FPA New Income, Inc. FPNIX

Third Quarter 2015 Webcast Presentation

Presented by: Thomas H. Atteberry, CFA, Portfolio Manager Abhijeet Patwardhan, Director of Research Joseph H. Choi, Research Analyst Prakash Gopinath, Research Analyst Julian Mann, Research Analyst/Trader Nazanin Pajoom, Data Analyst

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FPA New Income, Inc. – Fund highlights

Investment objective ■ The Fund's primary investment objective is current income and long-term total return. Capital preservation is

also a consideration.

Highlights ■ Short-term: seeks positive absolute returns in a 12-month period

■ Long-term: seeks positive real returns (outperform inflation plus 100 basis points) over five-year period and competitive returns versus bond market universe

■ Benchmark indifferent

Past performance is no guarantee of future returns

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FPA New Income, Inc. – Fund highlights

Investment profile ■ Rigorous security and portfolio analysis seeks to mitigate risk:

– Value-driven investing – Duration actively managed – Security and portfolio stress test

■ Investment restrictions as stated in the prospectus:

– Minimum 75% must be rated “AA” or higher – Maximum 15% in aggregate in Interest Only, Principal Only, Z bonds, and Inverse Floaters – Maximum 25% in foreign U.S. dollar or non-dollar securities

■ Other restrictions:

– Maximum 15% in restricted or illiquid securities – Options, futures, shorting, and leverage prohibited

Past performance is no guarantee of future returns

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Significant risks in bond markets

US Treasury yields and downside risk

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0.63% 0.91% 1.36% 1.74% 2.04% 2.85%

-0.34% -1.03%

-2.45% -3.80%

-5.78%

-14.96% 2 Years 3 Years 5 Years 7 Years 10 Years 30 Years

Yield to Maturity Total Return*

Yield to Maturity – Forecast annualized return if held to maturity

Stress test – Forecast 12-month total return with 100 bps interest rate increase within 12 months

As of September 30, 2015 *Simulated Treasury 12-month total return scenarios Source: Bloomberg Past performance is no guarantee of future results

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What would happen if interest rates rose 1% over 12 months?

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As of September 30, 2015

Duration YTW YTW/Duration Stress test

FPA New Income 1.42 2.79 1.96 1.87

Barclays U.S. Aggregate 1-3 Year Index 1.87 1.00 0.53 -0.37

Barclays U.S. Aggregate Bond Index 5.60 2.31 0.41 -2.79

Source: Barclays, FactSet. Past performance is no guarantee of future results and the index performance is not representative of the FPA New Income fund. Please refer to slide 25 for fund performance. As of September 30, 2015, the SEC yield was 2.77%. This calculation begins with the Fund’s dividend payments for the last 30 days, subtracts fund expenses and uses this number to estimate your returns for a year. The SEC yield is based on the price of the fund at the beginning of the month. The income yield stated here reflects prospective data and thus assumes payments collected by the fund may fluctuate.

Stress test return: yield−to−worst + (1 + yield−to−worst)

2 − duration

■ FPA New Income has more than 2.7x yield of the Barclays U.S. Aggregate 1-3 Year Index while taking on 27% less duration risk

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Focus on downside protection

Source: Morningstar Past performance is no guarantee of future results The index performance is not representative of the FPA New Income fund. Please refer to slide 25 for fund performance.

■ Five largest drawdown periods for Barclays U.S. Aggregate Bond Index during the past ten years

0.00 -0.37 -0.09

-0.85

0.00 -0.28

-0.63 -0.31 -0.32 -0.15

-1.81

-3.83

-1.65

-3.67

-2.15

-0.48

-11.00

-0.22

-2.62

-0.60

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

September 2005-October 2005

April 2008-October 2008

November 2010-December 2010

May 2013-August 2013

February 2015-June 2015

Max

imum

dra

wdo

wn

(%)

FPA New Income

Barclays US Aggregate 1-3 Yr

Barclays US Agg Bond

Nontraditional Bond Funds

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Standard deviation

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■ One year periods ending 9/30

Source: Morningstar Past performance is no guarantee of future results The index performance is not representative of the FPA New Income fund. Please refer to slide 25 for fund performance. Standard Deviation is applied to the annual rate of return of an investment to measure the investment's volatility.

0.51 0.38

0.84

0.59 0.62 0.80

0.48 0.47 0.46

0.74

2.96

2.12

3.02

2.58

3.06

2.18 2.20

2.43

1.12

1.98

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2011 2012 2013 2014 2015

Stan

dard

dev

iatio

n (%

)

FPA New Income

Barclays US Aggregate 1-3 Yr

Barclays US Agg Bond

Nontraditional Bond Funds

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Focus on risk and reward

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10/1/2005-9/30/2015 Source: Morningstar, Barclays Past performance is no guarantee of future results The index performance is not representative of the FPA New Income fund. Please refer to slide 25 for fund performance.

FPA New Income

Barclays US Agg Bond

Barclays US Aggregate

1-3 Yr

1-Yr Trsy Constant Maturity

30-Day Tbill

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0 1.0 2.0 3.0 4.0 5.0

10-Y

ear R

etur

n (%

)

10-Year Standard Deviation

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Unintended consequences: correlated volatility

9/30/15

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Unintended consequences: correlated volatility

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Source: Morningstar. Bond fund categories as defined by Morningstar.

FPA New Income Correlation

1/1997-12/2007 1/2008-9/2015

Nontraditional Bond Funds 0.25 0.06

Intermediate-Term Bond Funds 0.32 0.51

Long-Term Bond Funds 0.30 0.43

World Bond Funds 0.21 0.43

High Yield Bond Funds 0.30 0.08

Bank Loan Funds 0.21 -0.06

Emerging Markets Bond Funds 0.14 0.33

Intermediate Bond Funds Correlation

1/1997-12/2007 1/2008-9/2015

FPA New Income 0.32 0.51

Nontraditional Bond Funds 0.41 0.70

Long-Term Bond Funds 0.97 0.93

World Bond Funds 0.67 0.81

High Yield Bond Funds 0.22 0.69

Bank Loan Funds -0.02 0.48

Emerging Markets Bond Funds 0.19 0.77

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Portfolio – fixed income allocation alternative

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Low volatility strategies with goal of positive return in

rising interest rates, such as Short Duration

High Yield

Bank Loans

Emerging Markets

Non- traditional

Non-Dollar Developed

Core Fixed Income

■ Trying to find ideas that reduce the risk of Core

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Proposed Securities & Exchange Commission liquidity guidelines

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Source: Securities and Exchange Commission

…or what macro-prudential looks like

Liquidity risk management programs

■ Classification of the liquidity of fund portfolio assets

■ Assessment, periodic review and management of a fund’s liquidity risk

■ Establishment of a three-day liquid asset minimum

■ Board approval and review

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Proposal of how we will comply with the rules

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…or how we have thought about liquidity for over 30 years

Primary liquidity ■ Tier 1

− Stated maturity of one to two years

− Normal settlement of T+0 or T+1

− Classified as a U.S. Treasury obligation or U.S. agency senior obligation

■ Tier 2

− One year or less expected average life or maturity

− Normal settlement of T+3

− The lowest credit rating is AA-/AA3 at a minimum

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Proposal of how we will comply with the rules

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…or how we have thought about liquidity for over 30 years

Secondary level ■ If a security does not fit into any of the above tier levels, it is classified as potentially not liquid

enough for shareholder client redemption estimates over a 1, 3, 5, 10 business day time periods.

Securities may qualify as a source of liquidity for shareholder redemption estimates if the following

criteria are met:

− The minimum rating is AA-/AA3 or other equivalent from a nationally recognized statistical ratings organization

− Less than a 3 year expected average life or stated maturity

− Normal settlement date of T+3

− Current par amount $1 million minimum or classified as good delivery into an agency mortgage TBA bid

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Proposed Securities & Exchange Commission liquidity guidelines

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Source: Securities and Exchange Commission

…or what macro-prudential looks like

Swing Pricing ■ The Commission will consider proposed amendments to Investment Company Act rule 22c-1 that

would permit, but not require, open-end funds (except money market funds or ETFs) to use

“swing pricing.”

− Swing pricing is the process of reflecting in a fund’s NAV the costs associated with shareholders’ trading activity

in order to pass those costs on to the purchasing and redeeming shareholders.

− It is designed to protect existing shareholders from dilution associated with shareholder purchases and

redemptions and would be another tool to help funds manage liquidity risks.

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Portfolio characteristics

FPA New Income top allocations as of September 30, 2015

Source: FactSet See glossary of terms pages 30-31 Portfolio composition will change due to ongoing management of the fund. References to individual securities are for informational purposes only and should not be construed as recommendations by the Fund, Advisor or Distributor. As of September 30, 2015, the SEC yield was 2.77%. This calculation begins with the Fund’s dividend payments for the last 30 days, subtracts fund expenses and uses this number to estimate your returns for a year. The SEC yield is based on the price of the fund at the beginning of the month. The income yield stated here reflects prospective data and thus assumes payments collected by the fund may fluctuate.

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Sector % Held (MV) Maturity (Years)

Yield to Worst (%)

Effective Duration (Years)

Nominal Spread (Bps)

Cash & equivalents 7.78 0.36 0.09 0.22 5

Cash 0.49 0.00 0.00 0.00 0

Treasury (short) 7.29 0.38 0.10 0.23 5

Credit 9.67 2.41 8.47 1.73 845

Corporate 9.67 2.41 8.47 1.73 845

Municipal 1.19 0.59 7.87 0.54 754

Securitized 81.36 2.04 2.29 1.51 150

Mortgage Pass-Through 5.55 1.64 1.48 1.46 78

Mortgage Backed 20.13 2.41 2.96 2.10 158

ABS 38.39 1.37 1.49 1.21 104

CMBS 5.81 1.19 2.95 1.07 257

Stripped Mortgage-Backed 11.48 4.27 3.88 1.71 273

Total 100.00 1.93 2.79 1.42 213

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FPA New Income allocation changes

As of September 30, 2015

Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as recommendations by the Fund, its Advisor or Distributor.

As of September 30, 2014

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ABS Auto Subprime

19% Stripped Performing CMBS 10%

Corporates 10%

30-Year Relo MBS 8%

Treasury (short)

7%

15-Year Seasoned

MBS 7%

Non-performning

MBS 7%

ABS Equipment

6%

ABS Credit Cards

5%

Other 21%

ABS Auto Subprime

17%

15-Year Seasoned

MBS 13%

Corporates 10%

ABS Auto Prime

9%

30-Year Relo MBS 8%

Stripped Performing

CMBS 7%

Treasury (short)

6%

Non-Performing

MBS 5%

Other 25%

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Source: FactSet

FPA New Income portfolio

Q3 2015 Year-to-date ending 9/30/15

Average Weight (%)

Contribution to return (%)

Average Weight (%)

Contribution to return (%)

ABS 37.44 0.19 32.76 0.42 Auto 21.12 0.10 20.46 0.20 Other 11.72 0.06 9.09 0.19 Credit Card 4.59 0.02 3.20 0.04 Money Market -- -- 0.01 0.00

CMO 20.50 0.11 21.83 0.44 Non-Agency 10.27 0.07 8.82 0.23 Agency 10.23 0.04 13.01 0.21

CMBS 16.24 0.08 15.84 0.29 Stripped 10.18 0.04 9.98 0.16 Non-Agency 5.27 0.04 4.58 0.12 Agency 0.79 0.00 1.28 0.01

Mortgage Pass-Through 5.84 0.01 6.28 0.03 Municipal 0.47 0.01 0.16 0.01 Treasury (short) 7.52 0.00 8.94 0.01 Cash 1.80 0.00 2.44 0.00 MBS Stripped 1.21 -0.13 1.34 -0.11 Corporate 8.98 -0.27 10.43 0.05

Bank Debt 1.89 -0.03 2.29 0.08 Corporate 7.09 -0.24 8.14 -0.02

Total 100.00 0.00 100.00 1.14 First Pacifi

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Value in high yield?

0

20

40

60

80

100

120

140

160

180

200

0 20 40 60 80 100 120 140 160 180 200

$ B

ond

Valu

e

$ Business or Asset Value

Bond Value

Margin of Safety

Bond Loss

Margin of Safety is a principle of investing in which an investor only purchases securities when the market price is significantly below its intrinsic value. In other words, when market price is significantly below your estimation of the intrinsic value, the difference is the margin of safety. This difference allows an investment to be made with minimal downside risk. First

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Oil prices are down

Source: Barclays WTI = West Texas Intermediate

0

20

40

60

80

100

120

60

65

70

75

80

85

90

95

100

105

110

$ Pr

ice

$ Pr

ice

WTI spot price (right scale)

High Yield Independent Energy price

(left scale)

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High yield investment example

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Source: Company filings As of 9/30/15, FPA New Income had 0.90% of the portfolio in Atwood Oceanics

In March 2015 we began purchasing bonds issued by offshore drilling rig operator Atwood Oceanics ■ High quality, modern rig fleet, contracted cash flows, highly-regarded management team with strong operational track

record

■ Performed extensive due diligence focused on bottom-cycle, mid-cycle, and top-cycle rig fleet valuations

■ Identified an attractive risk-adjusted return profile in the 6.5% Senior Notes

As of 6/30/15 Amount ($ millions)

LTM EBITDA Multiple

Cash $75

Revolver $1,060

6.5% Senior Notes due 2020 $650

Net Debt $1,635 2.2x

Market Capitalization $1,709

Enterprise Value $3,345 4.5x

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FPA New Income investing discipline

Source: Bloomberg As of 9/30/15, FPA New Income had 0.90% of the portfolio in Atwood Oceanics

After initial purchase, higher oil prices lowered the bond yield below an appropriate risk-adjusted return ■ We waited nearly four months before resuming Atwood bond purchases

40

50

60

70

80

90

100

Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15

$ Pr

ice/

Bbl

Brent Crude Oil

Investment Investment Research

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Patient and flexible approach to investing

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Source: FactSet, Barclays Returns are gross of fees As of September 30, 2015, the SEC yield was 2.77%. This calculation begins with the Fund’s dividend payments for the last 30 days, subtracts fund expenses and uses this number to estimate your returns for a year. The SEC yield is based on the price of the fund at the beginning of the month. The income yield stated here reflects prospective data and thus assumes payments collected by the fund may fluctuate. Past performance is no guarantee of future results and the index performance is not representative of the FPA New Income fund. Please refer to slide 25 for fund performance.

FPA New Income As of 9/30/15 A & Below Non-corporate credit Corporate credit Barclays U.S.

Corp. HY Index YTW 6.72% 4.80% 8.47% 8.04% Duration 1.41 1.15 1.73 4.39 YTW/Duration 4.77 4.18 4.89 1.83 % of Portfolio 21.81% 12.14% 9.67% 100.00% % of Credit Holdings 100.0% 55.67% 44.33% n/a Q3 Return -0.73% 1.00% -3.10% -4.86% Q3 Contribution to return -0.17% 0.12% -0.28% n/a YTD Return 2.01% 3.71% -0.33% -2.45% YTD Contribution to return 0.46% 0.41% 0.05% n/a

FPA New Income Barclays U.S. HY FPA New Income Barclays U.S. HY Energy only Energy Metals & Mining Metals & Mining

YTW 9.49% 12.29% 14.91% 12.83% Duration 2.49 4.67 2.05 4.16 YTW/Duration 3.82 2.63 7.28 3.08 % of Portfolio 1.68% 12.52% 1.75% 4.62% % of Credit Holdings 7.70% n/a 8.04% n/a Q3 Return -7.37% -15.90% -7.86% -13.17% Q3 Contribution to return -0.10% n/a -0.15% n/a YTD Return -0.47% -12.24% -7.26% -15.66% YTD Contribution to return 0.06% n/a -0.13% n/a

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Question & Answer

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Performance

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Average annual total returns (%)*

As of Date: 9/30/15 YTD 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years 30 Years

FPA New Income 0.79 0.84 0.99 1.52 2.92 3.97 4.58 6.58 Barclays U.S. Agg Bond 1.13 2.94 1.71 3.10 4.64 5.29 5.59 7.04 CPI + 100 1.30 0.98 1.94 2.73 2.82 3.14 3.25 3.69

Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. This data represents past performance and investors should understand that investment returns and principal values fluctuate, so that when you redeem your investment it may be worth more or less than its original cost. Current month-end performance data may be obtained via http://www.fpafunds.com/newincome or by calling toll-free, 1-800-982-4372.

*Performance shown is net of fees A redemption fee of 2% will be imposed on redemptions within 90 days. Expense ratio: 0.56% (per most recent prospectus) Calculated using Morningstar Direct First

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Performance

* Performance shown is net of fees A redemption fee of 2% will be imposed on redemptions within 90 days. Expense ratio: 0.56% (per most recent prospectus) Calculated using Morningstar Direct Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. This data represents past performance and investors should understand that investment returns and principal values fluctuate, so that when you redeem your investment it may be worth more or less than its original cost. Current month-end performance data may be obtained via http://www.fpafunds.com/newincome or by calling toll-free, 1-800-982-4372. The CPI +100 Basis Points benchmark is created by adding 1% to the annual percentage change in the Consumer Price Index (“CPI”). This index reflects non-seasonably adjusted returns. The Consumer Price Index is an unmanaged index representing the rate of the inflation of the U.S. consumer prices as determined by the U.S. Department of Labor Statistics. There can be no guarantee that the CPI of other indexes will reflect the exact level of inflation at any given time.

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Annual Performance (%)

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 FPA New Income 1.32 0.67 2.18 2.23 3.18 2.89 4.31 6.02 4.79 1.57 2.60 8.32 4.52 12.33 9.32 Barclays US Agg Bond 5.97 -2.02 4.21 7.84 6.54 5.93 5.24 6.97 4.33 2.43 4.34 4.10 10.26 8.44 11.63 CPI + 100 1.68 2.51 2.78 4.06 2.45 3.85 0.98 5.15 3.55 4.37 4.38 3.06 3.51 2.62 4.47

1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985

FPA New Income 3.39 3.86 8.31 7.12 14.36 1.46 10.17 11.12 18.80 8.38 12.22 8.55 7.83 10.76 21.31 Barclays US Agg Bond -0.82 8.69 9.65 3.63 18.47 -2.92 9.75 7.40 16.00 8.96 14.53 7.89 2.76 15.26 22.10 CPI + 100 3.71 2.63 2.72 4.41 3.56 3.63 3.84 4.00 4.01 7.32 5.69 5.46 5.38 2.20 4.83

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-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

1 Year 3 Years 5 Years 10 Years 20 Years-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1 Year 3 Years 5 Years 10 Years 20 Years

Risk-adjusted returns

A record of attractive risk-adjusted returns

As of September 30, 2015 See glossary of terms pages 30-31 Source: Morningstar Direct. Bond Fund categories as defined by Morningstar. Past performance is no guarantee of future results and the index performance is not representative of the FPA New Income fund. Please refer to slide 25 for fund performance.

■ FPA New Income ■ Nontraditional Bond Funds ■ Short-Term Bond Funds

■ Intermediate-Term Bond Funds ■ Barclays U.S. Aggregate Bond Index

Sharpe Ratio

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Sortino Ratio

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Performance

FPA New Income: growth of $10,000 since inception

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

FPA New IncomeBarclays US Aggregate Bond Index

As of September 30, 2015. Inception date: July 11, 1984 Calculated using Morningstar Direct Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. This data represents past performance and investors should understand that investment returns and principal values fluctuate, so that when you redeem your investment it may be worth more or less than its original cost. Current month-end performance data may be obtained by calling toll-free, 1-800-982-4372. The chart illustrates the performance of a hypothetical $10,000 investment made in the fund on commencement of operations. Figures include reinvestment of capital gains and dividends, but do not reflect the effect of any applicable sales charges or redemption fees, which would lower these figures. This chart is not intended to imply any future performance of the fund.

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Disclosure These slides are intended as supplemental material to the 3rd Quarter 2015 New Income audio presentation that is posted on our website fpafunds.com. We do want to make sure you understand that the views expressed on these slides and in the accompanying audio presentation are as of today, October 27th, 2015 and are subject to change based on market and other conditions. These views may differ from other portfolio managers and analysts of the firm as a whole, and are not intended to be a forecast of future events, a guarantee of future results or investment advice. Any mention of individual securities or sectors should not be construed as a recommendation to purchase or sell such securities, and any information provided is not a sufficient basis upon which to make an investment decision. The information provided does not constitute, and should not be construed as, an offer or solicitation with respect to any securities, products or services discussed. Past performance is not a guarantee of future results. This data represents past performance and investors should understand that investment returns and principal values fluctuate, so that when you redeem your investment it may be worth more or less than its original cost. Performance has been calculated on a total return basis, which combines principal and dividend income changes for the periods shown. Principal changes are based on the difference between the beginning and closing net asset values for the period and assume reinvestment of all dividends and distributions paid. All applicable expenses such as advisory fees have been included in calculating performance. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the security examples discussed. Current month-end performance data may be obtained by calling toll-free, 1-800-982-4372. You should consider the Fund’s investment objectives, risks, and charges and expenses carefully before you invest. The Prospectus details the Fund's objective and policies, sales charges, and other matters of interest to the prospective investor. Please read this Prospectus carefully before investing. The Prospectus may be obtained by visiting the website at www.fpafunds.com, by email at crm@fpafunds.com, toll-free by calling 1-800-982-4372 or by contacting the Fund in writing. Statistics have been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed. The Barclays Capital U.S. Aggregate Bond Index is an unmanaged index that is generally considered to be representative of U.S. bond market activity. Unlike the Fund, the index does not incur fees or expenses. The 1-3 year and Intermediate versions of the Index are shorter duration versions of the index. The Short Term Peer Group is the Morningstar Short Term Bond Peer group. The Barclays Capital Government/Credit Index is considered a measure of bond performance and is included as a broad-based comparison to the Fund’s portfolio. The Barclays Capital Government/Credit Index is an unmanaged fixed income market value-weighted index that combines the Barclays Capital U.S. Government and Credit Indices, including U.S. government and agency securities. All issues are investment grade (Baa) or higher, with maturities of at least one year. You cannot invest directly in an index. Investments in mutual funds carry risks and investors may lose principal value. Capital markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The Fund can purchase foreign securities, which are subject to interest rate, currency exchange rate, economic and political risks. The securities of smaller, less well-known companies can be more volatile than those of larger companies. Interest rate risk is when interest rates go up, the value of fixed income securities, such as bonds, typically go down and investors may lose principal value. Credit risk is the risk of loss of principle due to the issuer's failure to repay a loan. Generally, the lower the quality rating of a security, the greater the risk that the issuer will fail to pay interest fully and return principal in a timely manner. If an issuer defaults the security may lose some or all its value. The return of principal in a bond fund is not guaranteed. Bond funds have the same issuer, interest rate, inflation and credit risks that are associated with underlying bonds owned by the fund. Lower rated bonds, convertible securities and other types of debt obligations involve greater risks than higher rated bonds. Mortgage securities and collateralized mortgage obligations (CMOs) are subject to prepayment risk and the risk of default on the underlying mortgages or other assets; such derivatives may increase volatility. Convertible securities are generally not investment grade and are subject to greater credit risk than higher-rated investments. High yield securities can be volatile and subject to much higher instances of default. The Fund may experience increased costs, losses and delays in liquidating underlying securities should the seller of a repurchase agreement declare bankruptcy or default.

It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the security examples discussed. Any statistics have been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed. The FPA Funds are distributed by UMB Distribution Services, LLC

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Glossary of terms ABL Revolver (Asset Based Revolving Loan) is a business loan secured by collateral (assets). ABS (Asset Backed Securities): financial securities backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. Average Maturity: is a measure of maturity that takes into account the possibility that a bond might be called back to the issuer. For a portfolio of bonds, average maturity is the weighted average of the maturities of the underlying bonds. B is the second rating down from the highest non-investment grade rating, regarded as speculative. Barclays ABS Index is the ABS component of the U.S. Aggregate index. The index includes pass-through, bullet and controlled amortization structures. Barclays CMBS Index is the CMBS component of the Barclays U.S. Aggregate Index. Barclays MBS Index is an unmanaged index comprising 15- and 30-year fixed-rate securities backed by mortgage pools of Ginnie Mae, Freddie Mac and Fannie Mae. Barclays Treasury Index is the U.S. Treasury component of the U.S. Government index. Barclays U.S. Aggregate 1-3 Year Index is the 1-3 year component of the U.S. Aggregate Bond index.. Barclays U.S. Aggregate 3-5 Year Index is the 3-5 year component of the U.S. Aggregate Bond index. Barclays U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. Barclays U.S. Corporate High Yield Index measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. BB is the next rating down from the highest non-investment grade rating, regarded as speculative. Bps (Basis Points): a unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. CCC is the third rating down from the highest non-investment grade rating, regarded as highly speculative. CMBS (Commercial Mortgage Backed Security): a mortgage-backed security backed by commercial mortgages rather than residential mortgages. CMO (Collateralized Mortgage Obligation): a mortgage-backed, investment-grade bond that separates mortgage pools into different maturity classes. Coupon: The interest rate stated on a bond when it's issued. The coupon is typically paid semiannually. Consumer price index (CPI) is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. CPI + 100 is a measure of the consumer price index (CPI) plus an additional 100 basis points Credit cycle is cycle involving the access to credit by borrowers. Credit cycles first go through periods in which funds are easy to borrow; these periods are characterized by lower interest rates, lowered lending requirements and an increase in the amount of available credit. These periods are followed by a contraction in the availability of funds. During the contraction period, interest rates climb and lending rules become more strict, meaning that less people can borrow. The contraction period continues until risks are reduced for the lending institutions, at which point the cycle starts again. Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. DTI (Debt-to-Income ratio): a personal finance measure that compares an individual's debt payments to the income he or she generates. EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization Effective Duration: the duration calculation for bonds with embedded options. Effective duration takes into account that expected cash flows will fluctuate as interest rates change. EPS: Earnings Per Share ETF (Exchange Traded Fund) is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. GDP (Gross Domestic Product): the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. 30

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Glossary of terms GNMA: Government National Mortgage Association Investment grade is a rating that indicates that a municipal or corporate bond has a relatively low risk of default. LTV (Loan-to-Value) ratio: a financial term used by commercial lenders to express the ratio of a loan underwritten to a value of an asset purchased. LTM: last twelve months Maturity: The period of time for which a financial instrument remains outstanding. Modified Duration: Modified duration follows the concept that interest rates and bond prices move in opposite directions. This formula is used to determine the effect that a 100-basis-point (1%) change in interest rates will have on the price of a bond. Mortgage Pass-Through: a security representing a direct interest in a pool of mortgage loans. MV (Market Value) Nominal Spread: the spread, expressed in percent or basis points, that when added to the yield at one point on the Treasury yield curve equals the discount factor that will make a security’s cash flows equal to its current market price. P&I: pertains to only those mortgage backed securities in the portfolio who’s underlying bonds pay both principal and interest. OAS (Option Adjusted Spread) is a measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option. RMBS (Residential Mortgage Backed Securities): mortgage-backed securities backed by residential mortgages. Seasoned Spread: spread on financial instrument that has been publicly traded in the secondary market long enough to eliminate any short-term effects from its initial public offering. Sharpe Ratio measures risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. Sortino Ratio differentiates between good and bad volatility in the Sharpe ratio. This differentiation of upwards and downwards volatility allows the calculation to provide a risk-adjusted measure of a security or fund's performance without penalizing it for upward price changes. Turnover Ratio is the percentage of a mutual fund or other investment vehicle's holdings that have been "turned over" or replaced with other holdings in a given year. Russell 3000 Index: a market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of the entire U.S. stock market. More specifically, this index encompasses the 3,000 largest U.S.-traded stocks, in which the underlying companies are all incorporated in the U.S. S&P GSCI Enhanced Commodity measures the total return available to investors holding a modified version of the S&P GSCI Index to which certain dynamic, timing, and seasonal rolling rules are applied. The index includes the commodity futures contracts. S&P 500 Index: An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. Spread-to-Worst: the difference in overall returns between two different classes of securities, or returns from the same class, but different representative securities. Stripped Mortgage-Backed Securities: a trust comprised of mortgage-backed securities which are split into principal-only strips and interest-only strips. Weighted Average Life: the average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding. Yield-to-Call: The yield of a bond or note if you were to buy and hold the security until the call date. This yield is valid only if the security is called prior to maturity. The calculation of yield to call is based on the coupon rate, the length of time to the call date and the market price. Yield-to-Maturity: the rate of return anticipated on a bond if held until the end of its lifetime. YTM is considered a long-term bond yield expressed as an annual rate. The YTM calculation takes into account the bond’s current market price, par value, coupon interest rate and time to maturity. It is also assumed that all coupon payments are reinvested at the same rate as the bond’s current yield. Yield-to-Worst: the lowest amount that an investor will make from a bond, computed by using the lower of the yield to maturity and the yield to call on every call date.

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