Economic Research:

U.S. Economic Forecast: Legends Of The Fall

Credit Market Services: Beth Ann Bovino, U.S. Chief Economist, New York (1) 212-438-1652; bethann.bovino@standardandpoors.com

Table Of Contents
The House On Haunted Hill Reform School This Is How The Story Goes The Good The Bad And The Ugly

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 1

1191251 | 301674531

Economic Research:

U.S. Economic Forecast: Legends Of The Fall

Happy Anniversary! It's been five years since the collapse of Lehman Brothers, and what a trip it has been. The U.S. recovery has been, in a word, ugly. The world's biggest economy has suffered four years of sluggish growth, a housing market that spent much of that time on life support, and an unemployment rate well above the country's near 65-year average of 5.8% To be sure, after five years of Americans cleaning up their balance sheets, the economy is on the mend. Jobs are trickling back, and consumers are spending, despite higher taxes. Commercial construction is starting to improve. Finally, the housing market has shown recent signs of strength. However, recent data suggest the recovery is losing some momentum heading into the third quarter. The recent drop in new home sales likely reflected both the jump in interest rates and declining demand as home prices rise. Consumer spending climbed higher in July but largely because of higher prices--all while paychecks have shrunk. Since jobs remain scarce and prices at the gas pump have ticked higher, real wages remain in negative territory, as they have through most of the recovery. Additionally, businesses are again becoming more reluctant to spend. Core capital goods orders, excluding aircraft and defense, which is a leading indicator of business investment spending, took a dive in July. We remain concerned that the bite from sequestration and Congressional indecision on what to do about long-term deficits have started to take a considerable toll. Overview Given the larger-than-expected fiscal drag, we expect 2013 GDP growth to be 1.7% (was 2.0% in July). We now expect GDP growth of 2.8% in 2014 (was 2.9% in August). The Fed should start tapering in December, given weak August jobs data, fiscal headwinds, and low inflation. The risk of another recession is 10%-15% for the year, with weight placed on the upper end of the range. We see the chance of a quick turnaround at 15%-20%.

Second-quarter growth, at 2.5%, was more robust than the 2.1% we had expected in July, thanks to stronger trade data and more inventory accumulation than the Bureau of Economic Analysis (BEA) had estimated. An upward revision to construction data suggests the final estimate may be even stronger, possibly closer to 2.7%. But more inventory accumulation in the second quarter has effectively siphoned growth from the third, and we are starting to see signs of weakness. In addition to the drop in core capital goods orders, real consumer spending was flat in July from June, with a good chunk of household money going to the gas pump rather than the mall. This suggests that growth will decelerate to a more modest 2.2% in the third quarter. The strong economic data fostered market hopes that the upcoming jobs report wouldn't disappoint. Those hopes

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 2

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

were soon dashed. Only 169,000 jobs were created in August, according to the Bureau of Labor Statistics (BLS)--fewer than the 180,000 economists' consensus forecast expected, although in line with our 165,000 projection. Downward revisions the prior two months shaved off a net 74,000 more jobs, making the soft August job gains even worse. The unemployment rate did drop to 7.3%, but for the wrong reasons. People lost jobs and even more people left the jobs market. There are other reasons to be depressed. The economy has already felt the sting from higher taxes after Washington's deal on the fiscal cliff. And, instead of a cameo role, it appears that sequestration is hogging the spotlight. Meanwhile, there are two other storms brewing in Washington: the expiration at the end of September of the continuing resolution that sustains funding for government agencies and the point when the Treasury reaches the debt ceiling, which arrives soon after. This all comes as the Federal Reserve talks about taking its foot off the gas pedal of monetary stimulus. We still expect the central bank to wait until December before it decides to taper its purchases of bonds. Even if it decides to move earlier, which is certainly a possibility, it's likely the Fed will take its time in reducing purchases next year, given the soft jobs data and lack of compromise on Capitol Hill.

The House On Haunted Hill

After being left for dead, the housing market finally got to its feet and took a few wobbly steps this year. But it still can't run. Home sales and construction on new units have reached multiyear highs (though still below historical averages). Prices, which hit bottom last year, have been steadily climbing, but are still 23% below their July 2006 peaks. While we still have some way to go, it seems housing can now aid the economic recovery, after taking away from growth for so long. Indeed, it now seems to be strong enough to spur talk among policymakers about the possible reform of so-called GSEs (government-sponsored enterprises) Fannie Mae and Freddie Mac. Housing starts have been climbing since 2009. Early on, that was largely the result of apartment building. People couldn't buy, so they rented instead. But single-family starts have started to move higher. And since each single-family home built adds two to three jobs to the economy--and not just in construction--the economic impact is far-reaching. Nonetheless, like a cliffhanger scene in a Hollywood thriller, fears have increased that things are taking a turn for the worse. The Fed is partly responsible, having tied the heroine to the tracks when it started musing about when to reduce its monthly bond purchases. Since then, the 30-year mortgage rate has risen to about 4.5%, from below 3.5% in May. The question is: will the recent jump in borrowing costs restrain buying? Recent data haven't given markets any clear indication either way. Existing home sales were up 6.5% month over month in July to an annualized rate of 5.39 million--the highest rate since November 2009, and above the consensus forecast of 5.15 million. But bear in mind that existing home sales track closed contracts, so they're more in line with mortgage rates from May and June, rather than those in July. Meanwhile, new home sales are counted when contracts are signed. So, the figure is more of a leading indicator and suggests August will be weak after new home sales fell 13.4% month over month in July, to 394,000 units, and June

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 3

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

was revised down to 455,000, with declines across all major regions. Following the July drop in new home sales, the Pending Home Sales Index--which measures contracts signed and offers an early signal on final sales of existing homes--slipped 1.3% over June to 109.5 in July. Though the pullback was partly because of summer season distortions, it's also partly because increasing costs--jumps in home prices, as well as rising mortgage rates--have started to limit demand. At the same time, we don't think the recent dip in some housing indicators means the recovery has reversed just yet. Rising rates might be one factor for the latest hiccup in new home sales and mortgage applications, but the average 30-year rate is still well below the 6.1% average from 2002-2007 and the historical average of 8.6%. Although rising rates will be a drag on momentum, we still expect the housing recovery to be resilient, especially given pent-up demand and expectations of continuing house-price increases.

Inventories remain lean, with the number of homes on the market up to 171,000 units in July--still near the 49-year low of 142,000 in July 2012, with the months' supply at 5.2 months. The months' supply of inventory of existing homes for sale is an even lower 5.1 months. In other words, it will take 5.1 months to clear the inventory of existing homes out there for sale--still below normal market levels of about 5.5 months and the double-digit readings seen during the crisis. Lean inventories, together with still-low, though climbing higher, interest rates, will likely push home prices higher.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 4

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

The S&P/Case-Shiller 20-City Composite Home Price Index increased 12.1% year over year in June, in line with our estimate and just off of May's seven-year peak of 12.2%. But as supply constraints loosen and homebuilders find ways to add inventory, price increases may slow. And a slowdown in the sharp price gains we've seen in the first half of the year, along with somewhat higher interest rates, aren't necessarily bad. Rising borrowing costs may encourage banks to lend, and moderating price increases may entice homebuyers on the sidelines to buy. As it stands, we've kept our 2013 forecast for the S&P/Case-Shiller 20-City Home Price Index at an 11% year-over-year increase. And it's worth noting that, while jumps in the index have been large, they were from significantly depressed levels. Remember that a 50% increase after a 50% tumble represents a 25% decline overall. For now, the index is still 23% below its July 2006 peak, though far better than the record low of 35% in February and March of last year.

Reform School
The improvement in the housing market helps explain why political activity related to reforming Fannie Mae and Freddie Mac has picked up over the last few months. A number of proposals have been introduced, and there are even signs of some agreement between the parties on what should be done. But there is still substantial political discord to be resolved, and, given that there is no deadline looming, as well as substantial profits now being generated at Fannie Mae and Freddie Mac, there seems to be little incentive to rush. Most policymakers agree that the U.S. housing finance system needs an overhaul, though how much of one is unclear. Furthermore, some GSE proposals recently called for higher levels of private capital. The bipartisan bill by Senators Bob Corker (R.-Tenn.) and Mark Warner (D.-Va.) would wind down the GSEs over five years, replacing them with a system in which private insurers would assume at least the first 10% of losses from defaulting borrowers, with a federal reinsurance entity absorbing the rest. The bill has almost half the Senate Banking Committee as cosponsors and got some support from President Obama, who said it was "pretty consistent" with his thoughts on the subject. Good news, but we're not there yet. Parties are still divided on key issues. One question is how big a role the federal government should have in the new system. Some proposals call for some federal support, while others--such as a bill from Congressman Jeb Hensarling (R.-Texas)--would wind down the GSEs and replace them with a purely private mortgage system. Another thorny issue is what impact reform will have on borrowing costs. While recent proposals have attracted support by calling for higher levels of private capital, this would likely mean higher required returns for investors and, thus, higher borrowing costs. Government support helps keep rates down. Since many Republicans oppose any government support for the GSEs, and many Democrats oppose a system that doesn't feature government support, it could be a long haul before any consensus is reached.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 5

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

This Is How The Story Goes

Naturally, there's a chance things could turn out better--or worse--than we expect. So, each quarter, Standard & Poor's projects two additional scenarios, one with slower growth than the baseline forecast and one with faster. We can then use these to estimate the credit effects of better- or worse-than-expected economic environments.

The Good
In our optimistic scenario, stronger consumer and business confidence, an improving jobs market, better economic growth abroad, and a rapid calming of the financial markets would help relieve some of the strains on the U.S. economy. Washington lawmakers would avoid a collision over the continuing resolution or, even worse, the debt ceiling, and agree on a sound deficit-reduction budget plan, with a reversal of sequestration's excessive austerity. As a result, business and consumer confidence would climb, keeping private demand alive, and a revival in productivity would keep inflation under control. Pent-up demand, helped by a better jobs situation and still-low mortgage rates, would continue to fuel the real estate recovery. Housing would also get a boost from government policies that sop up the excess inventory of unsold homes and process foreclosures faster. The baseline recovery expects modest performance coming out of the recession. Our high-growth scenario is a more normal, albeit delayed, upturn. In this projection, the housing sector would rebound faster than in the baseline scenario because of lower mortgage rates and continuing strong demand. Housing starts would rise to 980,000 this year and 1.48 million in 2014--the level needed to keep up with household formation--one year earlier than in our baseline projection. A faster-recovering economy and improving credit conditions would bolster capital spending. Borrowing conditions would continue to improve, with spreads narrowing to normal levels. Although business borrowing restrictions could continue to weigh on spending, credit markets might improve faster than in our baseline forecast. Amid renewed business confidence that the recovery is on track, spending on capital equipment could grow 4.6% and 14.3% in 2013 and 2014, respectively, compared with 3.5% and 8.8% in the baseline prediction. Nonresidential construction could grow 0.9% this year, a bit better than our baseline forecast of 0.3%. Core inflation rates would heat up faster, stirring inflation fears. In response to much stronger growth and a healthier jobs market, the Fed could end its stimulus policy much sooner than we expect, hiking interest rates early next year. This tightening would continue through 2015, helping to bring core CPI back down to 2.3% by 2015, closer to the central bank's target rate but higher than the 1.9% we see in our baseline forecast. The expansion in consumer spending would be stronger than in the baseline scenario because of a better jobs market and the easing of uncertainty over U.S. fiscal policy, despite a decrease in purchasing power from higher prices at the gas pump. Consumer spending could rise 2.3% this year, faster than the 2.0% we see in our baseline forecast. Spending would then climb 3.7% in 2014. The unemployment rate would fall below 6% by the third quarter of 2014, finally around the 60-year historical average.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 6

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

The Bad And The Ugly

In our downside scenario, further fiscal tightening and dire global economic conditions would push the U.S. recovery back into stagnation. While the U.S. would avoid recession in the most common sense of the term (consecutive quarters of contraction), the country would enter a period of minimal growth, as ongoing political wrangling resulted in the government's failure to agree on a sound deficit-cutting plan this year. After already allowing the automatic spending cuts to take effect in full in 2013, political gridlock would settle in. The continuing resolution expires at the end of September, and, in this scenario, Congress wouldn't pass another for a few weeks--making for a partial shutdown of government offices. Policymakers would further cut discretionary spending in 2014. Realizing that this austerity-by-default is here to stay, private-sector confidence would drop dramatically in the fourth quarter, and the stock market would crash to near-2009 levels. Housing activity would slow, credit would again tighten, and the once-promising economic recovery would take a turn for the worse at year-end. The additional spending cuts next year would take another slice out of growth in an already weak economy, as high-income earners and workers adjust to fewer after-tax dollars. Despite central bank efforts, the eurozone would continue to wallow in fiscal austerity and fall back into recession. Emerging Asian economies would continue their slowdown, amplifying the U.S. slump as exports take a hit. In this scenario, the U.S. sluggishness would last into next year, with government austerity weighing heavily on the economy. Consumer confidence would weaken significantly in response to political gridlock. While lower gas prices would help, higher taxes and sequestration-related cuts would hammer the jobs market. Consumer spending could advance just 1.7% and 1.5% in 2013 and 2014, respectively. Despite tensions in the Middle East, a global slump would push oil prices lower--perhaps down to $91 per barrel by next year. In this light, the Consumer Price Index could decelerate this year to 1.3%, compared with 1.5% in our baseline forecast. Core inflation, excluding food and fuel, could dip well below where the Fed would like to see it, decelerating to a 1.3% pace in 2013 and an even softer 0.9% pace in the following year. The Fed would keep a very accommodating stance through 2016. Consumer confidence and Americans' spending appetite would weaken significantly. The decline in consumer spending, together with economic slumps in Europe, China, and the U.S., could slash corporate revenues and damage business confidence. Equipment investment spending could rise just 2.5% for the year. Nonresidential construction would also lose steam, falling back into negative territory in 2013--the first time since 2010--and drifting lower in 2014. Stock prices would likely tumble, and the deeper downturn in Europe and China would keep U.S. exports weak. If businesses reined in hiring and government jobs disappeared, the unemployment rate could peak above 8.0% in 2014. Consequently, the housing recovery would falter. Gains in housing starts would disappear early next year. By the third quarter, starts could remain in a holding pattern below the million unit mark though 2014, which is significantly weaker than the growth to 1.22 million units we expect in our baseline forecast. Housing prices would again fall because of weaker demand and even tighter credit conditions, though not enough to repeat the 2012 low.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 7

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

Table 1

Standard & Poor's Economic Outlook

September 2013 2012 Q4 (% change) Real GDP Real final sales Consumer spending Equipment investment Nonresidential construction Residential construction Federal government State and local government Exports Imports CPI Core CPI Nonfarm unit labor costs Nonfarm productivity (Levels) Unemployment rate Payroll employment (mil.) Federal Funds Rate 10-year Treasury-note yield 'AAA' corporate bond yield Mortgage rate (30-year conventional) Three-month Treasury-bill rate S&P 500 Index S&P operating earnings ($/share) Current account (bil. $) Exchange rate (major trade partners) Crude oil ($/bbl, WTI) Saving rate Housing starts (mil.) Unit sales of light vehicles (mil.) Federal surplus (fiscal year unified, bil. $) e--Estimate. 7.8 134.5 0.2 1.7 3.5 3.4 0.1 1,418 23.15 (409) 94.2 88.17 6.6 0.90 14.9 (293) 7.7 135.1 0.1 2.0 3.9 3.5 0.1 1,515 25.77 (425) 96.3 94.35 4.1 0.96 15.3 (307) 7.6 135.7 0.1 2.0 4.0 3.7 0.1 1,610 26.36 (382) 98.4 94.22 4.5 0.87 15.5 91 7.4 136.3 0.1 2.7 4.5 4.5 0.0 1,668 26.70 (374) 98.8 106.24 4.4 0.92 15.8 (189) 7.4 137.0 0.1 2.8 4.5 4.5 0.1 1,695 27.43 (389) 98.6 103.44 4.2 1.01 15.8 (239) 9.3 130.9 0.2 3.3 5.3 5.0 0.2 947 56.86 (382) 100.0 61.69 6.1 0.55 10.4 (1,416) 9.6 129.9 0.2 3.2 4.9 4.7 0.1 1,139 83.77 (449) 97.0 79.41 5.6 0.59 11.6 (1,294) 8.9 131.5 0.1 2.8 4.6 4.5 0.1 1,269 96.44 (458) 91.2 95.07 5.7 0.61 12.7 (1,297) 8.1 133.7 0.1 1.8 3.7 3.7 0.1 1,380 96.82 (440) 94.6 94.21 5.6 0.78 14.4 (1,089) 7.5 136.0 0.1 2.4 4.2 4.0 0.1 1,622 106.26 (392) 98.0 99.56 4.3 0.94 15.6 (698) 7.0 138.6 0.2 2.9 4.6 4.6 0.1 1,759 113.75 (425) 99.6 96.00 4.8 1.22 16.0 (726) 6.5 140.9 0.4 3.2 4.9 4.9 0.4 1,831 125.14 (432) 99.7 91.27 5.3 1.50 16.3 (645) 0.1 2.2 1.7 8.9 17.6 20.1 (13.9) (1.0) 1.1 (3.1) 2.2 1.7 11.8 (1.7) 1.2 0.2 2.3 1.6 (25.7) 12.6 (8.4) (1.3) (1.3) 0.6 1.4 2.1 (4.2) (1.7) 2.5 1.9 1.8 2.9 16.1 13.0 (1.6) (0.5) 8.6 7.0 (0.0) 1.4 1.4 0.9 2.2 2.3 2.3 4.1 3.8 9.9 (3.2) 0.2 3.6 1.8 2.7 1.9 (0.7) 0.8 3.0 2.6 3.3 10.2 4.6 16.6 (3.0) (0.2) 5.0 8.8 1.2 1.8 1.5 0.9 (2.8) (2.0) (1.6) (22.9) (18.9) (21.4) 5.7 1.6 (9.1) (13.7) (0.3) 1.7 (2.0) 3.2 2.5 1.0 2.0 15.9 (16.4) (2.7) 4.3 (2.7) 11.5 12.8 1.6 1.0 (1.2) 3.3 1.9 2.0 2.6 12.7 2.1 0.4 (2.6) (3.6) 7.1 4.9 3.1 1.7 2.0 0.5 2.8 2.6 2.2 7.6 12.7 13.1 (1.4) (0.7) 3.5 2.2 2.1 2.1 1.2 1.5 1.7 1.7 2.0 3.5 0.3 13.7 (4.8) (0.6) 2.5 1.8 1.5 1.8 1.1 (0.1) 2.8 2.8 2.8 8.8 5.1 17.8 0.1 0.3 4.7 6.9 1.5 2.0 1.8 0.9 3.1 3.1 2.5 8.0 3.5 16.2 (0.6) 0.7 5.4 4.2 1.7 1.9 2.2 1.2 Q1 --2013-Q2 Q3e Q4e 2009 2010 2011 2012 2013e 2014e 2015e

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 8

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

Table 2

Upside Case
September 2013 2009 (% change) Real GDP Real final sales Consumer spending Equipment investment Nonresidential construction Residential construction Federal government State and local government Exports Imports CPI Core CPI Nonfarm unit labor costs Nonfarm productivity (Levels) Unemployment rate Payroll employment (mil.) Federal Funds Rate 10-year Treasury-note yield 'AAA' corporate bond yield Mortgage rate (30-year conventional) Three-month Treasury-bill rate S&P 500 Index S&P operating earnings ($/share) Current account (bil. $) Exchange rate (major trade partners) Crude oil ($/bbl, WTI) Saving rate Housing starts (mil.) Unit sales of light vehicles (mil.) Federal surplus (fiscal year unified, bil. $) e--Estimate. 9.3 130.9 0.2 3.3 5.3 5.0 0.2 947 56.86 (382) 100.0 61.69 6.1 0.55 10.4 9.6 129.9 0.2 3.2 4.9 4.7 0.1 1,139 83.77 (449) 97.0 79.41 5.6 0.59 11.6 8.9 131.5 0.1 2.8 4.6 4.5 0.1 1,269 96.44 (458) 91.0 95.07 5.7 0.61 12.7 8.1 133.7 0.1 1.8 3.7 3.7 0.1 1,380 7.4 136.2 0.1 2.5 4.3 4.1 0.1 1,667 6.1 140.0 0.8 4.4 5.6 5.4 0.8 2,037 5.0 143.5 3.0 4.8 6.3 6.5 2.8 2,076 (2.8) (2.0) (1.6) (22.9) (18.9) (21.4) 5.7 1.6 (9.1) (13.7) (0.3) 1.7 (2.0) 3.2 2.5 1.0 2.0 15.9 (16.4) (2.7) 4.3 (2.7) 11.5 12.8 1.6 1.0 (1.2) 3.3 1.9 2.0 2.6 12.7 2.1 0.4 (2.6) (3.6) 7.1 4.9 3.1 1.7 2.0 0.5 2.8 2.6 2.2 7.6 12.7 13.1 (1.4) (0.7) 3.5 2.2 2.1 2.1 1.2 1.5 2.0 2.0 2.3 4.6 0.9 15.5 (4.4) (0.4) 2.6 2.4 1.7 1.9 1.0 0.1 4.5 4.4 3.7 14.3 6.9 31.8 0.7 1.0 7.0 9.0 2.2 2.6 1.4 1.4 4.0 3.9 3.7 9.9 7.7 11.9 (0.6) 1.6 6.8 7.4 1.5 2.3 2.3 1.3 2010 2011 2012 2013e 2014e 2015e

96.82 108.92 116.47 116.47 (440) 95.0 (424) 97.0 (547) 97.0 (551) 101.0 88.93 5.2 1.72 17.7 (550)

94.21 102.03 104.09 5.6 0.78 14.4 4.0 0.98 15.8 (695) 4.1 1.48 17.4 (669)

(1,416) (1,294) (1,297) (1,089)

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 9

1191251 | 301674531

Economic Research: U.S. Economic Forecast: Legends Of The Fall

Table 3

Downside Case
September 2013 2009 (% change) Real GDP Real final sales Consumer spending Equipment investment Nonresidential construction Residential construction Federal government State and local government Exports Imports CPI Core CPI Nonfarm Unit Labor Costs Nonfarm Productivity (Levels) Unemployment rate Payroll employment (mil.) Federal Funds Rate 10-year Treasury-note yield 'AAA' corporate bond yield Mortgage rate (30-year conventional) Three-month Treasury-bill rate S&P 500 Index S&P operating earnings ($/share) Current account (bil. $) Exchange rate (major trade partners) Crude oil ($/bbl, WTI) Saving rate Housing starts (mil.) Unit sales of light vehicles (mil.) Federal surplus (Fiscal year unified, bil. $) e--Estimate. 9.3 130.9 0.2 3.3 5.3 5.0 0.2 947 56.86 (382) 100.0 61.69 6.1 0.55 10.4 9.6 129.9 0.2 3.2 4.9 4.7 0.1 1,139 83.77 (449) 97.0 79.41 5.6 0.59 11.6 8.9 131.5 0.1 2.8 4.6 4.5 0.1 1,269 96.44 (458) 91.2 95.07 5.7 0.61 12.7 8.1 133.7 0.1 1.8 3.7 3.7 0.1 1,380 7.6 135.8 0.1 2.2 4.2 4.0 0.0 1,576 8.0 136.5 0.1 1.9 4.1 4.0 0.1 1,509 8.1 137.2 0.1 2.4 4.6 4.4 0.1 1,621 (2.8) (2.0) (1.6) (22.9) (18.9) (21.4) 5.7 1.6 (9.1) (13.7) (0.3) 1.7 (2.0) 3.2 2.5 1.0 2.0 15.9 (16.4) (2.7) 4.3 (2.7) 11.5 12.8 1.6 1.0 (1.2) 3.3 1.9 2.0 2.6 12.7 2.1 0.4 (2.6) (3.6) 7.1 4.9 3.1 1.7 2.0 0.5 2.8 2.6 2.2 7.6 12.7 13.1 (1.4) (0.7) 3.5 2.2 2.1 2.1 1.2 1.5 1.3 1.4 1.7 2.5 (0.1) 12.0 (4.8) (0.6) 2.3 1.4 1.3 1.7 1.2 (0.3) 0.4 0.8 1.5 3.0 (0.5) 2.0 (2.9) (0.6) 1.0 1.9 0.9 1.5 2.3 (0.2) 1.9 1.7 1.1 4.5 0.5 11.3 (0.2) (0.7) 2.3 (0.4) 1.8 1.7 1.6 1.4 2010 2011 2012 2013e 2014e 2015e

96.82 108.92 116.47 116.47 (440) 94.6 94.21 5.6 0.78 14.4 (377) 98.8 97.30 4.5 0.92 15.4 (702) (322) 102.0 90.85 5.0 0.92 14.6 (783) (329) 100.0 92.77 5.4 1.11 14.4 (772)

(1,416) (1,294) (1,297) (1,089)

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 10

1191251 | 301674531

Copyright 2013 by Standard & Poor's Financial Services LLC. All rights reserved. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (free of charge), and www.ratingsdirect.com and www.globalcreditportal.com (subscription) and www.spcapitaliq.com (subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees.

WWW.STANDARDANDPOORS.COM/RATINGSDIRECT

SEPTEMBER 13, 2013 11

1191251 | 301674531