Strategic Focus: High Dividend Stock Strategy

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1 Strategic Focus: High Dividend Stock Strategy September South Grand Avenue, Los Angeles, CA 90071

2 WHY ARE HIGH DIVIDEND STOCKS APPEALING? I Support from Robust Corporate Profits and Improving Fundamentals II Attractive Yields Compared to Bond Yields III Provide Both Income and Exposure to Equity Markets I Support from Robust Corporate Profits and Improving Fundamentals The economic recovery and corporate cost cutting has led to robust profits and strong cash flow, dramatically improving the ability to pay and increase dividends. Currently, the companies in the S&P 500 Index have over $3 trillion of cash and short-term investments on their balance sheets. Furthermore, dividend payout ratios (which reflect the amount of corporate profits paid out as dividends) have been on the rise. This is often a signal of improving earnings growth, which may translate into higher stock prices. Higher Cash Balances May Lead to Increased Dividends Cash Balances on Corporate Balance Sheets Are at Record Highs $ $ In Trillions Cash and Short-term Investments 1.0 $ Period Ending December 31 Source: Nomura Securities

3 II Attractive Yields Compared to Bond Yields The current low level of interest rates makes high dividend stocks a competitive alternative to bonds. Dividend yields are similar or higher than those of many sectors in the bond market. The extension of the Bush tax cuts will keep qualified dividend income tax rates at low levels through December 2012, which could make after-tax yields particularly attractive. Yield Comparison Versus Bonds The High Dividend Stock Strategy Looks Attractive 10.0% 8.0% 6.0% Bond S&P 500 P&R High Dividend Stock Strategy The high dividend stock strategy stands out vs. bonds 5.35% (1) 6.38% 8.46% Yield 4.0% 3.66% 2.0% 2.13% 2.22% 0.0% 0.01% 3-Month Treasury Bill 0.20% 2-year Treasury S&P 500 Index 10-Year Treasury Barclays U.S. Corporate Bond Index P&R High Dividend Stock Strategy JP Morgan GBI-EM Global Diversified Index B of A High Yield Index Source: Bloomberg as of 8/31/11. Value Leaders Fund dividend is net of fund expenses. PYVLX holds primarily equities. Its share price will be correlated with the U.S. stock market. Several of the indices listed in the graph above: 3-month, 2-year and 10-year Treasury securities, the Barclays U.S. Corporate Bond Index, the JP Morgan GBI-EM Global Diversified Index and the Bank of America High Yield Index are bond indices and may not be as volatile as the stock market. PYVLX yield is computed as the annualized dividend for July/August 2011 divided by the Fund NAV on June 30, (1) Distribution yield, net of fees. The strategy invests in master limited partnerships, and a portion of the yield will be deemed a return of capital for tax purposes. III Seeks to Provide Both Income and Exposure to Equity Markets High dividend stocks may potentially offer significant income for investors and provide equity exposure, although there can be no guarantee that these goals will be met. In a rallying equity market environment, high dividend stocks generally participate in upside moves, although to a lesser degree than so-called growth stocks. High dividends often cushion price declines in down markets as well. However, investors could still lose money during a significant decline in the stock market.

4 WE FIND ATTRACTIVE YIELDS IN AREAS BEYOND COMMON STOCKS Potential opportunities for high yields exist in other parts of the equity market besides common stock. Our investment team evaluates other classes of securities that are not in well-known common stock benchmarks, but offer significant value and high dividend yields. We include securities such as preferred stocks, real estate investment trusts and master limited partnerships in our investable universe. PAYDEN HIGH DIVIDEND STOCK STRATEGY YIELD: 5.35% (1) TYPES OF STOCKS INCLUDED IN OUR PORTFOLIOS Common Stocks Have attractive dividend yields from the telecom, utilities/energy and financials sectors. Preferred Stocks Are senior in the capital structure to common stock, but higher yielding, with fixed dividends. Tend to be less sensitive to interest rate movements compared to bonds. Predominantly financials, preferred stocks yield 5 to 8%. Real Estate Investment Trusts (REITs) REITs offer attractive yields and capital gains potential as real estate fundamentals, such as occupancy rates, improve and new construction gets absorbed. Current steep yield curves also provide attractive financing rates. Current yields for many REITs are greater than 5%. Business Development Corporations (BDCs) These publicly-traded investment companies create portfolios of small private companies, and most profits are distributed to shareholders. Current yields are similar to REIT yields. Master Limited Partnerships (MLPs) These publicly-traded limited partnerships are often in the business of transportation and/or storage of energy commodities. Pipelines, processing plants and storage facilities often fall under this category, and have steady to increasing cash flow, which translates into distributions of 5% and higher. OUR TARGET YIELD RANGE 4-8%+ 5-8%+ 4-7%+ 7-10%+ 5-8%+ (1) The strategy invests in master limited partnerships, and a portion of the yield will be deemed a return of capital for tax purposes. Future yields are not guaranteed.

5 CURRENT ALLOCATION / CHARACTERISTICS (8/31/11) Info Tech 3% Consumer Discretionary 6% Consumer Staples 7% Healthcare 8% SECTOR ALLOCATION Telecom Services 8% Energy 13% Industrials 2% Utilities 27% Financials 26% Preferred Stocks 12% MLPs 13% SECURITY ALLOCATION REITs 10% Common Stocks 65% WEIGHTED CHARACTERISTICS VALUE LEADERS FUND VS. BROAD MARKET (S&P 500) Yield 5.35% (1) 2.13% Beta (1) to S&P Current Price/Earnings (x)* Price/Book (x)* Number of Securities *Valuation Metric (1) Beta is a measure of the sensitivity of the Fund s price movements relative to those of the S&P 500. TOP 10 HOLDINGS SECTOR SECURITY AT&T Telecom Services Common Bristol-Myers Squibb Health Care Common CenterPoint Energy Utilities Common Consolidated Edison Utilities Common Eli Lilly & Co Health Care Common Merck & Co. Health Care Common NiSource Utilities Common Pfizer Health Care Common Williams Partners Energy MLP Public Storage Preferred Financials Preferred Value Leaders (PYVLX) TOTAL PERFORMANCE as of 6/30/11 Trailing 1 year 5 year 10 year Returns are net of fees annualized. (1)The strategy invests in master limited partnerships, and a portion of the yield will be deemed a return of capital for tax purposes. Since Inception (11/1/96) 30.23% -0.01% 0.74% 4.26% Total Fund Expenses 0.83% Quoted performance data represent past performance, which does not guarantee future results. Investment returns and principal value will fluctuate, so investors shares, when sold, may be worth more or less than their original cost. For the most recent monthend performance, which may be higher or lower than that quoted, visit our web site at payden.com or call

6 WHY PAYDEN VALUE LEADERS FUND? The Payden Value Leaders Fund focuses on attractive value stocks, defined as those stocks with solid fundamentals, including strong earnings and cash flow, that pay above-average dividend yields. We believe that the current economic environment of moderate growth and low interest rates provides an attractive option for both stock and bond investors. FUNDAMENTALLY DRIVEN PROCESS Our analysts assess companies from both an equity perspective and a bond perspective. A focus on earnings and revenue combined with an analysis of cash flows, leverage, dividend payout and coverage ratios identifies companies with growth prospects and the ability to maintain or increase dividends. DIVERSIFICATION The Value Leaders Fund is well diversified across sectors and individual stocks. Although some sectors have higher dividend yields than others, our goal is not to sacrifice diversification to maximize yield. At cost, our largest holdings are 2% of the portfolio market value. EXPERIENCE IN EQUITY INVESTING We have over 15 years of experience in managing equities across several strategies, including large cap value, large cap growth and global core. Our sector analysts each have several years of experience in their respective areas and provide an insider s perspective into market driving factors.

7 Key strengths/focus of the Payden High Dividend Stock Strategy James T. Wong Principal Portfolio Manager James Wong, CFA, is a principal and lead manager of the equity strategies at Payden & Rygel. Wong has over 15 years of equity portfolio management experience, during which he has managed the breadth of equity styles and market capitalizations. He has extensive experience managing long/ short portfolios, creating hedging strategies using derivatives and developing customized investment solutions for client specific needs. Wong is also a member of the Investment Policy Committee. Prior to joining Payden & Rygel, Wong was a trader at the Union Bank of Switzerland where he focused on mortgage-backed securities. Previously, he was in the mergers and acquisitions group at Salomon Brothers Inc., focusing on financial institutions. ATTRACTIVE DIVIDEND YIELDS ON AN ABSOLUTE BASIS AND RELATIVE TO BOND YIELDS DIVERSIFIED PORTFOLIOS ACROSS SECTORS AND COMPANIES FUNDAMENTAL ANALYSIS A FOCUS ON BOTH GROWTH OPPORTUNITIES AND THE ABILITY TO MAINTAIN DIVIDENDS IN-DEPTH INVESTMENT PROCESS COMPANY ANALYSIS PERFORMED ACROSS ENTIRE CAPITAL STRUCTURE Wong holds the Chartered Financial Analyst designation and the FINRA series 7, 3 and 63 licenses. He earned an MBA degree from The Anderson School at the University of California, Los Angeles with an emphasis in finance. Wong received a BS degree in Finance from The Wharton School at the University of Pennsylvania.

8 A Broad Range of Mutual Funds >>U.S. BOND FUNDS Payden Cash Reserves Money Market Fund (PBHXX) Payden Limited Maturity Fund (PYLMX) Payden Short Bond Fund (PYSBX) Payden U.S. Government Fund (PYUSX) Payden GNMA Fund (PYGNX) Payden Core Bond Fund (PYCBX) Payden High Income Fund (PYHRX) Payden Corporate Bond Fund (PYACX) >>TAX EXEMPT BOND FUNDS Payden Tax Exempt Bond Fund (PYTEX) Payden California Municipal Income Fund (PYCRX ) >>U.S. EQUITY FUNDS Payden Value Leaders Fund (PYVLX) Payden U.S. Growth Leaders Fund (PUGLX) >>INTERNATIONAL EQUITY FUNDS Payden Global Equity Fund (PYGEX) Metzler/Payden European Emerging Markets Fund (MPYMX) >>CASH BALANCE PLAN FUNDS Payden/Kravitz Cash Balance Plan Fund Institutional (PKBIX) Payden/Kravitz Cash Balance Plan Fund Advisor (PKCBX) Payden/Kravitz Cash Balance Plan Fund Retirement (PKCRX) >>GLOBAL BOND FUNDS Payden Global Short Bond Fund (PYGSX) Payden Global Fixed Income Fund (PYGFX) Payden Emerging Markets Bond Fund (PYEMX) For more information and to obtain a prospectus, visit payden.com or call Before investing, investors should carefully read and consider investment objectives, risks, charges, expenses and other important information about the fund, which is contained in this document. Investment returns and principal value will fluctuate, so investors shares when sold, may be worth more or less than their original cost. The Paydenfunds are distributed by Payden & Rygel Distributors, member FINRA. 333 South Grand Avenue, Los Angeles, CA PAYDEN payden.com