1st Quarter 2020 - docs.aamlive.com · the square root of variance by determining the variation...

Managed Accounts

Core Plus Strategy2nd Quarter 2020

Agenda2

Company Overview

Appendix

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Firm Overview

Core Plus Strategy*

Appendix

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2

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*A separate and distinct strategy, Core Plus Bond, is available to financial advisors using the Envestnet platform. The Core Plus Bond Strategy does

not utilize alternative income producing assets, but is based on the same dynamic, value-oriented approach to investing as the Core Plus Strategy.

Firm Overview

Fixed Income

Structured Products

Managed AccountsAn array of managed account solutions with investment

expertise provided by both in-house management teams and

by partnering with select boutique institutional managers.

Exchange-Traded Funds

Mutual Funds

Unit Investment Trusts

$27.4 billion in assets.*

*As of March 31, 2020. Assets under supervision represent $5.2 billion in UIT assets. The firm has $19.8 billion in assets under administration that

represents the non-proprietary assets for which AAM provides various levels of service, but not management. The firm’s $2.4 billion in assets

under management represents AAM's proprietary separately managed account, mutual fund and ETF assets.

A Trusted Resource for Financial Advisors

AAM provides and distributes investment solutions to all

major wirehouses and large regional firms. Advisors Asset Management, Inc. (AAM) provides a wide

array of financial tools, leading technologies and industry

expertise. We offer investment solutions for varying market

conditions and investor objectives.

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Firm Overview4

AAM maintains 11 offices throughout the U.S.

San Diego, CA

Monument, COChicago, IL

Lisle, IL

Wichita, KA

Princeton, NJ

Boca Raton, FL

Charlotte, NC

Manhattan, NY

Melville, NY

Boerne, TX

Firm Overview5

Company Milestones

Firm Overview6

AAM’s Managed Account Value Proposition

40+ years of EXPERIENCE providing investment solutions

As dedicated today as when we were founded in 1979 to providingCOMPLETE, TAILORED PORTFOLIO SOLUTIONS for financial professionals and their clients

Leverage our EXPERTISE to create and manage portfolios focusedon income generation, particularly in volatile markets

DIRECT ACCESS to our team of investment professionals coupled with expert guidance and PERSONALIZED customer service

• AAM’s Core Plus Strategy is an unconstrained strategy that seeks above-average income by

investing in traditional debt instruments and/or alternative income producing assets**.

• AAM has relationships with 10 of the largest underwriters of the fixed income market, giving us

institutional-type access to nearly every new issue offering, bid wanted liquidity and better pricing

on institutional offerings.

• AAM’s investment tools and size enables us to customize individual portfolios.

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* A separate and distinct strategy, Core Plus Bond, is available to financial advisors using the Envestnet platform. The Core Plus Bond Strategy does not utilize alternative income producing assets, but is based on the same dynamic, value-oriented approach to investing as the Core Plus Strategy. Statistics shown are calculated using Core Plus Strategy composite portfolio.

** Alternative income producing assets include but are not limited to traditional Equities, Business Development Companies (BDCs), Real Estate Investment Trusts (REITs), Exchange Traded Funds (ETFs), Master Limited Partnerships (MLPs) and Closed End Funds (CEFs) that offer a compelling value and a high level of income.

Ratings may not be representative of any one client’s experience because the ratings reflect an average or sample of multiple client accounts. The results and portfolios for individual accounts may vary. Investment returns and principal value will fluctuate and there can be no assurance that any strategy’s objective will be achieved. See the ADV for Advisors Asset Management, Inc. and enclosed strategy fact card for more information about the firm, fees, strategies and related risks. Additional information may be required to make an informed investment decision.

©2020 Morningstar. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

The Morningstar Rating for separate accounts, commonly called the star rating, is a measure of a separate account’s risk-adjusted return, relative to other separate accounts in the same Morningstar Category. Separate accounts are rated from 1 to 5 stars, with the best performers receiving 5 stars and the worst performers receiving 1 star. Separate accounts are rated for up to three periods (three, five, and 10 years), and ratings are recalculated each quarter. The Morningstar Rating for separate accounts uses an enhanced risk-adjusted return measure, which accounts for all variations in a separate account’s monthly performance, with more emphasis on downward variation. Separate accounts are ranked against others in the same category and stars are assigned as follows: Top 10% 5 stars, Next 22.5% 4 stars, Middle 35% 3 stars, Next 22.5% 2 stars, Bottom 10% 1 star.

Fees for separate accounts can vary widely and are negotiated between the asset manager, the separate account program sponsor or advisor, and the investor. Morningstar has chosen to employ the AIMR-approved standard of gross-of-fees performance (before fees have been taken out) to compare separate accounts. Net-of-fees calculations often deduct the highest theoretical fees that an investor may pay. The Morningstar Rating uses an enhanced risk-adjusted return measure based on “expected utility theory,” which accounts for all variations in a separate account’s monthly performance, with more emphasis on downward variation. Morningstar will not calculate ratings for categories or time periods that contain fewer than five separate accounts. Each investor in the same separate account can experience slightly different total returns, because investors have different account preferences and restrictions. Therefore, all separate account performance data is reported to Morningstar as a “composite” of similarly managed portfolios.

Strategy HighlightsCore Plus*

Overall Morningstar RatingTM out of

178 strategies in the Allocation – 15%

to 30% Equity category based on risk-

adjusted returns as of 6/30/20

3-Year 5-Year 10-Year Overall

Morningstar Rating

as of 6/30/20

# Portfolios in Universe 178 141 76 178

All investing involves risk; loss of principal is possible. Past performance and these ratings are not indicative of future results.

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Important Details as of June 30, 2020

*A separate and distinct strategy, Core Plus Bond, is available to financial advisors using the Envestnet platform. The Core Plus Bond Strategy does not utilize alternative income producing assets, but is based on the same

dynamic, value-oriented approach to investing as the Core Plus Strategy. Statistics shown are calculated using Core Plus Strategy composite portfolio. Past performance does not guarantee future results. See

enclosed strategy profile for additional information about the firm, fees, strategies and related risks.

** Alternative income producing assets include but are not limited to traditional Equities, Business Development Companies (BDCs), Real Estate Investment Trusts (REITs), Exchange-Traded Funds (ETFs), Master Limited

Partnerships (MLPs) and Closed End Funds (CEFs) that offer a compelling value and a high level of income.

Duration is a measure of the sensitivity of the price of a fixed-income investment to a change in interest rates expressed as a number of years. Duration is the approximate percentage change in price for a 100 basis point

change in rates. The longer the duration, the more sensitive to shifts in interest rates. Modified duration is the approximate percentage change in a bond’s price for a 100 basis points change in yield, assuming that the bond’s

expected cash flow does not change when the yield changes. Yield to Worst (YTW) is the lowest potential yield that can be received on a bond without the issuer actually defaulting. The YTW is calculated by making worst-case

scenario assumptions on the issues by calculating the return that would be received if the issuer uses provisions, including prepayments, calls or sinking funds. Standard Deviation is a measure of the dispersion of a set of data

from its mean. In finance, standard deviation is a statistical measurement; when applied to the annual rate of return of an investment, it sheds light on the historical volatility of that investment. Standard deviation is calculated as

the square root of variance by determining the variation between each data point relative to the mean. Weighted Average Coupon is calculated by weighting the coupon of each bond by its relative size in the portfolio.

Coupons are fixed percentages paid out on a fixed-income security on an annual basis.

Strategy Highlights

Strategy AUM $146.5 million

Inception Date 7/1/2003

BenchmarkBloomberg Barclays US Aggregate

Bond Index

Core Plus*

Fixed Income Segment of

the Core Plus CompositeBenchmark

Average Modified Duration (years) 3.44 6.04

Average Yield-to-Worst (%) 2.95 1.25

Assuming everything gets called away

Average Coupon (%) 5.37 3.03

Composite / benchmark information as of the above date:

Core Plus Composite Benchmark

Average Standard Deviation (5 years - %) 11.90 3.08

% Core Plus

Composite

Alternative Income Producing Securities** 32.7

Fixed Income 64.6

Cash & Equivalents 2.6

9Core Plus* Investment Process

Alternative income producing securities

will typically:

• Have the potential to increase portfolio cash

flow through income payments

• Diversify holdings among targeted asset classes

• Be rated investment grade by at least one

nationally recognized statistical ratings

organization (NRSRO)

• Provide opportunities for higher income

• Align the portfolio with duration and

characteristic targets

Fixed income securities will typically:

AAM’s Core Plus Strategy may invest up to 100% in traditional debt or up to 100% in alternative income producing

assets depending on the market cycle. The portfolio management team will determine the appropriate asset allocation

and duration target based on the economic cycle and outlook across sectors.

To be considered for inclusion in the portfolio:

*A separate and distinct strategy, Core Plus Bond, is available to financial advisors using the Envestnet platform. The Core Plus Bond Strategy does not utilize

alternative income producing assets, but is based on the same dynamic, value-oriented approach to investing as the Core Plus Strategy.

AAM utilizes a four-step process for portfolio construction:

1. Duration is set based on interest rate outlook and top-down economic cycle analysis.

2. Economic cycle analysis seeks to identify the optimal credit risk exposure.

3. Bottom-up security valuation and selection is focused on maturity, credit quality and coupon.

4. Emphasizes balance through diversification across maturity, bond structure and position size.

10S

tep

1 Duration Selection

• Interest rate outlook• Risk/return analysis S

tep

2 Yield Curve Selection

• Identify Optional Position on Yield Curve

Ste

p 3 Issue Selection

• Maturity

• Credit Quality

• Coupon

Ste

p 4 Portfolio

Construction• Balance through

diversification

Ongoing Monitoring with adjustments as needed

Investment ProcessCore Plus*

*A separate and distinct strategy, Core Plus Bond, is available to financial advisors using the Envestnet platform. The Core Plus Bond Strategy does not utilize

alternative income producing assets, but is based on the same dynamic, value-oriented approach to investing as the Core Plus Strategy.

Core Plus

The AAM Portfolio Management Team Meets Frequently to Discuss Strategy.

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Investment Process

Quarterly Investment Committee Meetings

1. Discuss outlook on economic conditions including interest rates

2. Arrive at consensus view on economic outlook and interest rates

3. Set strategy duration4. Set strategy overall risk exposure

Security

Quality Meetings

1. Review strategy holdings2. Review credit trends3. Review market trends4. Review current/proposed holdings

Weekly Meetings

1. Market analysis

2. Review/adjust strategy and risk exposure based on market outlook

3. Review any potential security concerns

4. Review/add securities to buy list

Every security that we consider

for inclusion in our clients’

accounts is reviewed not only by

our analysts, but also by our

team of portfolio managers.

Once a quarter AAM’s entire

Investment Committee meets to

discuss market outlooks,

corporate events and review

current/proposed holdings and

allocations. Daily

communication rounds out this

team approach and allows all

members of the committee to

voice their opinions on security

and allocation changes.

Core Plus12

Security Approval, Review and Monitoring

✓ The management team actively seeks opportunities for improving income and risk-adjusted returns through bottom up security selection

✓ Management team members nominate securities for review ✓ Team reviews/analyzes security and assigns an internal rating

• Internal credit rating is compared to market/credit agency, if applicable ✓ Management team comes to a consensus on adding/avoiding the security

• Majority vote

Approval Process

✓ Ratings change triggers a review, if applicable

✓ Price changes and trading activity can trigger a review

✓ Sector and/or market trends can trigger review

✓ Management team comes to a consensus on holding/selling the security

• Majority vote

Review Process

✓ On-going surveillance by research team and portfolio managers

• Ratings changes

• Outlook/Watch status changes

• Price drops

✓ Utilize 3rd party/proprietary alert systems

Monitoring

Investment Process

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Core PlusSeparately Managed Accounts

June 30, 2020

Core Plus Strategy • www.aamlive.com • ©2020 Advisors Asset Management, Inc. All rights reserved. Past performance does not guarantee future results. Please see the disclosure section for additional information.

* Benchmark is the Bloomberg Barclays U.S. Aggregate Bond Index.

AAM’s Core Plus Strategy is an unconstrained strategy that seeks above average income by investing in traditional debt instruments and/or alternative income producing assets, including but not limited to traditional equities, business development companies (BDCs), real estate investment trusts (REITs), exchange-traded funds (ETFs), master limited partnerships (MLPs), and closed-end funds (CEFs) that offer compelling value and a high level of income.

Investment Objective and Strategy

Trailing Performance (Total returns as of the date shown above; annualized for periods greater than one year)

Core Plus CompositeGross of fee Net of fee Benchmark*

Quarter 14.94 14.78 2.90Year-to-Date -10.86 -11.13 6.141 Year -8.57 -9.16 8.743 Year -0.73 -1.42 5.325 Year 3.19 2.44 4.3010 Year 5.07 4.39 3.82Since Inception (7/2003) 4.91 4.31 4.29

Standard deviation %

More return/less risk

Less return/less risk

More return/more risk

Less return/more risk

Investment Process

Disciplined. Research-based. Focused on finding value while managing risk.

AAM’s Core Plus Strategy may invest up to 100% in traditional debt or up to 100% in alternative income producing assets depending on the market cycle. The portfolio management team will determine the appropriate asset allocation and duration target based on the economic cycle and outlook across sectors.

To be considered for inclusion in the portfolio, • fixed income securities will typically:

– be rated investment grade by at least one nationally recognized statistical ratings organization (NRSRO).

– provide opportunities for higher income.– align the portfolio with duration and characteristic

targets.

AAM utilizes a four-step process for portfolio construction:1. Duration is set based on AAM’s interest rate outlook and top-down economic cycle analysis. 2. Economic cycle analysis seeks to identify the optimal credit risk exposure.3. Bottom-up security valuation and selection focused on maturity, credit quality and coupon.4. Emphasizes balance through diversification across maturity, bond structure and position size.

Under normal conditions, AAM will seek to invest strategy assets in accordance with the investment objectives as stated above. Unusual market conditions, special instructions and/or account restrictions may cause individual accounts to exhibit characteristics outside of the stated objectives and may impact our ability to achieve stated objectives.

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Investment Professionals

Jim CostasExecutive Vice PresidentYears of Experience: 35+

Brian GilbertSenior Vice PresidentPortfolio ManagerYears of Experience: 27+

Scott ColyerCEO/CIOYears of Experience: 30+

Tracy NolteVice PresidentPortfolio ManagerYears of Experience: 21+

Advisors Asset Management, Inc. (AAM) 18925 Base Camp Road • Monument, CO 80132Founded: 1979 Firm Assets Under Management: $2.795 billion

Risk /Reward Analysis (Five years ending the date shown above)

Average Annual Total Return Standard Deviation

Sharpe RatioGross of fee Net of fee

Core Plus Composite 3.19% 2.44% 11.90 0.15

Benchmark* 4.30 — 3.08 1.01

3-month T-Bill 1.12 — 0.24 -0.22

Ave

rage

ann

ual t

otal

retu

rn %

• alternative income producing assets will typically:– have the potential to increase portfolio cash flow

through dividends.– diversify holdings among targeted asset classes.

Sonja Reed Vice PresidentPortfolio AnalystYears of Experience: 20+

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June 30, 2020


Annualized Total Returns Trailing 10 Calendar Years

Core Plus CompositeGross of fee Net of fee Benchmark*

2019 11.54% 10.83% 8.72%

2018 -3.86 -4.62 0.01

2017 8.71 7.91 3.54

2016 21.57 20.61 2.65

2015 -7.72 -8.32 0.55

2014 3.11 2.47 5.97

2013 1.54 1.07 -2.03

2012 15.02 14.32 4.22

2011 10.59 9.91 7.84

2010 12.51 11.88 6.54

Fixed Income Characteristics FIS Core Plus Composite Benchmark*

Avg. Coupon (%) 5.37 3.03Avg. Yield to Worst (%) 2.95 1.25Avg. Modified Duration (years) 3.44 6.04Avg. Maturity (years) 6.04 8.14

Fixed Income Segment (FIS)Core Plus Composite

Benchmark*

Alpha (5 years) 0.26% -

Beta (5 years) 0.74 1.00

Sharpe Ratio (5 years) 0.15 1.01

R-Squared (5 years) 0.36 1.00

Standard Deviation (5 years) 11.90 3.08

Top 10 Holdings

Security% of Core

Plus Composite

ANGLOGOLD ASHANTI HLDGS FIN PL 5.125% Due 08-01-22 5.26

WESTERN AST INFL LKD OPP & INM COM 4.64

GENERAL MTRS CO 4.875% Due 10-02-23 4.45

NEWTEK BUSINESS SVCS CORP COM NEW 4.36

KOHLS CORP 4.750% Due 12-15-23 4.21

ARES CAPITAL CORP COM 4.18

INTL LEASE FIN CORP 8.625% Due 01-15-22 4.17

FLUOR CORP NEW 4.250% Due 09-15-28 4.12

CLOUGH GLOBAL OPPORTUNITIES FD SH BEN INT 3.82

FIRST EAGLE SENIOR LOAN FUND COM NEW 3.81

% of Core Plus Composite

Alternative Income Producing Securities

32.7

Fixed Income 64.6

Cash & Equivalents 2.6

Total Portfolio

% AIP SegmentCore Plus Composite

% AIP SegmentCore Plus Composite

Business Development Companies (BDCs) 26.3 Real Estate Investment Trusts (REITs) 21.4

Closed-End Funds (CEFs) 37.3 Traditional Equities (Common Stock) 0.0

Exchange-Traded Funds (ETFs) 0.0 Other 0.0

Master Limited Partnerships (MLPs) 15.0

Alternative Income Producing (AIP) Securities - Allocation

Portfolio Characteristics

Asset Allocation

* Benchmark is the Bloomberg Barclays U.S. Aggregate Bond Index.Information is based on aggregate composite account holdings as of the date shown above, unless otherwise indicated.

% FIS Core Plus Composite

0-1 year 5.81-3 year 25.53-5 year 27.95-7 year 17.27-10 year 6.410+ years 17.2

Maturity Schedule

Sector Allocations % FIS Core Plus Composite

Govt/Agency 7.7Municipal 16.7Corporate 68.6Securitized (ABS, MBS, CMBS) 6.7

Derivative -Other 0.3

Quality Distribution (S&P Ratings)% FIS Core Plus

CompositeAAA 0.1AA 19.7A 4.9BBB 56.4BB 8.1B or lower 3.0Not Rated by S&P 7.7

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June 30, 2020


Strategy Assets (Supplemental information only; these values reflect all accounts in the strategy as of the date shown above)

Total Strategy Assets $146,506,858 Total Accounts in Strategy 492‡Supplemental information only*The Bloomberg Barclays U.S. Aggregate Bond Index represents securities that are investment grade, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. 1Partial period return from 7/2003 to 12/2003. Due to composite membership changes, statistics have changed in 2015-2018 affecting composite returns, total composite assets, composite dispersion and composite number of portfolios.

AAM’s Core Plus CompositeSchedule of Rates of Return and StatisticsJuly 1, 2003 (inception) Through December 31, 2019

YearCore Plus

(Gross of Fee)Core Plus

(Net of Fee)

Bloomberg Barclays

U.S. Aggregate

Bond Index*

3 Year Annualized Ex-Post Standard Deviation

Composite Totals

Total Firm Assets($MM)Core Plus Benchmark* Annual Dispersion

Number of Portfolios

Total Composite Assets ($MM)

20031 0.05% 0.05% 0.00% — <=5 $0.5 $1.2 2004 4.49 4.05 4.34 — <=5 1.1 10.82005 2.17 1.62 2.43 0.63 12 5.2 32.42006 5.82 5.19 4.33 0.41 24 13.2 75.72007 4.23 3.88 6.97 0.17 37 22.3 173.12008 -12.53 -12.86 5.24 4.76 26 15.6 199.32009 19.77 19.17 5.93 1.52 15 10.4 261.92010 12.51 11.88 6.54 2.42 19 13.2 363.92011 10.66 9.97 7.84 8.42% 2.78% 0.97 21 19.2 385.52012 15.02 14.32 4.22 2.90 2.38 1.72 28 27.5 451.22013 1.54 1.07 -2.03 3.78 2.94 0.57 45 38.3 491.12014 3.11 2.47 5.97 4.56 2.63 1.31 43 30.5 494.02015 -7.72 -8.32 0.55 5.78 2.88 1.32 31 16.2 798.02016 21.57 20.61 2.65 8.21 2.98 2.81 42 24.7 1,131.32017 8.71 7.91 3.54 7.82 2.78 0.62 48 28.7 1,325.32018 -3.86 -4.62 0.01 7.22 2.84 1.50 49 27.2 1576.12019 11.54 10.83 8.72 5.08 2.87 1.34 42 24.6 2765.1

3-year calculations are not available for this composite for the period of time specified and are not required to be presented for years prior to 2011. Investing involves risk. The value of the portfolio will fluctuate based on the value of the underlying securities. Amounts and information shown in this piece are based on aggregate composite accounts holdings and are the result of actual trading. Actual portfolios may differ as a result of account size, client-imposed investment restrictions, the timing of client investments, market, economic and individual company considerations and other factors. There is no assurance that the strategy’s objective will be achieved.

This report is for informational purposes only and is subject to change. Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness. This material is not intended to be a recommendation or investment advice and does not constitute a solicitation to buy or sell securities. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her adviser. This presentation should only be considered as one tool in

any investor’s investment decision matrix. Investors should consult their financial professional when reviewing the assumptions included in this piece. AAM and its representatives do not provide tax advice. You should consult your personal tax advisor before making any tax related investment decisions.

Advisors Asset Management, Inc. (AAM). AAM is an SEC-registered investment adviser and broker-dealer, FINRA member and SIPC member. Additional information about AAM, including a copy of our Form ADV, can be obtained by contacting AAM by emailing [email protected].

Composite Definition and Performance and Characteristic Information. The AAM Core Plus composite was created in July 2003. The composite consists of all fully discretionary, unconstrained separately managed account (SMA) program accounts managed in the style described under the strategy description with a size of at least $75,000 (for periods after May 21, 2014) and at least $200,000 (for periods prior to May 21, 2014).

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June 30, 2020


CRN: 2019-0118-7181 R Link 5639

Composites are valued on the last business day of the month for all periods presented. Historical performance amounts shown assume the reinvestment of dividends, capital gains and other earnings. All results are shown in U.S. dollars. Gross returns are stated gross of the AAM advisory fees and net of applicable transaction costs. Net returns include the deduction of transaction costs and AAM advisory fees. Net of fee returns are calculated using actual management fees. The AAM advisory fee range for purposes of these calculations for this strategy is 0.15% to 1.50%. There may be some accounts with fees negotiated outside this range depending on the overall relationship with the client. Quarterly and annual account return calculations use a time-weighted monthly linked percentage return formula with appropriate adjustments for cash flows. Taxes have not been deducted. Other assumptions and calculation methods may produce different results and the results for individual accounts and for different periods may vary depending on market conditions and the composition of the account. Care should be used when comparing these results to those published by other investment advisers, other investment vehicles and unmanaged indices due to possible differences in calculation methods.

Composites containing 5 portfolios or less show <=5 for “Number of Portfolios”. Composite dispersion measures represent the consistency of annual composite performance with respect to the individual account annual returns within a composite. This calculation utilizes the asset-weighted standard deviation of the individual composite component full-period portfolios around the composite weighted mean return. The Annual Dispersion calculation reflects information based on accounts that were in the composite for the entire year shown. Composites containing 5 portfolios or less for the period do not show an amount for Annual Dispersion.

All amounts shown are based on the aggregate composite account holding unless otherwise indicated. Portfolio Characteristics amounts do not reflect advisory fees.

GIPS: AAM claims compliance with the Global investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. AAM has been independently verified for the periods from July 1, 2003 through December 31, 2018. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. A list of composite descriptions and policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request.

Definitions: Alpha is the excess return of an investment relative to the return of the benchmark index. Beta is a measure of the volatility, or systematic risk, of the portfolio in comparison to the benchmark. Duration is the approximate percentage change in price for a 100 basis point change in rates. The longer the duration, the more sensitive to shifts in interest rates. Modified duration is the approximate percentage change in a bond’s price for a 100 basis points change in yield, assuming that the bond’s expected cash flow does not change when the yield changes. R-squared is a statistical measure

that represents the percentage of the portfolio’s movements that can be explained by movements in a benchmark index. Values range from 0 to 1. The higher the R--squared, the more the portfolio’s performance patterns have been in line with the index. A security with a low R-squared, at 70% or less, indicates the security has not performed much like the index. Sharpe Ratio is a measure for calculating risk-adjusted returns. The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. The higher the Sharpe ratio, the better the risk-adjusted performance has been. Standard deviation is a statistical measurement that sheds light on historical volatility by measuring the dispersion of a set of data from its mean. The higher the standard deviation, the higher the deviation within the data set. Standard deviation is calculated as the square root of variance by determining the variation between each data point relative to the mean. The weighted average coupon is calculated by weighting the coupon of each bond by its relative size in the portfolio. Coupons are fixed percentages paid out on a fixed-income security on an annual basis. Yield-to-worst (YTW) is the lowest potential yield that can be received on a portfolio without issuers actually defaulting. The YTW is calculated by making worst-case scenario assumptions on the issues by calculating the return that would be received if the issuer uses provisions, including prepayments, calls or sinking funds.

Benchmark: The benchmark is the Bloomberg Barclays U.S. Aggregate Bond Index, which represents securities that are investment grade, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.The selected index for this strategy is comprised of 100% fixed income, although the strategy may have a significant weighting in income producing equity type securities.

Indices shown are not managed portfolios and are not subject to advisory fees or trading costs. Investors cannot invest directly in the indices. Investors should be aware that the referenced benchmarks may have a different composition, volatility, risk, investment philosophy, holding times, and/or other investment-related factors that may affect the benchmark strategy’s ultimate performance results. Therefore, an investor’s individual results may vary significantly from the benchmark’s performance.

Team Biographies17

Scott ColyerChief Executive Officer & Chief Investment Officer

A highly respected and recognized portfolio manager with

over 30 years of industry experience, Scott Colyer has

been the CEO and CIO of AAM since 1998. An

accomplished fixed income strategist and investment

counselor, Scott’s insight is frequently featured in leading

financial media, including Barron's, The Bond Buyer,

Business Week, CNBC, CNNMoney, Fortune magazine,

Fox Business TV, Investment News, MarketWatch,

Pensions & Investments, TheStreet.com and The Wall

Street Journal.

Jim CostasExecutive Vice President, Portfolio Manager

Jim is responsible for AAM’s Capital Markets Groups,

including trading and money managers. Mr. Costas has

over 35 years of trading experience, previously serving as

Vice President, Trader for both EF Hutton and Prudential

Securities. In addition, he served as a Director at SunTrust

Bank before joining Advisors Asset Management in 2002.

Jim has a Bachelor of Science degree from Ithaca College

and holds a Series 7, 24, 53, 63, and 66 professional

designations.

Brian GilbertSenior Vice President, Portfolio Manager

With over 25 years of industry experience, Mr. Gilbert is a highly

skilled taxable portfolio manager. He has been with AAM since

2006 and as an AAM Insights contributor, his insightful

commentary assists advisors with navigating the fixed income

markets by providing timely guidance for managing credit and

interest rate risk. He has in-depth understanding of economic and

credit cycles and excels in analyzing fixed income investments.

He earned a Bachelor of Science degree in Business (Finance)

from the University of Colorado at Boulder and previously held

positions with Merrill Lynch, Murphey Favre, Inc. and Charles

Schwab (Schwab Institutional).

JB Golden, CFA®

Executive Director, Portfolio Manager

JB Golden has over 15 years of investment experience. Prior to

joining the portfolio management team, Mr. Golden served as 1st

Vice President/Regional Director, managing AAM’s South Region

fixed income sales and service desk. In addition, he has served the

firm in both a fixed income sales and trading capacity since joining

the firm in 2004.

Mr. Golden earned his undergraduate degree from Texas A&M

University and his law degree and MBA from the University of

Houston. He holds FINRA 7, 24, 65 and 66 registrations and is a

CFA® charterholder.

Team Biographies18

Jonathan LawVice President, Portfolio Manager

Jonathan Law is a Vice President and Portfolio Manager

with Advisors Asset Management and has 15 years of

investment experience. Mr. Law served initially as a credit

analyst for the portfolio management team when he joined

AAM in 2009. Previously, Mr. Law was a Portfolio Analyst

at Pilot Advisors, a hedge fund/investment manager in New

York City, where he researched equity and fixed income

securities, executed trades and monitored long-only

portfolios.

Mr. Law earned his Bachelor of Arts degree in Economics

from New York University. He holds the FINRA licenses 7,

24, and 66 registrations.

Tracy NolteVice President, Portfolio Manager

Tracy Nolte has been with AAM since 2005. Prior to joining

the Fixed Income portfolio management team, Tracy led

the Portfolio Analytics team and was responsible for

macroeconomic and strategy. His unique ability to clarify

complex economic issues and make them relevant to

portfolio strategy have made him one of AAM’s most

frequently requested presenters.

Tracy has extensive expertise in identifying, evaluating and

proposing rate and risk-appropriate strategies for income-

generating portfolios. Tracy received his BBA in Finance

from University of the Incarnate Word.

Len ReiningerVice President, Credit Research

Leonard (Len) Reininger has over 20 years of experience in a

complex mix of credit analysis/management functions including

fixed income, financial institutions, corporate, small business,

municipal, Treasury investments and bank loans. Prior to joining

AAM in 2014, Mr. Reininger was Director of Risk Management,

Fundamental Credit - Americas with American Express. He also

served as Credit Manager at US Federal Home Loan Bank of

Seattle.

Mr. Reininger earned his undergraduate from the State University

of New York, College at New Paltz and his graduate degree from

City University of New York-Baruch College.

Sonja ReedVice President, Portfolio AnalystSonja joined the firm in 2015, bringing over 20 years of experience

in a broad range of asset classes and roles. After graduating from

the University of Nebraska with a BS in Accounting in 2000, Sonja

was accepted to the leadership training program at Strong Capital

Management. Sonja earned her MBA from Marquette University in

2005 as Strong Capital was combined with Wells Fargo. Her

additional experience at Wells Capital Management, Black

Diamond Capital Management, and DRW Trading Group enables

Sonja to support both the Taxable and Tax-Free Portfolio

Management Teams while maintaining a critical understanding of

the AAM’s broader operational needs. She holds the FINRA

licenses 7, 66 and 24.

Team Biographies19

Steven MajorisPortfolio Analyst

Steven Majoris has multiple years of investment management

experience and has been at AAM since 2014. After graduating from

Rowan University in 2013 Steven started his first role as a financial

advisor mainly servicing the 403(b) and other qualified retirement

plan markets. As a portfolio analyst he supports the municipal bond

separately managed accounts portfolio management team.

Disclosures

AAM’s Core Plus Strategy is an unconstrained strategy that seeks above average income by investing in traditional debt instruments and/or alternative income producing assets, including but not limited to traditional equities, business development companies (BDCs), real estate investment trusts (REITs), exchange-traded funds (ETFs), master limited partnerships (MLPs), and closed-end funds (CEFs) that offer compelling value and a high level of income. All content in this presentation is representative of the Core Plus Strategy. A separate and distinct strategy, Core Plus Bond, is available to financial advisors using the Envestnet platform. The Core Plus Bond Strategy does not utilize alternative income producing assets, but is based on the same dynamic, value-oriented approach as investing in the Core Plus Strategy. For information on the Core Plus Bond Strategy, please contact your financial advisor.

This report is for informational purposes only and subject to change. All content has been obtained from sources believed reliable; however, we do not guarantee its accuracy or completeness. Each account will be managed on an individual basis and will have variations. Investment return and principal value will fluctuate and there can be no assurance that the portfolio's objective will be achieved. Past performance does not guarantee comparable future results. Actual returns may be lower. Bonds are subject to a variety of risks, including interest rate, income, credit and inflation risk.

The information within this report should not be considered investment advice or a recommendation to buy/sell any security.

Risk assessments and commentary are subjective views of AAM’s portfolio manager and not necessarily based on specific market research or factors.

All AAM employees, including research associates, receive compensation that is based in part upon the overall performance of the firm. AAM may make a market in or have other financial interests in any security or sector discussed in this report. Investors should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Past performance does not guarantee future performance.

AAM claims compliance with the Global investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. AAM has been independently verified for the periods from July 1, 2003 through December 31, 2018. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm’s policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation. A list of composite descriptions and policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request.

Unusual market conditions may cause some securities in the portfolio to temporarily exhibit characteristics outside the investment objectives.

Fee Disclosures: Fees are based on total market value of the account including all assets (cash, stocks, bonds, etc.) at the end of the period. These fees do not include custodial charges. There is no guarantee that the advisory services offered will result in the clients’ goals and objectives being achieved, nor is there any guarantee of profit or protection from loss.

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Disclosures

18925 Base Camp Road • Monument, CO 80132 • www.aamlive.com • ©2020 Advisors Asset Management, Inc. Advisors Asset Management, Inc.

(AAM) is an SEC-registered investment advisor and member FINRA/SIPC. CRN: 2019-0509-7427 R

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Benchmark Disclosures: Indices listed are used as a general measure of the economy and of market performance for a particular asset class or type. Indices assume reinvestment of all distributions and interest payments and do not take into account brokerage fees or taxes. It is not possible to invest directly in an index.

All investing involves risk; loss of principal is possible. Past performance is not indicative of future results.

Ratings may not be representative of any one client’s experience because the ratings reflect an average or sample of multiple client accounts. The results and portfolios for individual accounts may vary. Investment returns and principal value will fluctuate and there can be no assurance that any strategy’s objective will be achieved. See the ADV for Advisors Asset Management, Inc. and Strategy fact cards for more information about the firm, fees, strategies and related risks.

Additional information may be required to make an informed investment decision.

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