PDF Stable Value Fund Q3 2017 2% Fund Characteristics (Book Value) 1%

Stable Value Fund

Q3 2017

Objective of the Fund The objective of the Stable Value Fund ("Fund") is to preserve your principal investment and generate a stable rate of return.

Although this Fund is managed as a low risk investment option, there is no guarantee that the Fund's objectives will be achieved. All investments are subject to potential loss, including the investment contracts that this fund utilizes, which may lose value if the institutions issuing the contracts suffer insolvency. The Fund may also be subject to losses if assets are withdrawn under certain events (Plan terminations, Plan changes, Fund manager changes, termination of contract issuers, changes in laws or regulations, etc.). Under these types of events, losses may occur on withdrawals as assets are paid out at prevailing market values, which may differ from the prevailing book value of the fund.

Investment Strategy The Fund invests in a diversified group of high-quality, fixed-income investments, consisting of:

High-quality debt securities, including

mortgage-backed, commercial mortgagebacked, asset-backed and corporate (credit) securities within contracts that are intended to minimize market volatility;

Investment contracts which are obligations

of credit-worthy life insurance companies;

Short-term money market instruments and

collective investment trusts, to the extent they are consistent with the investment objectives of the Fund.

The principal and interest from these investments are strategically reinvested.

Fund Manager Bank of America selected Standish, a registered investment advisory firm to manage the assets in the Stable Value Fund. Located in San Francisco, Standish's stable value team manages nearly $19.1 billion1 in stable value assets. Headquartered in Boston, Standish is one of the nation's largest asset managers specializing in fixed income securities.

1 As of September 30, 2017. Includes assets managed by Standish personnel acting in their capacity as officers of The Bank of New York Mellon, another subsidiary of The Bank of New York Mellon Corporation.

Fund Characteristics (Book Value)

Assets: $4,817.0 mm

Yield: 2.12%

Duration: 3.11 years

Fund Performance

The Standish Mellon Asset Management Company LLC (Standish) has managed the Stable Value Fund since January 1, 2009. This Fund seeks to offer plan participants consistently higher returns than money market funds and US Treasuries of comparable maturity over a long-term investment horizon. The Fund seeks to preserve principal while the investment return typically changes through time as interest rates rise and fall.

Performance Results (%)

3%

2%

1%

0%

As of September 30, 2017 n Stable Value Fund 3

Quarter

YTD

0.53

1.54

n BofA ML US 3-Month Treasury Bill Index 4

0.26

0.57

n Ryan Labs 3-5 Year GIC Index 5

0.45

1.33

1-Year 2.07 0.65 1.75

3-Years 2.10 0.32 1.63

5-Years 2.15 0.22 1.69

Since Inception2

2.59

0.18

2.53

All returns shown greater than one year are compound annual returns. Past performance is not a guarantee of future results and should not be the basis for investment decisions.

2 Inception of the Stable Value Fund is January 1, 2009. 3 Individual participant returns may vary slightly. Returns are net of Standish's investment advisory fees and book

value wrap fees. Standish's investment advisory fees are approximately 0.03% annually. 4 The BofA ML US 3-Month Treasury Bill Index is comprised of a single issue purchased at the beginning of the month

and held for a full month. At the end of the month that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding Treasury Bill that matures closest to, but not beyond, three months from the rebalancing date. To qualify for selection, an issue must have settled on or before the monthend rebalancing date. While the index will often hold the Treasury Bill issued at the most recent 3-month auction, it is also possible for a seasoned 6-month Bill to be selected. 5 Represents the blended average yield of a hypothetical portfolio of thirty-six 3-year and sixty 5-year GIC contracts. Each month, the Index invests in new GICs with yields equal to the average of the ten highest quotes of highly-rated GIC issuers (each issuer must meet specific quality constraints). The index has a duration of approximately 2.0 years.

Market Commentary

The yield curve shifted slightly higher throughout the quarter as the domestic economy remains buoyant supported by a healthy combination of low unemployment, mild inflation and encouraging growth. Favorable equity market performance continues to garner significant attention while low volatility and subtle spread tightening in fixed income markets has been well received. Interest rates trended higher throughout the quarter and by quarter end the yield of the two-year US Treasury note increased 10 basis points to 1.48% while the five-year US Treasury note yield increased 5 basis points to 1.93% and the ten-year US Treasury note yield climbed 3 basis points to 2.33%. Much of the upward pressure on short term interest rates continues to be driven by anticipated increases in the target Federal Funds rate as directed by the Federal Open Market Committee (FOMC). The FOMC met twice during the quarter and on both occasions left the target rate unchanged at a range of 1.00% to 1.25%. Two FOMC meetings are on tap during the fourth quarter and it is generally believed that the FOMC will increase the target rate by 0.25% at their last meeting of the year in December. While interest rate normalization remains one of the FOMC's primary goals, two key components (unemployment and inflation) continue to hover near FOMC expectations. The current unemployment rate is 4.2% - having just dropped 0.2% in September. Inflation (as measured by the annual change in the price index for personal consumption expenditures, or PCE) recently measured 1.3% but could very well increase given recent strong gains in average hourly earnings. Both of these indicators are fairly consistent with the FOMC's long run statutory mandate of an unemployment rate between 4.4% and 5.0% combined with inflation of less than 2.0%. Domestic growth, as measured by Gross Domestic Product (GDP), measured 3.1% in the second quarter ? an encouraging pickup from lack luster growth experienced late last year and in the first quarter of this year.

BNY Mellon Investment Management is one of the world's leading asset management organizations, encompassing BNY Mellon's affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand for

The Bank of New York Mellon Corporation. Standish is a BNY Mellon investment management firm.

Q3 2017 | Stable Value Fund

Definitions

Asset-Backed Securities (ABS) purchased by the Fund are typically fixed rate securities whose value is tied to the cash flows from a pool of receivables or other similar type assets. There are a variety of assets used as the underlying collateral, including auto loans, credit card receivables, utility receivables and home equity loans. These are typically rated AAA/Aaa with weighted average maturities between two and five years.

Cash Investments are investments in high quality, short term liquid assets such as commercial paper, certificates of deposit, repurchase agreements, and time deposits. Such investments, which are typically made through a collective trust or mutual fund, provide daily liquidity and stability of invested principal.

Commercial Mortgage-Backed Securities (CMBS) purchased by the Fund are typically fixed rate bonds that are privately created using expected cash flows from large pools of mortgage loans. Underlying collateral in most CMBS structures are mortgages on commercial properties (e.g., office buildings, hotels, shopping malls and apartment buildings) and are typically rated AAA/Aaa. Weighted average maturities can vary, but usually are between three and ten years.

Credit allocation in the Fund includes debt securities issued by United States companies and multinational entities. These are dollar denominated, fixed rate debt obligations with average maturities between one and ten years. Credit quality is investment grade (BBB-/Baa3 minimum).

Guaranteed Investment Contracts (GICs) are debt obligations issued by life insurance and annuity companies that are typically rated AA/Aa or higher. These contracts have fixed coupons and maturities typically between two and five years.

GNMA Project Loans are mortgage loans on nonsingle-family properties. Loans may fund apartments, condominiums, cooperatives, landdevelopment, nursing homes, assisted-living facilities, or hospitals. GNMA project loans are government guaranteed, typically fixed rate and range in maturity between one and four years.

Government includes United States Treasury and Government Agency debt obligations with maturities between one and thirty years.

Mortgage-Backed Securities (MBS) purchased by the Fund are typically fixed rate bonds created using expected cash flows from large pools of residential mortgage loans issued through one of three federally sponsored agencies (Fannie Mae, Freddie Mac or Ginnie Mae). Generally, MBS have average maturities between three and ten years.

Stable Value Pooled Funds are bank-sponsored funds, that "pool" together unaffiliated plans for investment purposes to collectively purchase stable value investment products. These funds seek to provide consistent returns, daily liquidity, substantial diversification and high credit quality. These funds may also be referred to as collective funds or commingled funds.

Portfolio Diversification Diversification helps to reduce portfolio risk by decreasing sector and company-specific exposure. Fund assets are managed in an effort to diversify across many fixed income asset sectors and, within those sectors, to diversify among multiple issuers. However, diversification does not ensure a profit or guarantee against a loss.

Sector Diversification as of September 30, 2017

MortgageBacked

Securities (28%)

Credit (26%)

Other (1%)

CMBS (4%)

Cash Investments

(7%) Asset-Backed Secu rities (11%)

Government (23%)

Portfolio Guideline Standards

The Standish and Bank of America, as plan sponsor, work together to develop and

maintain strict guideline standards that are applied for selecting investments for the

Stable Value Fund. The financial health of every institution considered as an investment

issuer for the Fund is analyzed to help maintain these standards.

Credit Quality1 (Standard & Poor's) as of September 30, 2017

AAA (33%)

AA+ to AA(17%)

A+ to A(10%)

BBB (10%)

Government (23%)

Cash Investments

(7%)

Maturity Breakdown3 as of September 30, 2017

1 year to 2 years

11%

2 years to 3 years

10%

3 years to 4 years

64%

More than 4 years

15%

1 External managers may be used as part of the overall investment strategy and their credit rating methodology and data provided therein are used to calculate the average credit quality of the portfolio.

2 Standard & Poor's A and BBB credit quality issues reside within the diversified indexed and actively-managed portfolios. 3 Excludes cash, calculated using duration of investment contracts.

Additional Information

The Stable Value Fund is not a mutual fund; therefore it does not have a ticker

symbol or CUSIP. It is a separately managed account solely for the benefit of Bank

of America employees.

The comments provided herein are a general market overview and do not constitute investment advice, are not predictive of any future market performance, are not provided as a sales or advertising communication, and do not represent an offer to sell or a solicitation of an offer to buy any security. These views are current as of the date of this communication and are subject to rapid change as economic and market conditions dictate. Though these views may be informed by information from publicly available sources that we believe to be accurate, neither Standish nor The Bank of New York Mellon can make any representation as to the accuracy of such sources nor the completeness of such information. There can be no guarantee that the Fund's objective will be achieved, and current investments are subject to potential loss if the issuing institutions suffer insolvency. Portfolio composition is subject to change, and past performance is no indication of future performance.

Please note that this presentation does not comply with all of the disclosure requirements for an ERISA "section 404(c) plan," as described in the Department of Labor regulations under 404(c) Plan sponsors intending to comply with those regulations will need to provide the plan participants with additional information. This presentation is provided for general information only and should not be construed as investment advice or a recommendation. You should consult with your advisor to determine whether any particular investment strategy is appropriate.

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download