PORTFOLIO OPTIMIZATION FUNDS

Transcription

1 PORTFOLIO OPTIMIZATION FUNDS DIVERSIFIED ASSET ALLOCATION SOLUTIONS UPDATED AS OF 12/31/17 MFC

2 PORTFOLIO OPTIMIZATION FUNDS With thousands of mutual funds on the market today, creating a portfolio of investments that fits your risk tolerance and addresses your investment needs can be challenging. Optimization Funds make this task easier for you by offering one-step diversification managed by a dedicated multi-asset class solutions team. The funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Designed to: maximize long-term growth while diversifying across multiple asset classes to help reduce volatility targeted to your risk tolerance level and time horizon No bank guarantee May lose value Not FDIC insured

3 DEVELOP A LONG-TERM PLAN AND STAY INVESTED If you attempted to time the stock market over the past 20 years, you may have missed out on some of the best days. Investors who stay invested tend to outperform those investors who frequently buy and sell as a reaction to market movements. The Cost of Market Timing 1 Risk of Missing the Best Days in the Market Higher 10% 7.7% 5% 4.0% Returns 1.6% 0% 0.5% 2.4% Lower 5% 4.2% Invested for All 5,038 Trading Days 10 Best Days Missed 20 Best Days Missed 30 Best Days Missed 40 Best Days Missed 50 Best Days Missed How Much Difference Can a Few Days Make? (Annualized Total Returns) 7.7% Investors who stayed in the market for all 5,038 trading days. 4.0% 4.2% Missing just 10 of those days (the 10 best days of returns) lowered the return by almost half. And missing the 50 best days so still being invested for 4,988 trading days resulted in a negative return. Source: Morningstar Inc., s in this example are represented by the Ibbotson Large Company Index, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs. Past performance is no guarantee of future performance, and current performance may be lower or higher than the performance quoted. 1

4 DIVERSIFY TO HELP MANAGE MARKET VOLATILITY Diversification is based on the premise that different types of investments, or asset classes, generally react differently to various market events. Attempting to predict or time these events with precision is difficult. By strategically diversifying among a broad array of asset classes, you can help to smooth out the impact of market volatility on your portfolio s overall return. This is demonstrated by the total returns of the diversified portfolio (indicated in dark blue) in the chart below. Higher Total Returns Lower Source: Morningstar, Inc Returns assume dividends and capital gains are reinvested and do not include any managerial expenses. The performance data herein represents past performance. Past performance does not guarantee future returns. The category is based on the Russell 1000 Index. The category is based on the Russell 1000 Index. The category is based on the Russell 1000 Index. These three indexes measure the performance of the growth and value styles of investing in large-cap U.S. stocks and are constructed to provide a comprehensive and unbiased barometer of the large-cap market. The category is based on the Russell 2500 Index, which measures the performance of both growth and value styles of investing in mid-cap U.S. stocks and is constructed to provide a comprehensive and unbiased barometer for the small- to mid-cap segment. 2

5 Diversification 1 may increase your investment s growth potential while reducing the amount of risk to your portfolio The category is based on the MSCI EAFE Index (Morgan Stanley Capital International), which measures the performance of developed stock markets in Europe, Australasia, and the Far East. The category is based on the Bloomberg Barclays U.S. Aggregate Bond Index, which includes U.S. government, corporate, and mortgage-backed securities, and maturities up to 30 years. The category is based on the ICE BoA Merrill Lynch U.S. 3-Month Treasury Bill Index (T bill). The is represented by an equal portion of the previously listed indexes. Index performance is not illustrative of the performance of the Optimization Funds. For performance on the Optimization Funds, visit Indexes are unmanaged and cannot be invested in directly. Further, they hold no cash and incur no expenses. 1 Diversification does not guarantee future results, ensure a profit, or protect against loss. 3

6 DETERMINE YOUR RISK-TOLERANCE LEVEL Everyone has his or her own level of tolerance for investment risk. Evaluating yours, and factoring it into your decisions, is an important part of prudent long-term investing. Pacific Funds offers five Optimization Funds, allowing you to match the appropriate fund to your financial objectives, risk tolerance, and time horizon. Each fund is structured as a fund-of-funds (a mutual fund that invests in other mutual funds) that has been diversified to achieve a specific target-risk level using a strategic mix of multiple asset classes. Asset Management The underlying funds in the Optimization Funds are managed by some of the most well-recognized management firms in the industry. All management firms may not be represented in all Optimization Funds. 4

7 SELECT THE PORTFOLIO OPTIMIZATION FUND THAT S RIGHT FOR YOU Currently, each fund includes up to 22 individual asset classes, which spreads risk across various markets. To see fund holdings, please refer to the fund fact sheets in this brochure. High Broad asset class allocations as of 12/31/17 Aggressive- AG Potential Return Moderate Moderate-Conservative Low Conservative Domestic Equity International Equity Alternatives Low Risk Tolerance High About Risk There is no guarantee the Funds will achieve their investment goals. Asset allocation and diversification do not guarantee future results, ensure a profit or protect against loss. Although diversification among asset classes can help reduce volatility over the long term, this assumes that asset classes do not move in tandem and that positive returns in one or more asset classes will help offset negative returns in other asset classes. There is a risk that you could achieve better returns by investing in an individual fund or multiple funds representing a single asset class rather than using asset allocation. A fund-of-funds does not guarantee gains, may incur losses and/or experience volatility, particularly during periods of broad market declines, and is subject to its own expenses along with the expenses of the underlying funds. It is typically exposed to the same risks as the underlying funds in which it invests in proportion to their allocations. 5

8 OUR INVESTMENT APPROACH Experienced Management Established in 2007, PLFA provides multi-asset-class solutions, is an SEC-registered investment adviser, and is a wholly owned subsidiary of Pacific Life Insurance Company (Pacific Life). As of December 31, 2017, PLFA managed approximately $37 billion in total assets under management. Diversification is critical, no matter what stage of life you are in. While an investor nearing retirement may have different financial objectives than one just embarking on a career, both should consider employing diversification. But what is also critical is choosing the correct asset classes in which to diversify, which is known as asset allocation. Pacific Life Fund Advisors (PLFA) relies on three core principles to guide its investment decisions, which include a balanced process, an integrated team, and a diversified approach. Through these principles, it provides one-step diversification solutions for a range of investor needs and objectives. PLFA s process relies on the integration of the following teams that each have a specific role in the investment process: Asset Allocation An asset class model is developed for each fund that reflects a risk/return profile consistent with the Fund s investment goal. The model defines the asset classes, and the percentage of each, to include in the Fund. Manager Oversight Howard T. Hirakawa, CFA 23 years of investment experience Underlying fund managers are evaluated using quantitative screening to narrow the list of potential managers. Qualitative due diligence meetings are then conducted with the selected management firms to assess firm stability, performance repeatability, and investment style adherence. Allocation of underlying funds within each Fund is determined according to the Fund s target-risk objectives. Carleton J. Muench, CFA 19 years of investment experience Max Gokhman, CFA 11 years of investment experience Investment Risk Management Using the asset class model as a framework, fund risks are identified and evaluated, and if necessary, allocations are adjusted accordingly. In-depth risk analysis of portfolio construction and portfolio management is conducted by evaluating managers at the individual security level. Independent analysis and stress testing are performed to identify and evaluate fund risks and, if necessary, adjust allocations accordingly. Samuel S. Park 18 years of investment experience 6

9 ASSET ALLOCATION Objective Develop an asset class model for each Optimization Fund that reflects a risk/return profile consistent with the Fund s investment goal. The model defines the asset classes, and the percentage of each, to include in the Fund. The Process Evaluate asset classes and select those that, in combination, PLFA believes are appropriate for achieving the Fund s risk/return target. Agree on limits regarding the percentage of the Fund that can be devoted to each asset class. Adjust the model based on PLFA managers views of the current market environment, economy, fiscal and monetary policy, and specific asset classes. Universe of Asset Classes Develop Broad Asset Class Model ( Pacific Funds Optimization Moderate example as of 12/31/17) 32% Domestic Equity 46% International Equity 15% Alternatives 7% The broad asset class of alternatives can include equity and fixed-income strategies. Alternative strategies can have characteristics of equity or fixed-income investments. 7

10 MANAGER OVERSIGHT Objective Select the appropriate underlying funds for each Optimization Fund by evaluating investment management firms, and the funds they manage, in terms of their abilities to consistently represent the asset classes in our asset class models. The Process Quantitative Screening Narrows the list of potential managers for each asset class according to criteria such as: Peer-group rankings Manager tenure Performance and style consistency Qualitative Due Diligence With the resulting list, PLFA travels the world to perform thorough due diligence on the selected investment management firms, evaluating their: Corporate structure, culture, and history Investment philosophy and process Repeatability of each manager s processes and outcomes Construction Create a mix of underlying funds that best represents the blend of asset classes put together in the asset allocation phase. Ongoing Research and Evaluation Assess each manager on a regular basis, examining criteria such as: Performance Adherence to investment style Firm stability For Each Asset Class Evaluate Fund Managers and ( Domestic Equity example as of 12/31/17) Domestic Equity 46% 8

11 INVESTMENT RISK MANAGEMENT Objective Provide independent in-depth risk analysis of portfolio construction and portfolio management by evaluating managers at the individual security level. The Process Analytics and Stress Testing Identify and evaluate fund risks and, if necessary, adjust allocations accordingly. Confirm that potential downside risks are acceptable, given the Fund s risk and return objectives. Ensure the portfolio accurately represents current investment views. Maximize the potential for target-risk and return objectives to be achieved. Ongoing Risk Management Continue to monitor each Optimization Fund by regularly evaluating results, risks, and investment opportunities to determine if action is required. Periodic Rebalancing Direct cash inflows and outflows to keep the Fund aligned with its asset class model. Each Underlying Fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each Underlying Fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at Underlying Funds Determine Allocation of Underlying Funds PF Small-Cap (AB) 3.3% PF (BlackRock) 2.4% PF (Boston Partners) 6.1% PF (ClearBridge) 12.6% PF Comstock (Invesco) 5.5% PF (Ivy) 0.4% PF Developing (Lord Abbett) 0.3% PF (MFS ) 3.6% PF Real Estate (Morgan Stanley) 1.0% PF Main Street Core (Oppenheimer) 8.3% Pacific Funds Small-Cap (Rothschild) 0.4% PF Equity (Scout) 2.1% 9

12 PACIFIC FUNDS PORTFOLIO OPTIMIZATION CONSERVATIVE MANAGED BY PACIFIC LIFE FUND ADVISORS LLC DECEMBER 31, 2017 POAAX Class A Class C Advisor Class Class R 141 POACX 341 PLCDX 041 POARX 541 Fund Overview Investment Goal: The Fund seeks current income and preservation of capital. Investment Strategy: The Fund is a fund-of-funds that seeks to achieve its investment goal by investing in other funds of the Trust (underlying funds). Under normal market conditions, the Fund s exposure to the two broad asset classes of debt and equity are expected to be within the following ranges: debt: 70 85% and equity: 15 30%. Within the broad asset classes of debt and equity are narrower asset class categories. The Fund invests in underlying funds to gain exposure to these broad asset classes and narrower asset-class categories. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation/portfolio construction Manager oversight Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA 23 years of investment experience Carleton J. Muench, CFA 19 years of investment experience Max Gokhman, CFA 11 years of investment experience Samuel S. Park 18 years of investment experience of a Hypothetical $10,000 Investment Class A at NAV $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Since Fund Inception 12/31/03 Class A NAV Class A MOP Bloomberg Barclays U.S. Aggr. Bond Index S&P 500 Index ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index MSCI EAFE Index Calendar Year-End Returns (%) Class A NAV Class A MOP Bloomberg Barclays U.S. Aggr. Bond Index S&P 500 Index ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index MSCI EAFE Index Returns reflect reinvestment of dividends and distributions. Returns shown at net asset value (NAV) would have been lower if a sales charge had been deducted. Class A share returns shown at maximum offering price (MOP) reflect an up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns are shown at NAV and do not include sales charges. Performance for other share classes may differ. 1 Composed of investment-grade U.S. government and corporate bonds, mortgage pass-through securities, and asset-backed securities. 2 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the U.S. stock market. 3 Comprised of a single issue purchased at the beginning of the month and held for a full month. 4 Measures the performance of developed stock markets in Europe, Australasia, and the Far East. Indexes are unmanaged and cannot be invested in directly. Further, they hold no cash and incur no expenses. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. 10

13 Broad Asset-Class Allocations % Domestic Equity International Equity Alternatives Fund Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Ashmore PF Emerging Markets Debt 1.6 Pacific Asset Management Pacific Funds Core 7.8 Pacific Funds Floating Rate 3.2 Pacific Funds High 1.0 PIMCO PF Inflation Managed 0.9 PIMCO/Western Asset PF Managed Bond 42.9 T. Rowe Price PF Short Duration Bond 13.0 DOMESTIC EQUITY AB PF Small-Cap 1.5 BlackRock PF 0.5 Boston Partners PF 3.3 ClearBridge PF 6.3 Invesco PF Comstock 2.8 Ivy PF 0.3 MFS PF 0.8 Morgan Stanley PF Real Estate 0.2 Oppenheimer PF Main Street Core 1.2 Scout PF Equity 0.5 INTERNATIONAL EQUITY JPMorgan PF International 1.3 MFS PF International 1.4 Oppenheimer PF Emerging Markets 3.0 QS Investors PF International Small-Cap 0.5 ALTERNATIVES AQR PF Equity Long/Short 2.1 Eaton Vance PF Global Absolute Return 2.0 UBS AM/MCG PF Currency Strategies 1.8 Total Annual Fund Operating Expenses (%) Gross Net Class A Class C Advisor Class Class R The Fund s annual operating expenses shown above are effective 8/1/17 through 7/31/18. Gross Expense Ratio reflects the total annual operating expenses paid by the Fund. Net Expense Ratio reflects waivers, reductions, reimbursements, and the limitation of certain Other Expenses. Expense caps and/or fee waivers are reevaluated annually. There is no guarantee that the investment adviser will continue to cap expenses after the expiration date. Please see the current prospectus for detailed information. Fund Characteristics Annual Turnover Ratio 1 57% Total Net Assets ($M) 2 $ Calculated as of 3/31/17 fiscal year-end. 2 Net assets of the entire Fund, including all share classes. Total allocation percentages may not equal 100% due to rounding or omissions of holdings of less than 1%. Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at 11

14 PACIFIC FUNDS PORTFOLIO OPTIMIZATION MODERATE-CONSERVATIVE MANAGED BY PACIFIC LIFE FUND ADVISORS LLC DECEMBER 31, 2017 POBAX Class A Class C Advisor Class Class R 142 POBCX 342 PMCDX 042 POBRX 542 Fund Overview Investment Goal: The Fund seeks current income and moderate growth of capital. Investment Strategy: The Fund is a fund-of-funds that seeks to achieve its investment goal by investing in other funds of the Trust (underlying funds). Under normal market conditions, the Fund s exposure to the two broad asset classes of debt and equity are expected to be within the following ranges: debt: 50 70% and equity: 30-50%. Within the broad asset classes of debt and equity are narrower asset class categories. The Fund invests in underlying funds to gain exposure to these broad asset classes and narrower asset-class categories. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation/portfolio construction Manager oversight Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA 23 years of investment experience Carleton J. Muench, CFA 19 years of investment experience Max Gokhman, CFA 11 years of investment experience Samuel S. Park 18 years of investment experience of a Hypothetical $10,000 Investment Class A at NAV $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Since Fund Inception 12/31/03 Class A NAV Class A MOP Bloomberg Barclays U.S. Aggr. Bond Index S&P 500 Index MSCI EAFE Index ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Calendar Year-End Returns (%) Class A NAV Class A MOP Bloomberg Barclays U.S. Aggr. Bond Index S&P 500 Index MSCI EAFE Index ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Returns reflect reinvestment of dividends and distributions. Returns shown at net asset value (NAV) would have been lower if a sales charge had been deducted. Class A share returns shown at maximum offering price (MOP) reflect an up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns are shown at NAV and do not include sales charges. Performance for other share classes may differ. 1 Composed of investment-grade U.S. government and corporate bonds, mortgage pass-through securities, and asset-backed securities. 2 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the U.S. stock market. 3 Measures the performance of developed stock markets in Europe, Australasia, and the Far East. 4 Comprised of a single issue purchased at the beginning of the month and held for a full month. Indexes are unmanaged and cannot be invested in directly. Further, they hold no cash and incur no expenses. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. 12

15 Broad Asset-Class Allocations % MC Domestic Equity International Equity Alternatives Fund Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Ashmore PF Emerging Markets Debt 1.5 Pacific Asset Management Pacific Funds Core 6.9 Pacific Funds Floating Rate 2.9 Pacific Funds High 0.7 PIMCO PF Inflation Managed 0.9 PIMCO/Western Asset PF Managed Bond 34.9 T. Rowe Price PF Short Duration Bond 6.4 DOMESTIC EQUITY AB PF Small-Cap 2.1 BlackRock PF 1.1 Boston Partners PF 3.6 ClearBridge PF 8.9 Invesco PF Comstock 3.9 Ivy PF 0.3 Lord Abbett PF Developing 0.2 MFS PF 1.6 Morgan Stanley PF Real Estate 0.5 Oppenheimer PF Main Street Core 4.8 Rothschild Pacific Funds Small-Cap 0.3 Scout PF Equity 1.1 INTERNATIONAL EQUITY JPMorgan PF International 3.1 MFS PF International 3.2 Oppenheimer PF Emerging Markets 4.3 QS Investors PF International Small-Cap 1.1 ALTERNATIVES AQR PF Equity Long/Short 2.1 Eaton Vance PF Global Absolute Return 2.0 UBS AM/MCG PF Currency Strategies 1.8 Total Annual Fund Operating Expenses (%) Gross Net Class A Class C Advisor Class Class R The Fund s annual operating expenses shown above are effective 8/1/17 through 7/31/18. Gross Expense Ratio reflects the total annual operating expenses paid by the Fund. Net Expense Ratio reflects waivers, reductions, reimbursements, and the limitation of certain Other Expenses. Expense caps and/or fee waivers are reevaluated annually. There is no guarantee that the investment adviser will continue to cap expenses after the expiration date. Please see the current prospectus for detailed information. Fund Characteristics Annual Turnover Ratio 1 53% Total Net Assets ($M) 2 $ Calculated as of 3/31/17 fiscal year-end. 2 Net assets of the entire Fund, including all share classes. Total allocation percentages may not equal 100% due to rounding or omissions of holdings of less than 1%. Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at 13

16 PACIFIC FUNDS PORTFOLIO OPTIMIZATION MODERATE MANAGED BY PACIFIC LIFE FUND ADVISORS LLC DECEMBER 31, 2017 POCAX Class A Class C Advisor Class Class R 143 POMCX 343 POMDX 043 POCRX 543 Fund Overview Investment Goal: The Fund seeks long-term growth of capital and low to moderate income. Investment Strategy: The Fund is a fund-of-funds that seeks to achieve its investment goal by investing in other funds of the Trust (underlying funds). Under normal market conditions, the Fund s exposure to the two broad asset classes of debt and equity are expected to be within the following ranges: debt: 30 50% and equity: 50 70%. Within the broad asset classes of debt and equity are narrower asset class categories. The Fund invests in underlying funds to gain exposure to these broad asset classes and narrower asset-class categories. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation/portfolio construction Manager oversight Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA 23 years of investment experience Carleton J. Muench, CFA 19 years of investment experience Max Gokhman, CFA 11 years of investment experience Samuel S. Park 18 years of investment experience of a Hypothetical $10,000 Investment Class A at NAV $25,000 $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Since Fund Inception 12/31/03 Class A NAV Class A MOP S&P 500 Index Bloomberg Barclays U.S. Aggr. Bond Index MSCI EAFE Index ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Calendar Year-End Returns (%) Class A NAV Class A MOP S&P 500 Index Bloomberg Barclays U.S. Aggr. Bond Index MSCI EAFE Index ICE BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Returns reflect reinvestment of dividends and distributions. Returns shown at net asset value (NAV) would have been lower if a sales charge had been deducted. Class A share returns shown at maximum offering price (MOP) reflect an up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns are shown at NAV and do not include sales charges. Performance for other share classes may differ. 1 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the U.S. stock market. 2 Composed of investment-grade U.S. government and corporate bonds, mortgage pass-through securities, and asset-backed securities. 3 Measures the performance of developed stock markets in Europe, Australasia, and the Far East. 4 Comprised of a single issue purchased at the beginning of the month and held for a full month. Indexes are unmanaged and cannot be invested in directly. Further, they hold no cash and incur no expenses. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. 14

17 Broad Asset-Class Allocations % Domestic Equity International Equity Alternatives Fund Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Ashmore PF Emerging Markets Debt 1.0 Pacific Asset Management Pacific Funds Core 3.0 Pacific Funds Floating Rate 1.9 Pacific Funds High 0.2 PIMCO PF Inflation Managed 0.3 PIMCO/Western Asset PF Managed Bond 21.4 T. Rowe Price PF Short Duration Bond 4.6 DOMESTIC EQUITY AB PF Small-Cap 3.3 BlackRock PF 2.4 Boston Partners PF 6.1 ClearBridge PF 12.6 Invesco PF Comstock 5.5 Ivy PF 0.4 Lord Abbett PF Developing 0.3 MFS PF 3.6 Morgan Stanley PF Real Estate 1.0 Oppenheimer PF Main Street Core 8.3 Rothschild Pacific Funds Small-Cap 0.4 Scout PF Equity 2.1 INTERNATIONAL EQUITY JPMorgan PF International 3.9 MFS PF International 4.1 Oppenheimer PF Emerging Markets 6.0 QS Investors PF International Small-Cap 1.1 ALTERNATIVES AQR PF Equity Long/Short 2.0 Eaton Vance PF Global Absolute Return 2.4 UBS AM/MCG PF Currency Strategies 2.2 Total Annual Fund Operating Expenses (%) Gross Net Class A Class C Advisor Class Class R The Fund s annual operating expenses shown above are effective 8/1/17 through 7/31/18. Gross Expense Ratio reflects the total annual operating expenses paid by the Fund. Net Expense Ratio reflects waivers, reductions, reimbursements, and the limitation of certain Other Expenses. Expense caps and/or fee waivers are reevaluated annually. There is no guarantee that the investment adviser will continue to cap expenses after the expiration date. Please see the current prospectus for detailed information. Fund Characteristics Annual Turnover Ratio 1 48% Total Net Assets ($M) 2 $1, Calculated as of 3/31/17 fiscal year-end. 2 Net assets of the entire Fund, including all share classes. Total allocation percentages may not equal 100% due to rounding or omissions of holdings of less than 1%. Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at 15

18 PACIFIC FUNDS PORTFOLIO OPTIMIZATION GROWTH MANAGED BY PACIFIC LIFE FUND ADVISORS LLC DECEMBER 31, 2017 PODAX Class A Class C Advisor Class Class R 144 PODCX 344 PMADX 044 PODRX 544 Fund Overview Investment Goal: The Fund seeks moderately high, long-term capital appreciation with low, current income. Investment Strategy: The Fund is a fund-of-funds that seeks to achieve its investment goal by investing in other funds of the Trust (underlying funds). Under normal market conditions, the Fund s exposure to the two broad asset classes of debt and equity are expected to be within the following ranges: debt: 15 30% and equity: 70 85%. Within the broad asset classes of debt and equity are narrower asset class categories. The Fund invests in underlying funds to gain exposure to these broad asset classes and narrower asset-class categories. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation/portfolio construction Manager oversight Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA 23 years of investment experience of a Hypothetical $10,000 Investment Class A at NAV $25,000 $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Since Fund Inception 12/31/03 Class A NAV Class A MOP S&P 500 Index Bloomberg Barclays U.S. Aggr. Bond Index MSCI EAFE Index Calendar Year-End Returns (%) Class A NAV Class A MOP S&P 500 Index Bloomberg Barclays U.S. Aggr. Bond Index MSCI EAFE Index Returns reflect reinvestment of dividends and distributions. Returns shown at net asset value (NAV) would have been lower if a sales charge had been deducted. Class A share returns shown at maximum offering price (MOP) reflect an up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns are shown at NAV and do not include sales charges. Performance for other share classes may differ. 1 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the U.S. stock market. 2 Composed of investment-grade U.S. government and corporate bonds, mortgage pass-through securities, and asset-backed securities. 3 Measures the performance of developed stock markets in Europe, Australasia, and the Far East. Indexes are unmanaged and cannot be invested in directly. Further, they hold no cash and incur no expenses. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. Carleton J. Muench, CFA 19 years of investment experience Max Gokhman, CFA 11 years of investment experience Samuel S. Park 18 years of investment experience 16

19 Broad Asset-Class Allocations % Domestic Equity International Equity Alternatives Fund Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Ashmore PF Emerging Markets Debt 1.3 Pacific Asset Management Pacific Funds Core 1.6 Pacific Funds Floating Rate 1.9 PIMCO/Western Asset PF Managed Bond 9.1 T. Rowe Price PF Short Duration Bond 1.8 DOMESTIC EQUITY AB PF Small-Cap 3.9 BlackRock PF 3.4 Boston Partners PF 6.3 ClearBridge PF 13.9 Invesco PF Comstock 6.2 Ivy PF 0.5 Lord Abbett PF Developing 0.3 MFS PF 5.1 Morgan Stanley PF Real Estate 1.4 Oppenheimer PF Main Street Core 11.3 Rothschild Pacific Funds Small-Cap 0.4 Scout PF Equity 2.4 INTERNATIONAL EQUITY JPMorgan PF International 7.1 MFS PF International 7.1 Oppenheimer PF Emerging Markets 6.9 QS Investors PF International Small-Cap 1.6 ALTERNATIVES AQR PF Equity Long/Short 2.0 Eaton Vance PF Global Absolute Return 2.4 UBS AM/MCG PF Currency Strategies 2.1 Total Annual Fund Operating Expenses (%) Gross Net Class A Class C Advisor Class Class R The Fund s annual operating expenses shown above are effective 8/1/17 through 7/31/18. Gross Expense Ratio reflects the total annual operating expenses paid by the Fund. Net Expense Ratio reflects waivers, reductions, reimbursements, and the limitation of certain Other Expenses. Expense caps and/or fee waivers are reevaluated annually. There is no guarantee that the investment adviser will continue to cap expenses after the expiration date. Please see the current prospectus for detailed information. Fund Characteristics Annual Turnover Ratio 1 43% Total Net Assets ($M) 2 $1, Calculated as of 3/31/17 fiscal year-end. 2 Net assets of the entire Fund, including all share classes. Total allocation percentages may not equal 100% due to rounding or omissions of holdings of less than 1%. Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at 17

20 PACIFIC FUNDS PORTFOLIO OPTIMIZATION AGGRESSIVE-GROWTH MANAGED BY PACIFIC LIFE FUND ADVISORS LLC DECEMBER 31, 2017 POEAX Class A Class C Advisor Class Class R 145 POCEX 345 POEDX 045 POERX 545 Fund Overview Investment Goal: The Fund seeks high, long-term capital appreciation. Investment Strategy: The Fund is a fund-of-funds that seeks to achieve its investment goal by investing in other funds of the Trust (underlying funds). Under normal market conditions, the Fund s exposure to the two broad asset classes of debt and equity are expected to be within the following ranges: debt: 0 15% and equity: %. Within the broad asset classes of debt and equity are narrower asset class categories. The Fund invests in underlying funds to gain exposure to these broad asset classes and narrower asset-class categories. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation/portfolio construction Manager oversight Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA 23 years of investment experience Carleton J. Muench, CFA 19 years of investment experience of a Hypothetical $10,000 Investment Class A at NAV $25,000 $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Since Fund Inception 12/31/03 Class A NAV Class A MOP S&P 500 Index MSCI EAFE Index Bloomberg Barclays U.S. Aggr. Bond Index Calendar Year-End Returns (%) Class A NAV Class A MOP S&P 500 Index MSCI EAFE Index Bloomberg Barclays U.S. Aggr. Bond Index Returns reflect reinvestment of dividends and distributions. Returns shown at net asset value (NAV) would have been lower if a sales charge had been deducted. Class A share returns shown at maximum offering price (MOP) reflect an up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns are shown at NAV and do not include sales charges. Performance for other share classes may differ. 1 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the U.S. stock market. 2 Measures the performance of developed stock markets in Europe, Australasia, and the Far East. 3 Composed of investment-grade U.S. government and corporate bonds, mortgage pass-through securities, and asset-backed securities. Indexes are unmanaged and cannot be invested in directly. Further, they hold no cash and incur no expenses. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than the original cost. Max Gokhman, CFA 11 years of investment experience Samuel S. Park 18 years of investment experience 18

21 Broad Asset-Class Allocations % Domestic Equity International Equity Alternatives Fund Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Pacific Asset Management Pacific Funds Floating Rate 1.1 PIMCO/Western Asset PF Managed Bond 1.2 DOMESTIC EQUITY AB PF Small-Cap 5.2 BlackRock PF 5.5 Boston Partners PF 6.4 ClearBridge PF 15.8 Invesco PF Comstock 7.1 Ivy PF 0.5 Lord Abbett PF Developing 0.5 MFS PF 8.2 Morgan Stanley PF Real Estate 1.4 Oppenheimer PF Main Street Core 13.2 Rothschild Pacific Funds Small-Cap 0.7 Scout PF Equity 2.6 INTERNATIONAL EQUITY JPMorgan PF International 8.3 MFS PF International 8.4 Oppenheimer PF Emerging Markets 7.1 QS Investors PF International Small-Cap 1.6 ALTERNATIVES AQR PF Equity Long/Short 1.7 Eaton Vance PF Global Absolute Return 1.9 UBS AM/MCG PF Currency Strategies 1.7 Total Annual Fund Operating Expenses (%) Gross Net Class A Class C Advisor Class Class R The Fund s annual operating expenses shown above are effective 8/1/17 through 7/31/18. Gross Expense Ratio reflects the total annual operating expenses paid by the Fund. Net Expense Ratio reflects waivers, reductions, reimbursements, and the limitation of certain Other Expenses. Expense caps and/or fee waivers are reevaluated annually. There is no guarantee that the investment adviser will continue to cap expenses after the expiration date. Please see the current prospectus for detailed information. Fund Characteristics Annual Turnover Ratio 1 41% Total Net Assets ($M) 2 $ Calculated as of 3/31/17 fiscal year-end. 2 Net assets of the entire Fund, including all share classes. Total allocation percentages may not equal 100% due to rounding or omissions of holdings of less than 1%. Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at 19

22 SHARE CLASS OVERVIEW For more details and restrictions regarding sales charges and other information mentioned below, please see the prospectus. Read the prospectus carefully before investing. You can reduce the initial sales charge of Class A shares by taking advantage of breakpoint opportunities as noted on page 22. Reduced Sales Charges Class A Class C Advisor Class Class R Combination privilege Yes N/A N/A N/A Rights of accumulation (ROA) Yes N/A N/A N/A Letter of intent (LOI) Yes N/A N/A N/A Contingent Deferred Sales Charge (CDSC) Waived (if applicable) Class A Class C Advisor Class Class R Death (if the redemption of assets is requested within one year of the date of death or for redemptions from an IRA account, as long as re-registration of assets is made within one year of death) Permanent disability (as defined by Section 72(m)(7) of the Internal Revenue Code) Yes Yes N/A N/A Yes Yes N/A N/A Required minimum distributions (RMDs), only if calculated by Pacific Funds Yes Yes N/A N/A For certain amounts taken through systematic withdrawals Yes Yes N/A N/A Excess contributions from a retirement account Yes Yes N/A N/A Other Features Class A Class C Advisor Class Class R Shares convert to another class N/A N/A N/A N/A Transactions Class A Class C Advisor Class Class R Preauthorized investment programs opened directly with Pacific Funds Minimum $50 per fund per draft (initial fund minimums must be met). N/A N/A Electronic funds transfer (EFT) Purchase or redeem through EFT between a financial institution account and Pacific Funds. N/A N/A Systematic withdrawals Minimum $50 monthly, quarterly, semiannually, or annually ($5,000 minimum account value). Both contingent deferred sales charge (CDSC) and CDSC waivers may apply. Check with your financial advisor about availability and transaction charges. N/A N/A Dollar cost averaging (DCA) There is a minimum of $50 monthly, quarterly, semiannually, or annually within the same account (initial fund minimums must be met) for DCA. N/A N/A Dividends and distributions Automatically reinvest dividends and capital gains distributions into additional shares of other funds within the same account (fund s minimum balance must be met). N/A 20

23 Investment Minimums Class Initial ($) Additions ($) Maximum Initial Sales Charge (%) Maximum CDSC (%) Charges and Fees Annual 12b-1 Fee (%) Annual Non-12b-1 Service Fee (%) Net Expense Ratio (%) A 1, N/A C 1, N/A 2.02 CONSERVATIVE Advisor N/A N/A 0.00 N/A N/A N/A 1.02 MULTI-ASSET PACIFIC FUNDS SM PORTFOLIO OPTIMIZATION MODERATE- CONSERVATIVE MODERATE GROWTH R N/A N/A N/A 1.52 A 1, N/A C 1, N/A 2.06 Advisor N/A N/A 0.00 N/A N/A N/A 1.06 R N/A N/A N/A 1.56 A 1, N/A C 1, N/A 2.11 Advisor N/A N/A 0.00 N/A N/A N/A 1.11 R N/A N/A N/A 1.61 A 1, N/A C 1, N/A 2.16 Advisor N/A N/A 0.00 N/A N/A N/A 1.16 R N/A N/A N/A 1.66 A 1, N/A AGGRESSIVE- GROWTH C 1, N/A 2.19 Advisor N/A N/A 0.00 N/A N/A N/A 1.19 R N/A N/A N/A 1.69 The Funds annual operating expenses shown above are effective 8/1/17 through 7/31/18, and reflect applicable expense reductions, 12b-1 or service fees, advisory fees, and the limitation of certain Other Expenses. Expense caps and/or fee waivers are reevaluated annually. There is no guarantee that the investment adviser will continue to cap expenses after the expiration date. Please see the current prospectus for detailed information. 21

24 SALES CHARGES Class A Investment / Total Account to Date Sales Charge (%) CDSC < 1 Year (%) Less than $50, $50,000 to less than $100, $100,000 to less than $250, $250,000 to less than $500, $500,000 to less than $1 million $1 million and greater Shareholders can pay lower sales charges by reaching higher breakpoints through rights of accumulation or letters of intent. 1 A CDSC may be applied on withdrawals of shares (where a front-end sales charge was not paid) made within one year of purchase. Class C Account Assets CDSC < 1 Year (%) Up to $1 million 1.00 Maximum investment is less than $1 million. Purchase requests greater than the maximum will either be accepted and invested in Class A shares or declined. The CDSC may be applied on withdrawals of shares within one year of purchase. Advisor Class Account Assets CDSC (%) No limit N/A Advisor Class shares are generally only available to certain employer-sponsored retirement, savings, or benefit plans held in plan-level or omnibus accounts and to investors who purchase through a fee-based advisory program offered through a selling group member that enters into a fee-based advisory program agreement with the distributor of the funds. In a fee-based advisory program, a financial intermediary typically charges each investor a single fee based on the value of the investor s account in exchange for providing various services (like management, brokerage, and custody) to that account. 22