Canadian Pensions may find it challenging to increase ... · Traditional 60/40 portfolio Newedge...

PIMCO presentation for the Global Investment Conference

The Next Big Thing(s) in Fixed Income

April 2014

Andrew Spottiswoode, Vice President

For institutional investor use only

Pacific Investment Management Company LLC, 840 Newport Center Drive, Newport Beach, CA 92660, 949.720.6000

Canadian Pensions may find it challenging to increase funded status through traditional strategies

pg 1

SOURCE: Towers WatsonAs of 31 December 2013Refer to Appendix for additional investment strategy and risk information

Increasing interest in downside risk protection and locking in gains

160Recent equity market performance Canadian Equities U.S. Equities

100

110

120

130

140

150

Uni

t Gro

wth

pg 2

80

90

Dec '11 Feb '12 Apr '12 Jun '12 Aug '12 Oct '12 Dec '12 Feb '13 Apr '13 Jun '13 Aug '13 Oct '13 Dec '13 Feb '14

SOURCE: BloombergAs of 28 February 2014Canadian Equities is represented by the S&P/TSX Composite Index; U.S. Equities is represented by the S&P 500 IndexRefer to Appendix for additional investment strategy and risk information

Financial innovations are often a function of their environment

3.0Yield per unit of interest rate risk

U.S. AGG Global AGG U.S. Investment Grade CorpCanadian Gov't U.S. MBS AAA Municipals

1.0

1.5

2.0

2.5

Yiel

d pe

r uni

t of d

urat

ion

(%/y

ears

)

pg 3

SOURCE: BarclaysAs of 28 February 2014U.S. Agg is represented by the Barclays U.S. Aggregate Index; Global Agg is representation by the Barclays Global Aggregate Index; U.S. Investment Grade Corp is represented by the Barclays U.S. Credit Index; Canadian Gov’t is represented by the Barclays Canadian Issues Government-Related Index; U.S. MBS is representation by the Barclays U.S. U.S. Mortgage Backed Securities Index; AAA Municipals is represented by the Barclay AAA IndexRefer to Appendix for additional investment strategy and risk information

0.0

0.5

Dec '06 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13

Y

Increased flexibility or structural changes may be required…

Shift in global demography and regional

Central bank monetary policies

Flexibility is critical in today’s global capital

markets

demography and regional productivity

policies

pg 4

Strength and distribution of global economic

recoveryFuture of financial regulation

Refer to Appendix for additional investment strategy and risk information

Capitalize on the global opportunity set and diversify risk with benchmark agnostic strategies

Barclays Aggregate U.S. Index

Sector compositionU.S. gov't

U.S. securitized

Global fixed income market

Sector composition

U.S. IG credit

CanadaFrance

Germany ItalyJapan United Kingdom

AustraliaOther Eurozone/

Developed Europe

Other TreasuriesGlobal Other EM External

U.S. Gov'tU.S. IG Credit

U.S. Securitized

pg 5

SOURCE: Barclays, BofA.Sample for illustrative purposes onlyThe above global fixed income opportunity set is not indicative of the portfolio structure of the Unconstrained Bond Strategy.Refer to Appendix for additional investment strategy and risk information

ubs_phil_28

Gov't RelatedGlobal IG Corporate

Global SecuritizedGlobal Inflation-Linked non USDGlobal HY

CorporateEM Local Sovereign

EM Local CorporatesU.S. TIPS

ABS Floating Rate

High Yield

EM External Sovereign

Corporate

Strategic objectives of investment strategies

Alpha oriented

INVESTOR OBJECTIVES

Outcome oriented (alpha + tactical beta strategies)

Dedicated strategies(benchmark-oriented strategies) ( p g ) ( g )

Strategy seeks to provide positive returns regardless of market environment

May employ Long/Short positions and exploit market inefficiencies and illiquidity

Leverage may be used in an effort to boost returns

Deliver a particular risk-return profile and potentially cash flow or liability immunization

Investments are influenced by value proposition, not benchmarks

Access to alpha driven strategies and tactical beta while focusing on liquidity

Capitalizing on broader market value and sources of returns and risk

Additional value added by avoiding credits with downside risk and overweight others with greater return potential

pg 6

Beta oriented strategiesAbsolute return and alternative investments Deliver a desired outcome

Refer to Appendix for additional investment strategy and risk information.

CAR_phil_03_sep

COMMON ASSET ALLOCATION BUCKETS

Non-traditional strategies offer differentiated return and risk profiles

DM Equity EM Equity Nominal DM Duration Nominal EM DurationReal Duration EM Spread Mtge Spread Corp Spread

0

200

400

600

800

1000

1200

Estim

ated

Vol

atili

ty c

ontr

ibut

ion

(bps

)2

Real Duration EM Spread Mtge Spread Corp SpreadHY Spread Currency Commodity Other Factors¹

pg 7

As of 29 January 2013. SOURCE: PIMCO. Hypothetical example for illustrative purposes only.1 Other Factors include swap spread, curve, and Idiosyncratic (specific) risk2 See Appendix for additional information regarding volatility estimates.

The strategies shown above are representative accounts. The representative account information is supplemental to the PIMCO Unconstrained Full Authority Composite, PIMCO Credit Absolute Return Composite, PIMCO Mortgage Opportunities Composite, PIMCO Fundamental Advantage Absolute Return Composite, and the PIMCO Trends Composite performance presentations included in the Appendix. Refer to Appendix for additional performance and fee, hypothetical example, investment strategy, portfolio analysis, representative account and risk information.

-20060% S&P 500/

40% BAGGPIMCO UnconstrainedBond Representative

Account

PIMCO Credit AbsoluteReturn Representative

Account

PIMCO MortgageOpportunities

Representative Account

PIMCO FundamentalAdvantage AR

Representative Account

PIMCO TrendsRepresentative Account

Absolute return fixed income strategies

4 Key Tenets of our absolute return approach:

Reflects best ideas within each opportunity setPreserves key fixed income characteristics: liquidity, principal preservation, and diversificationy q y, p p p ,Benchmark-agnostic, absolute return orientation with broad flexibilitySeeks attractive risk-adjusted returns and downside risk mitigation

GLOBAL CREDIT GLOBAL FIXED-INCOMESECURITIZED /

STRUCTURED CREDIT

pg 8

Unconstrained Bond Mortgage OpportunitiesCredit Absolute Return

Opportunity set: global fixed-income markets, rates and currencies

Opportunity set: global corporate credit including IG, HY, EM and bank loans

Opportunity set: agency & non-agency U.S. and European RMBS and CMBS

Refer to Appendix for additional investment strategy, strategy availability and risk information.

Duration positioning over time reflects absolute return vs. relative return approach

6

8

rs)

3-month LIBOR Unconstrained Bond Representative Account vs. 3-month LIBOR

-2

0

2

4

Jun '08 Dec '08 Jun '09 Dec '09 Jun '10 Dec '10 Jun '11 Dec '11 Jun '12 Dec '12 Jun '13 Dec '13

Dur

atio

n (y

ear

4

6

8

ears

)

BAGG Total Return Representative Account vs. BAGG

pg 9ubs_review_13

-2

0

2


Dur

atio

n (y

e

As of 31 December 2013SOURCE: PIMCOThe representative account information presented is provided as supplemental information to the PIMCO Unconstrained Full Authority Composite and the PIMCO Core Plus – Total Return Full Authority Composite performance presentations included in the Appendix.Refer to Appendix for additional index, portfolio structure, representative account, and risk information.

Risk positions are actively managed and sized to target market opportunities and manage risk

10

Historical sector breakdownUnconstrained Bond representative account

Government related¹ Mortgage CorporatesHigh yield Non-U.S. developed Emerging marketsMunicipal/other Net cash equivalents Total duration

-4

-2

0

2

4

6

8

Dur

atio

n w

eigh

ted

expo

sure

(yea

rs)

pg 10ubs_stru_06

-8

-6


As of 31 December 2013SOURCE: PIMCO

1 Government related may include nominal and inflation-protected Treasuries, agencies, interest rate swaps, Treasury futures and options, FDIC-guaranteed and government-guaranteed corporate securities.The representative account information presented is provided as supplemental information to the PIMCO Unconstrained Full Authority Composite performance presentation included in the Appendix.Refer to Appendix for additional portfolio structure, representative account and risk information.

Country exposures reflect investment views across global opportunity set

10

Historical monthly duration by countryUnconstrained Bond representative account

U.S. Japan EMU AustraliaCanada U.K. EM/other Total

-4

-2

0

2

4

6

8

Dur

atio

n w

eigh

ted

expo

sure

(yea

rs)

pg 11ubs_review_16

As of 31 December 2013SOURCE: PIMCOThe representative account information presented is provided as supplemental information to the PIMCO Unconstrained Full Authority Composite performance presentations included in the Appendix.Refer to Appendix for additional portfolio structure, representative account and risk information.

-8

-6


Currency pairs trading further expands sources of return and diversification

Unconstrained Bond representative account fx exposure

Australian dollars Brazilian real British pound Canadian dollarsEuropean euro Hong Kong dollars Hungarian forint Indian rupeeJapanese yen Malaysian ringgit Mexican nuevo peso Norwegian kronerRussian ruble Singapore dollars South Korean won Swedish kronersSwiss franc Taiwanese dollar Turkish lira Yuan reniminbi

-20

-10

0

10

20

30

40

50

Perc

ent

(%)

p Swiss franc Taiwanese dollar Turkish lira Yuan reniminbi

pg 12ubs_review_11

As of 31 December 2013SOURCE: PIMCOThe representative account information presented is provided as supplemental information to the PIMCO Unconstrained Full Authority Composite performance presentations included in the Appendix.Refer to Appendix for additional portfolio structure, representative account, and risk information.

-50

-40

-30


Targeting specific risk factors: momentum

Momentum strategies are a source of diversification

2,0001.0

Correlation of Newedge Trend Index to the S&P 500(rolling 12 month correlations on weekly returns)

Rolling 12 month correlation - SPX vs. Newedge Trend Index (LH Axis)

S&P 500 level (RH Axis)

200

400

600

800

1,000

1,200

1,400

1,600

1,800

-0.5

0.0

0.5

SPX Index LevelCorr

elat

ion

pg 14

From 31 December 1999 to 31 December 2013SOURCE: BloombergRefer to Appendix for additional correlation, index, and risk information.

0

200

-1.0

Dec '99 Dec '00 Dec '01 Dec '02 Dec '03 Dec '04 Dec '05 Dec '06 Dec '07 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13

Trend-following strategies have shown attractive payoffs when traditional portfolio returns are negative

Monthly returns of the Newedge Trend Index2, bucketed by corresponding returns on a 60/40 portfolio (60% S&P500, 40% BAGG)

The Newedge Trend Index returns were positive on average when the 60/40 portfolio is losing money

-2.0%

0.0%

2.0%

4.0%

6.0%Traditional 60/40 portfolio Newedge Trend Index Average Newedge Index monthly return

pg 15

From 31 January 1999 to 31 December 20131 Deciles on the x-axis are constructed such that an equal number of observations falls within each bucket. 2 The Newedge Trend Index is equal-weighted and reconstituted annually. The index calculates the net daily rate of return for a pool of trend following based hedge fund managers.”

Refer to Appendix for additional index, investment strategy and risk information.

-8.0%

-6.0%

-4.0%

Bottom 2 3 4 5 6 7 8 9 Top

Momentum strategies are a source of diversification within portfolios

Traditional Portfolio ExampleNewedge

Trend Index10%

Traditional Portfolio with 10% Newedge Trend Index Example

Traditional Portfolio with 10% Newedge Trend Index

Traditional 60/40 Portfolio

Annualized Return 5 0%Annualized Return 4 7%

S&P 50060%

Barclays U.S. Aggregate

40% S&P 50054%

Barclays U.S. Aggregate

36%

10%

pg 16

Annualized Return 5.0%

Annualized Volatility1 8.3%

Sharpe ratio 0.60

Max drawdown -28%

Annualized Return 4.7%

Annualized Volatility1 9.3%

Sharpe ratio 0.50

Max drawdown -33%

As of 31 December 2013SOURCE: Bloomberg, PIMCO Monthly data since 31 December 1999

1 Annualized volatility is calculated using standard deviation of monthly returnsRefer to Appendix for additional performance and fee, investment strategy, and risk information.

Utilizing fixed income to fund genhanced equity overlay and tail risk hedging strategies

Capturing structural sources of yield advantage

Fixed income portfolio returnless money market rate =EXCESS RETURN

HYPOTHETICAL EXAMPLE

Receive return of equity index1

Pay short-term money market

Earn return on fixed income

Index “PLUS” portfolio return3

+– =

ABSOLUTE RETURN

pg 18

Goal: Achieve return on fixed income portfolio that exceeds short-term money market rate

Equity exposure managed with focus on minimizing the short-term money market rate paid

1 Equity index as specified by the investment guidelines.2 Short-term interest rate paid generally constrained to LIBOR by short, uncertain time horizon of majority of buyers of stock index futures; total return swaps generally specify a cost of LIBOR

+/- a spread.3 The return on bonds may be less than the short term money market financing rate, which would result in negative excess returns

Sample for illustrative purposes only. Refer to Appendix for additional investment strategy and risk information.

stocksplus_phil_62h

equity index money market rate2

fixed income portfolio3

portfolio return

Yield advantage over LIBOR provides a tailwind for prospective performance

FUNDAMENTAL INDEXPLUS AR REPRESENTATIVE ACCOUNT

Structural yield advantage*

Agency MBS Non-agency MBS Corporates TreasuriesEmerging markets Developed non-U.S. Agencies/swaps Volatility strategiesMoney markets Municipals Other

100

150

200

250

300

Basi

s poi

nt (b

ps)

advantage Money markets Municipals Other

256 bps

pg 19

As of 31 December 2013SOURCE: PIMCOPast performance is not a guarantee or reliable indicator of future results. Hypothetical example for illustrative purposes only.

* “Structural yield advantage” is a proprietary PIMCO measure of potential total return in excess of LIBOR associated with the amount of extra yield earned by a portfolio plus any additional return garnered (or given up) through yield curve roll down, option positions, and financing.Representative account information presented is provided as supplemental information to the PIMCO U.S. Large Company Fundamental IndexPLUS AR Composite performance presentation included in the AppendixRefer to Appendix for additional performance and fee, attribution analysis, hypothetical example, investment strategy, representative account, risk, and total carry information.

3cs_SP_review_04_400

0

50

Total carry 3-month LIBOR

25 bps

Utilizing fixed income to fund and supplement tail risk hedging programs

$350

S&P 500 Total Return Index

StocksPLUS Absolute Return Representative

Account (after fees)

StocksPLUS Absolute Return Representative

Account w/ Tail Risk Hedging (after fees)

A li d R t 7 7% 10 3% 10 3%

$100

$150

$200

$250

$300

Gro

wth

of $

100

Annualized Return 7.7% 10.3% 10.3%

Annualized Volatility 15.5% 17.5% 13.8%

Return / Volatility 0.50 0.59 0.75

Max drawdown -55.3% -61.9% -47.1%

Return / Max drawdown 0.14 0.17 0.22

Upside Capture 1.00 1.13 0.98

Downside Capture 1.00 1.03 0.82

Upside / Downside Capture 1.00 1.10 1.18

pg 20

As 31 December 2013SOURCE: PIMCO, CBOE Hypothetical example for illustrative purposes only. Volatility is measured using the annualized standard deviations of monthly returns.The Tail Risk Hedging Backtest was performed using a buy & hold strategy with 25% OTM 1yr S&P put options, budget cap = 2.0%, and 50% of notional hedged every six months. Actual option used for the backtest is the listed option which is closest in expiration and strike to the target parameters . In the event that the budget cap is reached, less than 100% of the position may be hedged. Transaction costs are excluded from this analysis.The model and representative account information presented is provided as supplemental information to the PIMCO StocksPLUS Absolute Return Composite performance presentation in the Appendix.Refer to Appendix for additional performance and fee, index, hypothetical example, investment strategy, maximum drawdown, model, representative account and risk information.

tail_risk_phil_09

$0

$50

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

StocksPLUS Absolute Return Representative Account (after fees)S&P 500 Total Return IndexStocksPLUS Absolute Return Representative Account w/ Tail Risk Hedging (after fees)

Conclusion

When considering asset allocation decisions in the current environment:

– Traditional asset allocation practices may not meet required return objectives

– Alternative strategies can be implemented in an effort to increase portfolio Information ratios without compromising on returns

– Fixed income strategies may serve to increase the efficiency of

pg 21

Fixed income strategies may serve to increase the efficiency of capital allocation in a financially repressive world

– Given recent risk asset performance using fixed income to fund tail risk hedging may be attractive to pension investors

!mk_Solutions_All_Channels_body

Refer to Appendix for additional investment strategy and risk information. risk information.

Appendix

Appendix

PERFORMANCE AND FEEPast performance is not a guarantee or a reliable indicator of future results. Certain performance figures do not reflect the deduction of investment advisory fees (for Pacific Investment Management Company LLC described in Part 2 of its Form ADV) in the case of both separate investment accounts and mutual funds; but they do reflect commissions, other expenses (except custody), and reinvestment of earnings. Such fees that a client may incur in the management of their investment advisory account may reduce the client's return. For example, over a five-year period, annual advisory fees of 0.425% would reduce compounding at 10% annually from 61.05% before fees to 57.96% after fees. The “net of fees’ performance figures reflect the deduction of actual investment advisory fees but do not reflect the deduction of custodial fees. All periods longer than one year are annualized. Separate account clients may elect to include PIMCO sector funds in their portfolio; sector funds may be subject to additional terms and fees. For a copy of net of fees performance, unless included otherwise, please contact your PIMCO representative.

ATTRIBUTION ANALYSISThe attribution analysis contained herein is calculated by PIMCO 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.

CHARTResults for certain charts and graphs may be limited by date ranges specified on those charts and graphs; different time periods may produce different results.

CORRELATIONThe correlation of various indices or securities against one another or against inflation is based upon data over a certain time period. These correlations may vary substantially in the future or over different time periods that can result in greater volatility.

HYPOTHETICAL EXAMPLENo representation is being made that any account, product, or strategy will or is likely to achieve profits, losses, or results similar to those shown. Hypothetical or simulated performance results have 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 any 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.

INVESTMENT STRATEGYThere is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. 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. Investors should

lt th i i t t f i l i t ki i t t d i i

pg 23ubs_app_01

consult their investment professional prior to making an investment decision.

MAXIMUM DRAWDOWNMaximum drawdown is measured as the average of the distribution of maximum drawdowns across 15,000 simulated annual paths under normal market conditions. This number represents an expected peak to trough drawdown within a one year time horizon.

MODELThe model portfolio being illustrated is a representation of a hypothetical model portfolio and no guarantee is being made that the structure of other similar portfolios will remain the same or that similar results will be achieved.

OUTLOOKStatements concerning financial market trends are based on 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.

Appendix

PORTFOLIO ANALYSISThe portfolio analysis is based on a sample portfolio of index proxies and proposed solutions consisting of a representative accounts. No representation is being made that the structure of the average portfolio or any account will remain the same or that similar returns will be achieved. Results shown may not be attained and should not be construed as the only possibilities that exist. Different weightings in the asset allocation illustration will produce different results. Actual results will vary and are subject to change with market conditions. There is no guarantee that results will be achieved. No fees or expenses were included in the estimated results and distribution. The scenarios assume a set of assumptions that may, individually or collectively, not develop over time. The analysis reflected in this information is based upon data at time of analysis. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.

PORTFOLIO STRUCTUREPortfolio structure is subject to change without notice and may not be representative of current or future allocations

REPRESENTATIVE ACCOUNTThese accounts was chosen because they are the largest accounts in the their respective composites. No guarantee is being made that the structure or actual account holdings of any account will be the same or that similar returns will be achieved. PIMCO 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.

RISKAbsolute return portfolios may not fully participate in strong positive market rallies. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Mortgage and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and their value may fluctuate in response to the market’s perception of issuer creditworthiness; while generally supported by some form of government or private guarantee there is no assurance that private guarantors will meet their obligations. High-yield, lower-rated, securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Entering into short sales includes the potential for loss of more money than the actual cost of the investment, and the risk that the third party to the short sale may fail to honor its contract terms, causing a loss to the portfolio. Tail risk hedging may involve entering into financial derivatives that are expected to increase in value during the occurrence of tail events. Investing in a tail event instrument could lose all or a portion of its value even in a period of severe market stress. A tail event is unpredictable; therefore, investments in instruments tied to the occurrence of a tail event are speculative. Swaps are a type of derivative; swaps are increasingly subject to central clearing and exchange-trading. Swaps that are not centrally cleared and exchange-traded may be less liquid than exchange-traded instruments. Derivatives may involve certain costs and risks such as liquidity interest rate market credit management and the risk that a position could not be closed when most advantageous Investing in derivatives

pg 24

Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Investors should consult their investment professional prior to making an investment decision. Diversification does not ensure against loss.

STRATEGY AVAILABILITYStrategy availability may be limited to certain investment vehicles; not all investment vehicles may be available to all investors. Please contact your PIMCO representative for more information.

TOTAL CARRYTotal Carry refers to the assumed total return a portfolio would potentially achieve over a 3 month period provided that par rates and option adjusted spread (OAS) of each security held in the portfolio and currency exchange rates remain unchanged. This hypothetical example also assumes no defaults are held in the account for the time period calculated. PIMCO makes no representation that any account will achieve similar results and the statistical information provided as total carry in no way reflects the actual returns of any current PIMCO portfolio.

ubs_app_01

Appendix

VOLATILITYWe employed a block bootstrap methodology to calculate volatilities. We start by computing historical factor returns that underlie each asset class proxy from January 1997 through the present date. We then draw a set of 12 monthly returns within the dataset to come up with an annual return number. This process is repeated 25,000 times to have a return series with 25,000 annualized returns. The standard deviation of these annual returns is used to model the volatility for each factor. We then use the same return series for each factor to compute covariance between factors. Finally, volatility of each asset class proxy is calculated as the sum of variances and covariance of factors that underlie that particular proxy. For each asset class, index, or strategy proxy, we will look at either a point in time estimate or historical average of factor exposures in order to determine the total volatility. Please contact your PIMCO representative for more details on how specific proxy factor exposures are estimated.

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. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO and YOUR GLOBAL INVESTMENT AUTHORITY are trademarks or registered trademarks of Allianz Asset Management of America L.P. and Pacific Investment Management Company LLC, respectively, in the United States and throughout the world. ©2014, PIMCO.

INDEX DESCRIPTIONSThe 3-Month LIBOR (London Interbank Offered Rate) Index is an average interest rate, determined by the British Bankers Association, that banks charge one another for the use of short-term money (3 months) in England’s Eurodollar market.

Barclays Global Aggregate (USD Unhedged) Index provides a broad-based measure of the global investment-grade fixed income markets. The three major components of this index are the U.S. Aggregate, the Pan-European Aggregate, and the Asian-Pacific Aggregate Indices. The index also includes Eurodollar and Euro-Yen corporate bonds, Canadian Government securities, and USD investment grade 144A securities.

The Barclays Investment Grade Corporate Index is an unmanaged index that is the Corporate component of the U.S. Credit Index. The index includes both corporate and non-corporate sectors and are publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. The corporate sectors are Industrial, Utility, and Finance, which include both U.S. and non-U.S. corporations. The non-corporate sectors are Sovereign, Supranational, Foreign Agency, and Foreign Local Government.

The Barclays Mortgage-Backed Securities Index is composed of all fixed-rate securitized mortgage pools by GNMA, FNMA, and the FHLMC, including GNMA Graduated Payment Mortgages.

Barclays U.S. Aggregate Index represents securities that are SEC-registered, 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. These major sectors are subdivided into more specific indices that are calculated and reported on a

l b i

pg 25

regular basis.

The JPMorgan Emerging Markets Bond Index Global is an unmanaged index which tracks the total return of U.S.-dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady Bonds, loans, Eurobonds, and local market instruments.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. Since June 2007 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. The index represents the unhedged performance of the constituent stocks, in US dollars.

The Newedge Trend Index is equal-weighted and reconstituted annually. The index calculates the net daily rate of return for a pool of trend following based hedge fund managers.

The S&P 500 Index is an unmanaged market index generally considered representative of the stock market as a whole. The index focuses on the Large-Cap segment of the U.S. equities market.

The S&P/TSX Composite Index is a list of the largest companies on the Toronto Stock Exchange as measured by market capitalization. The Toronto Stock Exchange listed companies in this index comprises about 71% of market capitalization for all Canadian-based companies listed on the TSX.

It is not possible to invest in an unmanaged index.

PIMCO UNCONSTRAINED FULL AUTHORITY COMPOSITE

Oct - Dec 07 1.39 1.36 1.30 N/A N/A N/A Five or Fewer 114 <1 1st $200 Million 0.600%2008 -2.86 -3.18 3.10 N/A N/A N/A Five or Fewer 594 <1 Thereafter 0.550%2009 14.63 13.67 0.36 N/A N/A N/A Five or Fewer 3,951 <1 2010 6.53 5.60 0.28 N/A 4.39 0.42 7 18,358 1 2011 1.41 0.52 0.31 0.57 3.03 0.02 16 23,432 2 2012 9.67 8.73 0.47 1.84 2.09 0.03 21 31,787 22013 -1.38 -2.22 0.28 3.11 2.23 0.03 41 47,066 2

a 1 Month LIBOR (inception - Dec. 2010), thereafter 3 Month LIBOR Index(qtrly reset)b E l i ht d t d d d i ti f l t f ll tf li i th it f th f ll N t t ti ti ll i f l f i d h t th f i hi h fi f tf li i l d d f th f ll

COMPOSITE RETURN (%)

BEFORE FEES

COMPOSITE RETURN (%) AFTER FEES

BENCHMARKa

RETURN (%)

COMPOSITE DISPERSIONb

BEFORE FEES

TOTAL ASSETS (USD) MILLIONS

UNCONSTRAINED FULL AUTHORITY FEE SCHEDULE:

NUMBER OF PORTFOLIOS

PERCENTAGE OF FIRM ASSETS

COMPOSITE 3-YR STD DEVc

BEFORE FEES

BENCHMARK 3-YR STD DEVc

b Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.

Pacific Investment Management Company LLC (PIMCO) is an investment adviser registered with the Securities and Exchange Commission that provides global investment solutions to institutions, individuals, and government entities worldwide. For GIPS compliance purposes, PIMCO has been defined to include its investment management activities as well as those of its subsidiaries, which include PIMCO Australia Pty Ltd, PIMCO Canada Corp., PIMCO Europe Ltd, PIMCO Japan Ltd, PIMCO Asia Pte Ltd, and PIMCO Asia Limited, as well as those of its affiliate PIMCO Deutschland GmbH. In March 2012, the firm was redefined to include assets managed by PIMCO on behalf of Allianz’s affiliated companies. In addition, in January 2010, the firm definition was expanded to include fixed income assets managed in collaboration with Allianz Global Investors using the PIMCO investment process. Prior to 2010, country-specific limitations restricted the full implementation of the PIMCO investment process for these assets. A complete list of composite descriptions is available upon request.

PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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.The Unconstrained Full Authority Composite includes all discretionary, fee-paying, USD-based, Unconstrained Bond accounts that allow Futures (long & short), Options (long & short), Swaps (credit default swaps and interest rate swaps), Non-USD investments (permitted allocation of at least 50%), High Yield (permitted allocation of at least 20%), and Emerging Markets (permitted allocation of at least 30%). PIMCO's Unconstrained Bond Strategy is an absolute return-oriented, investment grade quality fixed income strategy that is not tied to a benchmark nor has significant sector/instrument limitations. The strategy is designed to offer the traditional benefits of a core bond approach – capital preservation, liquidity and diversification – but with higher alpha potential and the opportunity to mitigate downside risk than what is reasonably possible from traditional active fixed income management approaches. The composite creation date is October 2010.The 3-Month LIBOR(London Interbank Offered Rate) Index isan average interest rate, determined by the British Bankers Association, that bankscharge one another for the use of short-term money(3 months) in England’s Eurodollar

GIPS_1062

Past performance is not a guarantee or a reliable indicator of future results.

The 3 Month LIBOR (London Interbank Offered Rate) Index is an average interest rate, determined by the British Bankers Association, that banks charge one another for the use of short term money (3 months) in England s Eurodollar market. The BofA Merrill Lynch U.S. Dollar 1 Month LIBOR (London Interbank Offered Rate) Index is an average interest rate, determined by the British Bankers Association, that banks charge one another for the use of short-term money (1 month) in England's Eurodollar market.Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees, including performance based fees, and, in some instances, custodial and administrative fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Fixed income derivatives are frequently used in a non-leveraged manner as substitutes for physical securities. Futures, options, and swaps may be used to gain, hedge or restructure exposure to interest rates, volatility, spreads, foreign bond markets and currencies within the parameters allowed by individual portfolio guidelines. Use of these instruments may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

PIMCO CORE PLUS - TOTAL RETURN FULL AUTHORITY COMPOSITE

2004 5.65 5.21 4.34 0.48 4.30 4.28 198 143,191 32 1st $25 Million 0.500%2005 3.31 2.89 2.43 0.31 4.09 4.07 213 167,015 32 Next $25 Million 0.375%2006 4.60 4.17 4.33 0.39 3.12 3.21 226 188,043 31 Thereafter 0.250%2007 9.34 8.88 6.97 0.82 3.17 2.77 227 214,649 32 2008 3.79 3.34 5.24 2.54 4.59 3.97 223 223,838 32 2009 14.68 14.17 5.93 2.38 4.99 4.11 207 320,812 342010 9.12 8.62 6.54 1.22 4.91 4.17 211 389,096 312011 4.68 4.20 7.84 1.70 3.68 2.78 216 392,132 292012 10.34 9.86 4.21 0.97 3.05 2.38 221 454,769 232013 -1 50 -1 94 -2 02 0 66 3 66 2 71 205 379 041 20

TOTAL RETURN SEPARATE ACCOUNT FEE SCHEDULE:




BEFORE FEES



BEFORE FEES


BENCHMARKa

RETURN (%)


BEFORE FEES


2013 1.50 1.94 2.02 0.66 3.66 2.71 205 379,041 20

a Barclays U.S. Aggregate Indexb Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.

PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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. The Core Plus - Total Return Full Authority Composite has been examined for the period December 1989 through December 2013. Benchmark returns and composite returns after fees were not examined and are not covered by the report of independent accountants. The verification and performance examination reports are available upon request.The Core Plus - Total Return Full Authority Composite includes all discretionary, fee-paying, U.S. dollar based, Total Return accounts that meet the U.S. Total Return Core Plus Full Authority criteria. PIMCO's Total Return accounts are managed to a core bond strategy that seeks to maximize price appreciation and current income with index-like volatility. Beginning January 1993, accounts must allow futures (long & short), options (long & short), non-U.S. dollar investments (permitted allocation of at least 20%), high yield (permitted allocation of at least 10%) and emerging markets to meet the Full Authority criteria. Beginning January 2013, the composite excludes tax-sensitive accounts with a primary objective of maximizing after-tax returns. The composite creation date is November 2002.


GIPS_1270


a primary objective of maximizing after tax returns. The composite creation date is November 2002.The Barclays U.S. Aggregate Index represents securities that are SEC-registered, taxable, and U.S. 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. Prior to November 2008, the index was published by Lehman Brothers. Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees, including performance based fees, and, in some instances, custodial and administrative fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Fixed income derivatives are frequently used in a non-leveraged manner as substitutes for physical securities. Futures, options, and swaps may be used to gain, hedge or restructure exposure to interest rates, volatility, spreads, foreign bond markets and currencies within the parameters allowed by individual portfolio guidelines. Use of these instruments may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

PIMCO U.S. LARGE COMPANY FUNDAMENTAL INDEXPLUS AR COMPOSITE

Aug-Dec 05 1.23 0.92 1.97 N/A N/A N/A Five or Fewer 465 <1 1st $150 Million 0.600%2006 17.94 17.10 15.79 N/A N/A N/A Five or Fewer 684 <1 Thereafter 0.550%2007 8.55 7.75 5.49 N/A N/A N/A Five or Fewer 670 <1 2008 -42.77 -43.23 -37.00 N/A 18.91 15.08 Five or Fewer 570 <1 2009 58.47 57.25 26.46 N/A 27.54 19.63 Five or Fewer 210 <1 2010 31.45 30.42 15.06 N/A 29.63 21.85 Five or Fewer 334 <12011 6.16 5.33 2.11 N/A 24.44 18.71 Five or Fewer 655 <12012 27.85 26.86 16.00 N/A 16.28 15.09 Five or Fewer 1,296 <12013 35.91 34.85 32.39 N/A 13.38 11.94 Five or Fewer 3,426 <1


BEFORE FEES


BENCHMARKa

RETURN (%)


BEFORE FEES


FUNDAMENTAL INDEXPLUS ABSOLUTE RETURN SEPARATE ACCOUNT FEE SCHEDULE:




BEFORE FEES


a S&P 500 Indexb Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.

Pacific Investment Management Company LLC (PIMCO) is an investment adviser registered with the Securities and Exchange Commission that provides global investment solutions to institutions, individuals, and government entities worldwide. For GIPS compliance purposes, PIMCO has been defined to include its investment management activities as well as those of its subsidiaries, which include PIMCO Australia Pty Ltd, PIMCO Canada Corp., PIMCO Europe Ltd, PIMCO Japan Ltd, PIMCO Asia Pte Ltd, and PIMCO Asia Limited, as well as those of its affiliate PIMCO Deutschland GmbH. In March 2012, the firm was redefined to include assets managed by PIMCO on behalf of Allianz’s affiliated companies. In addition, in January 2010, the firm definition was expanded to include fixed income assets managed in collaboration with Allianz Global Investors using the PIMCO investment process. Prior to 2010, country-specific limitations restricted the full implementation of the PIMCO investment process for these assets. A complete list of composite descriptions is available upon request. PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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.

The U.S. Large Company Fundamental IndexPLUS AR Composite includes all discretionary, fee-paying, USD-based, Fundamental IndexPLUS Absolute Return accounts benchmarked to the FTSE RAFI 1000 Total Return Index. PIMCO's Fundamental IndexPLUS Absolute Return Strategy seeks to consistently deliver attractive excess returns relative to a given equity index over three- to five-year time horizons. The strategy uses equity index derivatives to achieve passive stock market exposure and the collateral backing the derivatives is an actively managed fixed income portfolio with an absolute return orientation in an attempt to provide returns higher than the interest rate embedded in the index. Equity index futures generally comprise the vast majority of an account’s equity exposure, but most accounts may also hold equity index options, options on futures, swaps, and individual stocks. Aggregate equity exposures are managed to remain approximately equal to their underlying market values. Prior to March 2013, the composite was named the StocksPLUS Total Return - Fundamental Index Composite. The composite creation date is March 2006.

GIPS_0976


The S&P 500 Index is an unmanaged market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market. The composite benchmark was changed in August 2012 from the FTSE RAFI Index to the S&P 500 Index effective retroactively to the inception of the composite. The benchmark was changed because in our experience, our clients judge performance relative to the more commonly specified capitalization weighted indexes, such as the S&P 500, rather than the less frequently used passive FTSE RAFI indexes.Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees and, in some instances, custodial and administrative fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

PIMCO CREDIT ABSOLUTE RETURN COMPOSITE

Oct - Dec 11 3.45 3.28 0.09 N/A N/A N/A Five or Fewer 799 <1 On All Assets 0.600%2012 10.25 9.62 0.47 N/A N/A N/A Five or Fewer 1,209 <1 2013 1.84 1.05 0.28 N/A N/A N/A Five or Fewer 4,807 <1

a 3-Month LIBOR Indexb Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.

Pacific Investment Management Company LLC (PIMCO) is an investment adviser registered with the Securities and Exchange Commission that provides global investment solutions to institutions, individuals, and government entities worldwide. For GIPS compliance purposes, PIMCO has been defined to include its investment management activities as well as those of its subsidiaries, which include PIMCO Australia Pty Ltd, PIMCO Canada Corp., PIMCO Europe Ltd,


BEFORE FEES


BENCHMARKa

RETURN (%)


BEFORE FEES


PIMCO CREDIT ABSOLUTE RETURN FEE SCHEDULE:




BEFORE FEES


p p p , g , y , p , p ,PIMCO Japan Ltd, PIMCO Asia Pte Ltd, and PIMCO Asia Limited, as well as those of its affiliate PIMCO Deutschland GmbH. In March 2012, the firm was redefined to include assets managed by PIMCO on behalf of Allianz’s affiliated companies. In addition, in January 2010, the firm definition was expanded to include fixed income assets managed in collaboration with Allianz Global Investors using the PIMCO investment process. Prior to 2010, country-specific limitations restricted the full implementation of the PIMCO investment process for these assets. A complete list of composite descriptions is available upon request.

PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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.The PIMCO Credit Absolute Return Composite includes all discretionary, fee-paying, USD-based, Credit Absolute Return Strategy accounts. The Credit Absolute Return Strategy uses a global approach to credit selection with a focus on generating attractive absolute returns without the constraint of a benchmark. In an effort to achieve this goal, the strategy’s portfolio is constructed from PIMCO’s best bottom-up corporate credit ideas across investment grade, high yield, bank loans and other corporate securities. The composite creation date is September 2011.The 3-Month LIBOR (London Interbank Offered Rate) Index is an average interest rate, determined by the British Bankers Association, that banks charge one another for the use of short-term money (3 months) in England’s Eurodollar market.

Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees and, in some instances, custodial and administrative fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. The three-year annualized ex-post standard deviation of the composite is not presented because 36 monthly returns are not available. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

Fixed income derivatives are frequently used in a non-leveraged manner as substitutes for physical securities. Futures, options, and swaps may be used to gain, hedge or restructure exposure to interest rates, volatility, spreads, foreign bond markets and currencieswithin the parametersallowed by individual portfolio guidelines Use of these instrumentsmay involve certain costs and riskssuch as liquidity interest rate market credit management and the risk that a

GIPS_1446

bond markets and currencies within the parameters allowed by individual portfolio guidelines. Use of these instruments may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

PIMCO MORTGAGE OPPORTUNITIES COMPOSITE

Dec 12 2.23 2.18 0.03 N/A N/A N/A Five or Fewer 257 <1 On All Assets 0.600%2013 4.07 3.45 0.28 N/A N/A N/A Five or Fewer 952 <1

a 3-Month LIBOR Indexb Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.

Pacific Investment Management Company LLC (PIMCO) is an investment adviser registered with the Securities and Exchange Commission that provides global investment solutions to institutions, individuals, and government entities worldwide For GIPScompliance purposes PIMCOhasbeen defined to include its investment management activitiesaswell as those of its subsidiaries which include PIMCO Australia PtyLtd PIMCOCanada Corp PIMCOEurope Ltd


BEFORE FEES


BENCHMARKa

RETURN (%)


BEFORE FEES


MORTGAGE OPPORTUNITIES INSTITUTIONAL FEE SCHEDULE:




BEFORE FEES


worldwide. For GIPS compliance purposes, PIMCO has been defined to include its investment management activities as well as those of its subsidiaries, which include PIMCO Australia Pty Ltd, PIMCO Canada Corp., PIMCO Europe Ltd, PIMCO Japan Ltd, PIMCO Asia Pte Ltd, and PIMCO Asia Limited, as well as those of its affiliate PIMCO Deutschland GmbH. In March 2012, the firm was redefined to include assets managed by PIMCO on behalf of Allianz’s affiliated companies. In addition, in January 2010, the firm definition was expanded to include fixed income assets managed in collaboration with Allianz Global Investors using the PIMCO investment process. Prior to 2010, country-specific limitations restricted the full implementation of the PIMCO investment process for these assets. A complete list of composite descriptions is available upon request.

PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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.The PIMCO Mortgage Opportunities Composite includes all discretionary, fee-paying, USD-based, Mortgage Opportunities accounts. The Mortgage Opportunities strategy invests in a portfolio of mortgage-related assets including, but not limited to, residential and commercial mortgage-backed securities (MBS) and private label residential and commercial MBS, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements. The strategy will invest in a broad array of mortgage-related securities in seeking to generate consistent, absolute returns across full market cycles. The composite creation date is December 2012.The 3-Month LIBOR (London Interbank Offered Rate) Index is an average interest rate, determined by the British Bankers Association, that banks charge one another for the use of short-term money (3 months) in England’s Eurodollar market.

Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees and, in some instances, custodial and administrative fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. The three-year annualized ex-post standard deviation of the composite is not presented because 36 monthly returns are not available. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

Fixed income derivativesare frequentlyused in a non-leveraged manner assubstitutes for physical securities Futures options and swapsmaybe used to gain hedge or restructure exposure to interest rates volatility spreads foreign

GIPS_2295


Fixed income derivatives are frequently used in a non leveraged manner as substitutes for physical securities. Futures, options, and swaps may be used to gain, hedge or restructure exposure to interest rates, volatility, spreads, foreign bond markets and currencies within the parameters allowed by individual portfolio guidelines. Use of these instruments may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

PIMCO FUNDAMENTAL ADVANTAGE ABSOLUTE RETURN COMPOSITE

Apr-Dec 08 1.30 0.63 2.34 N/A N/A N/A Five or Fewer 234 <1 All Assets 0.850%2009 17.54 16.51 0.89 N/A N/A N/A Five or Fewer 1,781 <1 2010 11.63 10.65 0.34 N/A N/A N/A Five or Fewer 4,830 <1 2011 0.35 -0.54 0.31 N/A 7.67 0.11 Five or Fewer 2,042 <1 2012 11.76 10.77 0.47 N/A 4.00 0.03 Five or Fewer 3,257 <1 2013 4.49 3.57 0.28 N/A 4.08 0.03 Five or Fewer 3,149 <1

a 3-Month USD LIBOR Indexb Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variabilityof the composite and the benchmark returns over the preceding 36-month period


BEFORE FEES


BENCHMARKa

RETURN (%)


BEFORE FEES


FUNDAMENTAL ADVANTAGE ABSOLUTE RETURN SEPARATE ACCOUNT FEE SCHEDULE:




BEFORE FEES


c The three year annualized expost standard deviation measures the variability of the composite and the benchmark returns over the preceding 36 month period.


PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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.The Fundamental Advantage Absolute Return Composite includes all discretionary, fee-paying, USD-based accounts managed using the firm's Fundamental Advantage Absolute Return Strategy. PIMCO's Fundamental Advantage Absolute Return Strategy provides long derivative exposure to the Enhanced RAFI 1000 Index hedged by short exposure to the S&P 500 Index and backed by an actively managed fixed income portfolio with an absolute return orientation in an effort to isolate Enhanced RAFI 1000 outperformance. The Enhanced RAFI 1000 seeks to outperform the S&P 500 by eliminating the performance drag caused by systematic overweighting of overpriced stocks and underweighting of underpriced stocks in cap-weighted indices. Prior to March 2013, the composite was named the Fundamental Advantage Total Return Composite. The composite creation date is April 2008.The 3-Month LIBOR (London Interbank Offered Rate) Index is an average interest rate, determined by the British Bankers Association, that banks charge one another for the use of short-term money (3 months) in England’s Eurodollar market. Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees and in some instances custodial and administrative fees When applicable composite performance isnet of any actual withholding tax paid and not reclaimable Index returnsare gross of withholding tax Policies for valuing portfolios

GIPS_0988


and, in some instances, custodial and administrative fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Fundamental Advantage accounts use equity index derivatives to gain exposure to the benchmark index. Total return swaps generally comprise the vast majority of an account’s equity exposure, but most accounts may also hold equity index futures, options, options on futures, and individual stocks. The accounts are unleveraged with account aggregate equity exposures managed to remain approximately equal to their underlying market values. Use of these instruments may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested.

PIMCO TRENDS COMPOSITE

Apr-Dec 09 -9.32 -9.18 0.81 N/A N/A N/A Five or Fewer 3 <1 On All Assets 1.400%2010 9.78 8.52 0.83 N/A N/A N/A Five or Fewer 3 <12011 3.92 1.34 0.57 N/A N/A N/A Five or Fewer 3 <12012 8.45 6.56 0.24 N/A 11.63 0.20 Five or Fewer 5 <12013 -2.68 -4.27 0.25 N/A 10.56 0.14 Five or Fewer 5 <1

a BofA Merrill Lynch 1 Year Treasuryb Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.


BEFORE FEES


BENCHMARKa

RETURN (%)


BEFORE FEES


PIMCO TRENDS FEE SCHEDULE:




BEFORE FEES


Pacific Investment Management Company LLC (PIMCO) is an investment adviser registered with the Securities and Exchange Commission that provides global investment solutions to institutions, individuals, and government entities worldwide. For GIPS compliance purposes, PIMCO has been defined to include its investment management activities as well as those of its subsidiaries, which include PIMCO Australia Pty Ltd, PIMCO Canada Corp., PIMCO Europe Ltd, PIMCO Japan Ltd, PIMCO Asia Pte Ltd, and PIMCO Asia Limited, as well as those of its affiliate PIMCO Deutschland GmbH. In March 2012, the firm was redefined to include assets managed by PIMCO on behalf of Allianz’s affiliated companies. In addition, in January 2010, the firm definition was expanded to include fixed income assets managed in collaboration with Allianz Global Investors using the PIMCO investment process. Prior to 2010, country-specific limitations restricted the full implementation of the PIMCO investment process for these assets. A complete list of composite descriptions is available upon request. A complete list of composite descriptions is available upon request.

PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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.The PIMCO Trends Composite includes all discretionary, fee-paying, USD-based accounts managed to the PIMCO Trends strategy. PIMCO Trends is a momentum trading strategy designed to capture excess returns in markets that trend up and/or down. It is based on systematic rules for investing in liquid instruments across commodities, interest rates, foreign exchange and equity volatility markets. The composite creation date is February 2009.The BofA Merrill Lynch 1 Year Treasury Index is an unmanaged index that tracks the performance of the direct sovereign debt of the U.S. Government having a maturity of less than one year.

Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees, including performance based fees, and, in some instances, custodial and administrative fees. Certain accounts in this composite are charged performance-based fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

Fixed income derivativesare frequentlyused in a non-leveraged manner assubstitutes for physical securities Futures options and swapsmay be used to gain hedge or restructure exposure to interest rates volatility spreads foreign

GIPS_2080


Fixed income derivatives are frequently used in a non-leveraged manner as substitutes for physical securities. Futures, options, and swaps may be used to gain, hedge or restructure exposure to interest rates, volatility, spreads, foreign bond markets and currencies within the parameters allowed by individual portfolio guidelines. Use of these instruments may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

PIMCO STOCKSPLUS ABSOLUTE RETURN COMPOSITE

2004 14.44 13.64 10.88 N/A N/A N/A Five or Fewer 697 <1 Base fee on all assets 0.150%2005 4.97 4.13 4.91 N/A 9.55 9.04 Five or Fewer 417 <1 Participation rate 2006 14.75 14.21 15.79 N/A 7.34 6.82 Five or Fewer 808 <1 on excess over index 15%2007 8.89 8.32 5.49 N/A 7.62 7.68 Five or Fewer 819 <1 2008 -43.55 -43.79 -37.00 N/A 18.81 15.08 Five or Fewer 319 <1 2009 42.31 41.57 26.46 N/A 25.12 19.63 Five or Fewer 356 <12010 26.71 25.71 15.06 N/A 27.12 21.85 Five or Fewer 520 <12011 3.34 2.55 2.11 N/A 22.02 18.71 Five or Fewer 424 <12012 27.39 26.50 16.00 N/A 16.36 15.09 Five or Fewer 1,032 <12013 31.19 30.39 32.39 N/A 13.74 11.94 Fiveor Fewer 1,393 <1


BEFORE FEES


BENCHMARKa

RETURN (%)


BEFORE FEES


STOCKSPLUS ABSOLUTE RETURN SEPARATE ACCOUNT FEE SCHEDULE:




BEFORE FEES


2013 31.19 30.39 32.39 N/A 13.74 11.94 Five or Fewer 1,393 1

a S&P 500 Indexb Equal-weighted standard deviation of annual returns for all portfolios in the composite for the full year. Not statistically meaningful for periods shorter than a year or for years in which five or fewer portfolios were included for the full year.c The three-year annualized ex-post standard deviation measures the variability of the composite and the benchmark returns over the preceding 36-month period.


PIMCO claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. PIMCO has been independently verified for the period January 1987 through December 2013 by PricewaterhouseCoopers LLP. 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. The StocksPLUS Absolute Return Composite has been examined for the period July 2002 through December 2012. Benchmark returns and composite returns after fees were not examined and are not covered by the report of independent accountants. The verification and performance examination reports are available upon request.

The StocksPLUS Absolute Return Composite includes all discretionary, fee-paying, USD-based, StocksPLUS Absolute Return accounts benchmarked to the S&P 500 Index. PIMCO's StocksPLUS Absolute Return Strategy seeks to consistently deliver attractive excess returns relative to a given equity index over three- to five-year time horizons. The strategy uses equity index derivatives to achieve passive stock market exposure and the collateral backing the derivatives an actively managed fixed income portfolio with an absolute return orientation in an attempt to provide returns higher than the interest rate embedded in the index. Equity index futuresgenerallycomprise the vast majority of an account’s equity

GIPS_1000


managed fixed income portfolio with an absolute return orientation in an attempt to provide returns higher than the interest rate embedded in the index. Equity index futures generally comprise the vast majority of an account s equity exposure, but most accounts may also hold equity index options, options on futures, swaps, and individual stocks. Aggregate equity exposures are managed to remain approximately equal to their underlying market values. Prior to March 2013, the composite was named the StocksPLUS Enhanced Equity - Total Return Composite. The composite creation date is September 2002.The S&P 500 Index is an unmanaged market index generally considered representative of the stock market as a whole. The index focuses on the large-cap segment of the U.S. equities market.

Valuations are computed and performance is reported in U.S. dollars. Returns are presented gross and net of management fees and include the reinvestment of all income. Net results reflect the deduction of actual management fees, including performance based fees, and, in some instances, custodial and administrative fees. When applicable, composite performance is net of any actual withholding tax paid and not reclaimable. Index returns are gross of withholding tax. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. Diversification does not ensure against loss.

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