(PUB) Investing 2015

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February 2 015

Morningstar FundInvestor

Data through January 31, 2015 FPA New Income

Ticker Status Yield SEC Yield Total Assets Mstar Category FPNIX Open 2.8% . $5,623 mil Nontraditional Bond

Morningstar Analyst Rating 01-16-15

Investment Style Fixed Income Income Rtn %Rank Cat

Historical Profile Return Risk Rating Below Avg Low Below Avg

100

Manager Change Partial Manager Change

14.0 16.0

Morningstar Pillars Process Performance

Positive Positive Positive Positive Positive

∞ ∞ ∞ ∞ ∞

Growth of $10,000

12.0

Investment Values of Fund Investment Values of BC Agg Bnd Performance Quartile (within Category) History

People Parent Price

10.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 01-15

Morningstar Analyst Rating Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform over the long term on a risk-adjusted basis. Analyst Rating Spectrum Œ „ ´ˇ ¨

11.28 2.60 -1.74 1.30 3.50 -0.90

11.18 1.57 -0.86 -1.57 4.64 -3.07

10.84 4.79 0.46 -0.30 4.69 0.10

10.85 6.02 -0.95 0.38 5.07 0.95

10.95 4.31 -0.93 0.49 4.22 0.09

10.96 2.89 -3.04 1.90 3.28 -0.39

10.92 3.18 -3.36 2.85 3.85 -0.67

10.85 2.23 -5.61 1.96 4.12 -1.89

10.65 2.18 -2.03 1.67 2.27 -0.09

10.64 0.67 2.69 0.38 4.20 -3.53

10.27 1.32 -4.65 1.09 2.80 -1.48

10.16 0.40 -1.70 0.38 0.00 0.40

NAV

Total Return % +/-BC Agg Bnd

+/-BofAML LIBOR3M

Income Return % Capital Return %

Total Rtn % Rank Cat

Pillar Spectrum Positive ∞

0.49 0.00 0.62 3.77

0.39 0.00 0.61 3.69

0.51 0.00 0.62 4.68

0.50 0.00 0.62 4.31

0.54 0.00 0.61 4.21

0.46 0.00 0.60 3.20

0.36 0.00 0.60 2.98

0.42 0.00 0.60 3.94 117

0.44 0.00 0.57 2.12

0.24 0.00 0.58 2.74

0.44 0.00 0.56 2.59

0.00 0.00

Income $

§ Negative

¶ Neutral

Capital Gains $ Expense Ratio % Income Ratio % Turnover Rate % Net Assets $mil

. . .

Performance 01-31-15 1st Qtr 2nd Qtr

3rd Qtr

4th Qtr

Total 3.18 2.23 2.18 0.67 1.32

2010 2011 2012 2013 2014

1.19 0.81 0.92 0.65 0.47 0.56 0.57 -0.19 0.58 0.59 0.35 -2.57 0.64 -3.72 1.33 -5.28 1.46 -1.61 1.88 -2.69 2.95 -1.91 4.39 -1.48 Total

0.73 0.41 0.46 0.19 0.94 0.19 0.10 0.19 0.10 0.05

2,043

1,698

1,848

1,901

2,484

3,865

3,733

4,435

5,043

5,176

5,623

Portfolio Analysis 12-31-14

Rating and Risk Time Load-Adj

Date of Maturity

Amount

Value % Net $000 Assets

Morningstar

Morningstar Risk vs Cat

Morningstar Risk-Adj Rating

Period Return % Rtn vs Cat

Total Fixed-Income:276

$000

1 Yr 3 Yr 5 Yr

1.33 1.46 1.88 2.95 7.22

Trailing

+/- BC +/- BofAML %Rank Growth of

FHLMC CMO 2.5% US Treasury Note Csmc Tr 2013-6 CMO Reynolds Grp Issuer 7.87

07-15-24 04-30-16 07-25-28 08-15-19 07-25-43 05-01-19 10-25-42 04-15-16 11-16-44 08-25-57 10-15-18 12-01-17 10-01-18 12-25-41 03-27-24 03-25-42 08-16-44 02-25-42 04-09-18

123,813 2.20 85,003 1.51 83,493 1.48 75,636 1.35 71,200 1.27 69,020 1.23 66,546 1.18 64,374 1.14 63,946 1.14 57,012 1.01 55,749 0.99 55,141 0.98 49,937 0.89 49,757 0.88 49,543 0.88 47,398 0.84 45,678 0.81 45,671 0.81 45,653 0.81 44,912 0.80

Return% Agg Bnd LIBOR3M Cat

$10,000

-Avg -Avg -Avg

Low Low Low

3 Mo 6 Mo 1 Yr

0.29 0.52 1.10 1.13 1.55 0.95 2.01

29 10,035 23 10,064 46 10,133 75 10,444 76 10,976 79 13,374 73 19,049

10 Yr Incept

FNMA CMO 2.25%

3 Yr Avg 5 Yr Avg 10 Yr Avg 15 Yr Avg

Other Measures

Standard Index

Best Fit Index

Everest Acq Llc/Finance

BC Agg Bnd

BC US Universal

FNMA CMO 3.5%

Alpha

0.9

0.8

Nissan Auto Lease Tr 201

Beta

0.17

0.18

Ge Cap Ccmt 2010-1 3.69% 03-15-18

R-Squared

Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat 3 Yr (estimated) 5 Yr (estimated) 10 Yr (estimated) 0.18 74 1.26 59 0.56 77 1.30 56 1.52 52 1.39 21 Potential Capital Gain Exposure: -7% of assets Morningstar’s Take by Sumit Desai, CFA 01-16-15 The recent resignation of a senior member of FPA New Income’s management team raises questions around succession planning and analyst resources. As a result, while the fund’s experienced manager, strong volatility-adjusted record, and reasonable expenses count in its favor, its Morningstar Analyst Rating has been lowered to Bronze from Silver. Tom Atteberry joined FPA in 1997 and has led this fund since 2010 after comanaging the portfolio for several years with his predecessor Bob Rodriguez. Atteberry was supported by a team of four investment analysts, but the team was dealt a slight setback in early 2015 with the resignation of Melinda Newman, who was hired in 2013 to lead the team’s corporate credit efforts. This departure is concerning for two reasons. First, Newman was the most experienced team member after Atteberry and was considered a potential successor. Second, her departure leaves the fund’s already small analyst team even further stretched. Newman was hired in part to support potential

Sunset Mtg Ln Co Llc 201 Volt Xxvii Llc 2014-Npl7 Algeco Scotsman Global F Thompson Creek Metals Co Boart Longyear Mgmt Pty

Standard Deviation

0.67 1.46 2.09

Mean

Sharpe Ratio

FNMA CMO 2.5%

investments in high yield and bank loans; the fund’s stake in corporate bonds stood at 10% of total assets as of late 2014, up from close to 0% just a couple of years ago. Joseph Choi, who was hired as a second corporate analyst in early 2014, will assume some of Newman’s coverage responsibilities, and Abhijeet Patwardhan, who leads the fund’s structured products research, will also pinch-hit on some corporate holdings until a replacement for Newman is hired. The fund’s positioning has long reflected a bearish view on bond prices, which has caused it to miss much of the past decade’s bond rally and lag most of its peers. That’s by design: Low volatility is a hallmark of the fund, and it looks good on a volatility-adjusted basis, with long-term Sharpe ratios that rank near the top of the nontraditional bond Morningstar Category and top most intermediate- and short-term bond funds’. In all, the fund’s ultra-conservative positioning is better suited for investors looking for a safe haven against bond market sell-offs, rather than those looking for upside during fixed-income rallies.

Ores Llc 2014-Lv3 6%

FNMA CMO 3.5%

Sunset Mtg Ln Co Llc 201

FNMA CMO 2%

Americredit Auto Recv 20

Sector Breakdown

% of assets

Current Investment Style

US Treasuries

Duration Ltd Mod Ext

. . . . . . . . . . . . .

TIPS

Quality High Med Low

US Agency

Mortgage Pass-Throughs

figure provided by fund

Mortgage CMO Mortgage ARM US Corporate Asset-Backed

1 Avg Eff Duration Avg Eff Maturity Avg Credit Quality Avg Wtd Coupon Avg Wtd Price Coupon Range

1.6 Yrs 2.2 Yrs

Convertible Municipal

3.12%

97.65% of par

Corporate Inflation-Protected

% of Bonds Rel Cat

Foreign Corporate

0% PIK 0% to 6% 6% to 8% 8% to 10%

0.0 0.0 89.0 1.3 4.4 0.3 5.6 0.6 1.0 0.4

Foreign Govt

Composition - Net Cash 4.2

Bonds 94.0

More than 10%

Stocks 0.0

Other

1.7

Address:

FPA New Income Inc Los Angeles, CA 90064 800-638-3060 www.fpafunds.com

Minimum Purchase: Min Auto Inv Plan:

$1500 $100

Add: $100 IRA: $100

1.00=Category Average

Add: $100

Credit Analysis

Special Securities Restricted/Illiquid Secs Exotic Mortgage-Backed Emerging-Markets Secs Options/Futures/Warrants

% bonds 12-31-14

Sales Fees:

No-load, 2.00%R

AAA

Web Address: Inception: Advisor: Subadvisor: NTF Plans:

Management Fee:

0.50%

B 9 Below B 1 NR/NA 9

8 0 1

0 0

04-01-69

Actual Fees:

Mgt:0.50% Dist: .

First Pacific Advisors, LLC

Expense Projections: Income Distribution:

3Yr:$179 Quarterly

5Yr:$313 10Yr:$701

None

BBB

N/A

Mutual Funds ß ®

© 2015Morningstar, Inc.All rights reserved. The information herein isnot representedorwarranted to be accurate, correct, complete or timely. Pastperformance isnoguarantee of future results.Access updated reports at To order reprints, call 312-696-6100. mfb.morningstar.com.

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