May 12, 2015 Page 1 of 6. interest rates have continues to. likely finally. As we during. improvement. Chart I. Source: Strategas. f:

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1 Page 1 of 6 Managing Through an Inflection Point For the last thirty years, U.S. interest rates have been in a secular decline. In 2015, global interest rates continued to decline with some reaching a negativee yield. In the U.S., the 10-year Treasury bond touched 1.64% in early 2015 before recovering to the current rate of 2.10%. As worldwide interest rates have moved to these lower levels, yield hungry investors have reallocated into riskier assets such as equities to achieve yields in excess of inflation. Taken together, it appears that the U.S. interest rate cycle is at an inflection point. As the U.S. economy continues to modestly expand concurrent with a slow but steady pace toward full employment, inflation is likely to move toward the Federal Reserves target of 2%. Hence, we expect interest rates to finally move higher in the next months which should mark the beginning of a long-term secular rise in U.S.. and ultimately global interest rates. Once this inflection point occurs, the U.S. stock market may only offer returns in the mid-to-high single digits.. A rising cycle of interest rates should pressure valuations on most stocks. As such, we believe investment selectivity may be more rewarding than excessive diversification in generating good long-term returns. The second part of our quarterly describes our general processs of stock selection. Market Commentary As we entered 2015, our view was that the equity markets could return approximately 5%-10% % during the year assuming interest rates remained near historical lows and a modest improvement in Eurozone GDP was achieved. As Chart I below indicates, the S& &P 500 has marched higher with limited corrections over the past six years. Chart I Source: Strategas 111 Great Neck Road, Suite 310, Greatt Neck, NY t: t: f:

2 Page 2 of 6 Currently, the market appears fairly valued over the near term. The S&P 500 is trading at ~17 18 times estimated 2015 earnings and global equity markets are near all-time highs. Investors have limited opportunity to earn a reasonable rate of return in traditional fixed income. Thus, money flow continues into riskier assets; i.e. equities, real estate, or private capital investments. Central Banks around the world have engaged in market programs designed to stimulate struggling economies and, in essence, have lowered interest rates to near zero levels. As a result, the lower interest rate environment globally continues to push investment allocation towards these riskier assets and away from fixed income. Whether the process has helped spur a global economic recovery or just served to inflate asset prices will be determined in the coming years. While the European Union, China, and Japan continue to utilize economic stimulus tools, the Federal Reserve ended the use of Quantitative Easing tools in the latter part of With the expectation for a recovery in GDP, an increase level of employment, and a low interest rate environment, the FOMC committee felt these supportive tools were no longer needed. Indeed, historical data suggests that if 10-year U.S. Treasury rates did increase to 3.00% % from its current level of 2.10%, the S&P 500 could maintain equity valuations of ~17 18 times estimates. While most economists continue to forecast US economic growth of 3.00% or more (for the third year in a row!), the recent GDP release of 0.2% indicates an economy that remains fragile. It is difficult to see how GDP growth will accelerate to expected levels over the coming quarters. The strong dollar and weak global environment will continue to hinder export growth. As such, lower interest rates may be with us for a longer than expected period of time. During this past year, most major US-based multinationals have been severely hurt by the sharp relative increase in the US dollar vis-à-vis other global currencies. Many of these companies have seen negative foreign currency trends reduce near term earnings by 10% - 15% of total profits. While the speed of this relative change is far faster than any seen in past foreign exchange cycles, the equity market continues to unexpectedly power higher. As such, one would infer that market participants are still expecting a relatively unchanged interest rate outlook. Additionally, as FX trends stabilize, a headwind now could ultimately become a tailwind The fixed income market, both globally and in the US, offers limited return potential. Unless held in a tax-deferred account, most US Treasury and investment grade corporate debt provide either a near-zero or a negative return when adjusted for taxes and inflation. In addition, the government debt in many of the G-7 countries is negative, and as a result, investors are actually paying the government to hold money (Chart II).

3 Page 3 of 6 Chart II This is a scenario which makes little sense unless deflation fears are at crisis levels. Since this is not the case, we believe the trend should reverse shortly. Chart IIII underscores that investors should stay in shorter-duration debt. Chart III 111 Great Neck Road, Suite 310, Greatt Neck, NY t: t: f:

4 Page 4 of 6 While many clients continue to hold State specific municipal investments based on their respective tax, income, and return profiles, we continue to utilize short-duration investments in the high-yield corporate market to enhance return where appropriate. We do not know how long the current environment will persist. However, when the inflection point occurs and interest rates do begin to increase, we would make the following general observations. First, valuations are likely to either stabilize or decline unless global GDP growth is uniquely robust. Secondly, volatility is likely to accelerate as the market absorbs new macro trends. We believe that our active management approach should be able to generate attractive risk adjusted returns in this environment while the overall market gyrates given the broader exposure to these changing macro events. KPCM Equity Philosophy & Process Our process of seeking out suitable long-term equity investments begins with identifying superior management teams. Our experience indicates that successful management teams usually have a tangible track record of past success and can effectively articulate a well-defined strategy to grow the business over the coming years. Exclusive of special situations, the management teams are often leading companies that are either number one or number two in their areas of specialty. For our purposes, this usually ensures that the company is a low cost producer, can maintain their market dominance, and will continue to generate industry leading profitability. Within this framework, we refine our search process to identify companies that, regardless of its industry, have a certain set of common metrics. Each must generate a return on capital in excess of the cost of capital. To overly simplify, we seek companies that generate a return on deployed capital in excess of the cost of the capital. In addition, the company should generate positive cash flow and, ultimately, excess free cash flow. Free cash flow can be returned to shareholders in three distinct and direct ways; dividends, share repurchase, and /or debt reduction. We combine these three actions into a term called Direct Shareholder Return (DSR). Each of these corporate actions provides a direct benefit to shareholders through either a receipt of cash and/or increase in equity value. Our search efforts generally result in a relatively small universe of companies that meet all our criteria. Looking at our recent additions, such as Moody s (a global leader in financial ratings) and Nielsen N.V. (a global leader in media ratings and consumer brand share analysis), it is evident that our approach yields strong growing enterprises. More recently we have established a partial position in West Pharmaceuticals. West Pharmaceutical is a global manufacturer of product packaging for the specialty and broader ethical pharmaceutical industry. The firm

5 Page 5 of 6 manufactures packaging for injectable drugs, syringes, stoppers and seals for vials, devices for intravenous and blood collection systems, advanced injection products, and safety and administration systems. The company operates in two business divisions: Packaging Systems (72% of revenues and 94% of EBIT) and Delivery Systems (28% of revenues and 6% of EBIT). It generates 46% of revenues from the United States and 54% internationally. West Pharmaceuticals has over 90 years of experience in drug packaging, with the world s top 50 pharmaceutical companies as clients. The world s top 35 biologic drugs are all packaged using its components. In the U.S., seven out of ten injectable drugs are packaged with its materials. West Pharmaceuticals is truly a one of a kind company working closely with the global drug giants to bring their products to market. Moreover, it is in the beginning phase of investing in operations that will allow accelerated growth in cash flow and profit margins in the next five years. The company meets all our criteria for investment. We continue to seek out suitable equities with similar growth characteristics and quality. Our recent focus is to seek out less economically sensitive companies in large part because we believe that after six years of modest economic expansion, the U.S. is likely to see a slowing in growth over the next few years. As this occurs, our active approach to identify specific securities with the aforementioned characteristics should provide greater benefit to our client s portfolios. We have enclosed our annual Privacy Policy and our updated ADV for your records. As always, if you have any questions on your portfolio, please reach us at your earliest convenience. Jack L. Salzman Senior Managing Partner Jeffrey P. Bates Managing Partner John A. Marshall, IV CFA, CFP Beth C. Webb, CFP Nathan T. Fend Jason D. Beaird, CFA

6 Page 6 of 6 QUARTERLY LETTER DISCLOSURE The information in this letter has been developed internally and/or obtained from sources which Kings Point Capital Management LLC ( Kings Point ) believes to be reliable; however, Kings Point does not guarantee the accuracy, adequacy or completeness of such information nor does it guarantee the appropriateness of any investment approach or security referred to for any particular investor. Kings Point, its affiliates and/or its clients may have an investment position in a security or strategy (or related or opposing security or strategy) discussed in this letter, and may change that position without notice at any time. This material is provided for informational purposes only and is not advice or a recommendation for the purchase or sale of any security. This letter includes commentary by Kings Point. This information reflects subjective judgments and assumptions, and unexpected events may occur. Therefore, there can be no assurance that developments will transpire as forecasted. This material reflects the opinion of Kings Point on the date made and is subject to change at any time without notice. Kings Point has no obligation to update this material. Kings Point does not suggest that the strategy described herein is applicable to every client of or portfolio managed by Kings Point. In preparing this material, Kings Point has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you should consider consulting a professional advisor and whether the information provided in this material is appropriate in light of your particular investment needs, objectives and financial circumstances. Transactions in securities give rise to substantial risk and are not suitable for all investors. The strategies described represent Kings Point s current intentions. These are only general guidelines that Kings Point expects will be approximate over time, but portfolios that it manages may not meet any of these characteristics. Kings Point may pursue any objectives, employ any techniques or purchase any type of financial investment that it considers appropriate and in a client s best interests. No part of this material may be copied in any form, by any means, or redistributed, published, circulated or commercially exploited in any manner without Kings Point s prior written consent. It should not be assumed that investments made in the future will be profitable or will equal the performance of investments discussed in this letter. On request, Kings Point will provide to you a list of all of the investments made by it in the last year \001\ v1