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2016-07-15 PIP Quarterly Update

Dear Mr. and Mrs. Smith,

The Preferred Income Portfolio (PIP) continued to perform superbly in the second quarter of 2016. PIP’s current yield of 6.42% remains over 4% than the 30-year US Treasury bond. Over the second quarter, the average share price rose from $26.15 to $26.96 giving us capital appreciation of over 3% before adding the annual income stream of almost 7%

In a world of investing volatility, PIP remains a refuge of calm. The major stock markets lurched higher and lower over the quarter reacting to China, jobs reports, Federal Reserve action or inaction, and Brexit to close the quarter with the S&P 500 at 2098.86 up 39 points. The credit markets were also erratic finally closing with the 10-year U.S. Treasuries yielding 1.47% and the 30-year U.S. Treasury bond at 2.29%. While these are great interest rates if you need a mortgage, low rates make poor income products. TIA continues to believe that interest rates will stay lower longer than in previous credit cycles.

PIP remains a unique fixed income strategy combining high yield, short duration and diversification in a portfolio of NYSE listed $25 securities. It provides the logical solution for this low yield environment. PIP’s six sectors enhance credit default protection. Our allocations between financial issues and real estate investment trusts (REITS) provide a balanced approach to the credit markets. While credit risk remains our chief concern, PIP securities have not missed a dividend payment and did not miss a dividend payment during the worst financial crisis in three generations.

TIA has developed preferred portfolios for the three typical objectives of fixed income investing. PIP is a diversified portfolio suitable for most investors. Non-Cumulative Preferred stocks serve as an alternative to municipal bonds, while Shorter Call Preferred stocks are a cash management tool. We feel these investment tools continue to be well suited for this uncertain environment which we see continuing for the foreseeable future.

We welcome your inquiries regarding your Preferred Income Portfolio.

     J. Ron DeLay
     Senior Vice President
     Managed Preferred Securities

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