Professional Documents
Culture Documents
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FPA Crescent
Fund
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FPACX*
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Philosophy
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Seek long-term, equity-like returns with less risk than the stock market while avoiding
permanent impairment of capital
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Performance
Annualized returns
Standard deviation
$120,000
$100,000
$80,000
$40,000
$20,000
$0
1993
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1995
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P
1997
1999
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2001
S&P 500
10.37%
10.13%
8.79%
14.70%
7.81%
9.00%
0.53
0.26
0.31
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Sharpe ratio
$60,000
FPA Crescent
2003
2005
2007
2009
2011
2013
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FPACX
$90,556
S&P 500
$65,604
60% S&P/40% BA
$53,651
2015
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Performance
Trailing Performance (%)
As of Date: 9/30/2015
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Inception* 20 Years
FPA Crescent
S&P 500
CPI
60% S&P500/40% BC Agg
10.37
8.79
NA
7.81
15 Years
9.75
8.14
2.22
7.43
10 Years
FPA Crescent
S&P 500
CPI
60% S&P500/40% BC Agg
2013
2012
6.64
13.69
0.68
10.62
21.95
32.39
1.53
17.56
10.33
16.00
1.77
11.31
3 Years
1 Year
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YTD
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10.15
3.96
2.11
4.81
2014
5 Years
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6.90
6.80
1.80
6.22
8.41
13.34
1.71
9.33
8.08
12.40
0.92
8.14
-2.34
-0.61
-0.03
0.95
-4.73
-5.29
0.54
-2.62
QTR
-4.73
-6.44
-0.09
-3.39
3/25/0010/9/07
10/10/079/30/15
14.70
2.00
2.75
3.97
5.95
4.85
1.71
5.14
2011
2010
2009
2008
2007
2006
2005
2004
2003
3.02
2.11
3.03
4.69
12.04
15.06
1.44
12.13
28.37
26.46
2.81
18.40
-20.55
-37.00
-0.02
-22.06
6.84
5.49
4.11
6.22
12.43
15.79
2.52
11.12
10.83
4.91
3.34
4.00
10.21
10.88
3.34
8.30
26.15
28.68
2.04
18.48
Performance is annualized for periods exceeding 1 Year. Past performance is not a guarantee of future results. Calculated using Morningstar Direct.
Expense ratio as of the most recent prospectus is 1.11%.
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*The Fund commenced investment operations on June 2, 1993. The performance shown for periods prior to March 1, 1996 reflects the historical performance of a predecessor
fund. FPA assumed control of the predecessor fund on March 1, 1996. The FPA Crescent Fund's objectives, policies, guidelines and restrictions are, in all material respects,
equivalent to those of the predecessor fund.
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Market Cycle Performance reflects two most recent market cycles (peak to peak) defined as a period that contains a decline of at least 20% from the previous market peak over at
least a two-month period and a rebound to establish a new peak above the previous one by S&P 500 Index.
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This presentation is for informational purposes only and does not constitute an offer of securities nor the solicitation for purchase or sale of any securities.
This presentation is confidential and is not intended for public use or distribution. The information presented may not be reproduced or distributed without prior written consent of
First Pacific Advisors, LLC (FPA). Certain information contained herein has been obtained from third parties and is believed to be reliable; however, FPA assumes no
responsibility for the accuracy of the information.
Past performance is no guarantee of future results and current performance may be higher or lower than performance shown. This data represents past performance and
investors should understand that investment returns and principal values fluctuate, so that when you redeem your investment it may be worth more or less than its original cost.
Current month-end performance data may be obtained by calling toll-free, 1-800-982-4372.
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90%
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80%
70%
60%
50%
40%
30%
1996
1998
Risk
Exposure
2000
c
a
# of Quarterly
Periods
ri s
P
t
fi i
2002
2004
Avg Subsequent
2-Yr Return
2006
2008
2010
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2012
C
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2014
Risk
Exposure
# of Quarterly
Periods
Avg Subsequent
2-Yr Return
<55%
20
6.46%
<60%
30
7.98%
>65%
33
10.93%
<65%
38
9.03%
>70%
21
13.15%
<70%
50
8.55%
>75%
14
14.81%
>80%
11
15.03%
Source: Morningstar Direct. Last data point as of September 30, 2015. Past performance is no guarantee of future results.
4
FPA Crescent
20%
0%
-10%
-20%
-30%
-30%
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ri s
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FPACX
-20%
S&P 500
FPACX Outperformed
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10%
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-10%
0%
10%
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20%
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30%
S&P 500
9.54%
8.71%
12.12%
-1.81%
3.30%
18.37%
100% of periods
97.5% of periods
16.3% of periods
(49 of 49)
(77 of 79)
(13 of 80)
Rolling 5-year monthly returns as of September 30, 2015. Past performance is not a guarantee of future results.
Source: Morningstar Direct.
5
2007 to
2015
CAGR
9 Mos
YTD
2015
2014
9.05%
-7.64%
13.67%
39.62%
17.69%
6.25%
S&P 500
5.76%
-5.29%
13.69%
32.39%
16.00%
3.29%
-2.35%
-0.02%
7.23%
3.68%
-8.66%
12.36%
5.37%
1.02%
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2013
2012
2011
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2010
2009
2008
22.30%
38.39%
-38.27%
11.47%
2.11%
15.06%
26.46%
-37.00%
5.49%
1.69%
4.14%
7.24%
11.93%
-1.27%
5.98%
31.99%
17.68%
-0.48%
15.10%
21.18%
-39.22%
1.99%
7.63%
0.01%
6.73%
7.20%
17.21%
0.95%
9.48%
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1.31%
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2007
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FPA Crescents long-term approach to investing has led to low portfolio turnover and tax efficiency compared to other,
similar funds.
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This has meant that FPA Crescents tax-adjusted Morningstar category rankings are as good or better than its
pre-tax rankings.
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15-year
10-year
P
t
5-year
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fi i
10.15%
6.90%
8.41%
FPA Crescent
Tax-adjusted
Return
FPA Crescent
Tax-adjusted
Rank
99%
9.13%
99%
95%
5.80%
95%
75%
7.43%
81%
As of September 30, 2015. FPA Crescent is in the Morningstar Moderate Allocation Category. Past performance is not a guarantee of future results.
Source: Morningstar Direct.
7
Winners
Performance
Contribution
Percent of
Portfolio
Losers
0.20%
1.52%
Oracle
Sound Holding FP
0.05%
0.37%
Joy Global
Microsoft
0.04%
3.58%
0.03%
0.36%
0.03%
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Performance
Contribution
Percent of
Portfolio
-0.38%
4.10%
-0.37%
0.28%
Aon
-0.35%
3.25%
Citigroup
-0.26%
2.65%
United Technologies
-0.25%
2.57%
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0.00%
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Based on weighted contribution to quarterly performance of the Fund. Percentage of portfolio as of September 30, 2015.
As of September 30, 2015. Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as
recommendations by the Fund, its Advisor or Distributor. The discussions of Fund investments represent the views of the Fund's managers at the time of each report and are
subject to change without notice. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any First Pacific Advisors portfolio.
Security examples featured are samples for presentation purposes and are intended to illustrate our investment philosophy and its application. It should not be assumed that
most recommendations made in the future will be profitable or will equal the performance of the securities.
Past performance is not a guarantee of future results. Please refer to the back of the presentation for full disclosure information.
Portfolio characteristics
FPACX
Q3 2015
Market Capitalization (in millions)1
Price/Earnings2
Price/Book3
Debt/Capital4
Return on Equity5
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FPACX
Average
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$94,789
$29,100
16.9
16.7
1.6
1.7
L
,
S&P 500
$128,470
18.9
2.6
-20.9%
8.5%
52.2%
13.2%
12.8%
17.5%
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Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. This data represents past performance and
investors should understand that investment returns and principal values fluctuate, so that when you redeem your investment it may be worth more or less than its original
cost. Current month-end performance data may be obtained via http://www.fpafunds.com/crescent or by calling toll-free, 1-800-982-4372.
Geographic exposure
Domicile
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North America
South America / Latin America
Uncategorized Americas
Western / Northern Europe
Central / Eastern Europe
Asia / Pacific
Middle East / Africa
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Uncategorized Non-US
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Revenue
70.4%
43.9%
0.0%
2.3%
6.4%
25.1%
13.7%
3.9%
1.4%
-3.7%
8.2%
4.3%
7.5%
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16.6%
Domicile and revenue composition for the equity positions only in the FPA Crescent Fund as of September 30, 2015. Source: Bloomberg
10
Portfolio allocation
Risk Asset
Q3 2015
s
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Year End
2014
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A
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L
,
Average
Since Inception
58.1%
55.5%
-3.1%
-4.2%
3.4%
1.4%
12.4%
0.9%
1.4%
0.6%
0.4%
0.8%
0.3%
59.7%
54.9%
63.3%
53
51
38
Corporate debt
Mortgages
Other
Exposure, Net
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53.2%
-4.8%
Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as
recommendations by the Fund, its Advisor or Distributor. The discussions of Fund investments represent the views of the Fund's managers at the time of each
report and are subject to change without notice. These views may not be relied upon as investment advice or as an indication of trading intent on behalf of any
First Pacific Advisors portfolio. Security examples featured are samples for presentation purposes and are intended to illustrate our investment philosophy and its
application. It should not be assumed that most recommendations made in the future will be profitable or will equal the performance of the securities.
11
Risk Exposure
3/31/2015
6/30/2015
7/31/2015
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8/31/2015
a
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9/30/2015
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Source: FPA.
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A
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12/31/2014
54.9%
55.7%
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57.6%
54.6%
55.5%
59.7%
12
Positions exited
Purchases - % average AUM
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2015 9 mos
14
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Positions initiated
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Q3 2015
11.9%
20.6%
9.3%
15.6%
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Source: FPA. Positions initiated and exited are for equity and high yield debt positions only. Average AUM for Q3 2015 represents the average net assets of
the fund at each month end from 6/30/2015 9/30/2015. Average AUM for 2015 9 mos represents the average net assets of the fund at each month end
from 12/31/2014 9/30/2015.
13
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Average trailing P/E of companies purchased and sold in 2015, including both positions initiated and liquidated:
P/E
Sells
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Buys
14.4x
19.4x
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Disclaimer: P/E uses income in the denominator, even though income can be vastly different than free cash flow. We therefore use free cash flow. In
addition, trailing metrics may not be reflective of a business earnings power.
Source: Bloomberg. As of September 30, 2015. P/E ratios were calculated using the Funds average purchase or sales price divided by trailing 12 months
diluted earnings per share from continuing operations.
14
45
40
Price-Earnings Ratio
35
Oct. 2, 2015
Current
Since 1881
Since 1930
Since 1950
Since 1970
P/E
24.8
16.6
17.6
19.0
19.6
10-Year UST
2.00%
4.60%
5.10%
5.83%
6.69%
o
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A
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30
25
20
15
c
a
10
5
0
1881
P
t
1894
s
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1908
1921
L
,
18%
16%
14%
12%
10%
8%
fi i
6%
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50
C
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4%
2%
0%
1934
1948
1961
1974
1988
2001
2015
Interest Rate
Source: Shiller, Robert J. Online Data Robert Shiller, www.econ.yale.edu/~shiller/data.htm, and Bloomberg. Data as of October 2, 2015. P/E or price-to-earnings is a valuation
ratio of a companys current share price compared to its per-share earnings. Past performance is no guarantee of future results.
15
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16
US Treasury yields
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16%
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A
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14%
12%
10%
8%
6%
4%
2%
0%
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Source: Federal Reserve Bank of St. Louis. Data from January 4, 1982 October 27, 2015.
17
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18%
16%
14%
12%
10%
8%
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a
6%
4%
P
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2%
fi i
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30%
25%
20%
15%
10%
5%
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% of Assets in High Yield
35%
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20%
C
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0%
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2,000
1,800
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A
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1,600
1,400
1,200
1,000
800
600
400
200
0
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a
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i
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L
,
C
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Index
9 Mos
YTD 2015
-4.03%
Source: Barclays and Morningstar. Graph represents the Barclays U.S. Corporate High Yield Index spread relative to U.S. Treasuries from 8/15/2000 9/30/2015.
19
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2,000
1,800
o
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v
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A
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1,600
1,400
1,200
1,000
800
600
400
200
0
t
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a
P
i
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i
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L
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Source: Barclays. Graph represents the Barclays U.S. Corporate High Yield Index and its energy sub-component spreads over U.S. Treasuries from
8/15/2000 9/30/2015.
20
s
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t
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A
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L
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US primary dealers holdings of corporate debt securities have declined by over 80% since peaking in October 2007. Note: The data are split into two time
periods (July 2001 March 2013 and April 2013 Now) due to changes in data structure. Source: New York Fed, CLSA.
21
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*Free cash flow after investment required to sustain competitive position and pursue organic growth
This example is provided to assist in understanding the research used by the Advisor. It is not meant to be construed as a prediction of the future
return of this security. Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should
not be construed as recommendations by the Fund, its Advisor or Distributor.
22
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Leading Franchises
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Ubiquitous, necessary businesses in attractive markets. Sustainable, long-term business prospects for Otis, Carrier and Pratt.
Diversified by end market, product, cycle, technology and geography.
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Compelling Economics
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FPA expects UTXs businesses to grow on back of long-term macro drivers, resulting in an attractive 10%+ long-term
owners return (FCF + growth)
Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as
recommendations by the Fund, its Advisor or Distributor. As of 9/30/2015, United Technologies represented 2.57% of Crescent Funds total net assets.
Source: Company reports.
24
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Shareholder Focus
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UTX business grows and throws FCF we expect continued shareholder friendly use of FCF and balance sheet consistent
with company history and reputation of new CEO Greg Hayes
Compelling Valuation
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Portfolio composition will change due to ongoing management of the Fund. References to specific securities or sectors should not be construed as
recommendations by the Fund, its Advisor or Distributor. As of 9/30/2015, United Technologies represented 2.57% of Crescent Funds total net assets.
Source: Company reports.
25
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Q&A
t
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$30,000
FPACX
S&P 500
L
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10/10/2007 9/30/2015
Russell 2500
FPACX
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S&P 500
$16,000
o
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A
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$25,000
$14,000
$20,000
$12,000
$10,000
$15,000
MSCI ACWI
C
L
$8,000
$10,000
$6,000
$5,000
a
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Annualized
Return
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$4,000
Max
Drawdown
Annualized
Return
Max
Drawdown
14.70%
-10.94%
5.95%
-28.84%
2.00%
-44.73%
4.85%
-50.95%
8.08%
-27.27%
MSCI ACWI
0.93%
-54.92%
3.97%
-22.82%
5.14%
-32.54%
Market Cycle Performance reflects two most recent market cycles (peak to peak) defined as a period that contains a decline of at least 20% from the previous market peak over at least a twomonth period and a rebound to establish a new peak above the previous one by S&P 500 Index.
1 We
make a distinction between cash and liquidity, although we sometimes use them interchangeably. Cash includes the cash received from securities sold short and, as a result, can appear
to overstate the cash balance. Therefore, we believe liquidity, which nets that out, is the more appropriate measure. Past performance is no guarantee of future result.
27
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We believe our flexible approach greatly enhances the likelihood that we will deliver an equity-like return with less
risk over the long-term. (FPA Crescent Policy Statement)
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Long-term will generally include bear markets (20% declines) and other large corrections.
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We have successfully protected capital better than the S&P 500 during large drawdowns:
Ten largest S&P 500 drawdowns since FPA Crescents 1993 inception
Drawdown
within the
following period
2007 2009
1999 2002
2011
1998
2010
a
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2002 2003
t
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2015
1994
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2012
1996 1997
S&P 500
FPA Crescent
FPA Crescent
Downside Capture
as % of S&P 500
-50.95%
-28.84%
57%
-44.73%
-20.00%
45%
-16.26%
-11.58%
71%
-15.37%
-14.80%
96%
-12.80%
-5.98%
47%
-9.72%
-4.33%
45%
-8.36%
-6.29%
75%
-6.96%
-3.87%
56%
-6.60%
-5.36%
81%
-5.60%
-3.04%
54%
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Average
63%
1H 2015
Q3 2015
9 Mos
YTD 2015
5.62%
3.96%
4.83%
0.00%
1.71%
5.52%
1.23%
8.74%
2.63%
2.66%
4.75%
-1.52%
-0.61%
0.45%
0.76%
2.95%
-4.42%
-5.29%
-8.59%
-4.73%
-6.83%
-10.23%
-6.44%
-13.06%
-8.45%
-9.45%
-11.92%
-7.25%
-8.39%
-10.33%
-10.73%
-17.90%
0.95%
-1.54%
-4.17%
-4.73%
-5.24%
-5.28%
-5.29%
-5.47%
-6.04%
-7.04%
-7.73%
-8.66%
-8.96%
-9.92%
-10.06%
-15.47%
5.79%
-0.23%
6.02%
-7.84%
-9.18%
1.34%
-2.55%
-9.40%
6.84%
0.23%
-5.79%
-1.23%
-2.66%
4.45%
3.11%
1.71%
4.72%
4.67%
-2.18%
0.56%
2.31%
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FPACX vs.
Value index average
Growth index average
S&P 500
MSCI ACWI
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Growth
Value
As of June 30, 2015 and September 30, 2015. Past performance is not a guarantee of future results.
Source: Morningstar Direct. All index performance numbers are in USD with dividends reinvested.
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4.88%
0.35%
0.95%
2.25%
1.33%
Consumer Staples
Anheuser-Busch Inbev SA/NV ADR
Carlsberg A/S B
CVS Caremark
Henkel AG & Co. KGAA
Orkla ASA
Unilever N.V.
Walgreens Boots Alliance Inc.
4.93%
0.67%
1.03%
0.27%
0.62%
0.56%
0.95%
0.83%
Energy
Bennu Oil & Gas Series A
Bennu Oil & Gas Series B
Canadian Natural Resources Limited
Gazprom OAO - ADR
Halliburton Company
Lukoil OAO - ADR
Occidental Petroleum
Rosneft Oil Company Reg S GDR
Surgutneftegas-Preference
2.50%
0.00%
0.00%
0.37%
0.28%
0.20%
0.27%
1.13%
0.12%
0.13%
Financials
Alleghany Corporation
American Express Company
American International Group, Inc.
Aon
Bank of America Corporation
CIT Group
Citigroup
Groupe Bruxelles Lambert S.A.
Sberbank of Russia Preference
Sberbank of Russia - ADR
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Health Care
Express Scripts
Thermo Fisher Scientific Inc.
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Industrials
Esterline Technologies Corporation
General Electric Co.
Jardine Matheson Holdings Limited
Jardine Strategic Holdings Limited
Joy Global Inc.
Meggitt PLC
United Technologies Corporation
1.79%
0.59%
1.20%
16.20%
1.15%
0.27%
2.09%
0.78%
0.74%
3.58%
4.10%
0.81%
2.14%
0.54%
Materials
Alcoa Inc.
MMC Norilsk Nickel OJSC - ADR
Owens-Illinois
3.53%
2.21%
0.35%
0.97%
Telecommunication Services
Vodafone Group Plc - ADR
0.20%
0.20%
Other
Undisclosed
3.04%
3.04%
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3.40%
0.00%
0.37%
0.19%
0.37%
0.36%
0.13%
0.72%
0.39%
0.47%
0.17%
0.23%
Mortgages
Stanwich Mortgage Loan Trust (Various
issues)
Sunset Mortgage Loan Company
0.87%
Derivatives/futures
0.15%
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Information Technology
Analog Devices, Inc.
Arris Group, Inc.
Cisco Systems
Google Inc. Class A
Google Inc. Class C
Microsoft
Oracle Corporation
Qualcomm Incorporated
TE Connectivity
Yahoo
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13.28%
0.70%
0.26%
2.50%
3.25%
1.50%
1.07%
2.65%
1.11%
0.10%
0.14%
7.43%
1.05%
1.48%
0.32%
0.29%
0.28%
1.44%
2.57%
0.20%
0.67%
40.27%
36.30%
3.97%
100%
-3.13%
0.66%
0.37%
0.29%
Portfolio composition will change due to ongoing management of the Fund. References to specific securities
or sectors should not be construed as recommendations by the Fund, its Advisor or Distributor.
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Disclaimer
These slides are intended as supplemental material to the 3rd Quarter 2015 FPA Crescent audio presentation that is posted on our website fpafunds.com.
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We do want to make sure you understand that the views expressed on these slides and in the accompanying audio presentation are as of today, October 29, 2015 and are subject to change
based on market and other conditions. These views may differ from other portfolio managers and analysts of the firm as a whole, and are not intended to be a forecast of future events, a guarantee
of future results or investment advice. Any mention of individual securities or sectors should not be construed as a recommendation to purchase or sell such securities, and any information
provided is not a sufficient basis upon which to make an investment decision. The information provided does not constitute, and should not be construed as, an offer or solicitation with respect to
any securities, products or services discussed.
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Past performance is not a guarantee of future results. This data represents past performance and investors should understand that investment returns and principal values fluctuate,
so that when you redeem your investment it may be worth more or less than its original cost. Performance has been calculated on a total return basis, which combines principal and
dividend income changes for the periods shown. Principal changes are based on the difference between the beginning and closing net asset values for the period and assume
reinvestment of all dividends and distributions paid. All applicable expenses such as advisory fees have been included in calculating performance. It should not be assumed that
recommendations made in the future will be profitable or will equal the performance of the security examples discussed. Current month-end performance data may be obtained by
calling toll-free, 1-800-982-4372.
You should consider the Funds investment objectives, risks, and charges and expenses carefully before you invest. The Prospectus
details the Fund's objective and policies and other matters of interest to the prospective investor. Please read this Prospectus
carefully before investing. The Prospectus may be obtained by visiting the website at www.fpafunds.com, by email at
crm@fpafunds.com, toll-free by calling 1-800-982-4372 or by contacting the Fund in writing.
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Statistics have been obtained from sources believed to be reliable, but the accuracy and completeness cannot be guaranteed. The Standard & Poor's 500 Stock Index (S&P 500) is a
capitalization-weighted index which covers industrial, utility, transportation and financial service companies, and represents approximately 75% of the New York Stock Exchange (NYSE)
capitalization and 30% of NYSE issues. This index is considered a measure of large capitalization stock performance. The index does not reflect any commissions or fees which would be incurred
by an investor purchasing the stocks it represents. The Consumer Price Index (CPI) is an unmanaged index representing the rate of the inflation of the U.S. consumer prices as determined by the
U.S. Department of Labor Statistics. There can be no guarantee that the CPI or other indexes will reflect the exact level of inflation at any given time. 60% S&P500/40% Barclays Aggregate Index
is a hypothetical combination of unmanaged indices comprised of 60% S&P 500 Index and 40% Barclays Aggregate Index, the Fund's neutral mix of 60% stocks and 40% bonds.
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Investments in mutual funds carry risks and investors may lose principal value. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or
economic developments. The Fund may purchase foreign securities, including American Depository Receipts (ADRs) and other depository receipts, which are subject to interest rate, currency
exchange rate, economic and political risks; this may be enhanced when investing in emerging markets. Small and mid cap stocks involve greater risks and they can fluctuate in price more than
larger company stocks. Short-selling involves increased risks and transaction costs. You risk paying more for a security than you received from its sale.
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Interest rate risk is when interest rates go up, the value of fixed income securities, such as bonds, typically go down and investors may lose principal value. Credit risk is the risk of loss of principal
due to the issuers failure to repay a loan. Generally, the lower the quality rating of a security, the greater the risk that the issuer will fail to pay interest fully and return principal in a timely manner. If
an issuer defaults the security may lose some or all of its value.
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The return of principal in a bond investment is not guaranteed. Bonds have issuer, interest rate, inflation and credit risks. Lower rated bonds, callable bonds and other types of debt obligations
involve greater risks. Mortgage-backed securities and asset-backed securities are subject to prepayment risk and the risk of default on the underlying mortgages or other assets.
The portfolio holdings as the most recent quarter end may be obtained at http://fpafunds.com/docs/funf-holdings/2015-09-crescent---excluding-cusip-and-sedol.pdf?sfvrsn=2
The FPA Funds are distributed by UMB Distribution Services, LLC, 235 W. Galena Street, Milwaukee, WI, 53212.
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