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Home My WebLink About2011 08 09 Regular 602 Presentation From Bogdahn Consulting On Global Bond DiversificationNon -Core Global Fixed Income Overview & Manager Evaluation Presented 1st Quarter 2011 WWW.BOGDAHNGROUP.COM THE BOGDAHN -/ GRoup simplifying your investment and faducia?y decisions Why Extend a Bond Portfolio Beyond Core Domestic Issues? r` Diversification — Due to differences in business cycles across countries and industries, bond portfolio returns have the potential to be enhanced and /or risks (volatility) reduced through the inclusion of non - correlated fixed income investment vehicles. <.: Income/Yield Enhancement — The inclusion of high yield bonds and /or bonds whose rates are not directly linked to the U.S. yield curve have the potential to provide higher current income and yield enhancement in certain market environments. T'. Growth of the Global Credit Market —The increasing growth and stability of the global credit system offers investors a broader range of investment opportunities. Bond Index Characteristics As of 12131110 Credit Rating Distribution Merrill Lynch Domestic Master AAA. 76.6 Effective Duration: 4.94 Average Quality: AA1 \A .4.8% A. 9.5% BBB, 92`,', Distribution by Issuer Type Sovereign 36.6% Agency 13.4% Merrill Lynch Global Broad Securitized 6.0 Sovereign Market x USD 65.0% Corporate 15.7% Effective Duration: 6.27 6BB.3.0 ,', Average Quality: AA2 AAA 349% B 41 Corporate Merrill Lynch High veld Master II CCC. 142% Effective Duration: 4.44 Average Quality: B1 BB, a2.5 <,', Merrill Lynch Emerging Mkt Sovereign Plus Effective Duration: 7.12 Average Quality: 13131 BE BBB. 4, B. 17.3` , ', NR, 1.0% CCC, Sovereign 100.0% Securitized 30.3% Agency 11.9% Ah Corporate 21.2% Sovereign 36.6% Agency 13.4% Merrill Lynch Global Broad Securitized 6.0 Sovereign Market x USD 65.0% Corporate 15.7% Effective Duration: 6.27 6BB.3.0 ,', Average Quality: AA2 AAA 349% B 41 Corporate Merrill Lynch High veld Master II CCC. 142% Effective Duration: 4.44 Average Quality: B1 BB, a2.5 <,', Merrill Lynch Emerging Mkt Sovereign Plus Effective Duration: 7.12 Average Quality: 13131 BE BBB. 4, B. 17.3` , ', NR, 1.0% CCC, Sovereign 100.0% Non -U.S. Dollar Bonds (Developed) Opportunities 7. Increased Investment Opportunity — The U.S. bond market accounts for less than half (37.9 % *) of the global bond market. Yield Curve /Business Cycle Differences — Including global bonds as part of diversified portfolio has the effect of de- coupling a portfolio's return pattern from the U.S. yield curve. Market Structure — Unlike the U.S. market, which is dominated by mortgage and corporate issues, the global bond market is dominated by sovereign (government) issues. These sovereign issues should provide some safety versus a portfolio made up of primarily corporate issues. Risks Currency Fluctuation — Returns can be significantly impacted by fluctuations in currency exchange rates. If this currency exposure remains un- hedged, it can lead to volatile results once returns are converted to U.S. dollars. Geo- Political Concerns — In addition to the traditional default risk associated with all bonds, non -U.S. dollar denominated bonds are also subject to local sovereign risks such as political upheaval and economic instability. =3/31/09: Bank of International Settlement Domestic High Yield Bonds Opportunities r Enhanced Current Income — High yield bonds typically offer additional yield relative to treasury or investment grade corporate issues. r Capital Appreciation — A general economic upturn or specific improved company fundamentals can provide the potential for high yield bond price appreciation. As a result, market related events such as rating upgrades and improved earnings reports can push up the price of a high yield bond. Relatively Low Duration — Due to the inherent risk in the securities, high yield bonds are typically issued with terms of less than 10 years and may be callable or putable after four or five years. This low duration reduces a bond's overall sensitivity to changes in interest rates. Risks Default — By their very nature, high yield bond investing is associated with meaningful default rates (2.6% average 1920 -2008 1 4.5% average 1989 - 2008). Higher yields on these bonds represent compensation for that risk. 7 7 Credit Downgrade — Short of a default, deteriorating company fundamentals may cause an issue to be downgraded by a rating agency, which can reduce their market value. Greater Economic Sensitivity — High yield issues are more sensitive to downturns in the economic cycle since such conditions may reduce a company's financial health. Emerging Market Bonds Opportunities 7 Enhanced Current Income — Emerging market bonds typically offer additional yield relative to developed market issues. Capital Appreciation — As a sovereign credit issuer matures into a more developed economy, there is a potential for bond price appreciation. Market related events such as rating upgrades and strong economic activity can push up the price of emerging market bonds. f Yield Curve /Business Cycle Differences — Including emerging market bonds as part of diversified portfolio has the effect of de- coupling a portfolio's return pattern from the U.S. yield curve. Risks i Currency Fluctuation — Returns can be significantly impacted by fluctuations in currency exchange rates. If this currency exposure remains un- hedged, it can lead to volatile results once returns are converted to U.S. dollars. Default — Emerging market bonds have a higher default rate than those issued by their developed market counterparts. Geo- Political Concerns — In addition to the traditional default risk associated with all bonds, non - dollar denominated bonds are also subject to local sovereign risks such as political upheaval and economic instability. Historical Returns & Risks of Diversified Bond Investing Index Returns 1/1/97- 12131110 Historical Trailing Returns of Diversified Bond Investing Index Returns 1/1/97- 12131110 Trailing Returns ( %) 15.0% — 12.5% 10.0% 7.5% 5.0% 2.5% 0.0% 1 Year ■ Merrill Lynch Domestic Master ■ Merrill Lynch Global Broad Market x USD ■Merrill Lynch High Yield Master II ❑ Merrill Lynch Emg Mkt Sovereign Plus 3 Years 5 Years 7 Years 10 Years 13 years Historical Calendar Year Returns of Diversified Bond Investing Index Returns 1/1/97- 12131110 Calendar -- GBM '_ CORE GBM HYLD GBM HYLD GBM CORE HYLD HYLD Historical Calendar Year Returns — Effects of Currency Hedging Index Returns 1/1/97- 12131110 f:alanrlar Vaar Rafi irn (O/ 1 Opportunities for Bond Market vs. Equity Market Diversification Index Returns 1/1/97- 12131110 1. S &P 500 1 2. Russell 2000 0.81 1 2. ML Global Broad Market x USD 3. MSCI -EAFE 0.84 0.76 1 4. MSCI -EM 0.76 0.74 0.83 1 Combined . 1. ML Domestic Master 1.00 2. ML Global Broad Market x USD 0.51 1.00 3. ML High Yield Master II 0.14 0.19 1.00 4. ML Emerging Market Sovereign Plus 0.26 0.20 0.56 1.00 5. S &P 500 (0.05) 0.13 0.61 0.58 1.00 6. Russell 2000 (0.09) 0.12 0.62 0.56 0.81 1.00 7. MSCI -EAFE (0.02) 0.37 0.64 0.56 0.84 0.76 1.00 8. MSCI -EM (0.07) 0.19 0.64 0.69 0.76 0.74 0.83 1.00 Based on historical results, it appears that there are greater diversification opportunities in bond markets. Conclusions Diversification within a fixed income portfolio can provide a number of advantages over a traditional broad market bond portfolio including: • Current Income Enhancement • Potential Total Return Enhancement • Potential Risk (Volatility) Reduction in the form of Non - Correlated Return Patterns Although bond portfolio diversification is attractive, it is not without its risks including: • Increased Default Risk • Increased Sensitivity to Economic Cycles & Currency Fluctuations • Increased Sensitivity to Geo- Political Events In addition to the inclusion of global, high yield and emerging market securities in a traditional core domestic bond portfolio, many investors also use alternative bond strategies including: • Treasury Inflation Protected Securities (TIPS) • Real Return Strategies (Commodities) • Hedge Funds 4_�Yj Manager Profiles Firm Name Franklin Templeton Investments Product Franklin Templeton Global Bond Plus Separate 13 Mgrs/Dual Role PMs 2 Research Analysts 44 Traders 5 Franklin Templeton Investments Franklin Templeton Global Multi- Sector Plus 4 2 114 11 Loomis, Sayles & Company, L.P. Global Bond 59 4 60 37 PIMCO Diversified Income 17 5 36 0 Firm Name Franklin Templeton Investments Product Franklin Templeton Global Bond Plus .. JPM GBI Unhedged Product: eA Global Government Fixed Income Franklin Templeton Investments Franklin Templeton Global Multi- Sector Plus BC Global Multiverse Index eA Global Multi- Sector Fixed Income Loomis, Sayles & Company, L.P. Global Bond Citigroup WGBI Unhedged eA Global Government Fixed Income PIMCO Diversified Income BC Global Credit Hedged eA Global Agg Fixed Income Firm Name Product Offered As Annual Fee (bps) Annual Fee (bps) Annual Fee (bps) Franklin Templeton Investments Franklin Templeton Global Bond Plus SA, CM & MF 45 bps 60 bps 69 bps Franklin Templeton Investments Franklin Templeton Global Multi- Sector Plus SA & MF 45 bps 60 bps 89 Loomis, Sayles & Company, L.P. Global Bond SA, CM & MF 50 bps 57 bps 58 bps PIMCO Diversified Income SA & MF 50 bps - -- 75 bps Source: eVestment Alliance Strategy Overviews Templeton Global Bond Plus • Region: global • Sector : primarily government and agency • Developed and emerging markets • Below investment grade up to 25% • Hedging: un- hedged to USD. Cross hedge: yes • Drivers: duration positioning, currency allocation and sovereign credit allocation Templeton Multisector Plus • Region: global • Sector : government /agency, securitized and corporate sector • Developed and emerging markets • Below investment grade up to 50% • Drivers: duration positioning, currency allocation, sovereign credit allocation and spread sector allocation PIMCO Diversified Income • Region: global • Sector: global investment grade (sovereign and corporate sector) and high yield • Developed and emerging markets • Hedging: hedged to USD: 25% limit on "un- hedged" exposure. No cross hedging • Yield Curve: Active Loomis Sayles Fixed Income • Region: U.S. , international and EM • Sector: US treasuries, agency, securitized, corporate, muni, yankee, convertibles and preferreds • Non -U.S. including sovereign, quasi - government corporate sector and Emerging Markets • Hedging: un- hedged. No cross hedging • Emphasis on corporate credit, yield curve neutral 4_�yj Source: eVestment Alliance Templeton Global Bond Plus Sector Quality 166% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12/05 03/06 06/06 09/06 12/06 03/07 06/07 09/07 12/07 03/08 06/08 09/08 12/08 03/09 06/09 09/09 12/09 03/10 06/10 09/10 12/10 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% ❑ Other ❑ Non - Dollar ❑ Convertibles ❑ High Yield Corporates ■ Municipals ❑ Non - Agency ABS ❑ Non - Agency MBS ■ Invt. Grade Corporates ■ Agencies /Regionals ❑ Govts/Sovereigns ❑ Other ❑ Not Rated: Current ❑ Below BBB /Baa ❑ BBB /Baa: Current ❑A: Current ❑AA /Aa: Current ❑AAA/Aaa: Current Source: eVestment Alliance 0% 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 Templeton Multisector Plus Sector Quality 100% 90 % 80 70% 60% 50% 40% 30% 20% 10% 0% 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% ❑ Other ❑ Non - Dollar ❑ Convertibles ❑ High Yield Corporates o Municipals ❑ Non - Agency ABS ■ Non - Agency MBS ❑ Invt. Grade Corporates ❑Agencies /Reg ion als ❑ Govts/Sovereigns ❑ Other ❑ Not Rated: Current ❑ Below BBB /Baa ❑ BBB /Baa: Current ❑A: Current ❑AA /Aa: Current ❑AAA/Aaa: Current Source: eVestment Alliance 0% 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 Loomis Sa yles Fixed Income Sector Quality 100% 90% 80% 70% 60% 50% 40% / 30 20% 10% 0% 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 100% 90% 80% 70% 60 50% 40% 30% 20% 10% 2 Other 2 Non - Dollar 2 Convertibles 2 High Yield Corporates ■ Municipals ❑ Non - Agency ABS ■ Non - Agency MBS El lnvt. Grade Corporates ❑Agencies /Reg ion als 2 Govts/Sovereigns 11 Other 11 Not Rated: Current 11 Below BBB /Baa 2 BBB /Baa: Current ■A: Current 11 AA /Aa: Current 11 AAA/Aaa: Current Source: eVestment Alliance 0% 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 PIMCO Diversified Income Sector Quality 100% 90% 80% 70% 60% 50% 30 20% 10% 0% 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 2 Other 2 Non - Dollar 2 Convertibles 2 High Yield Corporates o Municipals ❑ Non - Agency ABS ■ Non - Agency MBS El lnvt. Grade Corporates ❑Agencies /Reg ion als 2 Govts/Sovereigns 11 Other 11 Not Rated: Current 11 Below BBB /Baa 2 BBB /Baa: Current ■A: Current 11 AA /Aa: Current 11 AAA/Aaa: Current Source: eVestment Alliance 0% 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 Historical Growth Manager Performance 7 Years Ended March 2011 Trailing Performance Manager vs Benchmark Return 7 Years Ended March 2011 (not annualized if less than 1 year) 30% E 3 15% y tY 10% 5% 0% * --61V 1 quarter YTD 1 year 0 Loomis Multisector Full Discr 0 PIMCO Diversified Inc 2 years 3 years 4 years 5 years 6 years 7 years ❑ Templeton GI Bond Adv 0 Templeton GI Multisector ML Global Brd Mld x USD Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance 1 quarter YTD 1 year 2 years 3 years 4 years 5 years 6 years 7 years Loomis Multisector Full Discr 3.46% 3.46% 12.16% 25.53 9.65 8.56 8.99 8.81 8.75 PIMCO Diversified Inc 1.96% 1.96% 11.03% 23.43 9.88 7.99 8.07 8.05 7.75 Templeton GI Bond Adv 2.15% 2.15% 8.44% 17.18 11.11 12.45 12.37 10.66 10.65 Templeton GI Multisector 3.28 3.28 11.31 22.90% 12.32% 12.85% 13.16% 11.72% 11.67% ML Global Brd MId x USD 1.78 1.78 8.54 10.24% 3.14% 7.18% 7.62% 5.30% 5.65% Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Annual Performance Calendar Year Return As of March 2011 0 Templeton GI Multisector 40% YTD 2010 2009 2008 2007 2006 2005 Loomis Multisector Full Discr 3.46% 12.90% 35.85% - 17.78% 9.16% 10.66% 4.12% PIMCO Diversified Inc 1.96% 14.27% 31.57% - 13.34% 3.97% 7.62% 5.89% Templeton GI Bond Adv 2.15% 13.00% 19.21% 6.47% 11.26% 13.72% - 2.84% Templeton GI Multisector 3.28% 15.30% 24.17% 1.12% 10.84% 17.45% - 2.02% ML Global Brd MId x USD 1.78% 4.78% 7.80% 4.39% 11.31% 8.22% - 8.53% 40% Risk / Reward Risk/ Return i% <V- 7 Years Ended March 2011 (Longest Concurrent Period) Multi- Period Risk/ Reward Risk / Return 3 Years Ended March 2011 (Late Mutual Iv- Exclusive Period) E 5 2% 4% 6% 8% 10% Standard Deviation • Loomis Multisector Full Discr • Templeton GI Multisector Risk / Return 4 Years Ended March 2008 (Early Mutually - Exclusive Period) 15% 10 %- 5 %- 0% 12% 14% 16% 0% 2% 4% 6% 8% 10% Standard Deviation • PIMCODi\ersifiedlnc • Temp etonGI Bond Adv ♦ Market BenchrrarkML Global 3rd MldxUSD 0 Citigroup3- rronthT -bill 12% 14% 16% Return ( %) Std Dev (% Beta Alpha R- Squared Sharpe Ratio • Return (°b) Std Dev ( °b) 10% Alpha R- Squared • • 5% 14.55 0.7253 7.83 31.68 0% 0 8.09 5.60 0.2320 5 2% 4% 6% 8% 10% Standard Deviation • Loomis Multisector Full Discr • Templeton GI Multisector Risk / Return 4 Years Ended March 2008 (Early Mutually - Exclusive Period) 15% 10 %- 5 %- 0% 12% 14% 16% 0% 2% 4% 6% 8% 10% Standard Deviation • PIMCODi\ersifiedlnc • Temp etonGI Bond Adv ♦ Market BenchrrarkML Global 3rd MldxUSD 0 Citigroup3- rronthT -bill 12% 14% 16% Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Return ( %) Std Dev (% Beta Alpha R- Squared Sharpe Ratio Return (°b) Std Dev ( °b) Beta Alpha R- Squared Sharpe Ratio Loomis Multisector Full Discr 9.65 14.55 0.7253 7.83 31.68 0.6309 Loomis Multisector Full Discr 8.09 5.60 0.2320 6.35 12.98 0.8100 PIMCO Diversified Inc 9.88 12.20 0.6482 8.05 35.98 0.7713 PIMCO Diversified Inc 6.19 4.89 0.1778 4.87 10.01 0.5400 Templeton GI Bond Adv 11.11 8.23 0.5637 9.21 59.79 1.2928 Templeton GI Bond Adv 10.31 6.94 0.6797 5.00 72.55 0.9739 Templeton GI Multisector 12.32 11.43 0.8702 9.49 73.93 1.0370 Templeton GI Multisector 11.19 7.16 0.6035 6.48 53.72 1.0675 ML Global Brd Mkt x USD 3.14 11.29 1.0000 0.00 100.00 0.2366 ML Global Brd Mkt x USD 7.58 8.70 1.0000 0.00 100.00 0.4635 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance • • • • 0 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Rolling Performance Manager vs Benchmark Return 7 Years Ended March 2011 (24 -Month Moving Windows, Computed Monthly) 30% 25% 20% 15% F_ 10% of 5% 0% -5% -10% -15% Mar 2006 Dec 2006 Dec 2007 Loomis Multisector Full Discr - PIMCO Diversified Inc Dec 2008 Dec 2009 Mar 201 1 Templeton GI Bond Adv - Templeton GI Multisector -ML Global Brd MId x USD Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Jun 2006 Dec 2006 Jun 2007 Dec 2007 Jun 2008 Dec 2008 Jun 2009 Dec 2009 M ar 2010 Jun 2010 Sep 2010 Dec 2010 M ar 2011 Loomis Multisector Full Discr 10.22% 7.34% 9.09% 9.90% 8.65% -5.26% -0.50% 5.69% 8.42% 7.37% 17.45% 23.84% 25.53% PIMCO Diversified Inc 8.12% 6.75% 5.45% 5.78% 5.27% -5.08% 0.95% 6.78% 9.31% 10.73% 18.59% 22.61% 23.43% Templeton GI Bond Adv 9.55% 5.12% 10.05% 12.48% 10.00% 8.84% 10.16% 12.66% 12.47% 13.96% 17.78% 16.06% 17.18% Templeton GI Multisector 10.65% 7.27% 12.64% 14.10% 10.65% 5.87% 7.26% 12.06% 12.83% 14.27% 21.95% 19.66% 22.90% ML Global Brd MId x USD 4.69% -0.51% 2.43% 9.76% 10.05% 7.80% 8.47% 6.08% 0.54% 1.41% 10.04% 6.28% 10.24% Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Performa Histogram Histogram of Returns 7 Years Ended March 2011 25% 20% E 0 15% 0 a� m 10% c a� a� a 5% 0% I 4 1231,- 118- 118ty- 199 -1991, -192 - 192, -95 95t, -88 -81 -, - ]4t,b] b]t,b bt,58 b8t,46 46-9 - 39[,32 32[,-25 -25W 18 - 18I, -11 -1.1 W14 14[,93 931,1 1W17 17[,24 24[,31 31[,38 38[,45 45[,52 52[,59 59t,96 96t,]3 73- >8 Returns Range ( %) 0 Loomis Multisector Full Discr ❑ PIMCO Diversified Inc ❑ Templeton GI Bond Adv 0 Templeton GI Multisector 0 ML Global Brd MId x USD Multi- Statistics Summary: 7 Years Ended March 2011 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance # of Average # of Average Batting Up Down Maximum Omega Information Average Capture Capture Drawdown v1AR = 0.00% Ratio Periods R turn Periods Return n Loomis Multisector Full Discr 58.33% 70.15% 58 1.94% 31.58% 26 - 1.94% - 24.38% 2.23 0.36 PIMCO Diversified Inc 52.38% 59.37% 62 1.57% 24.36% 22 - 1.96% - 19.15% 2.27 0.26 Templeton GI Bond Adv 60.71% 78.94% 56 1.96% 26.80% 28 - 1.31% - 6.45% 2.99 0.71 Templeton GI Multisector 63.10% 88.43% 58 2.19% 31.32% 26 - 1.79% - 12.73% 2.73 0.77 ML Global Brd MId x USD 0.00% 100.00% 51 2.16% 100.00% 33 - 2.09% - 13.66% 1.60 0.00 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Correlation Matrix Correlation Matrix: Returns vs. ML Global Brd Mkt x USD 7 Years Ended March 2011 (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) 1) Loomis Multisector Full Discr 1.00 2) PIMCO Diversified Inc 0.95 1.00 3) Templeton GI Bond Adv 0.63 0.58 1.00 Definitions Statistics Descrip Alpha A measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured by beta. It is a measure of the portfolio's historical performance not explained by movements of the market, or a portfolio's non - systematic return. Batting Average The batting average of the manager vs. a benchmark is the ratio between the number of periods where the manager outperforms the benchmark and the total number of periods. Beta A measure of the sensitivity of a portfolio to the movements in the market. It is a measure of a portfolio's non - diversifiable or systematic risk. Down Market Capture The ratio of average portfolio return over the benchmark during periods of negative benchmark return. Lower values indicate better product performance. Downside Risk A measure similar to standard deviation, but focuses only on the negative movements of the return series. It is calculated by taking the standard deviation of the negative quarterly set of returns. The higher the factor, the riskier the product. Excess Return Arithmetic difference between the managers return and the risk -free return over a specified time period. Information Ratio Measured by dividing the active rate of return by the tracking error. The higher the Information Ratio, the more value -added contribution by the manager. Return Compounded rate of return for the period. Chicago 4320 Winfield Road Suite 200 Warrenville, Illinois 60555 THE BOGDAHN GROUP simplifying your investment and fiduciary decisions J Orlando 4901 Vineland Road, Suite 600 Orlando, Florida 32811 866.240.7932 Cleveland 6133 Rockside Road Rockside Square I1, Suite 303 Independence, Ohio 44131 Dallas Milwaukee 15770 Dallas Parkway, Suite 250 250 E. Wisconsin Ave Suite 1800 Dallas, Texas 75248 Milwaukee, Wisconsin 53202 Non -Core G Income Presented Third Quarter 2011 WWW.BOGDAHNGROUP.COM T� 1 1%w THE BOGDAHN GROUP shpiplifyittg your iuvestmew rased fiduciary decisions Strategy Overviews Loomis Sayles Fixed Income • Region: U.S. , international and EM • Sector: US treasuries, agency, securitized, corporate, muni, yankee, convertibles and preferreds • Non -U.S. including sovereign, quasi - government corporate sector and Emerging Markets • Hedging: un- hedged. No cross hedging • Emphasis on corporate credit, yield curve neutral Templeton Global Bond • Region: global • Sector: primarily government and agency • Developed and emerging markets • Below investment grade up to 25% • Hedging: un- hedged to USD. Cross hedge: yes • Drivers: duration positioning, currency allocation and sovereign credit allocation PIMCO Diversified Income • Region: global • Sector: global investment grade (sovereign and corporate sector) and high yield • Developed and emerging markets • Hedging: hedged to USD: 25% limit on "un- hedged" exposure. No cross hedging • Yield Curve: Active Templeton Global Total Return • Region: global • Sector : government /agency, securitized and corporate sector • Developed and emerging markets • Below investment grade up to 50% • Drivers: duration positioning, currency allocation, sovereign credit allocation and spread sector allocation Mutual fund names are used to represent the overall strategies 11 Source: eVestment Alliance Manager Profiles Product Name Loomis, Company, Global Bond Diversified Income Franklin Templeton Global Bond Plus Franklin Templeton Global Multi- Sector Plus Total AUM $49,355 $16,119 $102,157 $21,200 Total AUM $156,281 $1,242,121 $703,514 $703,514 U.S. Equity AUM $15,277 $14,763 $96,696 $96,696 U.S. FI AUM $11,057 $858,011 $120,678 $120,678 Product: Separate 59 17 13 4 Product: Mgrs /Dual Role PMs 4 5 2 2 Product: Research Analysts 60 36 44 114 Product: Traders 37 0 5 11 Product: Preferred Benchmark Citigroup WGBI Unhedged BC Global Credit Hedged JPM GBI Unhedged BC Global Multiverse Index Product Offered As: SA, CM & MF SA & MF SA, CM & MF SA & MF Separate Account Annual Fee (bps) 50 bps 50 bps 45 bps 45 bps Commingled Annual Fee (bps) 57 bps - -- 60 bps - -- Mutual Fund Annual Fee (bps) 58 bps 75 bps 69 bps 89 bps Mutual Fund Name Loomis Sayles Fixed Income PIMCO Diversified Income Templeton Global Bond Templeton Global Total Return Mutual Fund TICKER LSFIX PDIIX TGBAX TTRZX 2 Source: eVestment Alliance Loomis Sayles Fixed Income Sector Quality Other Non - Dollar Convertibles High Yield Corporates — Municipals — Non - Agency ABS — Non- Agency MBS — lnvt. Grade Corporates ■Agencies /Regionals ■ Govts /Sovereigns 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 i uuno 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% -_ - -- -- 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12/05 3/06 6/06 9/06 12106 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 i Other i Not Rated: Current i Below BBB /Baa L BBB /Baa: Current ■A: Current AAA /Aa: Current F - AAA /Aaa: Current 3 Source: eVestment Alliance PIMCO Diversified Income Sector Quality 100% 90% 80% 70% Other Non - Dollar Convertibles High Yield Corporates — Municipals — Non - Agency ABS — Non- Agency MBS — lnvt. Grade Corporates ■Agencies /Regionals ■ Govts /Sovereigns 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 60% 50% 40% 30% 20% 10% 0% 100 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 12/05 3/06 6/06 9/06 12106 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 i Other i Not Rated: Current i Below BBB /Baa L BBB /Baa: Current ■A: Current AAA /Aa: Current F - AAA /Aaa: Current 4 Source: eVestment Alliance Templeton Global Bond Sector Quality 100% 90% 80% 70% Other Non - Dollar Convertibles High Yield Corporates — Municipals — Non - Agency ABS — Non- Agency MBS — Invt. Grade Corporates ■Agencies /Regionals ■ Govts /Sovereigns 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 60% 50% 40% 30% 20% 10% 0% 100% - - - - -_- 90% 80% 70% 60% 50% a0% 30% 20% 10% 0% 12/05 3/06 6/06 9/06 12106 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 i Other i Not Rated: Current i Below BBB /Baa • BBB /Baa: Current •A: Current AAA /Aa: Current F - AAA /Aaa: Current 5 Source: eVestment Alliance Templeton Global Total Return Sector Quality 100% 90% 80% 70% Other Non - Dollar Convertibles High Yield Corporates — Municipals — Non - Agency ABS — Non- Agency MBS — Invt. Grade Corporates ■Agencies /Regionals ■ Govts /Sovereigns 12/05 3/06 6/06 9/06 12/06 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 60% 50% 40% 30% 20% 10% 0% 100 90% 80 70% \ 60% 50% a0% 30% 20% 10% 0% 12/05 3/06 6/06 9/06 12106 3/07 6/07 9/07 12/07 3/08 6/08 9/08 12/08 3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 i Other i Not Rated: Current i Below BBB /Baa L BBB /Baa: Current ■A: Current AAA /Aa: Current F - AAA /Aaa: Current 6 Source: eVestment Alliance Historical Growth Manager vs. Benchmark Cumulative Performance: 7 Years Ended June 2011 220 200 160 140 120 100 Loomis Sayles Fixed Income PIMCO Diversified Income Templeton Global Bond Templeton Global Total Return - - - -- ML Global Brd Mkt x USD 180 ----------------------------------------------------------------------------------------------------------------------------------- ---------------- ---- ---- - - - - -- / / 1 �./ --------------------------------------------------------------------- - - - - -- ---- - - - - -- ------------------- - - - - -- -- -- --------- - - - - -- -- j J `% i % % ---------------------------------------- r ------------------------- - - - - -- 80 ' O� 0� Ok 0b 0� O 0� 0 Off' 0 O 0 0 0 0 .6 0$ O$ 6b Og O Og O°' NO NI) NQO NI) NN NN e 0 Y SOe pe �2C Yv1 5y pec me t Y", 5y 1&3 10 Y" Se pec 0 YP 5y pec 0 Y", 5e� Qe 10 Yv 28.47 0 WE 5Fy0XIII 177.78 157.3 7 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Trailing Performance Manager vs. Benchmark Trailing Returns: 7 Years Ended June 2011 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% ------------------------------------- ----- - - - - -- - - - - - -- F1 ■ Loomis Sayles Fixed Income ■PIMCO Diversified Income ■Templeton Global Bond ■Templeton Global Total Return ■ML Global Brd Mkt x USD ---------------------------- - - - - -- - - - -- YTD 1 year 2 years 3 years 4 years 5 years 6 years 7 years Loomis Multisector Full Discr YT�D 6.19% --P"j 16.16% 2 years 18.54% 3 years 10.22% 4 years 8.61% 5 yea�rs 9.59% 6 years 8.77% 7 years 9.77% PIMCO Diversified Inc 4.20% 11.93% 17.39% 11.12% 8.86% 8.74% 7.71% 8.57% Templeton GI Bond Adv 4.69% 13.95% 14.15% 13.96% 12.14% 12.36% 11.44% 11.55% Templeton Global TR 5.66% 16.74% 17.42% 15.09% 12.23% 13.29% 12.37% 12.53% ML Global Brd Mkt x USD 5.49% 15.22% 8.40% 5.82% 8.43% 7.49% 6.39% 6.68% 8 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Annual Performance Manager vs. Benchmark Calendar Year Returns as of June 2011 40.0% 30.0% 20.0% 10.0% 0.0% - 10.0% - 20.0% ■PIMCO Diversified Income ■Templeton Global Bond ❑Templeton Global Total Return ■ML Global Brd Mkt x USD YTD 2010 2009 2008 2007 2006 2005 Loomis Multisector Full Discr YTD 6.19% 2010 12.90% 2009 35.85% 2008 - 17.78% 2007 9.16% 2006 10.66% 2005 4.12% PIMCO Diversified Inc 4.20% 14.27% 31.57% - 13.34% 3.97% 7.62% 5.89% Templeton GI Bond Adv 4.69% 13.00% 19.21% 6.47% 11.26% 13.72% -2.84% Templeton Global TR 5.66% 15.30% 24.17% 1.12% 10.84% 17.45% -2.02% ML Global Brd Mkt x USD 5.49% 4.78% 7.80% 4.39% 11.31% 8.22% -8.53% N. Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance nN Q--O/ Risk / Return 16.0% Annualized Rett Manaaer Risk / Return: 7 Years Ended June 2011 (Longest Concurrent Period) 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% �-- 0.0% 10.0% 12.0% 14.0% 16.0% 2.0% 4.0% 6.0% 8.0% Annualized Standard Deviation Loomis Sayles Fixed Income Return 9.77% D ev 9.13% Downside Risk(%) 7.22% Beta 0.58 Alpha 5.56 R-Squared 31.54 Sharpe Ratio 0.7031 Tracking Error 8.5642 PIMCO Diversified Income 8.57% 7.52% 5.97% 0.47 5.13 30.07 0.7195 8.0087 Templeton Global Bond 11.55% 7.43% 5.15% 0.55 7.44 42.45 1.1137 7.0306 Templeton Global Total Return 12.53% 9.16% 6.57% 0.65 7.97 39.61 1.0249 7.8440 ML Global Brd Mkt x USD 6.68% 8.92% 6.43% 1.00 0.00 100.00 0.3825 0.0000 10 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance ❑ Templeton Global Total Return Templeton Global Bond Loomis Sayles Fixed Income PIMCO Diversified Income ML Global Brd Mkt x USD -----------------------------------------------------------------------------------------------------------'------------------------------------------------------------------------------- - - - - -- nN Q--O/ Multi- Period Risk / Return Manager Risk / Return: 3 Years Ended June 2011 (Late Mutually - Exclusive Period) Loomis Sayles Fixed Income Return (%) 10.22% Std Dev N 14.52% Beta 0.75 Alpha 6.29 R-Squared 31.74 Sharpe Ratio 0.68 PIMCO Diversified Income 11.12% 11.98% 0.63 7.64 32.58 0.90 Templeton Global Bond 13.96% 6.65% 0.47 10.99 59.16 2.05 Templeton Global Total Return 15.09% 10.30% 0.79 10.23 69.91 1.43 ML Global Brd Mkt x USD 5.82% 10.93% 1.00 0.00 100.00 0.50 Manager Risk / Return: 4 Years Ended June 2008 (Early Mutually - Exclusive Period) Loomis Sayles Fixed Income Return (%) 9.43% Std Dev N 4.70% Beta 0.14 Alpha 8.40 R-Squared 7.25 Sharpe Ratio 1.24 PIMCO Diversified Income 6.69% 4.50% 0.15 5.62 8.52 0.69 Templeton Global Bond 9.77% 7.39% 0.71 4.42 72.46 0.84 Templeton Global Total Return 10.65% 7.61% 0.64 5.84 55.05 0.93 ML Global Brd Mkt x USD 7.34% 8.84% 1.00 0.00 100.00 0.42 Annualized Return 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% Templeton GTR Templeton GB ■ PIMCO Loomis Sayles ■� ML Global x USD ----------------------------------------------------------- - - - - -- --------------------------- o.00% � 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Annualized Standard Deviation Annualized Return 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% ❑ Templeton GTR Loomis Sayles &mpleton GB ■ ------------------- ------------------------------- ---------------------------- ML Global x USD PIMCO ■ 0.00% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Annualized Standard Deviation 11 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance nN Q__O/ Rolling Performance 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% Manager vs. Benchmark Rolling Returns: 7 Years Ending June 2011 (24 -Month Rolling Windows, Computed Monthly) Loomis Salyes Fixed Income PIMCO Diversified Income -------------------------- Templeton Global Bond -------------------------------------------------------------------------------------------------------------- - - - - -- - - - - - -- - -- -- - - - -- - -- Templeton Global Total Return -- ML Global Brd Mkt x USD i� % \ ♦ ,�\ % -- ------ - - - - -- - -- - -- - - - 'Y - �`� ---- - - `t -- -------------------- - - - - -- -- - - - - -- - - - - - -- ----- - - - - -- - -- --- / --- `1 - - - - � - `� -- - - - - -- ---- - - - - -- - - -- ------ - - - - -- - - - -- --------- - - - - -- ---- - - - - -- -- ----- ,---- ------ ----- - - - - -- - - - - -- -- %- ------------------;/---------------------------- - - - - -- - 15.0% ' J �� 5e� 0� 0 O ee �a� � 5 eQ O e° �a� NY` e' ma t den g eQ Q ec �a� den 5 eQ Q ec �a� do t Loomis Multisector Full Discr 06/06 10.22% 16 7.34% 06/07 9.09% 1 9.90% 06/08 8.65% 1: -5.26% 06/09 -0.50% 19 5.69% 03/10 8.42% 06/10 7.37% 09/10 17.45% 1 23.84% 16 18.54% PIMCO Diversified Inc 8.12% 6.75% 5.45% 5.78% 5.27% -5.08% 0.95% 6.78% 9.31% 10.73% 18.59% 22.61% 17.39% Templeton GI Bond Adv 9.55% 5.12% 10.05% 12.48% 10.00% 8.84% 10.16% 12.66% 12.47% 13.96% 17.78% 16.06% 14.15% Templeton Global TR 10.65% 7.27% 12.64% 14.10% 10.65% 5.87% 7.26% 12.06% 12.83% 14.27% 21.95% 19.66% 17.42% ML Global Brd Mkt x USD 4.69% -0.51% 2.43% 9.76% 10.05% 7.80% 8.47% 6.08% 0.54% 1.41% 10.04% 6.28% 8.40% 12 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance Multi- Statistics Summary Histogram of Returns: 7 Years Ended June 2011 25.0% 20.0% 15.0% 10.0% 5.0% 0 no/ ■ Loomis Sayles Fixed Income ■PIMCO Diversified Income ■Templeton Global Bond ❑Templeton Global Total Return ■ML Global Brd Mkt x USD o .(l�' q A� 9, 'lR h1 6 h b Ag _'3' � _�� _ <� _Cl_R ll_ .n� <� �.R 'j '3a R h h_ C� 'l� :n � O, - - L0 .- LQ ' - L � .. - <6 LQ. - LO . LO. - LO LO LO <4 LO R LO O `S • 1 L0 LO . R <O - ^ LO - a i0 y L0 - v i0 g i0 6 L0 - 3 9i. Off' 95 �0 �1 1 A 6 G6 5 'j �C6 . .�'L 2y < 0 < 1 0. <. .1 3. 3. Q. y . y . 6. 1 `L �1 Multi- Statistics Summary: 7 Years Ended June 2011 13 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance nN Q__4/ Average Omega Down #of Do Maximum Information Up Capture Average Peri .. Return Drawdo 0. 00% Loomis Multisector Full Discr 57.14% 69.40% 59 1.94% 25.34% 25 -1.84% - 24.38% 2.49 0.36 PIMCO Diversified Inc 51.19% 58.29% 63 1.57% 18.57% 21 -1.85% - 19.15% 2.53 0.23 Templeton GI Bond Adv 59.52% 78.29% 55 2.04% 22.28% 29 -1.15% -6.45% 3.35 0.69 Templeton Global TR 61.90% 88.24% 58 2.24% 28.74% 26 -1.70% - 12.73% 2.95 0.75 ML Global Brd Mkt x USD 0.00% 100.00% 51 2.23% 100.00% 33 -1.99% - 13.66% 1.73 0.00 13 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance nN Q__4/ Correlation Matrix Correlation Matrix: 7 Years Ending June 2011 1) Loomis Multisector Full Discr 1.00 2) PIMCO Diversified Inc 0.94 1.00 3) Templeton GI Bond Adv 0.62 0.56 1.00 4) Templeton Global TR 0.77 0.71 0.94 1.00 5) S &P 500 0.77 0.70 0.59 0.68 1.00 6) MSCI EAFE Index 0.84 0.75 0.63 0.74 0.90 1.00 7) BofA Merrill Lynch Domestic Master 0.37 0.50 0.19 0.25 0.04 0.10 1.00 8) BofA Merrill Lynch High Yield Master II 0.92 0.89 0.51 0.66 0.74 0.75 0.18 1.00 9) BofA Merrill Lynch Emg Mkt Sovereign Plus 0.86 0.90 0.48 0.62 0.59 0.65 0.59 0.77 1.00 10) ML Global Brd Mkt x USD 0.55 0.53 0.64 0.62 0.37 0.54 0.53 0.34 0.50 1.00 14 Created with Zephyr StyleADVISOR. Manager returns supplied by Morningstar and eVestment Alliance nN Q--O/ Definitions Statistics Description Alpha A measure of the difference between a portfolio's actual returns and its expected performance, given its level of risk as measured by beta. It is a measure of the portfolio's historical performance not explained by movements of the market, or a portfolio's non - systematic return. Batting Average The batting average of the manager vs. a benchmark is the ratio between the number of periods where the manager outperforms the benchmark and the total number of periods. Beta A measure of the sensitivity of a portfolio to the movements in the market. It is a measure of a portfolio's non- diversifiable or systematic risk. Down Market Capture The ratio of average portfolio return over the benchmark during periods of negative benchmark return. Lower values indicate better product performance. Downside Risk A measure similar to standard deviation, but focuses only on the negative movements of the return series. It is calculated by taking the standard deviation of the negative quarterly set of returns. The higher the factor, the riskier the product. Excess Return Arithmetic difference between the managers return and the risk -free return over a specified time period. Information Ratio Measured by dividing the active rate of return by the tracking error. The higher the Information Ratio, the more value -added contribution by the manager. Return Compounded rate of return for the period. Sharpe Ratio Represents the excess rate of return over the risk free return divided by the standard deviation of the excess return. The result is the absolute rate of return per unit of risk. The higher the value, the better the product's historical risk - adjusted performance. Standard Deviation A statistical measure of the range of a portfolio's performance, the variability of a return around its average return over a specified time period. R- Squared The percentage of a portfolio's performance explained by the behavior of the appropriate benchmark. High R- Square means a higher correlation of the portfolio's performance to the appropriate benchmark. Tracking Error A measure of the standard deviation of a portfolio's performance relative to the performance of an appropriate market benchmark. Similar to Sharpe ratio, but focuses on beta rather than excess risk (standard deviation). Represents the excess rate of return over the risk free Treynor Ratio rate divided by the beta. The result is the absolute rate of return per unit of risk. The higher the value, the better the product's historical risk - adjusted performance. Up Market Capture The ratio of average portfolio return over the benchmark during periods of positive benchmark return. Higher values indicate better product performance. 15 Chicago 4320 Winfield Road Suite 200 Warrenville, Illinois 60555 THE BOGDAHN GROUP simplifying your investment and fiduciary decisions Orlando 4901 Vineland Road, Suite 600 Orlando, Florida 32811 866.240.7932 Dallas 15770 Dallas Parkwary, Suite 250 Dallas, Texas 75248 Cleveland 6133 Rockside Road Rockside Square II, Suite 303 Independence, Ohio 44131 Milwaukee 250 E. Wisconsin Ave Suite 1800 Milwaukee, Wisconsin 53202