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Spängler IQAM Bond CorporateSpängler IQAM Bond Non-Financial CorporatesApril, 2015 Investment Counsel
Since 1933
1
Agenda
I. Corporate Overview
II. Team, Philosophy, & Process
III. Spängler IQAM Bond Corporate
IV. Spängler IQAM Bond Non-Financial Corporates
V. Global Corporate Market Environment
VI. Appendix
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Section I.
3
1933Year Standish was founded
169.2 billion USD in assets under management1
186 employees2
131 investment professionals located in U.S., U.K. and Singapore2
U.S., regional and global mandates
With clients in 38 countries
The Story of Standish: “Best Ideas” DeliveredCo
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Ove
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Investment Strategies and SolutionsAbsolute Return Opportunistic Fixed Income
Tax-Sensitive Absolute Return
Multi-Sector Relative Return
Total Emerging Markets
Global Core Plus
Global Core/Non-U.S. Core
Long Duration
U.S. Core Plus
U.S. Core
Short/Intermediate Duration
Cash
Stable Value
Single Sector Relative ReturnEmerging Markets
Global Corporate Credit
Securitized Strategies
Mortgages
Tax-Sensitive
TIPS
Government
Source: Standish as of March 31, 2015 (preliminary).1 Assets under management (AUM) as of March 31, 2015 (preliminary). This figure includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation or The
Bank of New York Mellon, and high yield assets managed by personnel of Alcentra NY, LLC acting as dual officers of Standish. Standish, Dreyfus, and Alcentra are registered investmentadvisers; they and The Bank of New York Mellon are wholly-owned subsidiaries of The Bank of New York Mellon Corporation.
2 Includes shared employees of Standish Mellon Asset Management (UK) Limited and MBSC Securities Corporation, both affiliates of Standish Mellon Asset Management Company LLC("Standish"), contracted employees from BNY Mellon Investment Management Singapore Pte. Limited, and employees of Alcentra NY, LLC acting as dual officers of Standish. Theseindividuals may from time to time act in the capacity of shared employees of Standish, performing sales, marketing, portfolio management support, research and trading services for certainStandish managed accounts.In addition, Standish is also supported by BNY Mellon Asset Management Operations LLC (“BNYM AM Ops”) which is a legally separate entity that provides services related to all aspects ofIT and operations, including front, middle and back office services through a Service Level Agreement.
Solutions
Liability Driven Investing
Insurance Client Strategies
Liquidity Strategies
ESG/SRI
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Standish Mellon Asset Management Company LLC1
1 As of March 31, 2015 (preliminary). Assets under management (AUM) includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation or The Bank of New York Mellon, and high yield assets managed by personnel of Alcentra NY, LLC acting as dual officers of Standish. Standish, Dreyfus, and Alcentra are registered investment advisers; they and The Bank of New York Mellon are wholly-owned subsidiaries of The Bank of New York Mellon Corporation.
2 MBSC Securities employee who is a dual officer of Standish.
Desmond Mac IntyreChairman & Chief Executive Officer, Standish
Desmond Mac IntyreChairman & Chief Executive Officer, Standish
Michael Faloon, CFA, FRMChief Operating Officer
Michael Faloon, CFA, FRMChief Operating Officer
Active Fixed Income Division$122.2 Billion AUM1
Active Fixed Income Division$122.2 Billion AUM1
Tax Sensitive Division$27.9 Billion AUM1
Tax Sensitive Division$27.9 Billion AUM1
Christine Todd, CFA
President of StandishHead of Tax Sensitive Division
Christine Todd, CFA
President of StandishHead of Tax Sensitive Division
Desmond Mac Intyre
Chairman & CEO, Standish Head of Active Fixed Income Division
Desmond Mac Intyre
Chairman & CEO, Standish Head of Active Fixed Income Division
Stable Value Division$19.2 Billion AUM1
Stable Value Division$19.2 Billion AUM1
Eric Baumhoff, CFA
CIO, Stable ValueHead of Stable Value Division
Eric Baumhoff, CFA
CIO, Stable ValueHead of Stable Value Division
David Leduc, CFAChief Investment OfficerDavid Leduc, CFAChief Investment Officer
Alex OverManaging Director of Global Sales & Product Strategy
Alex OverManaging Director of Global Sales & Product Strategy
James Kohley, CFA2
Head of U.S. SalesJames Kohley, CFA2
Head of U.S. Sales
Julia Braithwaite, IACCPChief Compliance Officer
Julia Braithwaite, IACCPChief Compliance Officer
Corp
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Standish Investment ResourcesCo
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PORTFOLIO ANALYTICS
SPECIALIZED TRADING
RISK MANAGEMENT
RESEARCH
Corporate Research Sovereign & Currency Research
Rebecca Braeu, PhD, CFANate Hyde, CFA
Rowena Macfarlane1
Javier Murcio Cathy Elmore1
Aninda Mitra3
Federico Garcia ZamoraNicholas Tocchio
Rates & Securitized
Nate Pearson, CFADavid Fishman, CFAKaren Gemmett, CFA
Steven BrinkleyMarcos Duque, CFA
Tax Sensitive
David Belton, CFADaniel Barton, CFADavid Mann, CFA
Mark Ryan Mark StockwellScott Zerneri
Amy Koch, CFAGlobal Head of Fixed Income Trading
Emerging Markets
Prakash Gopalakrishnan3
Rosa VelasquezSarah Percy-Dove3
Milena Ianeva 1
Joseph Huang3
David Morse, CFADiana Belman, CFA
Maura Caporale, CFADavid Fishman, CFA
Benjamin Li, CFAJonathan Earle, CFA
Beth Fiore
Investment Grade
Kevin Cronk, CFA2
Clark Orsky, CFA2
Stephen Sylvester2
Andrew Sieurin, CFA2
Josephine Shin2
Edward Vietor2
Tim Raeke2
Robert Davis2
Frank Longobardi2Andrew Fahey2
Young Kwon2
Ashley Taylor2
High Yield
David Leduc, CFAChief Investment OfficerDavid Leduc, CFAChief Investment Officer
Thomas Higgins, PhDChief Economist & Global Macro Strategist
Thomas Higgins, PhDChief Economist & Global Macro Strategist
David Horsfall, CFACo-Deputy Chief Investment Officer
David Horsfall, CFACo-Deputy Chief Investment Officer
Raman Srivastava, CFACo-Deputy Chief Investment Officer
Raman Srivastava, CFACo-Deputy Chief Investment Officer
MULTI-SECTOR
STRATEGIES
Andrew Catalan, CFAMatthew Fontaine, CFA
Colyar Pridgen, CFA, FSA, EAMax Guimond, CFA, FRM
Christine Todd, CFAJames Kaniclides, CFA
Laura Lake, CFAAmanda Abdella, CFA
SOLUTIONS
David KingsleyGlenda NguyenBoris Kozorez
David Horsfall, CFARaman Srivastava, CFA
David Leduc, CFA
OPPORTUNISTIC FIXED INCOME
Raman Srivastava, CFABrendan Murphy, CFA
Thant Han1
GLOBAL FIXED INCOME
David Bowser, CFADavid Horsfall, CFA
U.S. CORE/CORE PLUS FIXED INCOME
LIABILITY DRIVEN INVESTING INSURANCE CLIENT STRATEGIESJohn Hosa, CFA
Stephen Murphy, CFAAnthony Honko
Amy LowenSara Cummins
SHORT DURATION
SINGLE-SECTOR
STRATEGIES
Alexander Kozhemiakin, PhD, CFACathy Elmore1
Javier MurcioMurray Collis3
Howe Chung Wan3
Federico Garcia Zamora
EMERGING MARKETS DEBT
Robert Bayston, CFAKaren Gemmett, CFADavid Fishman, CFANate Pearson, CFA
Marcos Duque, CFA
US RATES & SECURITIZED
Jake Gaul, CFAAndrew Catalan, CFA
Matthew Fontaine, CFADavid Morse, CFA
Chris Barris2
GLOBAL CORPORATE CREDIT
Global Rates & Currency
Bart StiresSherri Tilley
Christopher Sabo, CFA
Emerging Markets
Victor Tavares, CFADouglas McEneaney, CFA
William Newton, CFA
Global Corporate Credit
Joseph Chiurri, CFAGail Sweeney, CFAVinnie Ruschioni2
Global Rates & CurrencyMichael Piersol, CFA
Ian Barnes1
Patrick Savery
Sally BartunekRyan Lambert
Global Corporate CreditMichael Lynch
Christopher FrisoliIan Barnes1
Michael Cunningham, CFA2
Amy Lattimore4
Thomas Frangione2
Christine Todd, CFADaniel Rabasco, CFA
Thomas CaseyDaniel Marques, CFAJeffrey Burger, CFA
TAX SENSITIVE
Eric Baumhoff, CFABradley Bennett
Linda Lam, CFA, CPAJonathan Mauceli, CFA
STABLE VALUE
Municipal
Michael Bandar, CFAPaul Rockwood, CFA
Alisa Fitzgerald
David SwallowTyler Doyle
Michael Faloon, CFA, FRMVikas Malla, CFADouglas Reich
Emerging Markets
Michael Piersol, CFASally Bartunek
Rates & Securitized
Jeff Nutt, CFABryan Steele
Liability Driven Investing
Gail Sweeney, CFA
Insurance Strategies
Joe Pasquale, CFA
Rates & Securitized
Patrick GillisAdam Pischel
1Employees of Standish Mellon Asset Management (UK) Ltd who perform investment management and trading services as shared employees of Standish U.S. 2 Employees of Alcentra NY, LLC acting as dual officers of Standish on multi-sector strategies; 3 Employees of BNY Mellon Investment Management Singapore Pte. Limited who provide non-discretionary research services to Standish US and may also serve as sub-adviser to Standish
US for certain client mandates 4 Via service agreement with Alcentra Limited Note: Some investment professionals perform the same role on more than one product team. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
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Section II.
7
Global Investment Grade Credit Team
1 Includes employees from Standish Mellon Asset Management (UK) Limited2 Includes employees of Alcentra NY, LLC acting as dual officer of Standish3 Contracted research analysts from BNY Mellon Investment Management Singapore Pte. Limited dedicated to Standish
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
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Michael LynchIan Barnes1
Christopher Frisoli
David Morse , CFASenior Portfolio Manager
David Morse , CFASenior Portfolio Manager
Portfolio Management
CREDIT COMMITTEECREDIT COMMITTEE MACROECONOMIC RESEARCH COMMITTEEMACROECONOMIC RESEARCH COMMITTEE
Thomas Higgins, PhDChief Economist & Global Macro Strategist
Thomas Higgins, PhDChief Economist & Global Macro Strategist
Trading
Jake Gaul, CFADirector of Investment Grade Credit
CreditResearch
David Morse, CFA Building Materials, Environmental
Maura Caporale, CFA Telecom, Media, IndustrialsBenjamin Li, CFA Utilities, BasicsDiana Belman, CFA Banking, InsuranceJonathan Earle, CFA Consumer , Pharmaceuticals,
Technology, HealthcareBeth Fiore Banking, Finance,
TransportationDavid Fishman, CFA REITS
Kevin Cronk, CFA2 Director of Research Clark Orsky, CFA2 Homebuilders/Materials,
Manufacturing/Machinery, UtilityStephen Sylvester2 Broadcasting, Services, TransportationAndrew Sieurin, CFA2 Consumer Products, Gaming, LeisureJosephine Shin2 HealthcareEdward Vietor2 Cable, TelecommunicationsRobert Davis2 TechnologyAndrew Fahey2 Energy, RetailYoung Kwon2 Food/Beverage/Tobacco,
Metals/Mining, Paper/PackagingTim Raeke2 Chemicals, FinanceFrank Longobardi2 Aerospace/AutosAshley Taylor2 Media/Other
Prakash Gopalakrishnan3 Asia Rosa Velasquez Latin AmericaSarah Percy-Dove3 AsiaMilena Ianeva 1 CEEMEAJoseph Huang3 Asia
Sally BartunekMichael Piersol, CFA
Amy Lattimore2
Tom Frangione2
Mike Cunningham2
Investment Grade Corporate Analysts High Yield / Bank Loan AnalystsEmerging Market Corporate Analysts
Joseph Chiurri, CFAPortfolioAnalytics
Victor Tavares, CFADouglas McEneaney, CFA
William Newton, CFAVinnie Ruschioni2
8
Investment Philosophy – Global Credit
We believe: Success in managing corporate bonds requires both a strong defense against the negative return/risk
asymmetry of individual credits and a strong offense focused on the market’s least efficient quality tiers.
Outperformance demands a team of experienced credit analysts who apply proprietary “ratings and trend” metrics to distinguish deteriorating from stable-to-improving credits.
Effective fundamental credit research balances a bottom-up perspective with the firm’s macro or top-down view.
A chief source of excess return is identifying, avoiding, and/or selling potential problem credits.
A final contributor to outperformance can be found in certain niches of the corporate bond market, such as BBBs which can provide higher returns over time due to their disproportionate yields, pattern of ratings migration, and price increase on upgrade.
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Investment Philosophy – Historical Proof Statement
Historical Proof Statement – Standish Approach to Corporate Bonds Historically, bond ratings have been unstable even over very short periods, with migrations increasing in the
lower quality tiers.
Baa = BBB; Ba = BB; Caa_C = CCC – C; WR = Withdrawn (e.g. debt, acquisitions, divestitures, etc.)
CONCLUSION: Significant incremental return may be available to active managers with the confidence to overweight BBBs and the ability to capture upgrades and avoid downgrades.
Among investment-grade bonds, BBBs (Baas) have exhibited both the most frequent rating changes and the most positive results, with upgrades nearly equaling downgrades.
Because of their disproportionate yield advantage, BBBs have historically outperformed under 2 of 3 possible rating scenarios.
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Scenario “Probability”Spread
Impact (Bps)Incremental
Return “Probability”Spread
Impact (Bps)Incremental
ReturnDowngrade 5.56% +63 -3.34% 3.94% +264 -16.78%Upgrade 2.43% -4 1.35% 3.96% -18 2.96%No Change 86.06% - 1.07% 85.18% - 1.70%
Single A BBB
Sources: M oody's as o f 12/31/2013 for rating migration probabilities. Barclays POINT data from 1/1/1992 to 12/31/2014 and Standish calculation for spread impact. Incremental Return calculations assume a duration o f 7 years.
Average One-Year Rating Migrations, 1970 -2013Rating Aaa Aa A Baa Ba B Caa Default WRAaa 87.08% 8.33% 0.63% 0.00% 0.03% 0.00% 0.00% 0.00% 3.94%Aa 0.90% 84.50% 8.46% 0.51% 0.07% 0.02% 0.01% 0.02% 5.51%A 0.05% 2.43% 86.06% 5.56% 0.55% 0.11% 0.03% 0.06% 5.15%Baa 0.04% 0.17% 3.96% 85.18% 3.94% 0.73% 0.15% 0.17% 5.64%Ba 0.01% 0.05% 0.33% 5.60% 75.72% 7.31% 0.59% 1.06% 9.27%B 0.01% 0.03% 0.11% 0.30% 4.50% 73.52% 5.94% 3.71% 11.32%Caa 0.00% 0.02% 0.02% 0.11% 0.37% 8.58% 62.58% 12.81% 11.94%Source: M oody's as o f December 31, 2013.
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Fundamental Credit Research
► Understand key players, industry evolution, likely successful business models
► Employ proprietary valuation models to help set portfolio industry weights
► Participate in key industry events and visit companies
► Conduct one-on-ones with key senior management
► Apply financial and scenario analysis to individual issuers
► Compare resulting internal valuations to third-party and market views
► Examine company's liquidity and access to capital
► Review issuer's capital structure for bonds offering best risk/return profiles
► Review key covenants ► Develop asset valuation / recovery analysis
► Credit team’s diversified, model portfolio► Proprietary ratings and credit momentum
1 = Rapidly improving credit
2 = Improving credit
3 = Stable credit
4 = Deteriorating credit
5 = Rapidly deteriorating credit
ManagementManagement
Key Financial MeasuresKey Financial Measures
Financial FlexibilityFinancial Flexibility
Bondholder ProtectionBondholder Protection
BEST IDEASBEST IDEAS
Industry Structure & Dynamics
Industry Structure & Dynamics
Key Inputs
Standish Internal Credit Rating
Source: Standish . For illustrative purposes only.
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Standish ESG Timeline
|May 2007
Dec2012
|
|March2013
May2013
|
|June2013
Aug2013
|
|Sep
2013
|Nov2013
|
|Dec2013
|
|Feb
2014Apr
2014|
|June2014
Aug2014
|
Signatory to UNPRI
Adam Seitchik and Sarah Cleveland Consulting provides ESG consulting training to staff.
Contract with MSCI to provide research
Begin incorporating MSCI Research into credit process
Standish turns on ESG data in POINT®
Forms ESG Working Group
Purchases first green bond
ESG data available in portfolio management system
Contracts with KLD for inclusion of SRI screens in CRD compliance
Becomes member of Green Bond Working Group
ESG screens available in CRD compliance.All analysts trained on Bloomberg ESG
As of 9/30/14, Standish manages $14.9 billion in SRI mandates with the oldest active mandate dating back to 1989.
Standish & ESG
Becomes U.S. Climate Change Investor Signatory
Creates ESG Sovereign Model
Becomes EXCO member of Green Bond Principles
Hires Sustainalyticsto perform ESG gap analysis
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How is ESG incorporated into Standish’s research and investment process? Research: Analysts evaluate ESG as they would other relevant investment criteria (financial strength, competitive
position, etc.)
Depending on sector, we apply different emphasis to E, S, or G.
Utilize company filings, MSCI research and Bloomberg data as sources for ESG research.
Investment: Consider if externalities could affect the credit during our holding period.
ESG Incorporated in
Investment Process
Industrials
Financials
UtilitiesEE SS GG
EE
SS GG
SS GG
SovereignSS GG
EE
EE
Standish & ESGTe
am, P
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Pro
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Corporate Trading
Dedicated team of experienced corporate traders Industry specialists; e.g. telecom, banks, utilities, etc.
Deep understanding of relative value within assigned industries
Direct relationships with trading counterparts on “sell side”
Interaction with other sector traders at Standish; e.g. high yield, global, liquid products
Seeks best execution in the marketplace
Integral part of the portfolio management team Situated in close proximity to portfolio managers and analysts
Expected to add value, not just execute orders
Provide trading view in credit and portfolio discussions
Recommend optimal bond selection within issuers’ capital structures
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Investment Process – Industry Weights
Proprietary ranking model is used to support analysis of industry weightings.
Industry mean-variance analysis and risk parameter constraints aim to identify optimal min/max weightings.
Model incorporates objective and subjective inputs for fundamentals, momentum, and valuation
Research analyst input and discussion integrated into portfolio construction
Page 14Source: Standish . For illustrative purposes only.Note: Portfolio managers may use some or all of the techniques described in this document.
Fundamentals Momentum Valuation
Leverage Internal Ratings
Historical Spreads
Profitability External Ratings
Relative Spreads
Business Prospects
Sentiment Fair Value
Index Weights
Ave. OASLower Bound
Multiplier
Upper Bound
Multiplier
Range Low
Range High
Leverage Profit Business Prospects
Yield Level
Spread Regression
Sentiment S&P Moody's Fitch Standish Overall Score
Corporate 147
Reits 1.36 181 0.25 2.00 0.34 2.72 Decreasing Increasing Positive High Fair Positive Stable Stable Stable Positive 8.5
Paper 0.26 219 0.00 2.50 0.00 0.65 Unchanged Unchanged Stable High Cheap Stable Stable Stable Stable Stable 6.7
Finance Companies 2.80 168 0.65 1.50 1.82 4.20 Decreasing Increasing Stable Index Fair Stable Stable Stable Stable Stable 6.1
Metals & Mining 2.36 223 0.25 2.00 0.59 4.72 Increasing Unchanged Stable High Cheap Stable Stable Stable Stable Stable 6.1
Life Insurance 2.04 215 0.25 2.00 0.51 4.08 Unchanged Unchanged Stable High Fair Stable Stable Stable Stable Stable 5.7
Transportation 1.62 156 0.25 2.00 0.41 3.24 Unchanged Increasing Stable Index Fair Stable Stable Stable Stable Stable 5.6
Media-Noncable 1.29 163 0.25 2.00 0.32 2.58 Unchanged Increasing Stable Index Fair Stable Stable Stable Stable Stable 5.6
P&C 1.61 172 0.25 2.00 0.40 3.22 Unchanged Increasing Stable Index Fair Stable Negative Stable Stable Stable 5.4
Supermarkets 0.34 228 0.00 2.50 0.00 0.85 Unchanged Decreasing Negative High Cheap Stable Negative Negative Stable Stable 5.2
Banking 19.15 161 0.75 1.25 14.36 23.94 Decreasing Increasing Stable Index Fair Negative Negative Negative Negative Stable 5.0
Telecom 5.34 165 0.65 1.50 3.47 8.01 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Electric 6.01 130 0.65 1.50 3.91 9.02 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Energy 5.37 137 0.30 1.75 1.61 9.40 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Technology 3.65 122 0.30 1.75 1.10 6.39 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Natural Gas 2.70 174 0.25 2.00 0.68 5.40 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Media-Cable 1.97 152 0.25 2.00 0.49 3.94 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Chemicals 1.40 119 0.25 2.00 0.35 2.80 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Health Insurance 0.74 148 0.25 2.00 0.19 1.48 Unchanged Unchanged Stable Index Fair Stable Stable Stable Stable Stable 5.0
Brokerage 0.59 212 0.25 2.00 0.15 1.18 Unchanged Unchanged Stable High Cheap Negative Negative Negative Negative Negative 5.0
Consumer Cyclical 4.37 130 0.60 1.50 2.62 6.56 Unchanged Unchanged Positive Index Rich Stable Stable Stable Stable Stable 4.6
Food/Beverage 3.52 96 0.40 1.75 1.41 6.16 Unchanged Unchanged Stable Low Fair Stable Stable Stable Stable Stable 4.3
Health Care 1.36 116 0.25 2.00 0.34 2.72 Unchanged Unchanged Stable Low Fair Stable Stable Stable Stable Stable 4.3
Capital Goods 3.80 107 0.30 2.00 1.14 7.60 Unchanged Increasing Stable Low Rich Stable Stable Stable Stable Stable 3.9
Consumer Products 0.90 100 0.25 2.00 0.23 1.80 Unchanged Decreasing Stable Low Fair Stable Stable Stable Stable Stable 3.8
Tobacco 0.86 137 0.25 2.00 0.22 1.72 Unchanged Unchanged Stable Index Rich Negative Stable Stable Stable Stable 3.4
Pharmaceuticals 3.30 87 0.50 1.50 1.65 4.95 Increasing Decreasing Stable Low Fair Stable Stable Negative Negative Stable 2.9
Non-Corporate
Foreign Agency 5.35 580.33 1.75
1.77 9.36
Supranational 5.30 23 0.33 1.75 1.75 9.28
Sovereigns 4.79 114 0.33 1.75 1.58 8.38
Foreign Local Govt. 5.37 125 0.33 1.75 1.77 9.40
Total 99.5
October 10, 2012
Sector Statistics Risk Allowance Fundamentals Valuation Monentum / Outlooks
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Corporate Bond Management – Standish Differentiators
Security selection philosophy Security selection is premised on identifying stable to improving credits that are trading at attractive
valuations while avoiding deteriorating credits given the asymmetric risk/return profile of corporate bonds.
Team approach The firm’s macro and relative value views serve as the framework for the construction of portfolios, which are
further based on the interaction of sector heads who meet regularly to formulate market views using quantitative models to provide a disciplined approach for discussion and analysis.
Credit decisions are driven by experienced analysts employing a proprietary ratings and credit trend methodology. Portfolio construction benefits from this integrated team approach consisting of portfolio managers, analysts, and traders working in close proximity.
Right-sized Standish has a large enough asset-base to devote ample resources to the corporate sector, yet small enough
that security selection decisions have a material impact on returns.
Customization to meet client objectives Mandates can be tailored to meet specific guidelines while drawing from the best ideas across specialized
strategies.
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Section III.
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Portfolio PerformanceSp
ängl
er IQ
AM B
ond
Corp
orat
e
Performance (Net) as of 3/31/2015
YTD (%) 1 Year (%) 3 Year (%) 5 Year (%) Since Inception (%)1
Spangler IQAM Bond Corporate Fund 1.47 5.53 5.61 5.42 4.96Merrill Lynch EMU Corporate 1.38 7.21 6.44 5.65 5.24Value Added 0.09 -1.68 -0.83 -0.23 -0.28Market Value as of 3/31/2015: €187,168,7581 9/30/1999
Performance (Gross) as of 3/31/2015Qtr (%) 1 Year (%) 3 Year (%) 5 Year (%) Since Inception (%)1
Spangler IQAM Bond Corporate Fund 1.78 6.79 6.84 6.49 6.10
Merrill Lynch EMU Corporate 1.45 7.30 6.46 5.65 5.24
Value Added 0.33 -0.51 0.38 0.85 0.86
Market Value as of 3/31/2015: €187,168,7581 9/30/1999
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Performance Attribution Year-To-DateSp
ängl
er IQ
AM B
ond
Corp
orat
e
Attribution (Gross) as of 3/31/2015YTD (%)
Spängler IQAM Bond Corporate Fund (Gross) 1.78ML EMU Corporate 1.38Value Added 0.40
Contributions to Value Added (Gross)Yield Curve 0.03Asset Allocation 0.03Security Selection 0.24Pricing Differences & Intra-Day 0.04FX Allocation & Hedging 0.06Total 0.40
Top Positive Contributors YTD (%)WINDIM 0.04JCP 0.03GAZPRU 0.03Top Negative ContributorsFCX -0.13VZ -0.04VALEBZ -0.02
19
Portfolio RiskSp
ängl
er IQ
AM B
ond
Corp
orat
e
Source: Barclays POINT ® as of March 31, 2015.
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Portfolio Characteristics as of 3/31/15Sp
ängl
er IQ
AM B
ond
Corp
orat
e
Euro 63.3% Euro 100.0%US Dollar 33.2% US DollarPound 3.5% SterlingOther 0.0% Other
BenchmarkBond Currency Breakdown (%)
Portfolio
Duration (years)
Benchmark
0.000.250.500.751.001.251.501.752.002.25
0-1 1-3 3-5 5-7 7-10 10+
US EURO UK CANADA
Relative Portfolio Statistics (CTD)
0.530.32
0.260.260.230.210.180.16
0.180.010.000.00
-0.01-0.01
-0.01-0.01-0.02-0.02-0.03
-0.15-0.18
-0.43-1.49
-2.5 -2 -1.5 -1 -0.5 0 0.5 1
CONSUMER_NON_CYCLTREASURIES
BASIC_INDUSTRYENERGY
CONSUMER_CYCLICALCOMMUNICATIONS
REITSTECHNOLOGY
INSURANCEMORTGAGE_ASSETS
ELECTRICFINANCE_COMPANIES
FINANCIAL_OTHERLOCAL_AUTHORITIES
BROKERAGE_AM_EXCHINDUSTRIAL_OTHER
CAPITAL_GOODSUTILITY_OTHERNATURAL_GAS
TRANSPORTATIONBANKING
OWNED_NO_GUARANTEEFUT_FIXED_INCOME
Portfolio BenchmarkAAA 9.9% 0.4%AA 8.6% 13.7%A 37.6% 44.1%BBB 37.8% 41.8%BB 6.1% 0.0%Benchmark is M errill Lynch EM U Corporate Index
Ratings
Portfolio BenchmarkEffective Duration 6.3 5.2Yield To Maturity* 1.8% 0.9%Average Spread to Governments 144 99Average Coupon 3.9% 3.5%Average Maturity 8.6 5.8Average Quality A A-
Characteristics
*Yield includes implied cost of futures
S&P Rating* Portfolio Benchmark OverweightFREEPORT-MCMORAN COPPER. BBB- 0.14 0.00 0.14GOLDMAN SACHS GROUP INC. A- 0.13 0.01 0.12MICROSOFT CORP. AAA 0.12 0.01 0.11MORGAN STANLEY. A- 0.12 0.01 0.11BANK OF AMERICA CORP. A- 0.11 0.01 0.10ZIMMER HOLDINGS IN. A- 0.10 0.00 0.10GAS NATURAL SDG SA. BBB 0.10 0.01 0.09FORD MOTOR CO. BBB- 0.09 0.00 0.08VERIZON COMMUNICATIONS INC. BBB+ 0.10 0.01 0.08WELLS FARGO & CO. A+ 0.10 0.02 0.08Total 1.11 0.08 1.03
Top 10 Overweight Corporate Issuers as of 3/31/2015 (CTD)
21
Tactical Allocation to High YieldSp
ängl
er IQ
AM B
ond
Corp
orat
e
Allocation of High Yield vs. Spreads
0
200
400
600
800
1,000
1,2000.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
OAS
Mar
ket V
alue
(%
)
HY weight % BB Spread
MMEDEC121313GA
Section IV.
23
Portfolio PerformanceSp
ängl
er IQ
AM B
ond
Non
-Fin
anci
al C
orpo
rate
s
Performance (Net) as of 3/31/2015
YTD (%) 1 Year (%)Since Inception
(%)1
Spangler IQAM Bond Non-Financial Corporates 0.57 2.27 3.07
Merrill Lynch EMU Corporate Non-Financial 0.55 3.04 3.53
Value Added 0.02 -0.77 -0.46
Market Value as of 3/31/2015: €59,674,3851 4/6/2012
Performance (Gross) as of 3/31/2015
YTD (%) 1 Year (%)Since Inception
(%)1
Spangler IQAM Bond Non-Financial Corporates 0.89 3.33 4.16
Merrill Lynch EMU Corporate Non-Financial 0.58 3.07 3.49
Value Added 0.30 0.27 0.67
Market Value as of 3/31/2015: €59,674,3851 4/6/2012
24
Performance Attribution Year-To-Date
Attribution (Gross) as of 3/31/2015 YTD (%)Spängler IQAM Bond Non-Financial Corporates Fund (Gross) 0.89ML EMU Corporate 0.55Value Added 0.34
Contributions to Value Added (Gross)Yield Curve -0.02Asset Allocation 0.07Security Selection 0.30Pricing Differences & Intra-Day -0.03FX Allocation & Hedging 0.02Total 0.34
Top Positive Contributors YTD (%)GAZPRU 0.04JCP 0.04WINDIM 0.03Top Negative ContributorsFCX -0.15EDF -0.03RIG -0.01
Spän
gler
IQAM
Bon
d N
on-F
inan
cial
Cor
pora
tes
25
Portfolio Risk
Source: Barclays POINT ® as of March 31, 2015.
Spän
gler
IQAM
Bon
d N
on-F
inan
cial
Cor
pora
tes
26
Portfolio Characteristics as of 3/31/15
Euro 59.2% Euro 100.0%US Dollar 34.3% US DollarPound 6.5% SterlingOther 0.0% Other
Portfolio BenchmarkAAA 2.1% 0.3%AA 4.7% 6.9%A 32.8% 35.1%BBB 52.5% 57.9%BB 6.8% 0.0%B & Below 1.1% 0.0%
Bond Currency Breakdown (%)Portfolio Benchmark
Ratings
Relative Portfolio Statistics (CTD)
0.720.38
0.290.16
0.090.070.04
-0.01-0.01-0.03-0.04-0.06
-0.09-0.12-0.13
-0.20-1.18
-2 0 2
CONSUMER_NON_CYCLENERGY
BASIC_INDUSTRYCONSUMER_CYCLICAL
COMMUNICATIONSTECHNOLOGY
TREASURIESFINANCE_COMPANIES
INDUSTRIAL_OTHERUTILITY_OTHER
ELECTRICCAPITAL_GOODS
REITSNATURAL_GAS
TRANSPORTATIONOWNED_NO_GUARANTEE
FUT_FIXED_INCOME
Duration (years)
0.00
0.25
0.50
0.75
1.00
1.25
1.50
0-1 1-3 3-5 5-7 7-10 10+
US EURO UK Benchmark
Portfolio BenchmarkEffective Duration 2.8 2.9Yield To Maturity* 1.18 0.56Average Spread to Governments 119 77Average Coupon 4.13 3.92Average Maturity 4.2 3.1Average Quality BBB+ BBB+*Yield includes implied cost of futures
Characteristics
S&P Rating* Portfolio Benchmark OverweightFREEPORT-MCMORAN COPPER. BBB- 0.18 0.00 0.18PERNOD-RICARD SA. BBB- 0.11 0.00 0.11VOLKSWAGEN AG. A 0.13 0.03 0.11KINDER MORGAN INC/DE. BBB- 0.10 0.00 0.10GLENCORE XSTRATA PLC. BBB 0.09 0.01 0.08VERIZON COMMUNICATIONS INC. BBB+ 0.07 0.00 0.07ZIMMER HOLDINGS IN. A- 0.06 0.00 0.06HOLCIM LTD. BBB 0.06 0.00 0.06ACTAVIS INC. BBB- 0.06 0.00 0.06BP PLC. A 0.06 0.00 0.06Total 0.93 0.05 0.89
Top 10 Overweight Corporate Issuers as of 3/31/2015 (CTD)
Spän
gler
IQAM
Bon
d N
on-F
inan
cial
Cor
pora
tes
MMEDEC121313GA
Section V.
28
Historical Spread LevelsG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Source: Barclays as of March 31, 2015
Global Corporate Spreads 2005 - 2015 (10 yrs)
0
100
200
300
400
500
600
basi
s poi
nts
OAS = 121Bps Average = 167Bps +1 Std Dev = 266Bps -1 Std Dev = 68Bps
"Great Moderation"
Lehman Failure
European Sovereign Debt Crisis
29
Global Corporate ScorecardG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Current OAS Mar OAS Change YTD OAS Change Mar Excess Return YTD Excess US Corporates 129 6 (1) -0.43% 0.27% US Financials 118 6 1 -0.23% 0.30% Banking 110 6 1 -0.18% 0.28% Seniors 97 6 2 -0.15% 0.21% Subordinate 167 6 0 -0.29% 0.56% US Industrials 136 6 (3) -0.48% 0.29% Basic 184 9 2 -0.67% 0.00% Capital Goods 101 6 (1) -0.32% 0.21% Communications 154 5 1 -0.22% 0.11% Consumer Cyclical 112 7 (4) -0.36% 0.34% Consumer Noncyclical 111 7 0 -0.34% 0.19% Energy 180 5 (15) -1.13% 0.85% Technology 104 5 0 -0.23% 0.19% Transportation 124 8 (2) -0.39% 0.30% Other Industrial 106 4 7 -0.40% -0.54% US Utilities 121 9 2 -0.89% -0.04%
EUR Corporates 99 23 11 -0.53% 0.06% EUR Financials 104 23 10 -0.37% 0.27% Banking 92 23 13 -0.30% 0.03% Covereds 37 13 2 0.16% 0.38% Seniors 77 23 16 -0.32% -0.23% Subordinate 160 21 (8) -0.17% 1.35% EUR Industrials 93 24 12 -0.69% -0.18% Basic Industry 99 26 11 -0.59% -0.08% Capital Goods 80 24 11 -0.46% -0.14% Communications 103 22 11 -0.84% -0.12% Consumer Cyclical 89 31 19 -0.62% -0.26% Consumer Non-Cyclical 83 23 7 -0.72% -0.26% Energy 106 21 19 -0.80% -0.20% Technology 74 20 15 -1.21% -1.01% Transportation 90 21 8 -0.44% 0.12% Other Industrial 113 24 8 -0.24% 0.48% EUR Utilities 100 22 11 -0.52% 0.13%
A's 105 7 (2) -0.39% 0.23%BBB's 167 5 (3) -0.49% 0.36%
0Intermediate 104 6 (3) -0.22% 0.41%Long 186 7 0 -0.92% -0.03%
US HY 466 36 (17) -1.10% 1.09%EUR HY 349 34 (26) -0.20% 2.47%
10yr Bund 18 (15) (36)10yr US Treas 192 (7) (25)
Source: Barclays as of March 31, 2015. Excess Returns are shown gross of fees.
30
Credit CurvesG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Intermediate Spread Curve (Barclays US Credit Corp 7-10 vs 3-5) - 12m
Source: Barclays POINT as of 3/31/2015
35
40
45
50
55Sp
read
(Bps
)
10-30 Spread Curve (Barclays US Credit Corp 10+ vs 7-10) - 12m
Source: Barclays POINT as of 3/31/2015
20
25
30
35
40
45
50
55
Spre
ad (B
ps)
Intermediate Spread Curve (Barclays US Credit Corp 7-10 vs 3-5) - 10 yrs
Source: Barclays POINT as of 3/31/2015
-140
-120
-100
-80
-60
-40
-20
0
20
40
60
Spre
ad (B
ps)
10-30 Spread Curve (Barclays US Credit Corp 10+ vs 7-10) - 10 yrs
Source: Barclays POINT as of 3/31/2015
-100
-80
-60
-40
-20
0
20
40
60
Spre
ad (B
ps)
31
US Banks Are A Step Ahead In Recovery vs. European BanksG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
► European banks are larger and more levered resulting in more systemic risk to their respective countries. The asset deleveraging process is ongoing in Europe while U.S. banks have been forced to delever and derisktheir balance sheets beginning in 2008.
► European banks remain dependent on market sensitive wholesale funding but have benefited from unprecedented liquidity support by the ECB.
Source: Bloomberg US and European bank indices data as of December 31, 2014.
Net Interest Margin
0.0
1.0
2.0
3.0
4.0
%US banks European banks
Non-Performing Loans Ratio
0.0
1.0
2.0
3.0
4.0
5.0
6.0
%
US banks European banks
Assets/Equity
0.0
5.0
10.0
15.0
20.0
25.0
30.0
%
US banks European banks
Loans/Deposits
75.00
100.00
125.00
150.00
175.00
%
US banks European banks
32
US Banks Are De-leveraging
Source: Bloomberg as of March 31, 2015.
Net Interest Margin - Profitability
3.72 3.56 3.40 3.42 3.42 3.59 3.42 3.253.06
2006 2007 2008 2009 2010 2011 2012 2013 2014
US banks median
Non-Performing Loans Ratio - Asset Quality
0.330.67
1.49
2.99
2.58
1.821.52
1.030.76
2006 2007 2008 2009 2010 2011 2012 2013 2014
US banks median
Assets/Equity Leverage
10.4210.81
9.81
8.959.26 9.27
8.86 8.88 8.85
2006 2007 2008 2009 2010 2011 2012 2013 2014
US banks median
Tier 1 Capital Ratio
8.757.86
10.8311.54 12.10 12.40 12.01 11.98 12.43
2006 2007 2008 2009 2010 2011 2012 2013 2014
Tier 1 Capital Ratio
Glo
bal C
orpo
rate
Mar
ket E
nviro
nmen
t
33
Penalties/ Settlements Remain an Overhang for Global Banks
While Banks have built up capital buffers and improved operating earnings since the financial crisis, litigation costs and regulatory fines continue to rise.
Authorities, led by US Regulators, have become more aggressive in their pursuit of settlements. Instead of entering deferred prosecution agreements, we are now seeing larger fines and guilty pleas.
US Banks have faced fines related to the MBS mis-selling and foreclosure abuses while European Banks have faced fines related to money laundering, violating US trade sanctions and tax evasion. UK Banks have had to make large provisions for PPI and interest rate hedging mis-selling. LIBOR/EURIBOR has affected numerous global banks.
We expect future litigation costs to remain elevated. Potential future litigation costs are difficult to estimate however outstanding investigations include FX rigging, LIBOR/EURIBOR , commodities price fixing and market manipulation.
Banks continue to provision against potential fines, thus hampering profitability, and in some cases, weakening capital ratios. However, thus far, fines have been manageable given the improved balance sheets and earnings capacity of global banks.
Glo
bal C
orpo
rate
Mar
ket E
nviro
nmen
t
.
Penalties and Settlements for Financial Institutions
Source: Company Reports. Standish Estimates as of March 31, 2015.
$0
$10
$20
$30
$40
$50
$60
$70
Pre 2009 2009 2010 2011 2012 2013 2014
Am
ount
($
billi
ons)
Other
F/X Rigging
Trade Sanctions
Tax Evasion
Money Laundering
LIBOR/EURIBOR
Interest rate hedging products
PPI Mis-selling
US Mortgage Related
34
U.S. Credit Fundamentals Have Likely PeakedG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Source: JPMorgan as of December 31, 2014.
U.S. Earnings Payout Ratio
0%
5%
10%
15%
20%
25%
30%
35%
40%
U.S. Net Leverage
0.80x
1.00x
1.20x
1.40x
1.60x
1.80x
2.00x
U.S. EBITDA Margin %
20%21%22%23%24%25%26%27%28%29%
U.S. EBITDA/Interest
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
14.0x
15.0x
35
Euro Credit FundamentalsG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Euro Earnings Payout Ratio
0%
5%
10%
15%
20%
25%
30%
35%
Euro Net Leverage
0.80x
1.30x
1.80x
2.30x
2.80x
3.30x
Euro EBITDA Margin %
10%11%12%13%14%15%16%17%18%19%
Euro EBITDA/Interest
8.0x
9.0x
10.0x
11.0x
12.0x
13.0x
14.0x
15.0x
Source: JPMorgan as of December 31, 2014.
36
Euro vs. U.S. Credit FundamentalsG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Earnings Payout Ratio
0%
5%
10%
15%
20%
25%
30%
35%
40% US Europe
Net Leverage
0.80x
1.30x
1.80x
2.30x
2.80x
3.30x US Europe
EBITDA Margin %
10%
15%
20%
25%
30%US Europe
EBITDA/Interest
8.0x9.0x
10.0x11.0x12.0x13.0x14.0x15.0x16.0x US Europe
Source: JPMorgan as of December 31, 2014.
37
Moody’s Upgrade/Downgrade RatioG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
United States
-180
-135
-90
-45
0
45
90
# of
upg
rade
s/do
wng
rade
s
Downgrades Upgrades
United States
-1.00-0.500.000.501.001.502.002.503.003.504.004.50
Ratio
US Ratio
Western Europe
0.02
0.05
0.14
0.37
1.00
2.70
7.29
19.68
53.14 Western Europe Ratio
Western Europe
-200
-150
-100
-50
0
50
# of
upg
rade
s/do
wng
rade
s
Downgrades Upgrades
Source: Moody’s as of February 28, 2015.
38
Technicals–Gross SupplyG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
► Record levels of Investment Grade Supply in the US met with strong demand
► Lack of (net) supply in Euro
► High Yield new supply continues to grow
Investment Grade Gross Issuance
Source: Barclays as o f M arch 31, 2015
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
200120022003200420052006200720082009201020112012201320142015
billi
ons
US Europe
High Yield Gross Issuance
Source: Barclays as o f M arch 31, 2015
$0
$50
$100
$150
$200
$250
$300
$350
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
billi
ons
US Europe
39
Credit Cycle & DefaultsG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Global Speculative Grade Default Rate and Loan Standards
Sources: M oody's Global Speculative Grade Default Rate, US Federal Reserve Board Senior Loan Officer Large and M edium Commercial & Industrial Loan Standards Survey as o f M arch 31, 2015.
-40
-30
-20
-10
0
10
20
30
40
50
60
70
80
90
0%
2%
3%
5%
6%
8%
9%
11%
12%
14%
15%
17%
18%
20%
Dec-
87
Dec-
92
Dec-
97
Dec-
02
Dec-
07
Dec-
12
Net
% B
anks
Tig
hten
ing
Stan
dard
s
Def
ault
Rate
(% Is
suer
s)
Default Rate (Percent of Issuers) Default Forecast Percent of Banks Tightening C&I Loan Standards
5/9057%
1/0160%
10/0884%
8/93-20% 4/05
-24%7/11-22%
40
U.S. Corporate Credit UniverseG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Share of US Corporate Credit Universe By Rating
Source: Barclays POINT, Standish as of March 31, 2015
1.4%8.7%
45.5%
44.4%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
BBB
A
AA
AAA
► BBB’s continue to increase their share of the investment grade market.
41
Brokers Have Sharply Reduced Their Balance SheetG
loba
l Cor
pora
te M
arke
t Env
ironm
ent
Source: Federal Reserve Bank of New York as of March 31, 2015. Federal Reserve Bank of New York’s weekly release of primary dealer transactions reflecting dealer positions outright due greater than 1 year in billions
► …..Yet secondary market trading liquidity for corporate bonds remains strong.
Dealer Inventory Decreasing While Market Size Increasing
Source: Federal Reserve Bank of New York as o f M arch 31, 2015
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
0
50
100
150
200
250
billions
billions
Primary Dealer Inventory (Bln) U.S. Credit & HY Index Value (Bln, RHS)
MMEDEC121313GA
Section VI.
43
Important Disclosures
This information is not provided as a sales or advertising communication. It does not constitute investmentadvice. It is not an offer to sell or a solicitation of an offer to buy any security. Many factors affect performanceincluding changes in market conditions and interest rates and in response to other economic, political, orfinancial developments. Past performance is not a guide to or indicative of future results. Future returns arenot guaranteed and a loss of principal may occur. There can be no assurance that the investment objectivesoutlined in this presentation will be achieved. This information is not intended to provide specific advice,recommendations or projected returns of any particular Standish Mellon Asset Management Company LLC(“Standish”) product. Some information contained herein has been obtained from third party sources and hasnot been verified by Standish. Standish makes no representations as to the accuracy or the completeness ofany of the information herein.The enclosed material is confidential and not to be reproduced or redistributed without the prior writtenconsent of Standish. Any statements of opinion constitute only current opinions of Standish, which are subjectto change and which Standish does not undertake to update. Views expressed are subject to change rapidly asmarket and economic conditions dictate. Portfolio composition is also subject to change.The Firm is defined as Standish Mellon Asset Management Company LLC ("Standish"), a registered investmentadvisor and wholly owned subsidiary of The Bank of New York Mellon Corporation.BNY Mellon Investment Management is one of the world’s leading investment management organizations andone of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms,wealth management organization and global distribution companies. BNY Mellon is the corporate brand ofThe Bank of New York Mellon Corporation and may also be used as a generic term to reference theCorporation as a whole or its various subsidiaries generally. Products and services may be provided undervarious brand names and in various countries by subsidiaries, affiliates, and joint ventures of The Bank of NewYork Mellon Corporation where authorized and regulated as required within each jurisdiction.Standish Mellon Asset Management (UK) Limited, (“Standish (UK)”) is an affiliate of Standish located inLondon, which provides investment management services. Certain employees of Standish (UK) may also act inthe capacity as associated persons of Standish and in such capacity may provide contracted research servicesto Standish.Rankings include assets managed by BNY Mellon Asset Management and BNY Mellon Wealth Management.Each ranking may not include the same mix of firms.This portfolio data should not be relied upon as a complete listing of the Portfolio’s holdings (or top holdings)as information on particular holdings may be withheld if it is in the client’s best interest to do so. Portfolioholdings are subject to change without notice and may not represent current or future portfolio composition.The portfolio date is “as of” the date indicated.There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time youreceive this report or that securities sold have not been repurchased. The securities discussed do not representan account’s entire portfolio and in the aggregate may represent only a small percentage of an account’sportfolio holdings.It should not be assumed that any of the securities transactions or holdings discussed were or will prove to beprofitable, or that the investment recommendations or decisions we make in the future will be profitable orwill equal the investment performance of the securities discussed herein.The allocation distribution and actual percentages may vary from time-to-time. The types of investmentspresented in the allocation chart will not always have the same comparable risks and returns. The actualperformance of the portfolio will depend on the Investment Manager’s ability to identify and accessappropriate investments, and balance assets to maximize return while minimizing its risk. The actualinvestments in the portfolio may or may not be the same or in the same proportion as those shown above.Standish believes giving an proprietary Average Quality Credit rating to the holdings in a portfolio moreaccurately captures its characteristics versus using a single rating agencies ratings. Standish has aratings/number hierarchy whereby we assign a number between 0 (unrated bond) and 21 (S&P or Moody’sAAA) to all bonds in a portfolio based on the ratings of one or more of the rating agencies (with the lower ofthe 2 available agencies ratings prevailing), and then take a weighted numerical average of those bonds (withweighting based on each bonds percentage to the total portfolio assets). The resulting number is thencompared back to the ratings/number hierarchy to determine a portfolio’s average quality. For example, ifMoody’s AAA, S&P AAA= 21, Moody’s A1, S&P A+= 17, Moody’s Baa1 and S&P BBB+=14, Moody’s B1 andS&P B+=7. The numeric average of the 4 equally weighted holdings is 14.75, rounded up to the next wholenumber of 15. 15 converts to an average credit rating of S&P A/Moody’s A2.To the extent the strategy invests in foreign securities, its performance will be influenced by political, socialand economic factors affecting investments in foreign companies. Special risks associated with investments inforeign companies include exposure to currency fluctuations and controls, less liquidity, less developed or lessefficient trading markets, less governmental supervision and regulation, lack of comprehensive companyinformation, political instability, greater market volatility, and differing auditing and legal standards.
Further, investments in foreign markets can be affected by a host of factors, including political or socialconditions, diplomatic relations, limitations on removal of funds or assets or imposition of (or change in)exchange control or tax regulations in such markets. Additionally, investments denominated in a foreigncurrency will be subject to changes in exchange rates that may have an adverse effect on the value, price orincome of the investment.These risks are magnified in emerging markets and countries since they generally have less diverse and lessmature economic structures and less stable political systems than those of developed countries.These benchmarks are broad-based indices which are used for illustrative purposes only and have beenselected as they are well known and are easily recognizable by investors. Comparisons to benchmarks havelimitations because benchmarks have volatility and other material characteristics that may differ from theportfolio. For example, investments made for the portfolio may differ significantly in terms of securityholdings, industry weightings and asset allocation from those of the benchmark. Accordingly, investmentresults and volatility of the portfolio may differ from those of the benchmark. Also, the indices noted in thispresentation are unmanaged, are not available for direct investment, and are not subject to management fees,transaction costs or other types of expenses that the portfolio may incur. In addition, the performance of theindices reflects reinvestment of dividends and, where applicable, capital gain distributions. Therefore, investorsshould carefully consider these limitations and differences when evaluating the comparative benchmark dataperformance.The information regarding the index is included merely to show the general trends in the periods indicatedand is not intended to imply that the portfolio was similar to the index in composition or risk.The strategy may use alternative investment techniques (such as derivatives) which carry additional risks. Thelow initial margin deposits normally required to establish a position in such instruments may permit a highdegree of leverage. As a result, a relatively small movement in the price of a contract may result in a profit orloss that is high in proportion to the amount of funds actually placed as initial margin and may result in adisproportionate loss exceeding any margin deposited. Transactions in over-the-counter derivatives mayinvolve additional risk as there is no exchange on which to close out a position, only the original counterparty.Such transactions may therefore be difficult to liquidate, to value, or to assess the exposure. The strategy mayat times use certain types of investment derivatives, such as options, futures, forwards and swaps. Theseinstruments involve risks different from, and in certain cases, greater than, the risks presented by moretraditional investments.Standish sector models use regression analysis such as multi-linear data inputs, panel data, and probitfunction. Variables that the models take into account are: PMI, US Core CPI, Fed Fund rate, 3-month Libor, 3-month T-bill rate, foreign purchases of US Government bonds, Commodity Indices , Capacity Utilization,Deficit as a percent of GDP, S&P 500 return, Chicago Fed Index, IGOV, US output gap, Europe Core CPI, USunemployment rate, EU unemployment rate, and slope of the yield curve. Assumptions made are that samplesare representative of the population for the inference prediction; regression residuals are approximatelynormally distributed, uncorrelated, and have constant volatility; no high degrees of multi-colinearity in theindependent variables; variable sensitivity remains constant in the short term; and no structural shift in theshort term.
Appe
ndix
SBGCCQ4012915GA
Standish cares about the environment. Whenever possible, we choose double-sided printing to reduce paper use.
