%
These Biases Cost the Average Investor
Past performance does not guarantee future results. There can be no assurance that working with a financial advisor will improve investment results. Investors cannot invest
directly in indexes. Average equity investor and average bond investor performances were used from the Dalbar study “Quantitative Analysis of Investor Behavior” (QAIB), 2011.
QAIB calculates investor returns as the change in assets after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital
gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs, annualized over the period. The Standard & Poor’s 500 Index (S&P 500) is an
unmanaged index of 500 common stocks generally representative of the US stock market. Inflation is measured by the Consumer Price Index (CPI).
Source: Dalbar, Inc., “Quantitative Analysis of Investor Behavior,” 2011
3.8%
Average Individual
Investor Return
–5.3%
US Stocks

FAN Value Investing OpportunityBernstein.com
Opportunity, Yes. But Where Is the Catalyst?
Sustained outperformance probably requires economic clarity
 Odds of economic catastrophe reduced
 Malaise continues, and uncertainty about sustainable rate of growth remains high
Performance highly leveraged to small changes in perceived growth rates
Investor conviction in valuation as a catalyst is hostage to uncertainty
What to do?
 Uncertain outlooks and attractive valuations go hand in hand—
we cannot remain true to our discipline and avoid it
 Temper uncertainty with evidence of current success and balance-sheet strength

Disclosure
MSCI makes no express or implied warranties or representations and
shall have no liability whatsoever with respect to any MSCI data
contained herein. The MSCI data may not be further redistributed or used
as a basis for other indices or any securities or financial products. This
presentation is not approved, reviewed or produced by MSCI.

Notes on Dynamic Asset Allocation Simulation Results
The asset allocation framework discussed in this presentation is a new strategy for which actual data are not
yet available. The portfolios and their performance are hypothetical and do not represent the investment
performance or the actual accounts of any investors or any mutual funds. The securities in these hypothetical
portfolios were selected with the full benefit of hindsight, after their performance over the period shown was
known. The results achieved in our simulations do not guarantee future investment results.
The model performance information in this presentation is based on the back-tested performance of hypothetical
investments over the time periods indicated. “Back-testing” is a process of objectively simulating historical investment
returns by applying a set of rules for buying and selling securities, and other assets, backward in time, testing those
rules, and hypothetically investing in the securities and other assets that are chosen. Back-testing is designed to allow
investors to understand and evaluate certain strategies by seeing how they would have performed hypothetically during
certain time periods.
It is possible that the markets will perform better or worse than shown in the projections; that the actual results of an
investor who invests in the manner these projections suggest will be better or worse than the projections; and that an
investor may lose money by investing in the manner the projections suggest.
The projections assume the reinvestment of dividends and include transaction costs of 0.6% for purchases and sales of
equities and bonds and 1.0% for real estate investment trusts (REITs). For equity and bond derivatives, we assume total
one-way transaction costs and cost of financing of 0.5%. We assume no deduction for advisory fees, and that assets are
allocated in the manner the projections suggest for nearly 40 years and are rebalanced monthly.
Although the information contained herein has been obtained from sources believed to be reliable, its accuracy and
completeness cannot be guaranteed. While back-testing results reflect rigorous application of the investment strategy
selected, back-tested results have certain limitations and should not be considered indicative of future results. In
particular, they do not reflect actual trading in an account, so there is no guarantee that an actual account would have
achieved these results shown. Back-tested results also assume that asset allocations would not have changed over time
and in response to market conditions, which might have occurred if an actual account had been managed during the time
period shown. AllianceBernstein L.P. may have a different investment perspective and maintain different asset allocations
or other recommendations from those shown here.

Notes on Wealth Forecasting System
1. Purpose and Description of Wealth Forecasting Analysis
Bernstein’s Wealth Forecasting Analysis is designed to assist investors in making their long-term investment decisions as to their allocation of investments
among categories of financial assets. Our planning tool consists of a four-step process: (1) Client-Profile Input: the client’s asset allocation, income, expenses,
cash withdrawals, tax rate, risk-tolerance level, goals and other factors; (2) Client Scenarios: in effect, questions the client would like our guidance on, which
may touch on issues such as when to retire, what his cash-flow stream is likely to be, whether his portfolio can beat inflation long-term, and how different asset
allocations might impact his long-term security; (3) The Capital-Markets Engine: our proprietary model that uses our research and historical data to create a vast
range of market returns, which takes into account the linkages within and among the capital markets, as well as their unpredictability; and finally (4) A Probability
Distribution of Outcomes: based on the assets invested pursuant to the stated asset allocation, 90% of the estimated ranges of returns and asset values the
client could expect to experience are represented within the range established by the 5th and 95th percentiles on “box-and-whiskers” graphs. However,
outcomes outside this range are expected to occur 10% of the time; thus, the range does not establish the boundaries for all outcomes. Expected market
returns on bonds are derived taking into account yield and other criteria. An important assumption is that stocks will, over time, outperform long bonds by a
reasonable amount, although this is in no way a certainty. Moreover, actual future results may not meet Bernstein’s estimates of the range of market returns, as
these results are subject to a variety of economic, market and other variables. Accordingly, the analysis should not be construed as a promise of actual future
results, the actual range of future results or the actual probability that these results will be realized. The information provided here is not intended for public use
or distribution beyond our private meeting.
2. Rebalancing
Another important planning assumption is how the asset allocation varies over time. We attempt to model how the portfolio would actually be managed. Cash
flows and cash generated from portfolio turnover are used to maintain the selected asset allocation between cash, bonds, stocks, REITs and hedge funds over
the period of the analysis. Where this is not sufficient, an optimization program is run to trade off the mismatch between the actual allocation and targets against
the cost of trading to rebalance. In general, the portfolio allocation will be maintained reasonably close to its target. In addition, in later years, there may be
contention between the total relationship’s allocation and those of the separate portfolios. For example, suppose an investor (in the top marginal federal tax
bracket) begins with an asset mix consisting entirely of municipal bonds in his/her personal portfolio and entirely of stocks in his/her retirement portfolio. If
personal assets are spent, the mix between stocks and bonds will be pulled away from targets. We put primary weight on maintaining the overall allocation near
target, which may result in an allocation to taxable bonds in the retirement portfolio as the personal assets decrease in value relative to the retirement portfolio’s
value.

Cash Equivalents Three-month Treasury bills 100%
Intermediate-Term Diversified Municipals AA-rated diversified municipal bonds with a seven-year maturity 30%
US Value S&P/Barra Value Index 15%
US Growth S&P/Barra Growth Index 15%
Developed International MSCI EAFE Unhedged 15%
Emerging Markets MSCI Emerging Markets Index 20%
3. Expenses and Spending Plans (Withdrawals)
All results are generally shown after applicable taxes and after anticipated withdrawals and/or additions, unless otherwise noted. Liquidations may result in
realized gains or losses, which will have capital gains tax implications.
4. Modeled Asset Classes
The following assets or indexes were used in this analysis to represent the various model classes:
5. Volatility
Volatility is a measure of dispersion of expected returns around the average. The greater the volatility, the more likely it is that returns in any one period will be
substantially above or below the expected result. The volatility for each asset class used in this analysis is listed on the Capital Markets Projections page at the
end of these Notes. In general, two-thirds of the returns will be within one standard deviation. For example, assuming that stocks are expected to return 8.0% on
a compounded basis and the volatility of returns on stocks is 17.0%, in any one year it is likely that two-thirds of the projected returns will be between (8.9)% and
28.0%. With intermediate government bonds, if the expected compound return is assumed to be 5.0% and the volatility is assumed to be 6.0%, two-thirds of the
outcomes will typically be between (1.1)% and 11.5%. Bernstein’s forecast of volatility is based on historical data and incorporates Bernstein’s judgment that the
volatility of fixed income assets is different for different time periods.
6. Technical Assumptions
Bernstein’s Wealth Forecasting System is based on a number of technical assumptions regarding the future behavior of financial markets. Bernstein’s Capital
Markets Engine is the module responsible for creating simulations of returns in the capital markets. These simulations are based on inputs that summarize the
current condition of the capital markets as of December 31, 2009. Therefore, the first 12-month period of simulated returns represents the period from December
31, 2009, through December 31, 2010, and not necessarily the calendar year of 2009. A description of these technical assumptions is available on request.
Asset Class Modeled As Annual Turnover Rate

7. Tax Implications
Before making any asset allocation decisions, an investor should review with his/her tax advisor the tax liabilities incurred by the different investment alternatives
presented herein, including any capital gains that would be incurred as a result of liquidating all or part of his/her portfolio, retirement-plan distributions,
investments in municipal or taxable bonds, etc. Bernstein does not provide tax, legal, or accounting advice. In considering this material, you should discuss your
individual circumstances with professionals in those areas before making any decisions.
8. Tax Rates
Bernstein’s Wealth Forecasting Analysis has used the following tax rates for this analysis:
Federal Income Federal Capital State Income State Capital
Taxpayer Scenario Start Year End Year Tax Rate Gains Tax Rate Tax Rate Gains Tax Rate Tax Method
Type
Sample Current 2010 2010 35.00% 15.00% 6.00% 6.00% User Defined
The federal income tax rate represents Bernstein's estimate of either the top marginal tax bracket or an "average" rate calculated based upon the marginal rate
schedule. The federal capital gains tax rate is represented by the lesser of the top marginal income tax bracket or the current cap on capital gains for an
individual or corporation, as applicable. Federal tax rates are blended with applicable state tax rates by including, among other things, federal deductions for
state income and capital gains taxes. The state tax rate generally represents Bernstein's estimate of the top marginal rate, if applicable.

9. Assumptions: Capital Market Statistics
Data do not represent any past performance and are not a guarantee of future specific risk levels or returns or any specific range of risk levels or returns.
Based on 10,000 simulated trials each consisting of 30-year periods
Reflects AllianceBernstein’s estimates and the capital market conditions of December 31, 2009
Cash Equivalents 3.5% 3.8 3.8 0.3 10.1
Int.-Term Diversified Municipal 3.4 3.7 3.6 4.0 7.5
US Value 8.8 10.3 3.4 17.8 14.7
US Growth 8.4 10.3 2.1 20.2 15.7
Developed International 9.2 11.4 3.4 21.3 16.4
Emerging Markets 7.2 11.1 2.7 29.1 25.3
Inflation 2.9 3.1 n/a 1.2 9.5
Median Mean Mean One- 30-Year
Annual
20-Year Annual Annual Year Equivalent
Growth Rate Return Income Volatility Volatility

AllianceBernstein.com 2012 Cap Markets
26
The Bernstein Wealth Forecasting SystemSM (WFS) is designed to assist investors in making a range of key decisions, including setting
their long-term allocation of financial assets. The WFS consists of a four-step process: (1) Client Profile Input: the client’s current assets,
income, expenses, cash withdrawals, tax rate, risk tolerance, goals, and other factors; (2) Client Scenarios: in effect, questions the client
would like our guidance on, which may touch on issues such as which vehicles are best for intergenerational and philanthropic giving,
what his/her cash-flow stream is likely to be, whether his/her portfolio can beat inflation long term, when to retire, and how different asset
allocations might impact his/her long-term security; (3) The Capital Markets Engine: our proprietary model that uses our research and
historical data to create a vast range of market returns, taking into account the linkages within and among the capital markets (based on
indexes, not Bernstein portfolios), as well as their unpredictability; and (4) A Probability Distribution of Outcomes: based on the assets
invested pursuant to the stated asset allocation, 90% of the estimated returns and asset values the client could expect to experience,
represented within a range established by the 5th and 95th percentiles of probability. However, outcomes outside this range are expected
to occur 10% of the time; thus, the range does not establish the boundaries for all outcomes. Further, we often focus on the 10th, 50th,
and 90th percentiles to represent the upside, median, and downside cases.
Asset-class projections used in this presentation reflect initial market conditions as of March 31, 2012. They include the following median
forecasts of 40-year compound rates of return: US diversified stocks (represented by the S&P 500 Index), 8.7%; US value stocks
(represented by the S&P/Barra Value Index), 9.0%; US growth stocks (represented by the S&P/Barra Growth Index), 8.5%; US
SMID stocks (represented by the Russell 2500 Index), 8.8%; developed international stocks (represented by the Morgan Stanley Capital
International [MSCI] EAFE Index of major markets in Europe, Australasia, and the Far East, with countries weighted by market
capitalization and currency positions unhedged), 9.3%; emerging markets stocks (represented by the MSCI Emerging Markets Index),
7.6%; municipal bonds (represented by AA-rated diversified municipal bonds with seven-year maturities), 4.5%; and inflation (represented
by the Consumer Price Index), 3.4%. Expected total returns on bonds are derived taking into account yield and other criteria. Globally
diversified equity portfolios comprise an annually rebalanced mix of 21% US diversified stocks, 21% US value stocks, 21% US growth
stocks, 7% US SMID stocks, 22.5% developed international stocks, and 7.5% emerging markets stocks.
An important assumption is that stocks will, over time, outperform long-term bonds by a reasonable amount, although this is by no means
a certainty. Moreover, actual future results may not be consonant with Bernstein’s estimates of the range of market returns, as these
returns are subject to a variety of economic, market, and other variables. Accordingly, this analysis should not be construed as a promise
of actual future results, the actual range of future results, or the actual probability that these results will be realized.

Disclosures and Important Information
Disclosure on Security Examples
References to specific securities are presented to illustrate the application of our investment
philosophy only and are not to be considered recommendations by AllianceBernstein. The specific
securities identified and described in this presentation do not represent all of the securities
purchased, sold or recommended for the portfolio, and it should not be assumed that investments
in the securities identified were or will be profitable. Upon request, we will furnish a listing of all
investments made during the prior one-year period.
Past performance is not a guide to future performance.
Additional Information
The value of investments and the income from them can fall as well as rise and you may not get
back the original amount invested.
The value of non-domestic securities may be subject to exchange-rate fluctuations.
The views and opinions expressed in this presentation are based on AllianceBernstein’s internal
forecasts and should not be relied upon as an indication of future market performance or any
guarantee of return from an investment in any AllianceBernstein services.
MSCI makes no express or implied warranties or representations and shall have no liability
whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further
redistributed or used as a basis for other indices or any securities or financial products. This
presentation is not approved, reviewed or produced by MSCI.

Private Equity & Merger and Acquisition Update
Cliff Atherton
Managing Director

Total Debt Multiples
Source: GF Data for 1,439 transactions between $10 million and $250 million
2.3x
1.8x
2.2x 2.3x 2.2x
1.0x
1.1x
0.8x
0.9x 1.1x
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
3.5x
2008 2009 2010 2011 2012 1H
Senior Debt / EBITDA Sub Debt / EBITDA
3.3X
Total debt multiples in middle market transactions have returned to pre-crash
(2008) levels
3.3X

Average equity investment in middle market deals remained in the 48% - 50% range in
the first half of 2012, 3% above pre-crash levels but less than necessary in 2009-2010
Equity and Debt as a % of Total Enterprise Value (TEV)

6.0x 6.0x
5.9x
6.1x
6.2x
165
89
169
158
150
0
50
100
150
5.0x
5.4x
5.8x
6.2x
2008 2009 2010 2011 2012*
TEV/Adj. EBITDA Deals/Year
Average multiples in middle market deals reached 6.2 times in 2012 while the
number of deals has been falling since 2010
Average Multiples and Deal Volume
*2012 1H number of deals is annualized

Multiples increase as you move from the lower end to the upper end of the middle market
Buyout Multiples within the Middle Market by Deal Size

Middle Market deals normally represent more than 30% of Total Deal Value
and 80% to 90% of Deal Volume (# of Transactions)
*Through 6/30/2012Source: PitchBook
Percentage of Total Deals
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012*
Value of Deals Under $250MM
Value of Deals $250MM to $2.5BB
Number of Deals Under $250MM*

Deal Value in 2010 & 2011 for all transactions matched 2008
$76 $147 $219 $300 $491 $817 $345 $151 $336 $344
858
1,227
1,694
2,029
2,545
3,035
2,229
1,411
1,870 1,893
-
500
1,000
1,500
2,000
2,500
3,000
3,500
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capital Invested ($B) # of Deals Closed
Billions
Source: PitchBook
# of Deals

…but the Trend in 2012 is to lower value and fewer deals
$76 $147 $219 $300 $491 $817 $345 $151 $336 $344
858
1,227
1,694
2,029
2,545
3,035
2,229
1,411
1,870 1,893
-
500
1,000
1,500
2,000
2,500
3,000
3,500
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capital Invested ($B) # of Deals Closed
Billions
Source: PitchBook
167 106
978
666
0
200
400
600
800
1,000
$0
$50
$100
$150
$200
1H 2011 1H 2012
Billions # of Deals
# of Deals

Estimate of Uninvested Private Equity Capital =$432 Billion
PE Firms will be busy. They hold more than 4,000 portfolio companies purchased in 2008 or
earlier, and they have more than 8 quarters worth of dry powder to invest
Portfolio Companies by Year
of Investments
Source: PitchBook
0
1,000
2,000
3,000
4,000
5,000
6,000
2000
to
2004
2005
to
2008
2009
to
2012

Energy drives Houston’s economy and the world’s, so it will continue to be an active space
…all wealth creating economic activities require some form of energy and involve
manipulations of matter and/or information.
-Eric Beinhocker, The Origin of Wealth

Energy is a sector of consistent interest for PE Firms
*Through 6/30/2012
*
Source: PitchBook
Business Products and Services
(B2B)
Consumer Products and
Services (B2C)
Energy ($ in billions)
Financial Services
Healthcare
Information Technology
Materials and Resources

U.S. Rig Count vs. OSX Index vs. Oil Prices
Historically, the Rig Count has followed the OSX…but not lately
$0
$100
$200
$300
$400
0
600
1,200
1,800
2,400
Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12
Rig Count - Total US OSX Index

U.S. Rig Count vs. OSX Index (July 20, 2007 – July 20, 2012)
The OSX actually tracks very closely with Oil Prices. The question is “How will
the current gap between the Rig Count and OSX be closed?”
$0
$100
$200
$300
$400
0
600
1,200
1,800
2,400
Rig Count - Total US OSX Index WTI Crude (ICE) X 2.5

The prices of a BTU have diverged dramatically. The current oil-price of an BTU
is 5.8x the gas-price of a BTU
0
1
2
3
4
5
6
7
8
9
10
$0
$5
$10
$15
$20
$25
$30
Natural Gas - Henry Hub (NYMEX) WTI ($/MBTU) Oil/Gas Price Ratio
2.9
16.7
$ per BTU Oil price to gas
price ratio

Observations on Due Diligence and Deal Terms
 Sellers should always know more than the Buyer about their own accounting….but
they don’t
 2009 performance…or 2010 depending on the industry…provides a measure of
management skills to navigate adverse market conditions
 Credit standards and underwriting are tougher even though debt multiples are up
and interest rates are down (Minsky’s Hedge Lending)
 Seller debt is still a major source of subordinated debt. The yield is hard to beat.
The Risk?
 Back-end payments are replacing Earnouts:
• A bonus of $X million upon exit after the sponsor has achieved a negotiated
cash-on-cash return (e.g. 3X)

Real Estate Finance
John Fenoglio
Executive Vice President

CBRECapitalMarkets
Commercial Real Estate

CBRECapitalMarkets
3.5%
10.0%
24.2%
14.8%
13.4%
34.0%
Banks&Thrifts LifeInsuranceCompanies
Agency- andGSE-back mortgagepools CMBS, CDO, andother ABSissues
Other StateandLocal Government
U.S. Commercial & Multifamily Debt Outstanding
By Capital Source
Total $2.37 Trillion
Source: Mortgage Bankers Association, Q1 2012

CBRECapitalMarkets
Debt Capital Markets Update
 Life Companies
• Life Co. volume +/-$45 Billion in 2011 – expect higher allocations in 2012
• Large loans and portfolio loans are in demand
• More conservative, but great execution
• Forwards returning
 CMBS
• CMBS is stepping up again (secondary markets / B assets) - $33 Billion in 2011
• CMBS spreads and rates have moved in – 4.75%-5.10% or less (10 year term)
• Higher LTV’s, but for a price
• 15+ active lenders in the market
 Banks
• Using the balance sheet again
• May offer longer term loans and non-recourse for stable assets
• Most active in 5-7 year terms
 GSE’s (Freddie and Fannie)
• $40B plus volume in 2011, more expected in 2012
• Great execution in primary, secondary and some tertiary cities
• Market share declining with competition
• Uncertain future

CBRECapitalMarkets
Current Debt Pricing
Source: Valerie Achtemeier, CBRE Debt & Equity Finance. As of 7/6/2012.

CBRECapitalMarkets
Delinquency Rates
Source: MBA, ACLI, Wells Fargo, Fannie Mae, Freddie Mac, OFHEO and FDIC, Q1 2012

CBRECapitalMarkets
Loan Maturities
Source: Mortgage Bankers Association, Q4 2011. Updated Annually.
By Investor Type
Loan Maturities by Investor Type
0
50
100
150
200
250
Matured 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Later
$ Billions
CMBS, CDO or the ABS Life Insurance Companies
Fannie Mae, Freddie Mac, FHA, and Ginnie Mae Credit Companies, Warehouse and Other

CBRECapitalMarkets
Source: CBRE Research and RCA Troubled Assets Radar, June 2012
Top Metros Leading Distress Space
The Metros below account for 67% of distressed and potentially troubled assets:
0 5 10 15 20 25 30 35 40 45
New York
Los Angeles
Las Vegas
South Florida
SF Metro
Washington,…
Chicago
Phoenix
Atlanta
Dallas/Ft.…
Boston
Philadelphia
Houston
Honolulu
Seattle
Detroit
Est. Asset Value ($ Billions)
Distressed
Potentially Troubled

CBRECapitalMarkets
Investor Composition

CBRECapitalMarkets
Real Estate Investment

CBRECapitalMarkets
Capital Raising Activity Remains Strong
• REITs continued to actively raise capital in the public equity and
debt markets in the first half of the year, putting them on track to
match or surpass last year’s record for the annual amount of
capital raised. REITs raised a total of $33.21 billion in the first
half, including $22.36 billion in equity offerings and $10.85 billion
in unsecured debt offerings.
• By comparison, the U.S. REIT industry raised $51.28 billion in
all of 2011, including $37.49 billion in equity and $13.79 billion in
debt. REIT industry balance sheets also remained strong.

CBRECapitalMarkets
Direct Investment Fundraising Hits Highest First-Quarter
Investment In Publicly Registered DPPs, Non-Listed REITs & BDCs
($ in millions)
1st Qtr.
2010
1st Qtr.
2011
1st Qtr.
2012
REAL ESTATE
Equity LPs/LLCs $ 0.0 $ 0.0 $ 0.0
Mortgage Loan
LPs/LLCs
1.0 2.0 1.2
Equity NL-REITs 1,631.9 2,150.7 2,407.5
Mortgage NL-REITs 12.5 41.7 146.3
Total Real Estate $ 1,645.4 $ 2,194.4 $ 2,555.0
Level since 1980’s

CBRECapitalMarkets
Commercial Real Estate
• A recent survey of the Pension Real Estate Association (PREA), covering
some $2.4 trillion in assets under management, finds that real estate holdings
represent about ten percent (10%) of the total assets of the surveyed fiduciary
managers.
• State pension systems shifted 10% of their assets from public equities to
alternatives (32% being commercial real estate)over the five years ending
June 30, 2011, keeping other asset class weights largely unchanged.
• The median returns for real estate (7.3%) year are very attractive 10 year
outcomes, particularly compared to U.S. stocks and bonds.
• Institutional investors will increase their allocations to real estate and
infrastructure from 5-10% to 25% within the next decade, according to a new
report from JP Morgan Asset Management.
• Recent changes in asset allocations have largely involved tactical shifts
between bonds and equities, according to the report. But uncertainty,
heightened volatility and slower growth had strengthened a structural tilt
towards real assets – including real estate, infrastructure and timberland.

CBRECapitalMarkets
Commercial real estate volume up 17% during first half of 2012
• According to data release by Real Capital Analytics, U.S. commercial
real estate sales totaled $108.8 billion during the first half of 2012.
RCA notes that excluding mergers and acquisitions activity recorded a
year ago, first half volume is up 17% - driven by a 53% increase in
portfolio activity and a 10% increase in sales of individual properties.

CBRECapitalMarkets
Transaction Volume – by Seller Capital Type
* Through Q1 2012
Source: Real Capital Analytics
Cross-Border, 15.2%
Inst'l/Eq Fund, 26.2%
Listed/REITs, 7.7%
Private, 40.7%
User/other, 7.1%
Unknown, 3.1%
Cross-Border Inst'l/Eq Fund Listed/REITs Private User/other Unknown

CBRECapitalMarkets
Transaction Volume – by Buyer Capital Type
* Through Q1 2012
Source: Real Capital Analytics
Cross-Border, 9.9%
Inst'l/Eq Fund, 24.8%
Listed/REITs, 15.4%
Private, 40.2%
User/other, 6.4%
Unknown, 3.2%
Cross-Border Inst'l/Eq Fund Listed/REITs Private User/other Unknown

CBRECapitalMarkets
Capital Markets Concerns
1) U.S. NATIONAL DEBT CLOCK
• The Outstanding Public Debt as of 06 Sep 2012 at
07:22:48 PM GMT is:
• The estimated population of the United States is
313,456,308
so each citizen's share of this debt is $51,092.93.

CBRECapitalMarkets
2)

CBRECapitalMarkets
3) Between a Mountain of Debt and a Fiscal Cliff:
Finding a Smart Path Forward
4)

CBRECapitalMarkets
Capital Markets Summary
• Interest rates and cap rates are near historical lows
• Commercial real estate capital is available but disciplined; there are no
“reckless” sources of capital as in past cycles (yet!)
• Overbuilding is not on the horizon due to large equity requirements and
disciplined lending practices
• Core assets are in great demand by equity investors and lenders
• Opportunistic and distressed assets continue to attract capital in the search
for yield
• Low yields on alternative asset classes keep commercial real estate as a
favored asset class as yields have proven to be higher than other classes
• Houston is a favored market by lenders and equity investors due to our great
job growth and excellent supply/ demand dynamics
• The tepid national economy should keep Houston in a “favored nation” status
for the near term future
• These conditions will not last forever. You never see it coming, so get it while
you can!!!

Commercial Banking
Hank Holmes
Executive Vice President
President, Texas Region

Operating in a Heightened Regulatory Environment
 New regulations heighten oversight and compliance standards for banks of all sizes, effectively
attempting childproof the industry
 Dodd-Frank is 7,224 pages of new regulation that, laid end to end, would be five times the height of
the Empire State Building
 Managing the new regulation is a significant burden, particularly for America’s median size banks,
which have an average only 37 employees
 With a smaller base to absorb these rising cost of regulatory compliance, banks will either be forced
to partner with larger institutions, focus on expenses, increase costs for customers, or both
 Basel III fundamentally changes the way banks calculate their regulatory capital requirements
 By increasing the required minimum levels of capital, banks will be forced to limit credit extension to
certain asset types or increase interest expense to borrowers unilaterally

Operating in a Heightened Regulatory Environment (cont’d)
 Changing the math:
 Required capital ratios will face a denominator effect
 By increasing the denominator and narrowing the definition of capital, banks will be required
to hold more capital in order to maintain required capital ratios, which are being heightened
 For example, single family primary residence mortgages will double in weighting, resulting in
bank’s hindered desire to originate those loans, which could increase rates on mortgages
 Bottom line: less credit for borrowers, more expensive yields
Required Capital Ratios =
Risk Weighted Assets (increased)
Bank Capital (narrowed)

Accessing Capital in a More Stringent Credit Environment
 Many individuals and corporations have de-levered in addition to using the protracted low
interest rate environment to decrease debt service obligations
 Banks are attracted to established, conservative operators who maintain significant equity in
their companies and/or assets
 A chicken and the egg dilemma emerges

Improving Asset Quality
 Banks Reduce Loan-Loss Provisions to Five-Year
Low
 Banks set aside $14.2 billion in provisions for loan
losses in the second quarter, a $5 billion (26.2%)
decline from second quarter 2011, and is the
smallest quarterly total in five years.
 Net Charge-Offs Decline Across All Loan
Categories
 Net charge-offs totaled $20.5 billion in the second
quarter, an $8.4 billion (29.1%) reduction from
second quarter 2011. This is the eighth consecutive
quarter that charge-offs have declined from year-
earlier levels and represents the lowest quarterly
charge-off total since first quarter 2008.
 Noncurrent Loan Balances Continue to Fall
 Noncurrent loan balances (loans 90 days or more
past due or in nonaccrual status) declined for a ninth
consecutive quarter, falling by $12.9 billion (4.2%).
Noncurrent levels fell in all major loan categories.
The largest declines occurred in real estate.
Source: FDIC

Number of FDIC Insured Institutions Decreasing
 More Than a Year Since Last New Charter,
Number of Problem Banks Declining
 During the second quarter, the number of insured
institutions reporting financial results declined from
7,308 to 7,246.
 Forty-five institutions were merged into other
institutions and 15 institutions failed.
 This is the fourth quarter in a row in which no new
charters have been added. It has been more than six
quarters since the last charter was created other
than to absorb a failing bank.
 The number of full-time equivalent employees at
FDIC-insured institutions increased from 2,102,280
to 2,108,200.
 The number of institutions on the FDIC’s “Problem
List” fell for a fifth consecutive quarter, from 772 to
732. Total assets of “problem” institutions declined
from $291 billion to $282 billion.
Source: FDIC

U.S. Financial Institutions Mergers & Acquisitions
 Deals by Target Asset – Cycles Change Little
 2012 YTD
 65% of deals YTD have been for banks with assets
less than $250MM
less than $500MM
 P/TBV rises with increase in asset size
 Since 2005
less than $250MM
less than $500MM
 P/TBV rises with increase in asset size
Source: Raymond James
Since January 1, 2005
589 372
157
109 84 15
164.5%
185.6%
233.1% 226.6% 229.9%
253.6%
0%
50%
100%
150%
200%
250%
300%
0
100
200
300
400
500
600
700
< $100M $100M -
$250M
$250M -
$500M
$500M - $1B $1B - $5B > $5B
DealValue/TangibleBookValue
NumberofDeals
Year-to-Date 2012
37 28
16
12
7
3
118.1%
100.4%
114.1%
135.6%
116.3%
128.1%
0%
20%
40%
60%
80%
100%
120%
140%
160%
0
5
10
15
20
25
30
35
40
< $100M $100M -
$250M
$250M -
$500M
$500M - $1B $1B - $5B > $5B
DealValue/TangibleBookValue
NumberofDeals

Texas Financial Institutions Mergers & Acquisitions
 Price Performance
 Texas remains a bright spot in terms of valuation
 The pricing premium and P/TBV multiple publicly-
traded Texas banks benefitted from in early 2012
narrowed temporarily, but has re-emerged
 Pricing By Asset Size
 Smaller banks trading at discount in terms of
both P/LTM EPS and P/TBV discount
 Causes:
 Liquidity discount, greater investor sensitivity
to liquidity
 Perception credit issues may not be fully
resolved
 Lack of access to capital
 Weakened ability to generate asset growth
 Lower returns on equity
Source: Bank of America, Raymond James

U.S. Banking Sector Earnings
 2Q 2012 Results
 Super community banks are having the hardest time meeting earnings expectations, primarily due to increased
costs associated with heightened regulatory oversight and compliance
 Majority of income and asset growth is within large cap regionals as smaller competitors face stiff competitive
market and increasing costs
 Many earnings call transcripts cite competitive market for loan origination/compressing spreads
 However, yields being generated today are generally higher than pre-crisis levels
Source: Cadence Bank, JP Morgan
*PPNR – Pre-Provision Net Revenue

Conclusion
HOUSTON TOPS OUR LIST OF AMERICA’S COOLEST CITIES
“The Bayou City may not be the first place you associate with being hip or trendy. But Houston has something many
other major cities don’t: jobs.
With the local economy humming through the recession, Houston enjoyed 2.6% job growth last year and nearly
50,000 Americans flocked there in response — particularly young professionals. In fact, the median age of a Houston
resident is a youthful 33.
The result? Over the past decade, the dreary corporate cityscape has been quietly transforming. Stylish housing
developments have popped up downtown, restaurants have taken up residence in former factories and art galleries
like the Station Museum have been inhabiting warehouses.
Combine that with a strong theater scene, world-class museums and a multicultural, zoning-free mashup of a
streetscape and you have the recipe for the No. 1 spot on Forbes’ list of America’s Coolest Cities To Live!”

Follow us on Twitter @BoyarMiller

BoyarMiller Breakfast Forum: The Current State of the Capital Markets 2012

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