LEGAL and DISCLOSURES 

Website data and information as of June 30, 2022.

The information in this website is intended for U.S. institutional investors only. No part of this material may be modified, distributed or duplicated without the explicit permission of Pugh Capital Management.

DISCLOSURES

This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Statements concerning financial market trends are based on current market conditions, which will fluctuate. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

This web site is a publication of Pugh Capital Management, Inc. Nothing in this publication is intended to be relied upon as a forecast, research, constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The contents of this publication are intended for general information purposes only, and investors should evaluate their own situation and ability to invest for the long-term, especially during periods of volatility in the financial markets.

The information contained herein has been obtained from sources that we believe to be reliable, but its accuracy and completeness are not guaranteed and is subject to change. Pugh Capital reserves the right at any time and without notice to change, amend, or cease publication of the information. It has been prepared solely for informative purposes on an “as is” basis. Pugh Capital does not make any warranty or representation regarding the information. Pugh Capital disclaims any and all liability for the information, including without limitation, any express or implied representations or warranties for information or errors contained in, or omissions from, the information. Pugh Capital and its employees and officers shall not be liable for any loss or liability suffered by you resulting from the provision to you of the information or your use or reliance in any way on the information.  No part of this material may be modified, distributed or duplicated in whole or in part without the explicit written permission of Pugh Capital Management.

PERFORMANCE and FEE DISCLOSURES

Past performance is not a guarantee or a reliable indicator of future results. Investing involves risk; principal loss is possible.  Returns for less than one year are not annualized.  All portfolio returns of Pugh Capital Management are based in U.S. dollars and are computed using a time-weighted total rate of return. The total returns include reinvestment of interest and other earnings and include accrued interest. Account returns may be higher or lower than the product composite returns due to differences in portfolio holdings, timing of security transactions, and account inception date.

Gross of fee performance is calculated net of all transaction costs but before investment management fees, and includes accrued interest. Net of fee performance reflects the deduction of actual investment management fees and all transaction costs but does not reflect the deduction of custodial fees. Pugh Capital does not assess performance-based fees.  Fees are disclosed as part of the firm’s Form ADV Part 2A, which is available upon request.

It is not possible to invest directly in an index, and an index does not incur charges or expenses. Holdings in the strategy may differ from the index. The benchmark is provided for comparative purposes to represent the investing environment during the periods shown. 

Pugh Capital manages other investment strategies for clients that had investment returns materially different than the returns presented.

Composite Returns.  Pugh Capital claims compliance with the Global Investment Performance Standards (GIPS®). Pugh Capital has been independently verified for the periods from January 1, 2006 to December 31, 2021 by Absolute Performance Verification LLC. Results are based on all fee-paying, fully discretionary accounts under management, including those that are no longer with the firm.  To receive a GIPs Composite Report, the verification and performance examination reports and additional information regarding policies for calculating and reporting returns, please contact Deanna Hobson, Executive Vice President, Marketing & Client Service, at (206) 322-4985, or write Pugh Capital Management, 520 Pike Street, Suite 2900, Seattle, WA 98101, or info@pughcapital.com. Verification does not provide assurance on the accuracy of any specific performance report. GIPSs is a registered trademark of CFA Institute, which does not endorse or promote Pugh Capital, nor does it warrant the accuracy or content contained herein.

Composite Inclusion Criteria. Each composite includes all fee paying, fully discretionary accounts that invest in the strategy.  Discretion is measured by the ability of Pugh Capital to fully implement its intended strategy. Non-discretionary account examples excluded from composites: accounts with client restrictions that significantly hinder our ability to fully implement our intended strategy (such as tax considerations, significant cash flow requirements, legal constraints or limits on asset allocation, trading activity, or purchase and sale of certain securities); accounts with legacy holdings equal to or greater than 5%; and accounts that require client approval prior to trading. Please refer to the complete composite descriptions in the GIPS Composite Reports.

Cash Flow Policy. Pugh Capital has adopted a significant cash flow policy for composites with five or more portfolios. To qualify as a significant cash flow, the amount must be greater than 20% of the market value of the composite and at least 33% of the market value of the individual portfolio. The portfolio will be removed in the month when the significant cash flow occurs and will be added back into the composite effective the following month or as soon as the portfolio is invested consistent with the intended composite strategy. This policy has been in effect since 2006. A portfolio with large cash flows of 10% or more will be valued on the dates of the cash flows. Performance will be calculated with the pricing as of the business day before each large cash flow date and partial period returns will be calculated for the periods prior to and subsequent to the date. These returns will be linked geometrically to form the monthly return.

Supplemental Performance Return Information is Gross of Fees (such as attribution and excess returns) unless otherwise noted. Please refer to Effect of Management Fees disclosure.

Interim Performance Disclosure. Where requested, performance presented between official quarterly performance periods is preliminary. Net of fees returns are calculated after actual investment management fees, which are assessed and collected on a quarterly basis. During months where management fees are not collected, gross and net returns reflected may be the same. During months where management fees are collected, the net return is understated as it generally represents fees for the full quarter.  Likewise, where other partial periods are reported, fees are not estimated or prorated. Both gross and net of fee performance figures are reflected for official quarterly performance periods. Where reflected, interim period reporting is provided at your request for informational purposes.

Performance Reported as of 4:00 p.m. EST as of March 31, 2021 forward. In mid-January 2021, Bloomberg changed the time at which it strikes closing prices from 3:00 p.m. EST to 4:00 p.m. EST for the Bloomberg Indices. Because our performance is measured against these benchmarks, Pugh Capital moved to reporting performance as of 4:00 p.m. EST (1:00 p.m. EST on early close days) for performance as of March 31, 2021 forward.  All periods prior reflect reporting as of 3:00 p.m. EST.

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RISK DISCLOSURES

Investing in securities involves risk of loss that clients should be prepared to bear.  Securities will fluctuate in value on a daily basis. Pugh Capital does not guarantee market value, investment returns or performance for any securities or strategies.

Investing in fixed income securities comes with certain risks.  For example, idiosyncratic risks may arise from events affecting the issuer of fixed income securities, such as failing to meet its obligations to make payments to its bondholders (default risk), or a downgrade in its credit ratings, may cause a decline or loss in the value of its securities. In addition, participants in the fixed income markets, including Pugh Capital, rely on the accuracy and timeliness of information from issuers of securities, rating agencies, and other public sources of information.  If this information is inaccurate or materially misleading, or if these entities engage in fraud or similar practices that undermine the fairness and efficiency of the capital markets, investments in securities may lose money.

In addition, the market values of fixed income securities are sensitive to prevailing interest rates.  A rise in interest rates generally causes a decline in the value of fixed-income securities (interest rate risk). Expectations of higher inflation generally cause interest rates to rise. Fixed income securities of longer duration are more sensitive to this risk so may experience greater fluctuation in market values as a result.  This risk is more significant for our Long Duration Strategy, Long Credit Strategy, and Long Corporate strategies.

Fixed income securities are also subject to general market risks, meaning a decline in the value of securities due to factors that affect the overall market. It may become difficult to purchase or sell at an advantageous time or price (liquidity risk) under adverse market or economic conditions independent of any specific adverse change in the conditions of a particular issuer.  Liquidity risk has increased in recent years with the reduction in dealer market-making capacity. Market risks include, but are not limited to, government actions, regulatory environment, and economic conditions.  Fixed income securities are also subject to risks that may only affect a sector of the market, if they fall within the sector.

Mortgage-related and other asset-backed securities are subject to certain additional risks.  Generally, rising interest rates tend to extend the duration of fixed-rate mortgage-related securities, making them more sensitive to changes in interest rates (extension risk). When interest rates decline, borrowers may pay off borrowers may pay off mortgages sooner than expected, and investors may have to reinvest at lower interest rates (prepayment risk).  Certain types of asset-backed securities may also be subject to prepayment risk, as well as additional risks associated with the nature of the assets and the servicing of those assets.

There is also a risk that Pugh Capital’s investment style may underperform other investment styles or the overall market.

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INVESTMENT PROCESS DISCLOSURES

Analyst Research Report.  The report contained herein is for informational purpose only to demonstrate Pugh Capital’s credit analysis and selection process. It should not be considered as investment advice or a recommendation of any particular security. The report contains the current opinions of the analyst when the report was written and such opinions are subject to change without notice. Such reports are for internal use only at Pugh Capital.

Attribution Analysis.  The attribution analysis contained herein is calculated by Pugh Capital and is intended to provide an estimate as to which elements of a strategy contributed (positively or negatively to a portfolio’s performance. Attribution analysis is not a precise measure and should not be relied upon for investment decisions.  Attribution analysis is based on gross of fees performance data; please refer to the Effect of Management Fees disclosure in performance disclosures.

Charts and Graphs. No graph, chart, formula, or other device can by itself determine whether to buy or sell a security. Performance results for certain charts and graphs may be limited by date ranges specified on those charts and graphs; different time periods may produce different results.

Forecasts and Estimates.  Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be interpreted as investment advice, as an offer or solicitation, nor as the purchase or sale of any financial instrument. Forecasts and estimates have certain inherent limitations, and unlike an actual performance record, do not reflect actual trading, liquidity constraints, fees and/or other costs. In addition, references to future results should not be construed as an estimate or promise of results that a client portfolio may achieve.

Investment Adviser. Pugh Capital Management is a registered investment adviser.  Registration of an investment adviser does not imply any level of skill or training.

Investment Strategies and Processes. There is no guarantee that these investment strategies and processes will work under all market conditions and each investor should evaluate their ability to invest for a long-term, especially during periods of downturn in the market.

Issuers and Securities. References to specific securities and their issuers are for illustrative purposes only and are not intended, and should not be interpreted, as recommendations to purchase or sell such securities. Pugh Capital may or may not own the securities referenced and, if such securities are owned, no representation is being made that such securities will continue to be held.

Opinions. This material contains the current opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Statements concerning financial market trends are based on current market conditions, which will fluctuate.

Outlook. Statements concerning financial market trends are based on information available and current market conditions, which will fluctuate. There is no guarantee that these investment strategies will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice.

Portfolio Manager Scenarios. No representation is being made that any account, product, or strategy will or is likely to achieve profits, losses or results similar to those shown. Scenario analysis of performance results has several inherent limitations. Unlike an actual performance record, simulated results do not represent actual performance and are generally prepared with the benefit of hindsight. There are frequently sharp differences between simulated performance results and the actual results subsequently achieved by a particular account, product, or strategy. In addition, since trades have not actually been executed, simulated results cannot account for the impact of certain market risks such as lack of liquidity. There are numerous other factors related to the markets in general or the implementation of any specific investment strategy, which cannot be fully accounted for in the preparation of simulated results and all of which can adversely affect actual results.

Portfolio Structure/Allocation. Portfolio structure/allocation is subject to change without notice and may not be representative of current or future allocations.

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PROFESSIONAL DESIGNATIONS

ASA – Associate of the Society of Actuaries.  To attain the ASA designation, a candidate must successfully complete educational requirements in several categories as specified by the Society of Actuaries (SOA), the world’s largest actuarial professional organization. Requirements include an application process, examinations, an e-Learning course, a proctored project assessment, validation of educational experiences outside the SOA Education system (VEE), and a professionalism seminar.

CFA® – Chartered Financial Analyst®. The charter is a globally respected, graduate-level investment credential established in 1962 and awarded by the CFA institute – the largest global association of investment professionals. To earn the CFA charter, candidates must 1) pass three sequential, six-hour examinations, 2) have at least four years of qualified professional experience; 3) join CFA institute as members; and 4) commit to abide by, and annual reaffirm, their adherence to the CFA institute Code of Ethics and Standards of Professional Conduct. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

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AWARDS and RANKINGS DISCLOSURES

Third party rankings and recognition from rating services or publications are not a guarantee or reliable indicator of future investment success. Working with a highly rated adviser does not ensure that a client or prospective client will experience a higher level of performance or results. These ratings should not be construed as an endorsement of the firm by any client nor are they representative of any one client’s evaluation. Generally, ratings, rankings and recognition are based exclusively on information prepared and/or submitted by the recognized firm. Rankings based on AUM, where indicated, do not reflect an assessment of investment performance or services. 

eVestment Alliance. eVestment is a third-party, global provider of institutional investment data intelligence and analytics solutions. eVestment universes are based on a set of criteria which includes qualitative and quantitative factors to create and maintain a comparative peer group. Peer  ranking information pulled based on gross of fee returns. eVestment and its affiliated entities (collectively, “eVestment”) collect information directly from investment management firms and other sources believed to be reliable; however, eVestment does not guarantee or warrant the accuracy, timeliness, or completeness of the information provided and is not responsible for any errors or omissions. Rankings may vary significantly as additional data from managers is reported. eVestment  results are not indications of an adviser’s future performance. Performance results may be provided with additional disclosures available on eVestment’s systems and other important considerations such as fees that may be applicable. Not for general distribution. All categories not necessarily included; totals may not equal 100%. Copyright 2022 eVestment, LLC. All Rights Reserved.

CEO of The Year Award 2016 – February 2016 Issue. This award does not assess or reflect on the quality of investment management or services provided. The Seattle Business Magazine’s Executive Excellence Awards program recognizes WA executives demonstrating extraordinary leadership guiding companies/nonprofits to success. There was 1 winner in each of the 5 categories from a list of 85 nominees. Criteria: length of time in leadership position, growth of company under leadership, notable milestones/projects led, etc. Judges: Jeffrey Seely Founder former CEO, ShareBuilder Corp; John Oppenheimer, founder/CEO,Columbia Hospitality; JonFine, President/CEO, United Way King County; Joseph M. Phillips, Dean, Albers School of Business and Economics, Seattle University; Phyllis Campbell, Chair, JP Morgan Chase & Co., Pacific Northwest; Stanley B. McCammon, President/CEO, Joshua Green Corp. No existing Pugh Capital client was part of the nomination or selection process. This award is not an endorsement of any Pugh Capital strategy or its performance. Pugh Capital is not a subscriber of Seattle Business Magazine, did not pay any fees to the magazine, its organizers, or any third party to be nominated or selected for this award. For more information, please refer to the February 2016 issue of Seattle Business Magazine and contact Seattle Business Magazine at 206.284.1750.

Pension & Investments Best Places to Work 2018, 2019, 2020 & 2021. This award does not assess or reflect on the quality of investment management services provided. The Pensions & Investments Best Places to Work in Money Management is a national program managed by Best Companies Group, an independent research firm. Participating workplaces are ranked based on an analysis of an employer benefits and policies questionnaire and an employee engagement and satisfaction survey. A minimum of 20 employees is required to participate. No fee is required to participate in the survey; optional purchases include an employee feedback report, a logo for promotional use, and a featured employer advertisement. Pugh Capital is a subscriber of Pensions & Investments Magazine. No Pugh Capital client was part of the selection process. This distinction is not an endorsement of any Pugh Capital strategy of its performance. Recipients are determined the December prior to the years listed above.. For more information and a complete listing of the winners, please refer the December Pensions & Investments online magazine publication or call the Best Companies Group at 877-455-2159.

Federal Reserve Bank of San Francisco Fed Family Distinguished Service Award, awarded to Mary Pugh in 2018. This award does not pertain to the services provided by Pugh Capital and is not reflective of  the quality of investment management or services provided.

Seattle Storm Inspiring Women Award, awarded to Mary Pugh in 2017. This award does not pertain to the services provided by Pugh Capital and does not assess or reflect on the quality of investment management services provided.

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CLIENT REFERENCES DISCLOSURE

No portion of any content is to be interpreted as a testimonial or endorsement of Pugh Capital Management’s services and it is not known whether any clients referenced in listing of clients approve of Pugh Capital Management or its services, nor should it be assumed that any references to Pugh Capital client experiences are representative of all client experiences.

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SOURCE DISCLOSURES

Unless otherwise stated, the source of information is Pugh Capital Management.

Third Party Sources. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Investors should be aware of the risks associated with data sources and quantitative processes used in our investment management process. Errors may exist in data acquired from third party vendors, the construction of model portfolios, and in coding related to the index and portfolio construction process.  While Pugh Capital takes steps to identify data and process errors so as to minimize the potential impact of such errors on index and portfolio performance, we cannot guarantee that such errors will not occur.

This document is intended for U.S. institutional investors only. No part of this material may be modified, distributed or duplicated without the explicit permission of Pugh Capital Management.

INDEX DESCRIPTIONS

Bloomberg U.S. Aggregate Bond Index, valued in U.S. dollars, is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate pass-throughs), ABS and CMBS (agency and non-agency).

Bloomberg U.S. Corporate Index is a broad-based benchmark that measures the investment grade, fixed-rate, taxable, corporate bond market. It includes US Dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility, and financial issuers that meet specified maturity, liquidity, and quality requirements. Securities in the index roll up to the U.S. Credit and U.S. Aggregate Indices. The index breaks down to industry-level components, such as banking, Insurance, retailers, automotive, pharmaceuticals, telecommunications, energy, etc. Represents the total return measure of the corporates portion of the US Aggregate index.

Bloomberg U.S. Credit Bond Index measures the investment grade, U.S. dollar-denominated, fixed-rate, taxable corporate and government-related bond markets.  It is composed of the U.S. Corporate Index and a non-corporate component that includes non-U.S. agencies, sovereigns, supranationals and local authorities.  Securities must be rated investment grade and have $300 million par amount outstanding.  The U.S. Credit Index was called the U.S. Corporate Index until July 2000, when it was renamed to reflect its inclusion of both corporate and non-corporate issuers.  The U.S. Credit Index is a subset of the U.S. Government/Credit Index and U.S. Aggregate Index.

Bloomberg U.S. Long Corporate Bond Index, valued in U.S. dollars, measures the investment grade, fixed-rate, taxable corporate bond market whose maturity is 10 years or longer. It includes USD denominated securities publicly issued by US and non-US industrial, utility and financial issuers.

Bloomberg U.S. Long Government/Credit Bond Index, valued in US dollars, is a broad-based flagship benchmark that measures the non-securitized component of the US Aggregate Index with 10 or more years to maturity. The index includes investment grade, US dollar-denominated, fixed-rate treasuries, government-related and corporate securities.

Bloomberg US Mortgage-Backed Securities (MBS) Index – tracks fixed-rate agency mortgage-backed pass-through securities guaranteed by Ginnie Mae (GNMA), Fannie Mae (FNMA, and Freddie Mac (FHLMC).  The index is constructed by grouping individual TBA-deliverable MBS pools into aggregates or generics-based on program, coupon and vintage.

Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg does not approve or endorse this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

Citibank Economic Surprise Index: This measures data releases relative to the consensus of analysts’ expectations. The Index covers mostly activity indicators. The neutral level of the indices is zero. A positive reading means that economic data has been better than expected.

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas.

Long Credit Custom Index. The benchmark for this composite is a custom index of the weighted average of the Bloomberg US Long Credit Index (75%) and the Bloomberg US Long Government Index (25%), rebalanced monthly. The Bloomberg US Long Credit Index (75%) measures the performance of investment grade, US dollar-denominated, fixed-rate, taxable corporate and government-related debt with at least ten years to maturity. It is composed of a corporate and a non-corporate component that includes non-US agencies, sovereigns, supranationals and local authorities. The Bloomberg US Long Government Bond Index (25%) is comprised of the Long US Treasury and US Agency Indices. The index includes US dollar-denominated, fixed-rate, nominal US Treasuries and US agency debentures with 10 or more years to maturity.

The returns for this custom benchmark are calculated using the underlying monthly index return components of 75% Bloomberg US Long Credit Index and 25% Bloomberg US Government Long Bond Index which are linked together to form annual returns.

S&P 500 Index. This unmanaged index is generally considered representative of the stock market as a whole. The index focuses on the Large-Cap segment of the US equities market. S&P is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”), a subsidiary of The McGraw Hill Companies, Inc.

GLOSSARY

ABS: Asset Backed Securities. ABS bonds are securities created from car loan payments, credit card payments or other loans. As with mortgage-backed securities, receivables and loans are bundled together and packaged into securities that are sold to investors. Asset-backed securities are usually “tranched,” meaning that principal and interest are directed to specific classes in a predetermined order. ABS contain risks, including credit risk and cash flow timing uncertainty.

Alpha: The extra return due to nonmarket factors. This risk-adjusted factor takes into account both the performance of the market as a whole and the volatility of the manager’s performance. A positive alpha indicates that a manager has produced returns above the expected amount at that risk level, and vice versa for a negative alpha.

Average Life: The length of time the principal of a debt issue is expected to be outstanding. Average life is an average period before a debt is repaid through amortization or sinking fund payments.

Average (Credit) Quality: The weighted average of all the bond credit ratings in a bond portfolio.

BABs: Build America Bonds. These bonds are taxable municipal bonds that feature tax credits and/or federal subsidies for bondholders and state and local government bond issuers.

Batting Average: A measure of the frequency of success. This ratio is calculated by taking the number of periods in which the manager’s return equals or outperforms the return of the selected benchmark, divided by the total number of periods. This measure indicates a manager’s frequency of success, without regard to the degree of outperformance.

Beta: Is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns. Also known as “beta coefficient.“

bps: basis points. A basis point is a unit equal to one hundredth of a percentage point (1/10000 or 0.01%).

Bullet bonds. A bullet bond is a debt instrument whose entire principal value is paid in one lump sum on the maturity date, as opposed to amortizing the bond over its lifetime.

CMBS: Commercial Mortgage Backed Securities. CMBS bonds are backed by mortgages on commercial rather than residential real estate.

Core PCE: US Personal Consumption Expenditure Core Price Index YoY. Source: Bureau of Economic Analysis.

Convexity: A measure of the curvature in the relationship between bond prices and bond yields that demonstrates how the duration of a bond changes as the interest rate changes.

CBO: Congressional Budget Office.  It is a federal agency within the legislative branch of the U.S. Government that provides budget and economic information to Congress.

CPI: Consumer Price Index. It is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.

Credit Index Excess Return: A monthly excess return is the difference between total returns of the security and an implied Treasury portfolio matching the term-structure profile of that security. Total returns can be compounded. By separately compounding these two series of monthly total returns, we arrive at the two periodic total returns. The difference between them is the periodic excess return.

Credit Risk: Risk of loss of principal or loss of a financial reward stemming from a borrower’s failure to repay a loan or otherwise meet a contractual obligation.

Duration Times Spread (DTS): DTS is calculated on an individual bond level by multiplying the percent market value, the duration, and the spread of the bond. It has been shown to be a very strong predictor of excess return volatility.

Duration Risk: The risk of a fixed-income investment’s price sensitivity to a change in interest rates.

Earnings per share (EPS): is the portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability.

Effective Duration: A calculation used to approximate the actual, modified duration of a callable bond.

European Central Bank (ECB): is the central bank for the euro and administers monetary policy of the Eurozone, which consists of 19 European Union member states and is one of the largest currency areas in the world.

European Union (EU): is a political and economic union of 28 member states that are located primarily in Europe.

Global Financial Crisis (GFC): The financial crisis of 2007–2008, caused by the bursting of the U.S. Housing bubble which peaked in 2006/2007.

Federal Open Market Committee (FOMC):  A committee within the Federal Reserve System, is charged under the United States law with overseeing the nations open market operations.  They make key decisions about interest rates and the growth of the United States money supply.

Gross Domestic Product (GDP): is a monetary measure of the market value of all the final goods and services produced in a period of time, often annually or quarterly. Nominal GDP estimates are commonly used to determine the economic performance of a whole country or region.

High Yield: a high-paying bond with a lower credit rating than Investment-grade corporate bonds, treasuries, and municipal bonds. High yield securities with lower credit ratings involve greater risk than higher-rated securities.

Investment Grade or High Grade: a bond credit rating (BBB- or higher by standard market convention) that indicates a relatively low risk of default.

Information Ratio: A ratio of portfolio returns above the returns of a benchmark (usually an index) to the volatility of those returns. The information ratio (IR) measures a portfolio manager’s ability to generate excess returns relative to a benchmark, but also attempts to identify the consistency of the investor. This ratio will identify if a manager has beaten the benchmark by a lot in a few months or a little every month. The higher the IR the more consistent a manager is and consistency is an ideal trait.

Non-farm Payrolls: measures the change in the number of people employed during the previous month, excluding the farming industry. Job creation is the foremost indicator of consumer spending, which accounts for the majority of economic activity.

Option Adjusted Spread (OAS): A measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option. Typically, an analyst would use the Treasury securities yield for the risk-free rate.

Risk on is defined as periods when credit excess returns are positive.  Risk off is defined as periods when credit excess returns are negative.

Z-Score:  Is a statistical measurement of a score’s relationship to the mean in a group of scores. A Z-score of 0 means the score is the same as the mean. A Z-score can also be positive or negative, indicating whether it is above or below the mean and by how many standard deviations.

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This document is intended for U.S. institutional investors only. No part of this material may be modified, distributed or duplicated without the explicit permission of Pugh Capital Management.