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Generating Income in a Low Interest Rate EnvironmentSeptember 2012

Los Angeles | Boston | London | Frankfurt | Paris

The information in this presentation has been obtained from sources we consider to be accurate, but is not guaranteed. Our opinions are derived from current market conditions and may change at any time. No part of this presentation may be reproduced in any form without the express written consent of Payden & Rygel. © Payden & Rygel 2012

F:\GRAPHICS\TEMPLATE\Bound Books\Generating Income\Generating Income 9-12.pptx

Biographies James T. Wong, CFAPrincipal

1995 – Joined Payden & Rygel

James Wong, CFA, is a principal and co-manager of both the domestic large-cap andglobal equity strategies at Payden & Rygel. He has worked with firm’s equity productssince their inception. Wong has over 15 years of equity portfolio managementexperience, during which he has managed the breadth of equity styles and marketcapitalizations. He has extensive experience managing long/short portfolios, creatinghedging strategies using derivatives and developing customized investment solutionsfor client specific needs. Wong is also a member of the Investment Policy Committee.

Before joining Payden & Rygel, Wong was a trader at the Union Bank of Switzerlandwhere he focused on mortgage-backed securities. Previously, he was in the corporatefinance group at Salomon Brothers Inc.

Wong holds the Chartered Financial Analyst designation and the FINRA series 7, 3and 63 licenses. He earned an MBA degree from The Anderson School at theUniversity of California, Los Angeles with an emphasis in finance. Wong earned a BSdegree in Economics from The Wharton School, University of Pennsylvania with aconcentration in finance.

Sabur S. MoiniSenior Vice President – High Yield Portfolio Manager


Sabur Moini is a senior vice president and high yield portfolio manager at Payden &Rygel. He selects and monitors opportunities in the high-yield bond market, makingrelative value and total return industry and sector decisions. Moini frequentlypublishes analysis and commentary related to the high-yield bond market.

Prior to joining Payden & Rygel, Sabur Moini was a director at SunAmericaInvestments/AIG where he invested in high-yield bank loans for the firm’s $2.5 billionloan portfolio. Previously, he was an assistant vice president at Bank of Americawhere he handled Fortune 1000 credit relationships for the bank’s U.S. corporatedivision.

He earned an MBA from the Anderson School at the University of California, LosAngeles with an emphasis in finance and received a BA from Williams College inEconomics. Moini holds the FINRA series 7 and 63 licenses.

ContentsContents

I Payden & Rygel

High Yield Debt

High Dividend Stocks

Emerging Market Debt

II

III

IV

I Payden & Rygel


1

Payden & Rygel is one of the largest independent U.S. investment management firms, offering a full array of investment strategies and products to its varied client base, including corporations, pension plans, insurance, foundations, unions and family offices.

While the firm has grown and expanded considerably since its founding, it has never deviated from its mission of providing customized investment management services that focus on each client’s specific needs and objectives.

Meeting Our Clients’ Needs Through Customized Investment Services

Established in 1983 • U.S. Corporation – Privately Held • Global Investment Perspective

Shareholders All Active In The Management Of The Firm • $72 Billion In Assets Under Management

Investment Management Is Our Only Source of Revenue • 170 Employees

Headquartered in Los Angeles

Los Angeles | Boston | London | Frankfurt | Paris


Corporate Structure

Serving clients in Europe and Asia

Metzler/Payden, LLC Joint Venture

DublinMulti-currency based14 funds$1.3 billion in assets

Payden & RygelOffshore Funds

US based funds19 domestic & international funds$5.5 billion in assets

Paydenfunds

Established 1983Investment Management Is Our Only Source of Revenue

2


Global Reach

3

Headquartered in Los Angeles, California, Payden & Rygel has an international presence, with over 350 client relationships worldwide.Established in 1983

Payden & Rygel Global Limited, a wholly-owned subsidiary of Payden & Rygel, is centered in London, with a satellite office in Paris, that provides a full-range of investment services to clients in Europe, the United Kingdom, Asia, Middle East and South Africa.

London / Paris

Over $72 billion in assets under managementFully owned by 18 senior executives active in day-to-day management of the firm

Located in the heart of Boston’s Financial District, Payden & Rygelworks with clients and their consultants on the East Coast and in Canada, Europe, Bermuda, and Latin America.

BostonMetzler Bank, Payden & Rygel'spartner in the 50/50 joint-venture Metzler/Payden LLC, is located in Frankfurt and provides active portfolio management for the joint-venture's international equity offerings for clients in Europe and the United States.

Frankfurt / Tokyo


Index Replication

Absolute Return

Portable Alpha (Russell 2000)

Legacy Mandates

4

Enhanced Cash

Low Duration

Municipal (Tax Advantage)

Core Bond/Core Plus

Liability Driven Investment (LDI)

High Yield

Emerging Markets (Hedged, Local)

Structured Product (GNMA, ABS, MBS)

Global Fixed Income – Hedged & Unhedged

Global Credit

Fixed Income

Our Strategies

All Payden & Rygel strategies can be customized to any local currency

Specialized Solutions

Investing Is A Process – Not A Product

High Dividend Stock

Global Equity

Emerging Markets

Enhanced Equity

Equity


5

Investment Strategies: Fixed IncomeInvestment strategies are customized to meet specific client objectives.

Low Duration

Intermediate / Core / Core Plus

US Government Bonds

An alternative to cash and short-term bank deposits. Portfolio structure is based upon a client’s liquidity requirements.

Comprises the principal part of any medium to long-term fixed income strategy.

Intermediate maturity strategy which is 100% US Government securities. High quality strategy for risk averse investors.

High Yield Bonds Dedicated strategy or combine with other strategies to provide greater diversification.

Emerging Market Bonds Hedged, local or blended portfolios primarily sovereign with opportunistic exposure in corporates.

Global Fixed Income Short/Intermediate strategy which utilizes mostly sovereign bonds from developed countries to provide a diversified investment portfolio. This strategy can be hedged to any local currency.

Cash Management Liquidity management of operating funds or sweep funds.

Global Credit An opportunity to source credit from around the world.

Municipal Bonds Tax exempt bonds that are exempt from federal income tax and provide attractive current income while preserving capital.


6

Investment Strategies: Equity

Large-cap common stocks with above-average dividend yields and other income-producing securities such as preferred stocks, real estate investment trusts and master limited partnerships. The fund focuses on individual companies capable of maintaining or increasing their dividend. Strategy provides current income and equity market participation through large cap value stocks.

US Large Cap Value/High Dividend

This strategy uses stock-index futures to track the client’s specified equity index such as the S&P 500 Index or MSCI World Index. Returns are enhanced with a short-term bond portfolio. This “stocks plus alpha” strategy has been successfully employed as a core equity holding by institutional investors for many years.

Enhanced Equity

This strategy employs a bottom-up approach to stock selection in these low-turnover portfolios. Both fundamental and quantitative analyses are used to build portfolios consisting of 40-70 European growth stocks diversified among sectors. Metzler/Payden LLC is the subadvisor for this strategy.

European Emerging Markets & Large Cap Core

A unique top-down approach is employed to overweight/underweight different countries, industries and sectors. A powerful combination with traditional, bottom-up managers.

Global Core

Investment strategies are customized to meet specific client objectives.


7

Investment Strategies: Specialized Solutions

Liability Driven Investing

Portable Alpha

Absolute Return

Portfolios constructed to better match the duration of long-term pension liabilities. Two approaches: traditional & derivatives based.

Portfolios designed to capture and transport ”alpha” over a given index. Sources of alpha can include Fixed Income, Equity, and Currency strategies. For example: Enhanced Equity.

Portfolios designed to produce a threshold total rate of return over time. For example, LIBOR +3%, regardless of equity or fixed income market trends.

Futures overlay to achieve policy asset allocation target.Target Overlay

Securities LendingCash Management

Portfolios using Payden’s pioneering cash management strategies to manage cash collateral from securities lending programs.

Cash securities or derivatives based solutions are used to replicate a variety of global indices. Example: Barclays US Aggregate Index and Citi Non-US Index replication.

Index Replication

Investment strategies are customized to meet specific client objectives.


Representative Clients

8

Corporations AARPAdobe Systems, Inc.American Airlines, Inc. Boeing Broadcom CorporationCisco Systems, Inc.GoogleMarvell International Ltd.Northrop Grumman Shell Oil Co. United Technologies

Endowments, Foundations, Charities Emory UniversityGeorgia TechIndiana University The Pennsylvania State UniversityThe Texas A&M University System Trustees of Dartmouth CollegeU.K. UniversitiesUnited WayUniversity of Michigan University of WashingtonUnited Nations Agencies – Rome

Representative sample of our clients.

Our Most Precious Asset

Jointly-Trusteed PlansAmerican Fed. of Musicians and EmployersBuilding Service 32BJ Pension FundCarpenters Pension Fund of IllinoisInternational Association of Machinists Intl. Brotherhood of Electrical Workers (D.C.)National Automatic Sprinkler Industry National Electrical Benefit Fund New York District Council of CarpentersOhio Laborers’ District CouncilPasadena Police Officers Association Producer-Writers Guild of America

InsuranceAthene Life Re Ltd.California Insurance Guarantee AssociationCalOPTIMACarl Späengler KAG mbHClifton Casualty Insurance CompanyEverest Re Group, Ltd.Guaranty Fund Management Services®L.A. Care Health Plan Lloyd’s of London (multiple syndicates)Texas Property and Casualty Guaranty AssociationWorkmen’s Insurance Group

Health Care Catholic Health Services of Long IslandChildren’s Hospital Los Angeles Good Samaritan Hospital Kaiser Permanente Montefiore Medical CenterNew York-Presbyterian Hospital North Mississippi Health Services PeaceHealthSt. Luke’s Regional Medical Center

Government FundsCity of Detroit Policemen and Firemen City of St. LouisCity of Westminster (London)Florida Local Government Investment TrustKansas Public Employees Nevada Public Employees North Carolina Department of State TreasurerOrange County Transportation AuthoritySovereign Wealth Funds (various)State of Connecticut Treasurer’s OfficeVirginia Retirement System

Families & IndividualsFamily offices, businesses, foundationsCharitable remainder trusts Offshore family trusts


Characteristics of the Firm

Independence:

Payden & Rygel is one of the largest independent global investment managers, with 100% of the company shares owned by senior portfolio managers or executives that are involved in the day-to-day direction of the firm.

Customization:

Our independence provides us the ability to manage bond portfolios with complete customization to our client's special objectives. Managing unique mandates is the hallmark of our firm. The outcome results in outstanding interactions between Payden and our clients.

Risk Management:

Our approach focuses on a very basic tenet, an investment portfolio should behave in a manner consistent with the client’s objectives. As simple as this sounds, disasters in stocks and bonds over the past 20 years have occurred as investment managers looked to get aggressive on risk and invest in securities that were, perhaps, allowable under the letter of the client's guidelines, but not the spirit.

Diversified Approach:

We use a top down, macro focus for major strategy themes such as the stock/bond mix, sector-weights, country decisions and duration stance combined with a bottom up approach for individual item selection.

9

The senior management team has been working together on average for more than 20 years. Success has been due to a team approach where ideas flow freely and are not constrained by geographic borders.


10

Payden & Rygel is 100% Employee-Owned

Shareholders

* Investment Policy Committee

Title Experience Tenure at P&R

YEARS

Executive Committee

Principals

Managing Principals

Joan A. Payden, CFA* CEO & Chair, Executive Committee 40 29

Brian W. Matthews, CFA* CFO, Executive Committee 29 26

James P. Sarni, CFA* Executive Committee 27 21

Mary Beth Syal, CFA* Executive Committee 27 21

Scott J. Weiner, Ph.D.* Executive Committee 27 19

Edward S. Garlock, Esq. Executive Committee – Legal 30 15

Asha B. Joshi, CFA* Managing Principal – Institutional Clients 28 18

Michael E. Salvay, CFA* Managing Principal – Investment Strategy 27 15

Kristin J. Ceva, Ph.D., CFA* Managing Principal – Global Fixed Income 23 14

Gregory T. Morrison, CFA, CPA Managing Principal – IT 18 14

Robin B.B. Creswell, FSI Managing Principal – UK 32 14

Justin G. Bullion, CFA Managing Principal – Boston 21 2

David P. Ballantine, CFA, CFP Principal – Structured Products 27 21

James T. Wong, CFA* Principal – Equities 20 17

Gregory P. Brown, CFA Principal – Institutional Business 29 16

Yot Chattrabhuti Principal – Operations 27 15

Mark J. Morris, CFA Principal – Institutional Clients – UK 25 10

Nigel Jenkins, ASIP* Principal – Global Fixed Income – UK 24 6

YEARS


Biographies

11

Joan A. Payden, CFAPresident and CEO

1983 – Established Payden & Rygel

Joan Payden, CFA, is the president and chief executive officer of Payden & Rygel, theglobal investment management firm that she founded in 1983. Payden has overseenthe firm’s international expansion and its growth to more than $65 billion in assetsunder management. In 1992 the firm launched Payden & Rygel Investment Group, afamily of mutual funds, of which she is chairman and chief executive officer.Subsequently many of these strategies were duplicated in offshore funds domiciled inIreland. In 1998 Payden & Rygel Global Ltd. was founded in London. At the sametime, the firm established Metzler/Payden LLC, its joint venture with Metzler Bank,Germany’s oldest private bank. She is a member of the Payden & Rygel InvestmentPolicy Committee and serves as chairman of the board. She serves on the board ofvisitors of the Anderson School of Business at UCLA, and is a trustee of the Universityof Southern California, Loyola Marymount University and Occidental College. She isalso a member of the board of the Los Angeles Sports Council, the California Chamberof Commerce, the LA ’84 Foundation and the Natural History Museum of Los Angeles.She is past chairman of the Investment Counsel Association of America.

Joan Payden holds the Chartered Financial Analyst designation. She is a graduate ofthe Advanced Management Program at Harvard Business School and earned a BAfrom Trinity College in Mathematics and Physics.

Mary Beth Syal, CFA, is a managing principal at Payden & Rygel and a member of theExecutive Committee of the board of directors. Syal is a member of the firm’s InvestmentPolicy Committee. She directs the firm’s low duration strategies and also serves as asenior portfolio manager advising corporations, insurance companies and family offices.She is a trustee of The Payden & Rygel Investment Group, the sponsor of thePaydenfunds, for which Payden & Rygel is the investment adviser.

Prior to joining Payden & Rygel, Syal was a portfolio manager and strategist at AmervestCompany, Inc., where she was the co-chair of the Investment Strategy Committee.

Mary Beth Syal is a member of the CFA Society of Los Angeles, the CFA Institute andthe Los Angeles Association of Investment Women. In addition, she serves on theInvestment Committee of the Western Province of the Religious of the Sacred Heart ofMary and is a member of the Investment Review Committee for the St. Joseph HealthSystem.

Syal holds the Chartered Financial Analyst designation. She earned a BA degree inGovernment from Smith College in Northampton, Massachusetts.

Mary Beth Syal, CFAManaging Principal


James P. Sarni, CFAManaging Principal


Brian W. Matthews, CFAManaging Principal


Brian Matthews, CFA, is a managing principal and the chief financial officer at Payden &Rygel, and is a member of the Executive Committee of the board of directors. Matthewsis a member of the firm’s Investment Policy Committee and serves as a senior portfoliomanager advising institutional clients, including corporations, pension funds, insurancecompanies and foundations and endowments. He is a director of Metzler/Payden LLC,the firm’s joint venture with Metzler Bank of Frankfurt, Germany. Matthews is also co-chairman of Payden/Kravitz LLC, a joint venture specializing in cash balance retirementplans.Prior to joining Payden & Rygel, Matthews was an investment officer at Brown BrothersHarriman & Company in New York, where he was responsible for managing fixed-income portfolios and asset/liability management.Matthews is a member of the CFA Society of Los Angeles, the CFA Institute and theInvestment Counsel Association of America, Inc. He is past chairman of the board ofdirectors for the Boy Scouts of America Los Angeles Area Council and serves on theboard of directors for Oaks Christian School, St. Anne’s, Kids in Sports, and the board ofvisitors for Pepperdine University and is a board member of the Patron of the Arts in theVatican Museums.Brian Matthews holds the Chartered Financial Analyst designation. He earned a BS inEconomics at the University of Notre Dame.

James Sarni, CFA, is a managing principal at Payden & Rygel and a member of theExecutive Committee of the board of directors. Sarni is a member of the firm’sInvestment Policy Committee and serves as a senior portfolio manager advisingpension funds, insurance companies, corporations, health care organizations, Taft-Hartley plans, universities and endowments. Sarni is a director of Payden & RygelGlobal Ltd. and Payden Global Funds plc.Prior to joining Payden & Rygel, Sarni was a vice president and senior portfoliomanager at First Interstate Bank where he managed the trust department’scommingled bond funds as well as institutional client portfolios.James Sarni is a member of the board of directors of the Center for Investment Studiesat University of Southern California’s Marshall School of Business, the Pasadena CityCollege Foundation, and the Mayfield Senior School. He is past president of theWashington, DC-based Investment Adviser Association and the CFA Society of LosAngeles and is a member of the CFA Institute. He is also past president of the St.Philip the Apostle school board of trustees.Sarni holds the Chartered Financial Analyst designation. He earned an MBA with anemphasis in finance and a BS from the University of Southern California.


Biographies

12

Asha B. Joshi, CFAManaging Principal


Asha Joshi, CFA, is a managing principal at Payden & Rygel. Joshi is a member of thefirm’s Investment Policy committee and board of directors. She is a senior portfoliomanager serving institutional clients including public plans, corporations, universitiesand endowments.

Prior to joining Payden & Rygel in 1994, Joshi was a vice president in capital marketsat CIBC/Wood Gundy and previously, a vice president at First Interstate Bank, Ltdwhere she was responsible for managing derivatives.

Joshi is a past president of the CFA Society of Los Angeles and a member of the CFAInstitute. She also serves on the board of the California Council on EconomicEducation.

Asha Joshi holds the Chartered Financial Analyst designation. She earned an MBA,with an emphasis in finance, and an MA degree from UCLA the year that she was aRotary Foundation Ambassadorial Fellow. Joshi received an undergraduate degreewith the highest honors from Bangalore University in India.

Scott Weiner, PhD, is a managing principal at Payden & Rygel and a member of theExecutive Committee that manages the firm. Weiner is also a member of the firm’sInvestment Policy Committee which directs investment strategy and monitors the riskcontrols for the firm and its clients. As a frequent speaker at industry forums, hespecializes in topics relating to asset allocation, risk management and internationalinvesting.

Prior to joining Payden & Rygel, Weiner was a senior strategy member of theinvestment arm of First Interstate. More previously, he was with Goldman Sachs inNew York as one of the strategists in the 1980s developing expertise in the mortgagemarket.

Scott Weiner earned a PhD in Pharmaceutical Chemistry from the University ofCalifornia, San Francisco focusing on theoretical macromolecular biophysicalchemistry. He received a AB degree in Mathematics from Occidental College in LosAngeles.

Scott J. Weiner, PhDManaging Principal 1993 – Joined Payden & Rygel

Michael E. Salvay, CFAManaging Principal

1997 – Joined Payden & RygelMichael Salvay, CFA, is a managing principal at Payden & Rygel. He is a member ofthe firm’s Investment Policy Committee and serves as senior portfolio manageradvising public pension plans, endowments and universities and corporations. Hedirects the core bond architecture group and has extensive experience in developingcustomized mandates for active and passive index replication portfolios as well ashedging programs. Salvay is also a trustee of The Payden & Rygel Investment Group,the sponsor of the Paydenfunds, for which Payden & Rygel is the investment advisor.

Prior to joining Payden & Rygel, Salvay was a senior portfolio manager at DeweySquare Investors in Boston, where he specialized in mortgage-backed securities andduration immunization strategies.

Michael Salvay holds the Chartered Financial Analyst designation and is a member ofthe CFA Institute. He earned an MBA from the Amos Tuck School at DartmouthCollege and a BA in Economics from the University of California, San Diego.

Edward S. Garlock, Esq.Managing Principal and General Counsel

1997 – Joined Payden & RygelEdward Garlock, Esq., is a managing principal at Payden & Rygel and a member ofthe Executive Committee of the board of directors. He is responsible for legal,regulatory and compliance issues for the firm and its global subsidiaries in London andDublin. He oversees similar issues for Metzler/Payden LLC, the firm’s joint venture withMetzler Bank of Frankfurt, Germany. Garlock is a member of Payden & Rygel’s boardof directors.

Prior to joining Payden & Rygel, Garlock was a senior vice president, group generalcounsel and corporate secretary at First Interstate Bancorp.

Edward Garlock is a member of the American Corporate Counsel Association and theAmerican Society of Corporate Secretaries. He is a member of the board of directors ofthe Rose Bowl Operating Company and the Bishop Stevens Foundation.

Garlock earned a JD degree from Northwestern University School of Law and a BA inHistory from Stanford University.


Biographies

13

Robin B.B. Creswell, FSIManaging Principal-London


Robin Creswell is a managing principal at Payden & Rygel. He is responsible for thefirm’s London office; Payden & Rygel Global Ltd. Creswell is a member of the firm’sboard of directors.

Creswell’s 30-year career in the financial industry began in banking. He was then aleading figure in the development of the global hedge fund and derivatives industry inthe 1990s. He was responsible for launching the first publicly offered hedge funds in anumber of jurisdictions, including Japan, Australia and Hong Kong.

Prior to joining Payden & Rygel, Creswell was responsible for global distribution atED&F Man. Subsequently he established the fund management subsidiary, GreystoneInternational Ltd., for Chicago-based futures broker Gelderman, Inc. later acquired bythe Man Group.

Robin Creswell is a fellow of the Securities & Investment Institute, and he chairs theinvestment advisory committee of the Charities Aid Foundation where he is a trusteeand board member.

Gregory Morrison, CPA, CFA, is a managing principal and the director of informationtechnology at Payden & Rygel. He is responsible for strategic planning anddevelopment of the firm’s portfolio management and accounting technology andprocesses.

Prior to joining Payden & Rygel, Morrison was a member of the assurance and advisoryservices practice of Deloitte & Touche, where he specialized in audits of globalinvestment managers and securities brokers and dealers. He is a member of the CFAInstitute, the CFA Society of Los Angeles and the American Institute of Certified PublicAccountants.

Greg Morrison is a certified public accountant and holds the Chartered FinancialAnalyst designation. He earned a BS in Accounting and Management from WashingtonUniversity in St. Louis, Missouri.

Gregory T. Morrison, CPA, CFAManaging Principal


Kristin Johnson Ceva, PhD, CFAManaging Principal


Kristin Ceva, PhD, CFA, is a managing principal at Payden & Rygel. Ceva is amember of the firm’s Investment Policy Committee and is a senior portfolio managerdirecting the firm’s global sovereign debt strategies. She also is a frequent speaker atindustry forums, focusing on topics related to international investing and emergingmarkets.

Prior to joining Payden & Rygel, Ceva worked with a number of international policyinstitutes, including the Pacific Council on International Policy, the Center for U.S.-Mexican Studies and the North America Forum at Stanford University.

Kristin Ceva holds the Chartered Financial Analyst designation. She earned a PhDfrom Stanford University in Political Science with an emphasis on international politicaleconomy. She was a Fulbright Scholar based in Mexico City and her dissertation wasentitled “Economic Restructuring and Business-Government Relations: Trade andFinancial Liberalization in Mexico.” Ceva has completed extensive economic andpolitical research on emerging markets and is fluent in Spanish. She received a BBAin Finance from Texas A&M University.

Justin G. Bullion, CFA, is a managing principal at Payden & Rygel. He is responsiblefor the firm’s Boston office. Bullion serves the firm’s east coast and global clients andcoordinates with Payden & Rygel Global Ltd. in London and Metzler/Payden LLC, thefirm’s joint venture with Metzler Bank of Frankfurt, Germany.

Prior to joining Payden & Rygel, Bullion was a fixed-income professional at WellingtonManagement Company, LLP in Boston, where he held roles in product management,short duration portfolio management, and business management for over 12 years.He also spent time in various roles with Miller Anderson & Sherrerd LLP (now MorganStanley Investment Management) and Blackstone (now BlackRock) FinancialManagement prior to joining Wellington.

Bullion holds the Chartered Financial Analyst designation and is a member of theBoston Security Analysts Society. He is on the Massachusetts Board for the Trust forPublic Land. He earned a BA in Sociology at the University of Pennsylvania.

Justin G. Bullion, CFAManaging Principal



Biographies

14

Yot Chattrabhuti is a principal and director of operations at Payden & Rygel. He isresponsible for the planning, development and implementation of the firm’s operationalpolicies, procedures, guidelines and strategies.

Prior to joining Payden & Rygel, Chattrabhuti was a vice president at the Bank ofAmerica where he served in various managerial capacities including domestic custody,securities processing and employee benefit trust.

Chattrabhuti is a member of the Investment Company Institute Operations Committee,a national association of the American investment company industry.

Yot Chattrabhuti holds the FINRA series 6, 63 and 26 licenses. He earned a BS inPolitical Science, with an emphasis on international relations, from ChulalongkornUniversity in Bangkok.

Yot ChattrabhutiPrincipal


Gregory P. Brown, CFAPrincipal


Gregory Brown, CFA, is a principal at Payden & Rygel and manages the firm’sbusiness development group. His team is responsible for marketing the firm’sinvestment services and mutual fund products to pension plans, foundations,endowments, non-profit organizations, educational institutions, unions, independentregistered investment advisors and the defined contribution market.

Prior to joining Payden & Rygel, Brown was a vice president at First Interstate Bankwhere he served in several capacities during his 14 years with the bank, includingcorporate finance, mergers/acquisitions, strategic planning and corporate lending.

Greg Brown is a member of the CFA Society of Los Angeles, CFA Institute and theAssociation of Investment Sales Executives.

Brown holds the Chartered Financial Analyst designation. He earned an MBA from theAnderson School at the University of California, Los Angeles with an emphasis infinance and international business. Brown received a BS in Biochemistry from theUniversity of California, Irvine.

James T. Wong, CFAPrincipal


James Wong, CFA, is a principal and co-manager of both the domestic large-cap andglobal equity strategies at Payden & Rygel. He has worked with firm’s equity productssince their inception. Wong has over 15 years of equity portfolio managementexperience, during which he has managed the breadth of equity styles and marketcapitalizations. He has extensive experience managing long/short portfolios, creatinghedging strategies using derivatives and developing customized investment solutionsfor client specific needs. Wong is also a member of the Investment Policy Committee.

Before joining Payden & Rygel, Wong was a trader at the Union Bank of Switzerlandwhere he focused on mortgage-backed securities. Previously, he was in the corporatefinance group at Salomon Brothers Inc.

Wong holds the Chartered Financial Analyst designation and the FINRA series 7, 3and 63 licenses. He earned an MBA degree from The Anderson School at theUniversity of California, Los Angeles with an emphasis in finance. Wong earned a BSdegree in Economics from The Wharton School, University of Pennsylvania with aconcentration in finance.

David P. Ballantine, CFA, CFPPrincipal


David Ballantine, CFA, CFP, is a principal and senior fixed-income portfolio strategist atPayden & Rygel. He oversees the firm’s trading operations and is a key member of theportfolio management team responsible for developing strategies for short- andintermediate-term fixed-income portfolios.

Prior to joining Payden & Rygel, Ballantine traded corporate, asset-backed andmortgage securities at The Capital Group and worked in the fixed-income departmentat Fidelity Investments.

David Ballantine is a member of the CFA Institute, Investment Counsel Association ofAmerica, Inc. and the Financial Planning Association. He is also a member of theLeadership of Southern California and the L.A. Works Organization.

Ballantine holds the Chartered Financial Analyst designation and is a certified financialplanner. He earned a BS in Business Administration from the University of NewHampshire.


Biographies

15

Nigel Jenkins is a principal and member of the global fixed income strategy team atPayden & Rygel Global Ltd. who is responsible for the management of UK andEuropean benchmarked fixed-income and money market portfolios.

Prior to joining Payden & Rygel, Jenkins was a founding partner of Centric CapitalLLP, a fixed-income and currency hedge fund focusing on quantitative methodologies.Previously he was head of global fixed-income at WestLB, and a director of the fixedincome & currency group at Rothschild Asset Management, both in London.

Jenkins holds the ASIP designation of the UK Society of Investment Professionals, amember society of the CFA Institute. He earned a MA degree in Economics from theUniversity of Cambridge.

Nigel Jenkins, ASIPPrincipal-London


Mark Morris is a principal with Payden & Rygel Global Ltd. responsible for global clientrelationships and portfolio management in the United Kingdom and in continentalEurope.

Prior to joining Payden & Rygel, Morris was a managing director at Credit SuisseAsset Management Ltd where he oversaw a variety of global fixed-income mandatesand was a senior member of the Fixed-Income Asset Allocation Committee.Previously he worked in the project finance divisions of Barclays National IndustrialBank in Johannesburg, South Africa, and subsequently at Bank of America inLondon.

Mark Morris is a member of the CFA Institute and the CFA Society of the UK.

Mark holds the Chartered Financial Analyst designation. He received a BSc inElectrical Engineering and an MBA from the University of Cape Town.

Mark J. Morris, CFAPrincipal-London


II High Yield Debt


The Global High Yield Market

Key Attributes of High YieldGlobal asset class (issuers based in U.S., Europe, Asia and Latin America; over 30% of the market is outside the U.S. and growing).

Critical Mass ($1.4 trillion in size) and growing rapidly. Over $750 billion of new issuance during 2009-2011.

Good Diversifier: low correlation with many other asset classes.

Attractive return profile: higher Sharpe ratio and lower volatility than Equities. Solid absolute and relative returns over past 1, 3, 5 and 10 year periods.

17

The Global High Yield Continuum

$1.4 trillion

Emerging Market High Yield Corporates

$172 billion

US Dollar High Yield Corporates

$1 trillion

Global Non-dollarHigh Yield Corporates

$185 billion


Corporations have significantly reduced debt loads.

Corporate profits are at historical highs, surpassing the last business cycle peak in 2007..

Corporations have been hoarding cash.

Corporate sales have picked up.

Corporate Fundamentals are SoundCorporate Sales Corporate Profits

Corporate Cash Corporate Debt

18


High Yield Corporate Credit FundamentalsBalance sheets continue to improve in the high yield market – companies are de-levering and cash/debt is near record highs

2.50

3.50

4.50

5.50 HY Leverage

12%

13%

14%

15%

16%

17%

18%HY LTM EBITDA Margins

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0 HY Interest Coverage

2%

6%

10%

14%

18% HY Cash/Debt

Source: Morgan Stanley, Bloomberg

19


Compelling Attributes of the High Yield Market

20

Attractive risk adjusted yields: With yields close to the 6.5% level and spreads in the +550 basis points (bps) range, the high yield market provides for attractive yields in a low rate environment. Further spread compression likely.

– Spreads for the Merrill Lynch high yield BB/B index widened in 2011, but have compressed in 2012 to date.

Interest Rate Insensitivity: High yield bonds have historically been largely insensitive to rising interest rates, with the asset class’s Yield and lower duration (approximately 4 years) providing “protection” against rising rates.

– Correlation of the broad high yield index to the 10 year US Treasury is -0.2 over the past 15 years per JPMorgan data.

– In Q4:2010, when rates backed up dramatically and the U.S. Treasury Index was down -2.5%, the high yield index was up +2.4%.

Good Inflation hedge: Similar to the protection provided against rising interest rates, high yield bonds also are a good inflation hedge with the attractive yields providing cushion.

– Correlation of the broad high yield index to U.S. Inflation is a low 0.13 over the past 15 years.


Payden & Rygel Global High Yield Debt Business Summary

Global HY Assets Overseen by Team *

$2.6 billion total High Yield assets$1.1 billion US mutual fund (PYHRX)HY dedicated accountsCore and Core plus HY holdings

Resources

Long tenure of high yield manager and strategy teamFour dedicated corporate bond traders

Representative Clients

Number of private wealth management platformsHigh net worth family offices and RIAsUS Teacher pension fundsPublic US corporationsGerman pension portfolio

Styles (Separate Account/Mutual Fund)

100% USD benchmark (US domiciled fund ticker: PYHRX)100% USD benchmark (offshore fund ticker: PARGLHI, multiple FX share classes)Global HY (85% USD/15% Euro & Sterling) benchmark

No Capacity Issues

*As of 6/30/2012

21


Attributes of Payden High Yield

22

Seasoned and Experienced TeamPortfolio Manager of Payden High Yield has been with the firm over 12 years, concentrating on high yield portfolios. Core team has been together for 8 years. Industry analysts with significant experience. On average the analysts have 16 years of industry experience.Analysts do their own independent credit analysis and derive an independent risk-return profile and rating. No out-sourcing of analyst functions.

Payden operates in the sweet spot for High Yield managersWith $2.6 billion in High Yield assets, Payden can selectively play in bond offerings without buying the market as larger managers must. Many larger managers are, in effect, Index funds.In addition, we can play deals in the $200-$300 million which larger managers cannot due to size constraints. Many of the best companies issue deals in this size context.

Commitment to Risk ControlsClosely monitor attribution and ex-ante tracking error. Ex-ante tracking error contributions used to size positions and control common factor risks. Sophisticated understanding of risk controls.

Global FocusActive in the global high yield market.Work closely with our Emerging Markets and other Global Fixed Income teams to seek relative value opportunities globally.

Performance We are acutely focused on risk adjusted returns and have a strong focus to limit downside risk. Our high yield portfolios exhibit significantly less volatility than our peers. Payden & Rygel high yield portfolios will typically out-perform in stable to down markets, but will under-perform in frothy, technically-driven markets such as 2003 and Q2:2009.


Payden High Yield Investment PhilosophyHigher quality ratings focus

Payden & Rygel has always focused upon the higher-quality of the high yield bond market, as we believe the risk-return profile of BB and single B rated bonds is superior to that of CCC and below rated bonds.

CCC and below rated bonds are very technically driven bonds and have significantly higher default probabilities than BB and single B rated bonds. Payden & Rygel does not participate in the distressed segment of the high yield market.

Fundamental driven processWe invest in companies based on their fundamentals and outlooks for cash flow growth and de-leveraging. When we invest in a high yield rated company, we typically take a 3-5 year investment horizon and our global industry analysts internally risk rate the holding through an economic cycle.

We do not invest in bonds to hold them for short term price appreciation. It is critical for us to be comfortable with the respective management team and whether they have operated a levered company before, in particular, in a down market.

Diversification is criticalOur high yield portfolios are diversified, with the average holding in the 0.75 – 1.0% position context. Our largest holdings will not exceed 2.0% of the portfolio market value. We do not believe in taking concentrated bets nor do we believe in holding 300 issuers and becoming essentially an index fund. Our typical portfolio will hold 130 to 150 distinct issuers.

Cash bond focusOur optimal size as a high yield manager allows us to invest in the high yield cash market and avoid the credit derivative market (CDS and CDX) altogether. The technicals in the credit derivatives market can be heavy and overwhelm performance, whereas the cash bond market behavior is more pure.

No style driftPayden & Rygel has maintained a consistent style of investing in the high yield market. We do not change our style to conform to market whims and technicals.

Focus upon liquidityWe do not invest in bonds below $200 million in issue size, as these can become, in essence, private placements with limited liquidity. For us liquidity is of high importance. Our sweet spot is investing in deals in the $200 - $300 million context, which are below the radar of large high yield managers.

23


Credit Analysis

24

To make informed credit decision Investors must look at the Mosaic the entire picture

Combine above to make informed decisions.

I. Fundamental Analysis of Company

Liquidity

Asset Values

Management

SWOTs (Strengths, Weaknesses, Opportunities and Threats)

II. Security Analysis & Market TradingIndentures and Financial Covenants

Bond/Loan market trading levels

CDS/LCDS trading levels

Equity/Share price & Enterprise Valuations


Overview of a Corporate Bond Decision

25

Provides macroeconomic perspective

Investment Policy Committee Current economic conditions• Slower Global economy• Financial sector re-capitalization• Rising unemployment

Recommendations: Healthcare sector

Sector likely to outperform due to: • Attractive demographics (aging society)• Relatively stable reimbursement environment• Proposed Healthcare reforms positive for certain sub-sectors,

especially hospitals

Give industry recommendations & industry weightings

Sector Strategists

Perform name-specific analysis

Industry Analysis Analysis: HCA Inc.• Critical mass: largest U.S. operator of hospitals• Stable free cash flow generation and de-leveraging• National footprint• Superior management team

Investigate relative value of credit

Technical Analysis / Traders Relative Value and Technical Analysis:• Attractive yield (6%) for BB rated company• Strong technical demand for HCA bonds given stability of cash flows• Company has large secured and unsecured bond issues across the

curve• Major index constituent

Buy security to match risk/return and strategy guidelines

Portfolio Construction Target Weight: 1.25% to 1.50% of portfolio holdings


Payden High Income Fund Portfolio Analytics

26

Fund Index*

Yield to Maturity 6.8% 7.0%

Duration to Worst (years) 4.1 4.2

Option Adjusted Spread (bps) 542 551

Avg Coupon 7.51% 7.78%

Overweights Fund % Index %Consumer Products 4.98 1.69

Food/Beverage/Tobacco 4.35 1.50

Services 4.10 2.85

Underweights Fund % Index %Homebuilders/Real Estate 0.5 2.7

Telecommunications 7.3 9.4

Banks & Thrifts 3.9 5.9

Maturity Breakdown

Portfolio Characteristics

Sector Positioning

6%

26%

34%29%

2% 1%

10%

24%

30%

25%

8%3%

0%5%

10%15%20%25%30%35%40%

0-3 3-5 5-7 7-10 10-20 20-30

% o

f Por

tfolio

Years

Fund % Index %

Credit Breakdown

4%0%

39%

49%

7%0%

52%48%

0%

10%

20%

30%

40%

50%

60%

Cash IG BB B CCC

% o

f Por

tfolio

Rating

Fund %

Index %

As of 6/30/12

*Merrill Lynch High Yield BB/B Constrained Index


Payden High Income Fund Performance

27

Performance by Calendar Year

YTD 2012 2011 2010 2009 2008

High Income Fund* 6.74% 4.09% 13.00% 32.46% -19.68%

Benchmark 6.45% 5.43% 14.25% 45.98% -25.96%

Trailing Performance as of 6/30/2012

1-year 3-year 5-year 10-year

High Income Fund* 6.95% 12.43% 5.56% 7.19%

Benchmark 7.07% 14.26% 7.64% 8.85%

*Net of fees

Quarterly Performance as of 6/30/2012

Q2 2012 Q1 2012 Q4 2011 Q3 2011

High Income Fund* 1.78% 4.87% 6.36% -5.79%

Benchmark 1.94% 4.42% 5.90% -5.02%

* Net of fees

* Net of fees


2012 Outlook

28

Outlook:

The fundamentals of the high yield market remain sound. The average high yield company continues to report stronger margins, cash flows, and earnings, which we expect to continue.

With strong corporate balance sheets, plenty of liquidity, and few imminent maturities coming due, we expect default rates to remain in the 3% context for the remainder of the year (currently 2.7% versus a historical average of 4.3%).

New issuance is on pace for its fourth consecutive strong year. Over $150 billion has priced year-to-date, and we expect another $75-$100 billion in the second half as investor demand for high yield bonds continues.

The second half of 2012 will likely be influenced by the macro concerns (Greek exit, Spain, fiscal cliff, U.S. elections) but expect likely Federal Reserve actions (possible QE III) and solid quarterly earnings to trump the macro worries.

III High Dividend Stocks


Yield Comparison – Stocks and Bonds

30

0.08% 0.30%

1.64%

3.27%

6.08%

7.38%

2.08%

5.14%(1)

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

3-MonthTreasury Bill

2-yearTreasury

10-yearTreasury

S&P 500Index

Barclays U.S.Corporate

Bond Index

P&R HighDividend

Stock Strategy

JP MorganGBI-EMGlobal

DiversifiedIndex

B of A HighYield Index

(B/BB)

Yie

ld

Bond

S&P 500

P&R High Dividend Stock Strategy

Source: Bloomberg as of 6/30/12(1) Distribution yield. The strategy invests in master limited partnerships, and a portion of the yield will be deemed a return of capital for tax

purposes.* Qualified dividends are currently taxed at 0% or 15%, depending on investor’s tax bracket.

Qualified dividends* of certain common stocks may make the strategy’s after-tax yields especially attractive compared to bond yields.

Our focus today


Attractive Yields in Areas Beyond Common Stocks

31

Common Stocks — Have attractive dividend yields from the telecom, utilities/energy and financials sectors.

Preferred Stocks — Are senior in the capital structure to common stock, but higher yielding, with fixed dividends. Tend to be less sensitive to interest rate movements compared to bonds. Predominantly financials, preferred stocks yield 5 to 8%.

Real Estate Investment Trusts (REITs) — REITs offer attractive yields and capital gains potential as real estate fundamentals, such as occupancy rates, improve and new construction gets absorbed. Current steep yield curve also provides attractive financing rates. Current yields for many REITs are greater than 4%.

Business Development Companies (BDCs) — These publicly traded investment companies create portfolios of small private companies, and most profits are distributed to shareholders. Current yields are similar to REIT yields.

Master Limited Partnerships (MLPs) — These publicly-traded limited partnerships are often in the business of transportation and/or storage of energy commodities. Pipelines, processing plants and storage facilities often fall under this category, and have steady to increasing cash flow, which translates into distributions of 5% and higher. A portion of these distributions may be deemed a return of capital.

Types of Stocks Included in our Portfolios Approximate Yields

4-8%+

5-8%

4-7%+

7%+

5-8%+


High Dividend Stocks vs. S&P 500 – Total Returns

32

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Ann

ualiz

ed T

otal

Ret

urn

Dow Jones U.S. Select Dividend S&P 500

High dividend stocks have outperformed the broad market in 13 of the last 19 calendar years.

1998-2001 Annualized TRDJDVY 9.02%S&P 500 5.66%

Annualized Total Return (1993-2011)DJDVY 11.0%S&P 500 8.4%


Better Risk-Adjusted Returns – High Dividend Stocks vs. Broad Market

33

High dividend stocks exhibit the lowest risk per unit of total return when compared to other US equity styles.

1 Total return performance from 12/31/92 to 12/31/112 Coefficient of Variation measures the amount of risk per unit of total return.

StylesAnnualized

Total Return (1)StandardDeviation

Coefficientof Variation (2)

DJ US Select Dividend 10.8% 15.7% 1.45

SP400 Midcap 10.9% 17.7% 1.62

SP500 Large Cap 7.8% 15.3% 1.96

Large Cap Value 7.5% 15.1% 2.01

RL2K Small Cap 7.9% 19.9% 2.53

Large Cap Growth 6.1% 17.7% 2.91

Note—Investors may not be able to invest directly in this index. Past performance may not be indicative of future results.

Source: Payden & Rygel, Bloomberg


-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

1948 1952 1956 1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012

High Dividend Stocks Have Done Well inRising Interest Rate Environments

10 Y

ear U

S T

reas

ury

Yie

ld (%

)

* Annualized returns as each period duration exceeds 12 months.DVD – High dividend paying stock index created by Ken French. SPX – S&P 500 Index total return.

Since 1948, high dividend stocks have outperformed the broad market in five of seven rising rate environments.Rising interest rate environments often reflect healthy economic and earnings growth, both of which benefit equity prices.

Rising rates

Falling rates

Annualized TR

Period DVD SPX DIFF

1 1/48-12/56 20.3% 20.5% -0.2%

2 4/58-1/60 26.5% 19.1% +7.4%

3 5/61-1/70 7.4% 6.2% +1.2%

4 11/71-3/80 8.5% 5.4% +3.0%

5 4/86-12/87 10.8% 6.3% +4.5%

6 10/93-8/95 8.1% 13.7% -5.5%

7 6/03-6/06 12.0% 11.2% +0.8%

1 2 3 4 5 6 7

Rising Interest Rate Environments


High Dividend Stock Strategy

35

Objective

Seeks to provide current income and equity market participation in a well diversified, high quality, large cap stock portfolio.

Bottom-up Stock Selection

Focus on value stocks, defined as stocks with strong fundamentals that pay above-average dividends, and have positive earnings and dividend growth rates.Look beyond common stock universe for yield – preferred stock, real estate investment trusts, business development companies, master limited partnerships.

Diversified Portfolios/Risk Management

Generally hold 50-70 stocks; no holding greater than 3% of portfolio at cost.Emphasis on sector and security diversification.Ensure macro themes and company exposures that are consistent with “house view” and Investment Policy Committee (IPC) risk guidelines.Regular monitoring includes analysis of company fundamentals and price movements, correlations and common factor analysis, and performance attribution.

Investment Process

Screen for large cap stocks with dividend yields almost double that of the S&P 500 Index (current screen: 4% vs. SPX yield of 2.1%).Analysts are solely responsible for in-depth fundamental sector and company research, which is shared with the portfolio managers. P&R analysts look at sectors and companies from both equity and bond perspectives, which we believe is a competitive advantage.The portfolio management team makes all decisions as a team regarding stock selection and weightings, risk control and portfolio construction. We do not divide the portfolio up among managers.

Dividends from the Fund are not guaranteed. The dividend yield will vary. A decline in the stock market could cause investors to lose money.


36

Identifying the universe

Market capitalization screen ($2B+)Dividend yield screen (2 times S&P 500 yield, currently 4%)

Investment Process – Step-by-Step

Step 1

Step 2

Step 3

Step 4

Step 5

Step 6

In-depthfundamentalResearch

Rank universe by yield, high to lowFocus on stable, predictable cash flowsAssess dividend policy

Determine stock weightings / build model portfolio

Focus on fundamentals, valuation, sector and security diversificationStock weights: 1 to 3% at cost

Risk ControlConsistent with macro “house views”In-line with Payden’sInvestment Policy Committee risk guidelinesAssess sector and security weightings vs. marketPerform correlation and factor analysis vs. market

ExecutionAim to exceed volume weighted average price (VWAP)

Monitoring / Rebalancing

Focus on dividend policySell signal –dividends at riskAssess performance attributionUniverse screen performed regularly

IterativeProcess


Current Portfolio Themes

37

We believe that the current macroeconomic environment is favorable for dividend paying stocks. Dividend yields and payouts are on an uptrend as companies continue to distribute record high cash balances back to investors.

Include stocks (other than common stock) that offer high dividends and diversification

Preferred StocksReal Estate Investment Trusts (REITs) Master Limited Partnerships (MLPs) – Pipelines

Within common stock universe, we favor:

Utilities (electric and gas)Telecom PharmaceuticalsAvoiding most banks (still building capital)


High Dividend Stock Portfolio Characteristics

38

As of June 30, 2012

(1) Current Price / Earnings is the stock price divided by current earnings per share. Price/Book is the stock price divided by the company’s book value per share. Multiples represent the common stock portion of the fund only.

Financials - Preferred 14%

Financials - REIT11%

Financials - Common2%

Utilities20%

Energy18%

Telecom Services8%

Health Care8%

Consumer Staples7%

Industrials6%

Info Tech3%

Consumer Discretionary

2%Materials

1%

Common Stocks60%

MLPs15%

Preferred Stocks14%

REITs11%

CharacteristicsHigh Dividend Stock Strategy

Beta to S&P 500 0.7Current Price/Earnings (x) 14.5(1)

Price/Book (x) 2.0(1)

Historical Growth Rates (Annualized)3 Year Dividend Growth Rate 3.3%3 Year Earnings Growth Rate 9.7

Forward Long-Term Earnings Growth Rate 6.2

Top 10 Holdings Sector SecurityAltria Consumer Staples CommonAmeren Corp. Utilities CommonAmerican Electric Power Utilities CommonAT&T Inc. Telecom Services CommonConocoPhillips Energy CommonHealth Care REIT Inc. Financials REITMerck & Co Inc. Health Care CommonPepco Holdings Inc. Utilities CommonVerizon Communications Telecom Services CommonVornado Realty Tr. Preferred Financials Preferred

Sector Security Type


Example: Enbridge Energy Partners (Ticker: EEP)

39

EEP Distributions Paid – Consistent Over Time EEP Distribution Projections – Expect Continued Growth

The Story

Functions as a “toll collector” for transporting oil and natural gas through pipelines, generating stable and growing cash flow. 20 years of consistent distribution growth with no cuts to payout.EEP suffered no significant decrease in cash flow during the worst of the financial crisis.

A master limited partnership (MLP) that transports crude oil and natural gas from western Canada to refining centers in the Midwest and Ontario, Canada.

Market Cap: $9.1bnYield: 6.5%5 yr. Dividend Growth: 2.5%

Source: EEP Management.

0%1%2%3%4%5%6%7%8%9%10%

0

100

200

300

400

500

600

UIS

D M

n

Dividends Paid Baseline Rolling 5-year yield

$3.60

$3.80

$4.00

$4.20

$4.40

$4.60

$4.80

2009 2010 2011 2012 2013

Div. per share (Low End Div. per share (High End))


40

Performance Summary – Payden Value Leaders Fund (PYVLX)

P&RValue Leaders Fund

Russell 1000 Value Index

ValueAdded

As of June 30, 2012

Year to Date 6.83% 8.67% -1.84%

1 year 13.57% 3.00% 10.57%

3 years* 18.51% 15.79% 2.72%

5 years* -1.38% -2.19% 0.81%

10 years* 3.73% 5.27% -1.54%

Trailing Periods

* Annualized returns.

The high dividend stock strategy was implemented in January 2011.

For more information and to obtain a prospectus or summary prospectus, visit payden.com or call 800 572-9336. Before investing, investors should carefully read and consider investment objectives, risks, charges, expenses and other important information about the funds, which is contained in these documents.

Quoted performance data represent past performance, which does not guarantee future results. Investment returns and principal value will fluctuate, so investors’ shares when sold, may be worth more or less than their original cost. For the most recent month-end performance, which may be lower or higher than that quoted, visit payden.com or call the phone number listed above.

Dividends from the Fund are not guaranteed. The dividend yield will vary. Dividends from some master limited partnerships include return of capital. A decline in the stock market could cause investors to lose money. The Paydenfunds are distributed by Payden & Rygel Distributors, member FINRA.

Total Fund Expenses: 0.82%


Outlook

41

Economic growth to slow, but headwinds have been reduced.

The Fed and other central banks are committed to keep interest rates low for the foreseeable future.

Uncertainty surrounding Europe will continue to be the wild card.

Equity valuations and corporate fundamentals are attractive.

Stable corporate profits and record amounts of cash on balance sheets should support dividends.

Proposed dividend tax changes face a difficult road for approval, but may lead to increased volatility for high dividend paying stocks and equities in general.

Our outlook is derived from current market conditions and it may change at any time. Future performance is not guaranteed.

IV Emerging Market Debt


Emerging Markets: Growth of an Asset Class

Emerging Market bond investors pre-Brady era, before 1989

Local Investors

Hedge Funds

Distressed Loan Buyers

Present day investor base has grown to also include:

Institutional investors looking for higher-yielding opportunities

Corporate Bond Funds

European and Asian Retail

Sovereign Wealth Funds

In 1993-94, this expanded to:High Yield

Dedicated Mutual Funds

International Bond Funds

43


Navigating Through Emerging Market Debt

44

Emerging markets offer investment opportunities that include US dollar, Euro and local currencydenominated sovereign and corporate bonds. The universe is also well diversified across regions with issuers in Latin America, Eastern Europe, Asia and Middle East / Africa.

• Interest rates• Inflation outlook• Currency moves

Sovereigns(US$ 5,870 billion outstanding)

There are approximately 20 countries that are easily accessible to foreign investors (eg. Mexico, South Africa, Poland).

Corporates (US$ 1,825 billion outstanding)

The local currency corporate market is less transparent and very difficult to access forforeigners due to taxation and settlement issues. There is very low liquidity in this market.

Sovereigns(US$ 669 billion outstanding)

There are approximately 50 countries that issuesovereign bonds in USD and EUR.

Corporates(US$ 355 billion outstanding)

There are approximately 200 corporate issuers in 35countries that issue bonds in USD.

Performance Drivers

USD

/ EU

RLo

cal C

urre

ncy Performance Drivers

• Creditworthiness• Ability to pay

Source: Bank of America


Emerging Markets Upgrades Coincide With Developed Market Downgrades (Unprecedented)

45

Upgrades and Downgrades in Emerging Markets

0

10

20

30

40

50

60

2007 2008 2009 2010 2011 2012F

Rat

ings

Cha

nge

Upgrade Downgrade

Source: S&P, Moody’s, Fitch, JP Morgan


ArgentinaBrazil

Canada

ChileChina

France

GermanyIndia

Indonesia

Ireland

Mexico

Peru

Poland

Portugal

Russia

SpainUS

UK

0

20

40

60

80

100

120

-12-10-8-6-4-2024

Gro

ss D

ebt a

s a

Per

cent

of G

DP

Budget Balance as a Percent of GDP

Emerging Market Debt Dynamics in Global Perspective

46

Source: Source: BMI/EIU

Budget Balance and Debt as a Percent of GDP

The Eurozone periphery’s debt concerns have translated into strong investor focus on sovereign debt sustainability globally. Stronger growth and conservative debt management make EM countries’ debt dynamics much more sustainable.


Payden & Rygel Emerging Market Debt Business Summary

Resources

Lead manager has managed strategy since inceptionAdded three team members in past months to support EMD team

Recent Clients

$800mm Sovereign Wealth Fund$250mm Bermuda reinsurer$430mm US Health Care Company$700mm Virginia Retirement System (publicly known)$100mm German insurer€120mm European pension€70mm European insurer

Styles (Separate Account/Mutual Fund)

100% USD benchmark (US domiciled fund ticker: PYEMX)100% Local-pay benchmark(US domiciled fund ticker: PYELX; offshore fund ticker: PAYGCUA, multiple FX share classes)70% USD / 30% Local-pay benchmark (Dublin/offshore fund ticker: PARGEMD; multiple FX share classes)100% CEMBI benchmark

No Capacity Issues

EMD Assets Overseen by Team*

$5.3bn total$4.3bn EMD dedicated$1.0bn tactically in other portfolios

*As of 6/30/2012

47


Payden & Rygel Emerging Market Debt – Distinguishing Features

48

Excellent Track Record: #2 Performing Manager in 2008

Cash Bond Focused Approach – Transparency of Holdings

Consistent Positive Value Added from Local Currency Allocations

Willingness to Customize Strategies to Meet Clients’ Return Objectives and Risk Tolerance

Morningstar 5-star Offshore Fund

No Focus on CCC-Rated/Distressed Credits – No Defaults

Attractive fees

Full Toolkit – US Dollar Pay, Local Currency, Private Sector Corporate Bonds


Emerging Markets Investment Process

49

Fundamental Research Sovereign Risk Analysis

Economic Structure & InstitutionsMonetary StabilityFiscal ResponsibilityExternal Liquidity

Asset AllocationAssess universe of investment opportunities in each country

US dollar-pay Sovereign DebtLocal Debt and CurrencyPrivate Sector Corporate Debt

External DebtSovereign cash bond yield curve analysis (EUR and USD)Corporate cash bond yield curve analysis

Local MarketsSovereign local market bond yield curve analysisSovereign interest rate swap (IRS) curve analysisRelative value - bonds versus IRS

COUNTRY ALLOCATION

SECURITY SELECTION

STEP 1

STEP 2

STEP 3

We begin with top-down country allocation, followed by bottom-up security selection.

Political Risk


50

Emerging Markets Strategy ThemesRegion US Dollar-Pay Debt Local Rates Currency

Latin America

We overweight Latin American sovereign credits including the Dominican Republic, Colombia and Peru.

We have been avoiding potential trouble spots where default risk is high, such as Ecuador.

We prefer corporates in Brazil, Mexico and Peru where spreads to sovereigns are attractive.

The recent cut in its benchmark interest rate to 8.50% by the Central Bank in Brazil continues to reflect its easing policy stance. However, with inflation at the higher end of the Central Bank target, we hold inflation-linked bonds.

The relative steepness of the curve in Mexico continues to be supportive of longer-dated local rates.

Uruguay inflation-linked bonds offer an attractive yield, with inflation protection and sound currency fundamentals.

With high growth and an aggressive reform agenda, the Colombian peso offers attractive opportunities.

The Mexican Peso stands out as the regional laggard and is attractive from a valuation standpoint.

EmergingEurope/Africa/ Middle East

Ukraine’s balance of payments dynamics and upcoming political contest warrant an underweight.

We see Russian corporate debt as attractive.

We are underweight Egypt and Lebanon due to political uncertainty.

The National Bank of Hungary faces a policy dilemma, as sluggish economic growth suggests an easing bias, but pressure on the Forint and potential pass-through inflation prevent the Bank from cutting aggressively. Bond yields are not sufficient to compensate for the various risks in this local market.

Nigeria short dated bonds offer an attractive yield.

Russia local rates offer an attractive positive real yield. Liberalization of the local market in the second half of the year should also provide a very positive technical backdrop for local rates.

The Russian Ruble is attractive from a valuation perspective.

Asia In Asia, we see the most attractive investments in Indonesia.

US dollar sovereign spreads in much of investment-grade Asia are very tight, including China.

We like select quasi-sovereigns in the region.

Local rates are fairly valued in the region from an outright and curve shape perspective. We remain on the sidelines in Asia local rates.

Impressive balance of payments positioning for the region, good growth relative to other regions and historically attractive valuations bode well for continued appreciation of the currencies in the region.

We favor long exposure to various Asian currencies in the region against the USD (Malaysian Ringgit, Singapore Dollar and Philippine Peso).


Emerging Markets Fixed Income Strategy – June 30, 2012

51Index – JP Morgan EMBI Global Diversified

* 100% - government-owned corporates

Country Allocation Payden IndexLatin America 45.9% 38.6% OverweightArgentina 3.3% 1.7% NeutralBelize 0.1%Brazil 9.6% 6.7% OverweightChile 1.4% 2.9% UnderweightColombia 6.3% 4.6% OverweightDominican Republic 3.0% 0.8% OverweightEcuador 0.2%El Salvador 1.2% 1.4% NeutralGuatemala 0.3% 0.2% NeutralJamaica 0.4%Mexico 7.6% 6.1% OverweightPanama 1.5% 3.0% UnderweightPeru 5.5% 3.8% OverweightUruguay 1.2% 2.3% UnderweightVenezuela 5.0% 4.1% OverweightEurope 26.1% 31.2% UnderweightAzerbaijan 0.2%Bulgaria 0.5%Belarus 1.0% 0.6% NeutralCroatia 1.9%Hungary 1.2% 2.4% UnderweightGeorgia 2.8% 0.2% OverweightKazakhstan 4.4% 3.0% OverweightLithuania 0.5% 2.6% UnderweightPoland 0.5% 3.8% UnderweightRomania 2.0% 0.8% OverweightRussia 7.1% 6.0% OverweightSerbia 0.4% 0.7% NeutralTurkey 4.6% 6.0% UnderweightUkraine 1.6% 2.6% NeutralAsia 16.3% 19.8% OverweightChina 3.2%Hong Kong 0.3% OverweightIndia 0.7% OverweightIndonesia 6.8% 5.8% OverweightMalaysia 2.4%Mongolia 0.5% 0.2% NeutralPakistan 0.3%Philippines 6.1% 6.2% OverweightSri Lanka 1.9% 1.1% OverweightVietnam 0.7%Africa / Middle East 7.5% 10.4% UnderweightEgypt 0.7%Gabon 0.3%Ghana 2.0% 0.3% OverweightIraq 0.8%Ivory Coast 0.6%Jordan 0.2%Lebanon 3.4%Namibia 0.2%Nigeria 1.0% 0.2% NeutralQatar 1.3% OverweightSenegal 0.7% 0.2% NeutralSouth Africa 2.0% 3.6% UnderweightUnited Arab Emirates 0.5% OverweightCash 4.20%TOTAL 100.0% 100.0%

Currency Position Payden LONG SHORT

Unhedged Bonds Brazilian Real 1.0%Mexican Peso 2.0%Nigerian Naira 1.0%Russian Ruble 1.4%Uruguayan Peso 1.0%

6.4% 0.0%

FX forwardsEuro 5.8%Malaysian Ringgit 0.9%Mexican Peso 1.0%Philippine Peso 1.0%Singapore Dollar 1.0%

3.9% 5.8%

TOTAL Non-USD exposure 10.3% 5.8%

Portfolio Characteristics Payden IndexAverage Credit Quality Ba1/BB+ Baa3/BBB-Interest Rate Duration (years) 7.6 7.2Yield to Maturity 6.7% 5.3%

Sector BreakdownSovereign 57.7% 79.4%Quasi-sovereigns* 15.6% 20.6%Corporates 22.5%Cash 4.2%

100.0% 100.0%


Emerging Markets Strategy Performance Attribution

52

Security Selection

Year

Payden Emerging Markets*

JP Morgan EMBI Global Diversified

Under / Out performance

(%)Country

SelectionUS $

SovereignUS $

Corporate

Local Markets

Rates/Currency Comments2001 14.78 9.71 5.07 = 3.11 2.44 -0.48 – Exited Argentina before default

2002 10.68 13.65 -2.97 = -2.69 -0.28 – – Underweight Brazil, Venezuela

2003 19.45 22.22 -2.77 = -1.67 -1.25 0.15 – Underweight CCC-rated sector

2004 14.11 11.62 2.49 = 1.29 0.40 0.30 0.50 Overweight Latin America, Turkey and Ukraine local

2005 12.62 10.25 2.37 = 1.22 – 0.25 0.90 Overweight Philippines external, Mexico local

2006 10.94 9.86 1.08 = 0.21 0.23 0.22 0.42 Overweight Brazil local, corporates

2007 3.64 6.16 -2.52 = -0.34 -1.73 -0.82 0.37 Strong local currency perf., corporates underperformed

2008 -9.47 -12.02 2.55 = 1.78 0.75 -0.51 0.53 No CDS, no Ecuador and Argentina, low corp. exposure

2009 29.95 29.82 0.13 = -1.73 0.28 0.71 0.87 No high default risk countries detracted from performance

2010 13.90 12.24 1.65 = 0.68 0.28 0.25 0.44 Corporate and local allocation added to performance

2011 6.61 7.35 -0.74 = 0.28 0.08 -0.99 -0.11 An overweight to corporates and emerging market currencies detracted

2012** 6.88 7.12 -0.24 = -0.29 -0.26 0.37 -0.06 An overweight to corporates benefited while country selection and currency exposure detracted

Returns in US Dollars (%)

1yr 8.31 9.773yra 14.26 13.125yra 8.86 9.17a) Annualized

Index: EMBI Global Diversified* Payden EM Composite (gross-of-fees.) 0-40% local currency exposure. No focus on CCC-rated or distressed

credits. Historical annualized tracking error 3.5%Total EMD Assets Under Management: US $5.3 billion as of June 30, 2012.

**As of June 30, 2012

Payden Index

generating income 9-12 · 2012. 9. 17. · f:\graphics\template\bound books\generatin g...

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