Portfolio Strategies for Today’s Economy and Financial Markets

Leo Grohowski Chief Investment Officer, BNY Mellon Wealth Management

May 2012

2

1As of 3/31/12

BNY Mellon LEADERSHIP

BNY Mellon: A Global Leader

• Leading global provider of securities services

− $26.6 trillion in assets under custody and administration1

• 11th largest global asset manager

− $1.3 trillion under management1

• 8th largest U.S. asset manager

BNY Mellon Wealth Management: A National Leader

• Top 10 U.S. wealth manager

− $176 billion in private client assets1

− Approximately $11 billion in deposits and $7 billion in loans outstanding1

• Third largest U.S. private bank

• Two centuries of experience and perspective

− Oldest private bank in U.S. history

− Among first to create dedicated family office business

3

BNY Mellon Asset Management Investment Firms DEPTH AND BREADTH IN VIRTUALLY EVERY ASSET CLASS AND STYLE

1Do not offer services in the U.S.; 2A division of The Bank of New York Mellon; 3A division of The Dreyfus Corporation; 4Minority Interest; 550/50 Joint Venture. Please see the disclosures in the appendix.

3

1,5

4

4

1

4

Historical Market Returns

Returns as of 4/30/12, unless noted otherwise. Standard deviations are calculated based on monthly data for the trailing 10 years. 1Standard deviation is for 5 years; 2Returns are for periods through 9/30/11.

Source: Morningstar.

Asset Class Index 1Q YTD 1 Year 3 Year 5 Year 10 Year

Treasury Bills Treasury Bills (90 Day) 0.0 0.0 0.0 0.1 1.0 1.8 0.5

Tax-Exempt Bonds S&P Intermed. Munis 1.1 2.3 9.9 7.1 6.2 5.5 4.3

Taxable Bonds Barclays Aggregate 0.3 1.4 7.5 7.1 6.4 5.7 3.6

High Yield ML US HY Master II 5.2 6.2 5.1 19.7 8.0 9.0 10.9

International Bonds BarCap Global Agg. Ex U.S. 1.2 2.4 0.6 8.0 6.4 8.3 8.9

EMD - Local Currency JPM GBI EM Global Divers1

8.3 9.3 (0.3) 14.1 9.7 14.5

Large Cap Stocks S&P 500 12.6 11.9 4.8 19.5 1.0 4.7 15.9

Mid Cap Stocks S&P MidCap 400 13.5 13.2 (0.9) 22.7 4.1 7.7 18.5

Small Cap Stocks Russell 2000 12.4 10.7 (4.3) 20.3 1.5 6.2 21.0

International Stocks MSCI EAFE (Net) 10.9 8.7 (12.8) 11.8 (4.7) 5.4 18.7

Emerging Mkts Stks MSCI EMF 14.1 12.7 (12.6) 18.3 3.5 13.9 24.5

Hedge Funds HFRX Global Hedge Index 3.1 3.3 (6.7) 3.1 (2.9) 1.8 6.1

Real Estate FTSE EPRA/NAREIT 12.9 15.6 0.6 24.4 (3.8) 10.3 21.5

Commodities S&P GSCI 5.9 5.3 (10.6) 13.3 (2.7) 4.6 24.9

Private Equity Cambridge Assoc. PE Index2

13.4 6.5 8.6 12.0

10 Yr.

Std. Dev.

Annualized Returns

5

6

U.S. Unemployment Rate, Seasonally Adjusted

As of 3/31/12. Source: Bureau of Labor Statistics, Haver Analytics.

*Includes officially unemployed, those who want a job but stopped looking, and those who need full-time jobs but can only find

part-time work, measured as a percentage of the civilian labor force plus all the marginally attached workers.

3

6

9

12

15

18

79 82 85 88 91 94 97 00 03 06 09 12

PE

RC

EN

T

8.2%

14.5%

Civilian Unemployment Rate Broader Unemployment Rate*

Employment Showing Signs of Improvement

7

As of 3/31/12. Sources: National Federation of Independent Businesses and Ned Davis Research.

NFIB Index of Small Business Optimism

Business Confidence Up from Fourth Quarter Lows FISCAL CONCERNS WEIGHED ON SENTIMENT

75

80

85

90

95

100

105

110

76 79 82 85 88 91 94 97 00 03 06 09 12

IND

EX

8

20

40

60

80

100

120

140

160

71 78 85 92 99 06

As of 3/31/12. Sources: The Conference Board and Haver Analytics.

Conference Board's Consumer Confidence Index

Consumer Confidence Recovering PACE OF RECOVERY WEIGHING ON SENTIMENT

IND

EX

12

9

10

Households Reducing Debt FORCED DELEVERAGING A PARTIAL CONTRIBUTOR

As of 12/31/11. Household debt includes home mortgage and consumer credit. Source: Ned Davis Research.

Household Debt as Percentage of Disposable Personal Income

112.8%

60

70

80

90

100

110

120

130

81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11

11

-2

0

2

4

6

8

10

12

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Quarterly Data 3/31/1947 – 12/31/2011. Source: Ned Davis Research, Department of Commerce, Department of Labor, Haver Analytics.

Net National Savings (as a % of GDP)

Savings Rate Improved from Low of Financial Crisis

PE

RC

EN

T

14

12

Housing Starts HINT OF RECOVERY FROM LOW LEVEL

Seasonally Adjusted Annual Rate

74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120

500

1,000

1,500

2,000

2,500

TH

OU

SA

ND

UN

ITS

As of 3/30/12. Source: U.S. Census Bureau.

13

-20

-10

0

10

20

84 88 92 96 00 04 08 12

PE

RC

EN

T

14

As of 3/31/12. Source: Ned Davis Research, Haver Analytics, National Association of Realtors.

Median Price of Existing Homes – Percent Change from Year Ago

Month’s Supply of Existing Homes

Housing Market Still Challenged

3

6

9

12

84 88 92 96 00 04 08 12

6.3

1.9%

MO

NT

HS

15

1.9

-0.3

-3.5

3.0

1.7

2.5 2.5

-4

-2

0

2

4

2007 2008 2009 2010 2011 2012E 2013E

PE

RC

EN

T

U.S. GDP Forecast MODERATE GROWTH EXPECTATIONS

BNY Mellon Wealth Management GDP Estimates

Sources: 2007-2011: Bureau of Economic Analysis; 2012-2013: BNY Mellon Wealth Management.

16

European Manufacturing Contracting

Euro-Zone Market Manufacturing Purchasing Managers' Index

As of 4/30/12. Seasonally adjusted. Source: Haver Analytics, RBS/Markit

IND

EX

LE

VE

L

38

42

46

50

54

58

2007 2008 2009 2010 2011 2012 2006

62

34

17

Source: Associated Press

ECB Behind the Curve in 2011

18

-2

0

2

4

6

8

10

United States

United Kingdom

Japan Euro Area Brazil Russia India China

PE

RC

EN

T

2011 2012E 2013E

Real Gross Domestic Product (GDP)

As of April 2012. Sources: International Monetary Fund and BNY Mellon Wealth Management.

Euro Region Uncertainty Restraining Global Growth GROWTH RATES LIKELY TO COME DOWN AS GLOBAL DEMAND SLOWS

19

Central Banks Maintaining Accommodative Policies

Central Bank Rates

As of 3/31/12. Source: Bloomberg LP

0

2

4

6

8

10

12

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

Bank of England U.S. Federal Funds Rate

Bank of Japan European Central Bank

PE

RC

EN

T

20

Source: Associated Press

Leadership Change at ECB…

21

Europe Aiding Bank Liquidity

Source: European Central Bank

€ 489 € 530

0

200

400

600

LTRO 1 (Dec 2011) LTRO 2 (Feb 2012)

ECB 3-Year Long-Term Refinancing Operations

€ B

ILL

ION

S

523 Bidders 800 Bidders

As of 4/30/12. Source: Bloomberg L.P.

Increasing Pressure on Italian Bonds

10-Year Government Bond Yields and Credit Default Swaps

0

100

200

300

400

500

600

3

4

5

6

7

8

06 07 08 09 10 11 12

10-Year Yield (Left Axis) 10-Year CDS (Right Axis)

PE

RC

EN

T

BA

SIS

PO

INT

S

22

YEAR

LIBOR Rates Have Subsided

3-Month LIBOR

23

Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-120.2

0.3

0.4

0.5

0.6

PE

RC

EN

T Y

IEL

D

As of 4/30/12. Source: British Bankers Association.

M2 Money Supply as of 3/30/12; Commercial and Industrial Loans Outstanding as of 3/30/12.

Sources: Federal Reserve System and The Conference Board.

Back in the U.S... MONEY AND CREDIT ARE ACCELERATING

Year-over-Year Percent Changes

94 96 98 00 02 04 06 08 10 12-40

-30

-20

-10

0

10

20

30

M2 Money Supply Commercial and Industrial Loans Outstanding

24

PE

RC

EN

T

25

70

80

90

100

110

IND

EX

Trade-Weighted Dollar

As of 4/30/12. Source: Bloomberg L.P.

Avg = 97.5

Avg = 92.7

Avg = 90.3

Avg = 89.3

Avg = 85.9 Avg = 83.0

2003 2004 2005 2006 2007 2008

Avg = 87.3

2009 2010

Avg = 83.8

2011

Avg = 79.5

U.S. Currency Bounces off Mid-2011 Lows DOLLAR GIVING UP GROUND AS SOVEREIGN DEBT FEARS SUBSIDE

2012

26

Strong Rebound in Capital Spending COMPANIES SHRUG OFF UNCERTAINTY

Manufacturers’ New Orders, Nondefense Capital Goods, Seasonally-adjusted

94 96 98 00 02 04 06 08 10 1230

40

50

60

70

80

90

$ B

ILL

ION

S

As of 02/29/12. Sources: Conference Board and FactSet.

0

500

1000

1500

2000

2500

66 75 84 93 02 11

Before Tax After Tax Undistributed

As of 12/31/11. Source: Bureau of Economic Analysis.

Corporate Earnings Very Strong

$ B

ILL

ON

S

27

Corporate Profits with Inventory Valuation and Capital Consumption Adjustments

28

Inflation Remains Contained

Year-over-Year Percent Change in Consumer Price Index

96 98 00 02 04 06 08 10 12-3

-2

-1

0

1

2

3

4

5

6

PE

RC

EN

T

As of 03/30/12. Source: U.S. Bureau of Labor Statistics.

Core CPI Headline CPI

29

China Inflation Moderating

China CPI vs Food Prices (Year-to-Year Changes)

As of 3/31/12. Sources: Ned Davis Research and Haver Analytics

IND

EX

LE

VE

L

-5

0

5

10

15

20

1998 2000 2002 2004 2006 2008 2010 2012

25

CPI CPI for Food CPI excluding Food

Yield on 5-Year Treasury Note minus yield on 5-Year TIPS. As of 4/27/12. Source: Federal Reserve System.

Inflation Expectations Remain Subdued

5-Year Breakeven Inflation

04 06 08 10 12-3

-2

-1

0

1

2

3

PE

RC

EN

T

2.06%

30

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 120

2

4

6

8

10

12

14

16

PE

RC

EN

T

1.95%

31

Treasury Yields near Historic Lows

As of 4/30/12. Source: FactSet.

10-Year Constant Maturity Treasury Note Yields

32

Continued Strong Appetite for Bond Funds

Net Fund Flows By Asset Class, 12-Month Moving Average

As of 3/31/12. Sources: Investment Company Institute and Ned Davis Research.

82 88 94 00 06 12 -16

-4

0

4

16

36

$ B

ILL

ION

S

Equity Funds Bond Funds

33

0

2

4

6

8

10

90 92 94 96 98 00 02 04 06 08 10 12

S&P 500 Operating Earnings Yield 10-Year Treasury Note

Stocks Attractive Relative to Bonds

Earnings yield is inverse of P/E for 4-quarter trailing operating earnings.

As of 3/31/12. Sources: Standard & Poor’s Corp. and Bloomberg L.P.

Internet bubble:

Earnings yield of 3.4 = P/E of 29

S&P 500 Earnings Yield vs. 10-Year Treasury Note

PE

RC

EN

T

Treasuries

Year P/EDividend

Yield10-Year YTM

1962 14.0 4.1 3.91

1966 13.0 4.0 5.01

1970 13.4 4.6 7.91

1974 6.9 5.9 7.90

1982 8.1 6.7 13.06

1987 12.4 4.1 9.52

1990 13.0 4.1 8.72

2002 16.7 2.1 3.94

2009 11.7 3.4 2.82

Current* 14.3 2.0 1.95

S&P 500

34

Valuation of Stocks at Major Market Bottoms

*Estimates as of 4/30/12. Dividends are for the year. Treasuries YTM are averages rates for the appropriate month,

except for the current value. Source: Bhirud Associates, Inc.

35

S&P 500 Operating Earnings Estimates CONSISTENT WITH SLOW GROWTH SCENARIO

82.54

49.51

56.86

83.77

96.44 100-105

0

25

50

75

100

2007 2008 2009 2010 2011 2012 Estimate

As of 3/31/12. Earnings represent trailing four-quarter earnings per share.

Source: Standard & Poor’s and BNY Mellon Wealth Management.

S&P 500 Earnings and BNY Mellon Wealth Management Estimates

$ D

OL

LA

RS

36

S&P 500 Sector Current 2005 2000 1995

Information Technology 26.5% 26.5% 18.0% 14.2%

Health Care 18.6% 20.6% 14.8% 10.6%

Financials 14.6% 12.7% 11.2% 14.0%

S&P 500 13.2% 11.5% 8.8% 9.0%

Consumer Discretionary 10.1% 8.0% 4.0% 5.0%

Industrials 9.9% 4.1% 3.9% 3.4%

Materials 8.6% 7.3% 2.1% 4.0%

Consumer Staples 6.9% 6.7% 3.5% 4.0%

Energy 5.6% 9.1% 4.6% 4.2%

Utilities 2.0% 2.3% 2.4% 1.2%

Telecommunications 3.9% 3.4% 1.6% 1.6%

Cash as Percentage of Assets

As of 12/31/11. Source: StrategasRP.

37

Equity Dividend Yields Currently Competitive with Bond Yields

As of 4/30/12. Source: Baseline.

S&P 500 Dividend Yield vs. 10-Year U.S. Treasury Yield

0

2

4

6

8

10

88 91 94 97 00 03 06 09

S&P 500 Dividend Yield 10-Year U.S. Treasury Yield

PE

RC

EN

T

12

38

Dividend Payout Ratios at Historic Lows

As of 3/31/12. Source: StrategasRP. Ned Davis Research, January 1930 – December 2009.

90.1

59.4 54.6 56.0

45.5 48.6 47.6

35.3 30.0

0

25

50

75

100

1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s Current*

PE

RC

EN

T

39

Steep Tax Increases in 2013

*Excludes qualified dividends.

Note: The 2013 rates reflect the expiration of the Bush tax cuts and the 3.8% medicare tax on net investment income for certain

high income taxpayers as well as the additional medicare payroll tax on employees. The rates summarized above do not take into

consideration the increase in the marginal tax rates for higher income taxpayers due to the loss of the personal exemption, the loss

of some itemized deduction and the deduction for self-employment tax.

PE

RC

EN

T

Maximum Tax Rates 2012 vs. 2013 Reduced Exemptions

$5.12M

$1M

Estate and Gift Tax

$5.12M

$1.36M

Gen. Skipping Tax

35 35

15 15

35 39.6

43.4 43.4

23.8

55

0

10

20

30

40

50

60

Ordinary Income: Wages

Ordinary Income:

Investments*

Qualified Dividends

Capital Gains

Estate, Gift GST Tax

2012 2013

40

30

40

50

60

70

80

00 01 02 03 04 05 06 07 08 09 10 11 12

Drop in Investor Sentiment

*12/1/95 – 4/24/12.

As of 4/24/12. Source: Ned Davis Research.

Ned Davis Crowd Sentiment Poll

Extreme Pessimism

Extreme Optimism

CR

OW

D S

EN

TIM

EN

T IN

DIC

AT

OR

S&P 500 Gain*

When Indicator Is:

% Gain/

Annum

% of

Time

Above 61.5 0.8 38.0

Between 55.5 and 61.5 5.2 20.7

55.5 and Below 9.2 41.3

41

Sell in May and Go Away?

-10

-5

0

5

10

15

20

25

30

35

1926-1929

1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010-2011

1926 To Date

November-April May-October

Source: The Leuthold Group

S&P 500 Annual Total Returns

PE

RC

EN

T

$16,575

$455,289

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

May 1-Oct 31 Nov 1-Apr 30

42

Sell in May and Go Away?

Source: Ned Davis Research.

S&P 500, Growth of $10,000 Investment, 1950-2010

43

4.9

7.9

9.3

15.1 15.1

0

5

10

15

PE

RC

EN

T

Market Performance and Political Parties

S&P 500 Performance by Partisan Control, 1933-2010

Source: StrategasRP

D Congress

R President

R Senate

D House

R President

D Congress

D President

R Congress

R President

R Congress

D President

44

CBOE Volatility Index (VIX)

2008 2010 201210

20

30

40

50

60

70

80

90

IND

EX

LE

VE

L

As of 04/30/12. Source: FactSet.

Lower Volatility in 2012 vs. 2011 LIKELY TO PICK UP AS YEAR PROGRESSES

45

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

73 76 79 82 85 88 91 94 97 00 03 06 09 12

Correlations Moving Lower MARKET RESPONDING TO FUNDAMENTALS

Daily data 1/1/1973 – 4/30/2012. Source: Ned Davis Research.

CO

RR

EL

AT

ION

Median 63-Day Correlation of S&P 500 Stocks to the S&P 500 Index

Mean

+1

+2

+3

-1

-2

46

More

Attractive

Asset Class

Less

Attractive

Asset Class Outlook

U.S. Large Cap Equities

International Developed Equities

Emerging Markets Equities

High Yield Bonds

Treasuries

Commodities

U.S. Small/Mid Cap Equities

Real Estate (REITs)

Emerging Markets Debt

Private Equity

Hedge Funds (Long/Short)

Municipal Bonds

Corporate Bonds

Managed Futures

47

Recommended Balanced Portfolio Structure

The allocation represents BNY Mellon Wealth Management’s Growth and Income (60/40) Non-Traditional Strategic Asset Allocation.

Implementation of allocations may vary based on our asset class outlook at the time of investment and any client specific circumstances.

*Limited to qualified investors only and where appropriate. As of 4/30/12.

Fixed Income 26.5%

High Yield 2.8% Real Estate 2.0%

Commodities 1.2%

Absolute Return Hedge* 3.1%

Long/Short Hedge* 7.3%

International Equities 7.0%

Emerging Markets Equities 10.0%

Emerging Markets Debt 2.5%

Private Equity* 7.5%

Managed Futures 3.0%

U.S. Small/Mid Cap 5.0%

U.S. Large Cap 22.1%

48

Fixed Income Sector Returns

9.8

4.8

8.2

13.6

6.2

5.0

7.0

10.7

-1.3

0.0

2.1

0.9 0.6

5.3 5.5

1.8

-4

0

4

8

12

16

Treasury Agency Corporate TIPS MBS High Yield Emerging Markets

Municipal Bond Index

2011 2012 YTD

Selected Sector Returns

As of 3/31/12. Source: Barclays Capital.

PE

RC

EN

T

Municipal Upgrades and Downgrades

Sources: 2005 – 2011 Moody's Investors Service; 2012 BNY Mellon Wealth Management

-6

-4

-2

0

2

4

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E

Upgrades per Downgrade Downgrades per Upgrade

49

8.8

10.3

12.5 11.8

0.7 1.4

2.2

4.2

0

2

4

6

8

10

12

14

AAA AA A BAA

2011 2012 YTD

50

Credit Quality Returns

As of 3/31/12. Source: Barclays Capital.

Municipal Credit Quality Returns OPPORTUNITIES FOR WELL RESEARCHED ISSUE SELECTION

PE

RC

EN

T

Corporate Spreads Receding RISK ON – RISK OFF

Baa Corporate Spread

51

Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12160

180

200

220

240

260

280

300

320

PE

RC

EN

T

As of 4/30/12. Sources: Barclays Capital and FactSet.

52

Strategic Architecture NEW INVESTMENT SOLUTIONS INTRODUCED IN THE LAST FEW YEARS

Date Introduced Solution

October 08 Municipal Opportunities

December 08 Diversified International

January 09 Inflation Adjusted Securities

March 09 Commodities

March 09 Small Cap Value Multi-Strategy

April 09 Focused Equity

September 09 Small/Mid Cap Strategy

December 09 Opportunistic Small Cap

January 10 Mezzanine Finance

January 10 Distressed Opportunities

March 10 Managed Futures

September 10 Tax-Sensitive Large Cap Multi-Strategy

September 10 Large Cap Market Opportunities

November 10 Large Cap Dividend Equity

March 11 Venture Capital/Buyout Private Equity Strategy

March 11 Dynamic Commodities Strategy

July 11 Emerging Markets Debt Local Currency Strategy

July 11 Emerging Markets Income Strategy

December 11 International Equity Dividend Strategy

March 12 Corporate Bond Strategy

Municipal Opportunities

Focused Equity

Mezzanine Finance

Distressed Opportunities

Large Cap Dividend Equity

Emerging Markets Debt Local Currency Strategy

Emerging Markets Income Strategy

International Equity Dividend Strategy

Corporate Bond Strategy

53

Preservation and Income

Inflation Protection

Capital Appreciation

Incremental Diversification

Enhanced Return

Objective-Driven Investing

MANAGING WEALTH TO SERVE BOTH LIFESTYLE AND WEALTH TRANSFER NEEDS

Wealth

Preservation

Income

Generation

Wealth

Accumulation

Generational

Transfer

Legacy

Funding

Lifestyle Wealth Transfer

Total Portfolio

Lifestyle

Portfolio

Wealth Transfer

Portfolio

54

SLOW, SPORADIC

GROWTH

POLICY HEADWINDS

CHANGED BELIEFS Multi-dimensional Recovery Challenges

A Challenging, Dynamic Landscape

Extreme Investing Environment

2010-2020:

WHY THE MOST CRITICAL DECADE

FUNDAMENTAL

CHANGES

The Most Critical Decade

55

Investment Innovation and Rigorous Discipline

Dynamic, Seamless Planning

A Different Quality of Client-Advisor Engagement

2010 to 2020: The Most Critical Decade

56

THANK YOU!