QUARTERLY PORTFOLIO REVIEW

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Gertrude Lambert
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1 QUARTERLY PORTFOLIO REVIEW Quarter 2016 PAYDEN.COM LOS ANGELES BOSTON LONDON PARIS

2 LETTER FROM THE CEO Jauary 2017 Dear Cliet, As we look back o the past year, we ote that global fiacial markets repeatedly made the leap from ucertaity to certaity, each time as if they kew what would happe ext. It remids us of a quote from Sir Wisto Churchill Fate holds terrible forfeits for those who gamble o certaities. The outlook i Jauary of 2016, ad subsequet market movemets, idicated a cotiuig tred toward lower iterest rates ad ucertaity over the actual growth of the US ad other major global ecoomies. These treds cotiued durig the first half of this year, as global iterest rates cotiued to fall sharply, with egative rates i Germay ad Japa. I the US, the Federal Reserve Board cotiued to be cautious about lower iflatio rates ad therefore took o actio o icreasig the Federal Fuds rate at that time. Our view was slightly differet, as our assessmet of the US ecoomy i the secod quarter was positive. Wage growth seemed to be o track, ad we were lookig for higher iflatio rates i the 2% to 2½% rage. These treds forecasted a icrease i the Federal Fuds rate i the secod half of the year. The first surprise came with the Brexit vote ad the subsequet assessmets of what might happe over the ear to itermediate term. The secod surprise was the electio of Doald Trump as the 45th Presidet of the Uited States. It is difficult at this time to assess the impact of these evets o the global ecoomy, but oe thig that we feel strogly about is diversificatio ad liquidity i maagig portfolios. As 2017 begis, we remai positive o US ecoomic ad wage growth ad we believe this will support a cotiued positive tred i corporate earigs across the board. We are aticipatig a modest icrease i shortterm iterest rates i lie with the positive outlook for the US ecoomy. Our approach globally is somewhat more cautious, ad the ucertaities that exist will take at least 12 to 18 moths to work themselves out. Our very best wishes for health ad happiess i 2017! Sicerely, Joa A. Payde Presidet & CEO

3 FLORIDA TRUST SHORT-TERM BOND FUND 1300 EMW LAM Portfolio Review ad Market Update - 4th Quarter 2016 PORTFOLIO CHARACTERISTICS (As of 12/31/2016) Portfolio Market Value Weighted Average Credit Quality Weighted Average Duratio SEC 30-Day Yield (et) $967.2 millio AAA 1.45 years 1.12% SECTOR ALLOCATION DURATION DISTRIBUTION 28% 45% 24% 40% 20% 35% 16% 30% 12% 25% 8% 20% 4% 15% 0% Credit Asset-Backed Treasuries Gov't Related Agecies Yakee CD Muicipal Mortgage-Backed 10% 5% 0% Years PORTFOLIO RETURNS - Periods Edig 12/31/2016 4th Quarter 2016 Trailig 3 Yrs Trailig 5 Yrs Sice Iceptio (1/1/92) SHORT-TERM BOND FUND (gross) -0.17% 1.36% 0.96% 1.17% 3.98% SHORT-TERM BOND FUND (NAV) -0.21% 1.10% 0.72% 0.90% 3.64% BAML 1-3 Year US Treasury Idex* -0.43% 0.88% 0.68% 0.57% 3.53% Periods over oe year aualized * Taxable moey market fuds average prior to 02/2000. Payde & Rygel 265 Frakli Street Bosto, Massachusetts (617)

Portfolio Review ad Market Update - 4th Quarter 2016 MARKET THEMES A year of surprises came to a ed with the oe thig everyoe expected, a rate hike by the Federal Reserve.

4 Portfolio Review ad Market Update - 4th Quarter 2016 MARKET THEMES A year of surprises came to a ed with the oe thig everyoe expected, a rate hike by the Federal Reserve. The electio of Doald Trump ad Republica cotrol of both chambers of the US Cogress led to icreased iflatio expectatios amid prospects for fiscal stimulus uder the ew Admiistratio. This drove iterest rates ad US equity prices higher. Credit-related securities posted positive excess returs as improvig ecoomic data ad the prospect of lower corporate tax rates motivated ivestors to embrace risk despite risig iterest rates. STRATEGY The portfolio holds a diversified mix of credit sectors for icome geeratio. Corporate bod yield premiums remai attractive, ad we expect to maitai our exposure through the purchase of bods i the ew issue market. We maitaied our allocatio to high-quality asset-backed ad mortgage-backed securities (ABS/MBS) with short duratio profiles for their yield ad diversificatio beefits. INTEREST RATES Treasury yields were sigificatly higher across all maturities with the two-year maturity risig 0.43% to ed the year at 1.19%. The US Treasury curve steepeed with the yield differece betwee oe- ad two-year maturities icreasig to 0.38%. The portfolio s defesive duratio positioig was beeficial to performace as iterest rates moved higher. Floatig-rate credit ad securitized holdigs cotributed to outperformace as prices moved miimally. SECTORS The mix of fixed ad floatig-rate credit securities was additive to outperformace. Yield premiums betwee credit ad govermet securities were uchaged. High-quality ABS cotiued to add positively to performace while providig reivestmet opportuities. The MBS allocatio was modestly additive to performace as floatig-rate exposure beefited from yields resettig at higher rates. Payde & Rygel 265 Frakli Street Bosto, Massachusetts (617)

5 MARKET PERSPECTIVE The Year i Review Through the Eyes of the Bod Market: A Tale of Two Halves The tale of 2016 is really a tale of two halves. The govermet bod markets i the US, Germay, Japa ad the UK tell the story best. Durig the first half of the year, all four coutries saw their govermet bod yields fall. After the price of crude oil fell to $26/ barrel i February fears of a US ad global recessio took over. Fallig oil prices also reewed fears of fallig cosumer prices (deflatio). Cetral baks i Europe ad Japa eacted additioal quatitative easig ad egative iterest rate policy to combat low iflatio, but bod yields fell further. The Japaese te-year govermet bod yield dropped below zero i early 2016, ad the Germa te-year followed Japa s lead, movig egative durig the summer. But durig the summer of 2016 iterest rates pivoted. The shock Brexit vote seemed to be a key, cathartic momet for the year. While ucertaity origially moved yields lower, resiliece i the UK calmed ivestor fears. After bottomig i early July, US Treasury yields rose steadily util late November as ivestors bega aticipatig a Federal Reserve iterest rate hike. Yields the moved sharply higher with the electio of Doald Trump as the ext US Presidet. The rest of the world s bod yields followed suit to varyig degrees. By year-ed, all bod yields had moved off their summer lows. As moetary policy diverges, the most otable chage is the differetial betwee US ad Germa yields. The te-year yield differetial is at the widest level sice the fall of the Berli Wall. Te-Year Govermet Bod Yields i 2016 Divergece betwee US, UK, Europea & Japaese yields reflect differeces i growth ad iflatio treds 3 US Japa UK Germay Crude oil bottoms at $26/barrel, recessio fears mout US electio Oil at $54/barrel, summer 2015 levels Yield (%) Brexit vote 0 Japa's 10-year yields fall egative for the first time -0.5 Ja Feb Mar Apr May Ju Jul Aug Sep Oct Nov Dec Sources: Bloomberg

6 OVER 30 YEARS OF INSPIRING CONFIDENCE WITH AN UNWAVERING COMMITMENT TO OUR CLIENTS NEEDS. LOS ANGELES BOSTON LONDON PARIS PAYDEN.COM US DOMICILED MUTUAL FUNDS CASH BALANCE Payde/Kravitz Cash Balace Pla Fud EQUITY Equity Icome Fud GLOBAL FIXED INCOME Emergig Markets Bod Fud Emergig Markets Corporate Bod Fud Emergig Markets Local Bod Fud Global Fixed Icome Fud Global Low Duratio Fud TAX-EXEMPT FIXED INCOME Califoria Muicipal Icome Fud US FIXED INCOME Absolute Retur Bod Fud Cash Reserves Moey Market Fud Core Bod Fud Corporate Bod Fud Floatig Rate Fud GNMA Fud High Icome Fud Limited Maturity Fud Low Duratio Fud Strategic Icome Fud US Govermet Fud DUBLIN DOMICILED UCITS FUNDS EQUITY World Equity Fud FIXED INCOME Absolute Retur Bod Fud Global Emergig Markets Bod Fud Global Emergig Markets Corporate Bod Fud Global Govermet Bod Idex Fud Global High Yield Bod Fud Global Iflatio-Liked Bod Fud Global Bod Fud Global Short Bod Fud Sterlig Corporate Bod Fud Ivestmet Grade US Core Bod Fud USD Low Duratio Credit Fud LIQUIDITY FUNDS Euro Liquidity Fud Sterlig Reserve Fud US Dollar Liquidity Fud For more iformatio about Payde & Rygel, cotact us at a locatio listed below. LOS ANGELES 333 South Grad Aveue Los Ageles, Califoria BOSTON 265 Frakli Street Bosto, Massachusetts LONDON 1 Bartholmew Lae Lodo EC2N 2AX Uited Kigdom + 44 (0) PARIS Represetative Office 54, 56 Aveue Hoche Paris, Frace

QUARTERLY PORTFOLIO REVIEW

QUARTERLY PORTFOLIO REVIEW Quarter 2015 PAYDEN.COM LOS ANGELES BOSTON LONDON PARIS LETTER FROM THE CEO Jauary 2016 Dear Cliet, As ivestmet maagers, we evaluate future treds i the ecoomy ad traslate them