PORTFOLIO OPTIMIZATION FUNDS

Transcription

1 PORTFOLIO OPTIMIZATION FUNDS DIVERSIFIED ASSET ALLOCATION SOLUTIONS UPDATED AS OF 6/30/15 7/ C

2 PORTFOLIO OPTIMIZATION FUNDS With thousands of mutual funds on the market today, creating a portfolio of investments that fits your risk tolerance and addresses your investment needs can be challenging. Optimization Funds make this task easier for you by offering one-step diversification managed by a dedicated multi-asset class solutions team. The funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Designed to: maximize long-term growth while diversifying across multiple asset classes to help reduce volatility targeted to your risk tolerance level and time horizon Effective December 31, 2014, Pacific Life Funds and its family of mutual funds changed its name to Pacific Funds SM. In addition, individual funds were also renamed. Optimization Funds refers to Pacific Funds Optimization. For more information, please visit No bank guarantee Not a deposit May lose value Not FDIC/NCUA insured Not insured by any federal government agency

3 DEVELOP A LONG-TERM PLAN AND STAY INVESTED If you attempted to time the stock market over the past 20 years, you may have missed out on some of the best days. Investors who stay invested tend to outperform those investors who frequently buy and sell as a reaction to market movements. 1 The Cost of Market Timing Risk of Missing the Best Days in the Market Higher 10% 9.9% 8% 6% 6.1% Returns 4% 3.6% 2% 1.5% 0% Lower 2% 0.4% 2.2% Invested for All 5,040 Trading Days 10 Best Days Missed 20 Best Days Missed 30 Best Days Missed 40 Best Days Missed 50 Best Days Missed How Much Difference Can a Few Days Make? (Annualized Total Returns) 9.9% 6.1% 2.2% Investors who stayed in the market for all 5,040 trading days. Missing just 10 of those days (the 10 best days of returns) lowered the return by almost half. And missing the 50 best days so still being invested for 4,990 trading days resulted in a negative return. Source: Morningstar Inc., s in this example are represented by the Standard & Poor s 500, which is an unmanaged group of securities and considered to be representative of the U.S. stock market in general. An investment cannot be made directly in an index. The data assumes reinvestment of income and does not account for taxes or transaction costs. Past performance is no guarantee of future performance, and current performance may be lower or higher than the performance quoted. 1

4 DIVERSIFY TO HELP MANAGE MARKET VOLATILITY Diversification is based on the premise that different types of investments, or asset classes, generally react differently to various market events. Attempting to predict or time these events with precision is difficult. By strategically diversifying among a broad array of asset classes, you can help to smooth out the impact of market volatility on your portfolio s overall return. This is demonstrated by the total returns of the diversified portfolio (indicated in dark blue) in the chart below. Higher Total Returns Lower Source: Morningstar, Inc Returns assume dividends and capital gains are reinvested and do not include any managerial expenses. The performance data herein represents past performance. Past performance does not guarantee future returns. The category is based on the Russell 1000 Index. The category is based on the Russell 1000 Index. The category is based on the Russell 1000 Index. These three indexes measure the performance of the growth and value styles of investing in large-cap U.S. stocks and are constructed to provide a comprehensive and unbiased barometer of the large-cap market. The category is based on the Russell 2500 Index, which measures the performance of both growth and value styles of investing in mid-cap U.S. stocks and is constructed to provide a comprehensive and unbiased barometer for the small- to mid-cap segment. 2

5 Diversification 1 may increase your investment s growth potential while reducing the amount of risk to your portfolio The category is based on the MSCI EAFE Index (Morgan Stanley Capital International), which measures the performance of developed stock markets in Europe, Australasia, and the Far East. The category is based on the Barclays U.S. Aggregate Bond Index, which includes U.S. government, corporate, and mortgage-backed securities, and maturities up to 30 years. The category is based on the BofA Merrill Lynch U.S. 3-Month Treasury Bill Index (T bill). The is represented by an equal portion of the previously listed indexes. Index performance is not illustrative of the performance of the Optimization Funds. For performance on the Optimization Funds, visit Indexes are unmanaged and cannot be invested in directly. 1 Diversification does not guarantee future results, ensure a profit, or protect against loss. 3

6 7/15 DETERMINE YOUR RISK-TOLERANCE LEVEL Everyone has his or her own level of tolerance for investment risk. Evaluating yours, and factoring it into your decisions, is an important part of prudent long-term investing. To get started, your financial advisor can help you determine your level of risk tolerance by providing you with our questionnaire, or by using other analytic tools. Ask your financial advisor for details. PORTFOLIO OPTIMIZATION FUNDS RISK-TOLERANCE QUESTIONNAIRE To help you and your financial advisor determine which fund may meet your investment goals, work together to answer the following eight questions to help identify your financial needs, investment time horizon, and risk tolerance. Investment Time Horizon 1. When do you expect to begin withdrawing money from your investment account? A Less than 2 years B 2 years C 3 to 4 years D 5 to 7 years E 8 to 10 years F 11 years or more 2. After you begin withdrawing money from your investment account, how long do you expect the withdrawals to last? A I plan to take a one-time lump-sum distribution B 1 to 4 years C 5 to 7 years D 8 to 10 years E 11 years or more Risk Tolerance 3. Which of the following choices best reflects your attitude toward inflation and risk? A My main goal is to avoid loss, even though I may only keep pace with inflation. B My main goal is to earn slightly more than inflation, while taking on a low level of risk. C My main goal is to increase my portfolio s value. Therefore, I am willing to accept short-term losses, but I am not comfortable with extreme performance fluctuations that may be experienced in the most aggressive investment options. D My main goal is to maximize my portfolio value, and I am willing to accept more extreme levels of risk and performance fluctuations in my portfolio to do so. 4. The table below presents a hypothetical worst-case loss, expected gain, and best-case gain of five sample portfolios over a one-year period with an initial $100,000 investment. Which portfolio would you prefer to hold? Hypothetical Best-Case ($) Expected Gain ($) Hypothetical Worst-Case ($) A 1 119, ,600 87,600 B 2 123, ,200 84,700 C 3 130, ,200 80,100 D 4 136, ,300 75,800 E 5 141, ,900 72, C No bank guarantee Not a deposit May lose value Not FDIC/NCUA insured Not insured by any federal government agency C PF Risk Questionaire_ indd 2 7/14/15 3:31 PM Asset Management The underlying funds in the Optimization Funds are managed by some of the most well-recognized management firms in the industry. All management firms may not be represented in all Optimization Funds. 4

7 SELECT THE PORTFOLIO OPTIMIZATION FUND THAT S RIGHT FOR YOU Pacific Funds offers five Optimization Funds, allowing you to match the appropriate fund to your financial objectives, risk tolerance, and time horizon. Each fund is structured as a fund-of-funds (a mutual fund that invests in other mutual funds) that has been diversified to achieve a specific target-risk level using a strategic mix of multiple asset classes. Currently, each fund includes up to 21 individual asset classes, which spreads risk across various markets. To see fund holdings, please refer to the fund fact sheets in this brochure. International High Broad Asset Class Allocations as of 6/30/15 C MC M G AG Aggressive- Domestic International Domestic C MC M Moderate G AG International Domestic Potential Return C MC M Moderate-Conservative G AG International Domestic C MC M G AG Low C Conservative MC M G Domestic Equity International Equity AG International Domestic Low Risk Tolerance High About Risk A fund-of-funds is subject to asset allocation risk. Although diversification among asset classes can help reduce volatility over the long term, this assumes that asset classes do not move in tandem and that positive returns in one or more asset classes will help offset negative returns in other asset classes. A fund-of-funds does not guarantee gains and may incur losses and/or experience volatility, particularly during periods of broad market declines. There is also a risk that you could achieve better returns by investing in an individual fund or multiple funds representing a single asset class rather than using asset allocation. A fund-of-funds is subject to its own expenses along with the expenses of the underlying funds. It is typically exposed to the same risks as the underlying funds in which it invests in proportion to the allocation of assets among those underlying funds. 5

8 OUR INVESTMENT APPROACH Experienced Management Established in 2007, Pacific Life Fund Advisors LLC (PLFA) provides multi-asset class solutions through its Asset Allocation, Manager Research, and Investment Risk Management groups. PLFA is an SEC-registered investment advisor and a wholly owned subsidiary of Pacific Life Insurance Company (Pacific Life). As of June 30, 2015, PLFA managed approximately $41 billion in total assets under management. Diversification is critical, no matter what stage of life you are in. While an investor nearing retirement may have different financial objectives than one just embarking on a career, both should consider employing diversification. But what is also critical is choosing the correct asset classes in which to diversify, which is known as asset allocation. Pacific Life Fund Advisors (PLFA) applies an investment approach using three fundamental disciplines: asset allocation, manager research, investment risk management. Using these disciplines, PLFA determines each Optimization Fund s overall asset allocation strategy and the appropriate underlying funds. Asset Allocation An asset class model is developed for each fund that reflects a risk/return profile consistent with the fund s investment goal. The model defines the asset classes, and the percentage of each, to include in the fund. Manager Research Underlying fund managers are evaluated using quantitative screening to narrow the list of potential managers. Qualitative due diligence meetings are then conducted with the selected management firms to assess firm stability, performance repeatability, and investment style adherence. Investment Risk Management Howard T. Hirakawa, CFA Manager since 2003 Industry since 1994 Using the asset class model as a framework, the specific percentage that will be invested into each underlying fund is determined according to the fund s target-risk objectives. Rigorous analysis and stress testing are performed to identify and evaluate fund risks and, if necessary, adjust allocations accordingly. Carleton J. Muench, CFA Manager since 2006 Industry since 1998 Samuel S. Park Manager since 2013 Industry since

9 ASSET ALLOCATION Objective Develop an asset class model for each Optimization Fund that reflects a risk/return profile consistent with the fund s investment goal. The model defines the asset classes, and the percentage of each, to include in the fund. The Process Evaluate asset classes and select those that, in combination, are appropriate for achieving the fund s risk/return target. Agree on limits regarding the percentage of the fund that can be devoted to each asset class. Adjust the model based on PLFA managers views of the current market environment, economy, fiscal and monetary policy, and specific asset classes. Asset allocation, although intended to provide diversification, does not guarantee future results, ensure a profit, or protect against loss. Better returns could be achieved by investing in an individual fund or funds representing a single asset class rather than using asset allocation. Pacific Life Fund Advisors draws on research from Ibbotson Associates in developing asset class models. Ibbotson is one of the most highly respected consulting firms in the U.S., with more than 30 years of experience in real-world asset allocation. Universe of Asset Classes Develop Broad Asset Class Model ( Pacific Funds Optimization Moderate example as of 6/30/15) 28% Domestic Equity 43% International Equity 15% Alternatives 14% The broad asset class of alternatives can include equity and fixed income strategies. Alternative strategies can have characteristics of equity or fixed income investments. 7

10 MANAGER RESEARCH Objective Select the appropriate underlying funds for each Optimization Fund by evaluating investment management firms, and the funds they manage, in terms of their abilities to consistently represent the asset classes in our asset class models. The Process Quantitative Screening Narrows the list of potential managers for each asset class according to criteria such as: Minimum track record Peer-group rankings Manager tenure Performance and style consistency Fund/Firm size and fees Qualitative Due Diligence With the resulting list, PLFA travels the world to perform thorough due diligence on the selected investment management firms, evaluating their: Corporate structure, culture, and history Management and key personnel Investment philosophy and process Repeatability of each manager s processes and outcomes Ongoing Research and Evaluation Assess each manager on a regular basis, examining criteria such as: Performance Adherence to investment style Asset growth Firm stability For Each Asset Class Evaluate Fund Managers and ( Domestic Equity example as of 6/30/15) Domestic Equity 43% 8

11 INVESTMENT RISK MANAGEMENT Objective Determine the allocation of underlying funds within each Optimization Fund according to the fund s target-risk objectives. The Process Construction Create a mix of underlying funds that best represents the blend of asset classes put together in the asset allocation phase. Analytics and Stress Testing Identify and evaluate fund risks and, if necessary, adjust allocations accordingly. Confirm that potential downside risks are acceptable, given the fund s risk and return objectives. Ensure the portfolio accurately represents current investment views. Maximize the potential for target-risk and return objectives to be achieved. Ongoing Risk Management Continue to monitor each Optimization Fund by regularly evaluating results, risks, and investment opportunities to determine if action is required. Periodic Rebalancing Direct cash inflows and outflows to keep the fund aligned with its asset class model. Underlying Funds Determine Allocation of Underlying Funds PF Small-Cap 4.1% PF 4.5% PF 9.1% PF Comstock 7.0% PF 2.0% PF Small-Cap 1.6% PF 3.5% PF Real Estate 0.9% PF Main Street Core 6.1% PF Equity 4.0% 9

12 PACIFIC FUNDS PORTFOLIO OPTIMIZATION CONSERVATIVE POAAX JUNE 30, 2015 Class A Class B Class C Advisor Class R 141 POABX 241 POACX 341 PLCDX 041 POARX 541 Fund Overview Investment Goal: Seeks current income and preservation of capital. Investment Strategy: The fund is a fund of funds that seeks to achieve its investment goal through a strategy of allocating its assets among other funds of the Trust ( Underlying Funds ). Under normal market conditions, the fund allocates its assets between two major asset classes of debt and equity in the following target amounts: 80% debt and 20% equity. Within the broad asset classes of debt and equity, the fund diversifies its holdings by investing in underlying funds that represent a variety of investment styles and security types, including alternative or non-traditional investment strategies. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation Manager research Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA Manager since 2003 Industry since 1994 Carleton J. Muench, CFA Manager since 2006 Industry since 1998 Samuel S. Park Manager since 2013 Industry since 1999 of a Hypothetical $10,000 Investment Class A (Without Sales Charge) $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Life of Fund 12/31/03 Class A w/o Sales Charge Class A w/ Sales Charge (4.46) (4.93) Barclays U.S. Aggr. Bond Index 1 (0.10) S&P 500 Index BofA Merrill Lynch U.S. 3-Month Treasury Bill Index MSCI EAFE Index (4.22) Calendar Year-End Returns (%) Class A w/o Sales Charge (10.26) Class A w/ Sales Charge (3.07) (0.41) 0.44 (15.18) (3.03) 3.03 (2.69) (3.02) Barclays U.S. Aggr. Bond Index (2.02) 5.97 S&P 500 Index (37.00) BofA Merrill Lynch U.S. 3-Month Treasury Bill Index MSCI EAFE Index (43.38) (12.14) (4.90) Returns reflect reinvestment of dividends and distributions. Class A shares have up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns do not include sales charges. If sales charges were included, returns would be lower. 1 Composed of approximately 7,000 asset-based, corporate, government, and mortgage-backed bonds. The index s total return consists of price appreciation/depreciation and income as a percentage of the original investment. 2 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. 3 Comprised of a single issue purchased at the beginning of the month and held for a full month. 4 MSCI EAFE Index (Morgan Stanley Capital International) measures the performance of developed stock markets in Europe, Australasia, and the Far East. Indexes are unmanaged and cannot be invested in directly. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so, when redeemed, may be worth more or less than the original cost. 10

13 Broad Asset Class Allocations 17.3% 4.8% 77.9% C Domestic Equity International Equity Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Ashmore 9.4% PF Emerging Markets Debt 14.7% 6.0 BlueBay PF Absolute Return 4.0 Eaton Vance32.7% Pacific Asset Management PIMCO/Western Asset Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at MC PF Floating Rate Loan 6.1 PF Global Absolute Return % Pacific Funds Core % Pacific Funds High 5.5 PF Inflation Managed 6.4 PF Managed Bond 30.7 T. Rowe Price PF Short Duration Bond 12.2 UBS/MCG PF Currency Strategies 2.0 DOMESTIC EQUITY AQR PF Equity Long/Short 3.1 BlackRock PF 1.5 ClearBridge PF 5.0 Invesco PF Comstock 3.0 Ivy Funds PF 1.0 MFS PF 1.2 Oppenheimer PF Main Street Core 1.0 Scout Investments PF Equity 1.5 INTERNATIONAL EQUITY JPMorgan PF International 1.9 MFS PF International 2.9 Total M 38.4% Annual Fund Operating Expenses (%) Gross 18.7% Net 19.5% Class A Class B Class C Advisor Class R % Gross annual operating expenses reflect the total annual operating expenses Gpaid by each fund. Net operating expenses reflect waivers, reductions, and reimbursements. Gross operating expenses and net operating expenses are sourced from the prospectus dated 8/1/14. The investment advisor has agreed to limit certain Other Expenses incurred by the fund that exceed an annual rate of 0.15% through 7/31/15, and 0.30% from 8/1/15 through 7/31/23 for Class A, B, C, and R shares; 0.15% through 7/31/15, 0.20% from 8/1/15 through 12/31/15, and 0.30% from 1/1/16 through 7/31/23 for Advisor shares. There is no guarantee that the investment advisor will continue to cap expenses after the expiration date. Fund Characteristics Annual Turnover Ratio 1 11% Total Net Assets ($M) 2 $ Calculated as of 3/31/14 fiscal year-end. 2 Net assets of entire fund, including all share classes. Performance for other share classes may differ. Please see the prospectus for additional information about fees, expenses, and availability. 11

14 PACIFIC FUNDS PORTFOLIO OPTIMIZATION MODERATE-CONSERVATIVE POBAX Class A Class B Class C Advisor Class R 142 POBBX 242 POBCX 342 PMCDX 042 JUNE 30, 2015 POBRX 542 Fund Overview Investment Goal: Seeks current income and moderate growth of capital. Investment Strategy: The fund is a fund of funds that seeks to achieve its investment goal through a strategy of allocating its assets among other funds of the Trust ( Underlying Funds ). Under normal market conditions, the fund allocates its assets between two major asset classes of debt and equity in the following target amounts: 60% debt and 40% equity. Within the broad asset classes of debt and equity, the fund diversifies its holdings by investing in underlying funds that represent a variety of investment styles and security types, including alternative or non-traditional investment strategies. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation Manager research Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA Manager since 2003 Industry since 1994 Carleton J. Muench, CFA Manager since 2006 Industry since 1998 Samuel S. Park Manager since 2013 Industry since 1999 of a Hypothetical $10,000 Investment Class A (Without Sales Charge) $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Life of Fund 12/31/03 Class A w/o Sales Charge Class A w/ Sales Charge (4.27) (4.38) Barclays U.S. Aggr. Bond Index 1 (0.10) S&P 500 Index MSCI EAFE Index (4.22) BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Calendar Year-End Returns (%) Class A w/o Sales Charge (18.76) Class A w/ Sales Charge (1.79) (23.21) (4.44) (2.22) Barclays U.S. Aggr. Bond Index (2.02) 5.97 S&P 500 Index (37.00) MSCI EAFE Index (43.38) (12.14) (4.90) BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Returns reflect reinvestment of dividends and distributions. Class A shares have up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns do not include sales charges. If sales charges were included, returns would be lower. 1 Composed of approximately 7,000 asset-based, corporate, government, and mortgage-backed bonds. The index s total return consists of price appreciation/depreciation and income as a percentage of the original investment. 2 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. 3 MSCI EAFE Index (Morgan Stanley Capital International) measures the performance of developed stock markets in Europe, Australasia, and the Far East. 4 Comprised of a single issue purchased at the beginning of the month and held for a full month. Indexes are unmanaged and cannot be invested in directly. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so, when redeemed, may be worth more or less than the original cost. 12

15 Broad Asset Class Allocations 32.7% 9.4% 57.9% MC Domestic Equity International Equity Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Annual Fund Operating Expenses (%) Ashmore 14.7% PF Emerging Markets Debt Gross 9.8% 18.7% 5.0 Net 19.5% 25.1% BlueBay PF Absolute Return 3.3 Class A PF Floating 38.4% Rate Loan 5.0 Class B Eaton Vance PF Global Absolute Return 4.0 Class C Pacific Asset Management 46.9% PIMCO/Western Asset Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at M Pacific Funds Core 0.8 Pacific Funds High % PF Inflation Managed 5.9 PF Managed Bond 19.8 T. Rowe Price PF Short Duration Bond 6.6 UBS/MCG PF Currency Strategies 3.0 DOMESTIC EQUITY AB PF Small-Cap 1.0 AQR PF Equity Long/Short 3.1 BlackRock PF 3.3 ClearBridge PF 7.5 Invesco PF Comstock 5.0 Ivy Funds PF 1.0 Lord Abbett PF Small-Cap 1.1 MFS PF 2.7 Oppenheimer PF Main Street Core 5.0 Scout Investments PF Equity 3.0 INTERNATIONAL EQUITY JPMorgan PF International 2.0 MFS PF International 2.9 Oppenheimer PF Emerging Markets 2.0 QS Batterymarch PF International Small-Cap 2.5 Total Performance for other share classes may differ. Please see the prospectus for additional information about fees, expenses, and availability. G Advisor Class R % 1.59 Gross annual operating expenses reflect the total annual operating expenses AG paid by each fund. Net operating expenses reflect waivers, reductions, and reimbursements. Gross operating expenses and net operating expenses are sourced from the prospectus dated 8/1/14. The investment advisor has agreed to limit certain Other Expenses incurred by the fund that exceed an annual rate of 0.15% through 7/31/15, and 0.30% from 8/1/15 through 7/31/23 for Class A, B, C, and R shares; 0.15% through 7/31/15, 0.20% from 8/1/15 through 12/31/15, and 0.30% from 1/1/16 through 7/31/23 for Advisor shares. There is no guarantee that the investment advisor will continue to cap expenses after the expiration date. Fund Characteristics Annual Turnover Ratio 1 5% Total Net Assets ($M) 2 $ Calculated as of 3/31/14 fiscal year-end. 2 Net assets of entire fund, including all share classes. 13

16 PACIFIC FUNDS PORTFOLIO OPTIMIZATION MODERATE POCAX Class A Class B Class C Advisor Class R 143 POMBX 243 POMCX 343 POMDX 043 JUNE 30, 2015 POCRX 543 Fund Overview Investment Goal: Seeks long-term growth of capital and low to moderate income. Investment Strategy: The fund is a fund of funds that seeks to achieve its investment goal through a strategy of allocating its assets among other funds of the Trust ( Underlying Funds ). Under normal market conditions, the fund allocates its assets between two major asset classes of debt and equity in the following target amounts: 40% debt and 60% equity. Within the broad asset classes of debt and equity, the fund diversifies its holdings by investing in underlying funds that represent a variety of investment styles and security types, including alternative or non-traditional investment strategies. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation Manager research Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA Manager since 2003 Industry since 1994 Carleton J. Muench, CFA Manager since 2006 Industry since 1998 Samuel S. Park Manager since 2013 Industry since 1999 of a Hypothetical $10,000 Investment Class A (Without Sales Charge) $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Life of Fund 12/31/03 Class A w/o Sales Charge Class A w/ Sales Charge (3.67) (3.92) S&P 500 Index Barclays U.S. Aggr. Bond Index 2 (0.10) MSCI EAFE Index (4.22) BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Calendar Year-End Returns (%) Class A w/o Sales Charge (26.73) (0.20) Class A w/ Sales Charge (30.75) (5.68) (1.97) S&P 500 Index (37.00) Barclays U.S. Aggr. Bond Index (2.02) 5.97 MSCI EAFE Index (43.38) (12.14) (4.90) BofA Merrill Lynch U.S. 3-Month Treasury Bill Index Returns reflect reinvestment of dividends and distributions. Class A shares have up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns do not include sales charges. If sales charges were included, returns would be lower. 1 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. 2 Composed of approximately 7,000 asset-based, corporate, government, and mortgage-backed bonds. The index s total return consists of price appreciation/depreciation and income as a percentage of the original investment. 3 MSCI EAFE Index (Morgan Stanley Capital International) measures the performance of developed stock markets in Europe, Australasia, and the Far East. 4 Comprised of a single issue purchased at the beginning of the month and held for a full month. Indexes are unmanaged and cannot be invested in directly. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so, when redeemed, may be worth more or less than the original cost. 14

17 Broad Asset Class Allocations 46.9% M Domestic Equity International Equity Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME 14.7% Ashmore 9.8% 18.7% PF Emerging Markets Debt % BlueBay PF Absolute Return 25.1% % PF Floating Rate Loan 3.0 Eaton Vance PF Global Absolute Return 3.0 Pacific Funds Core 0.5 Pacific Asset Management Pacific Funds High % 65.1% PF Inflation Managed 2.6 PIMCO/Western Asset PF Managed Bond 11.7 Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at G AG T. Rowe Price PF Short Duration Bond 3.2 UBS/MCG PF Currency Strategies 3.9 DOMESTIC EQUITY AB PF Small-Cap 4.1 AQR PF Equity Long/Short 4.1 BlackRock PF 4.5 ClearBridge PF 9.1 Invesco PF Comstock 7.0 Ivy Funds PF 2.0 Lord Abbett PF Small-Cap 1.6 MFS PF 3.5 Morgan Stanley PF Real Estate 0.9 Oppenheimer PF Main Street Core 6.1 Scout Investments PF Equity 4.0 INTERNATIONAL EQUITY JPMorgan PF International 3.1 MFS PF International 4.7 Oppenheimer PF Emerging Markets 3.4 QS Batterymarch PF International Small-Cap 3.5 Total Annual Fund Operating Expenses (%) Interna Gross Net Domest Class A Class B Class C Advisor Class R Gross annual operating expenses reflect the total annual operating expenses paid by each fund. Net operating expenses reflect waivers, reductions, and reimbursements. Gross operating expenses and net operating expenses are sourced from the prospectus dated 8/1/14. The investment advisor has agreed to limit certain Other Expenses incurred by the fund that exceed an annual rate of 0.15% through 7/31/15, and 0.30% from 8/1/15 through 7/31/23 for Class A, B, C, and R shares; 0.15% through 7/31/15, 0.20% from 8/1/15 through 12/31/15, and 0.30% from 1/1/16 through 7/31/23 for Advisor shares. There is no guarantee that the investment advisor will continue to cap expenses after the expiration date. Fund Characteristics Annual Turnover Ratio 1 1% Total Net Assets ($M) 2 $1, Calculated as of 3/31/14 fiscal year-end. 2 Net assets of entire fund, including all share classes. Performance for other share classes may differ. Please see the prospectus for additional information about fees, expenses, and availability. 15

18 PACIFIC FUNDS PORTFOLIO OPTIMIZATION GROWTH PODAX Class A Class B Class C Advisor Class R 144 PODBX 244 PODCX 344 PMADX 044 JUNE 30, 2015 PODRX 544 Fund Overview Investment Goal: Seeks moderately high, long-term capital appreciation with low, current income. Investment Strategy: The fund is a fund of funds that seeks to achieve its investment goal through a strategy of allocating its assets among other funds of the Trust ( Underlying Funds ). Under normal market conditions, the fund allocates its assets between two major asset classes of debt and equity in the following target amounts: 20% debt and 80% equity. Within the broad asset classes of debt and equity, the fund diversifies its holdings by investing in underlying funds that represent a variety of investment styles and security types, including alternative or non-traditional investment strategies. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation Manager research Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA Manager since 2003 Industry since 1994 Carleton J. Muench, CFA Manager since 2006 Industry since 1998 Samuel S. Park Manager since 2013 Industry since of a Hypothetical $10,000 Investment Class A (Without Sales Charge) $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Life of Fund 12/31/03 Class A w/o Sales Charge Class A w/ Sales Charge (3.03) (3.28) S&P 500 Index Barclays U.S. Aggr. Bond Index 2 (0.10) MSCI EAFE Index (4.22) Calendar Year-End Returns (%) Class A w/o Sales Charge (33.85) (2.04) Class A w/ Sales Charge (37.51) (7.43) (1.42) S&P 500 Index (37.00) Barclays U.S. Aggr. Bond Index (2.02) 5.97 MSCI EAFE Index (43.38) (12.14) (4.90) Returns reflect reinvestment of dividends and distributions. Class A shares have up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns do not include sales charges. If sales charges were included, returns would be lower. 1 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. 2 Composed of approximately 7,000 asset-based, corporate, government, and mortgage-backed bonds. The index s total return consists of price appreciation/depreciation and income as a percentage of the original investment. 3 MSCI EAFE Index (Morgan Stanley Capital International) measures the performance of developed stock markets in Europe, Australasia, and the Far East. Indexes are unmanaged and cannot be invested in directly. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so, when redeemed, may be worth more or less than the original cost.

19 Broad Asset Class Allocations 18.7% 61.8% 19.5% G Domestic Equity International Equity Holdings Fund Manager Underlying Fund Allocation (%) FIXED INCOME Ashmore 9.8% PF Emerging Markets Debt 1.5 BlueBay 25.1% PF Absolute Return 1.5 Eaton Vance PF Global Absolute Return 2.0 Pacific Asset Management Pacific Funds High 2.0 PIMCO/Western Asset PF Inflation Managed % PF Managed Bond 7.0 T. Rowe Price PF Short Duration Bond 0.5 UBS/ MCG PF Currency Strategies 4.0 AG DOMESTIC EQUITY AB PF Small-Cap 6.6 AQR PF Equity Long/Short 4.1 BlackRock PF 5.0 ClearBridge PF 9.1 Invesco PF Comstock 7.5 Ivy Funds PF 2.5 Lord Abbett PF Small-Cap 4.1 MFS PF 4.0 Morgan Stanley PF Real Estate 1.9 Oppenheimer PF Main Street Core 9.1 Scout Investments PF Equity 7.9 INTERNATIONAL EQUITY JPMorgan PF International 4.1 MFS PF International 6.0 Oppenheimer PF Emerging Markets 4.6 QS Batterymarch PF International Small-Cap 4.0 Total Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at International Annual Fund Operating Expenses (%) Domestic Gross Net Class A Class B Class C Advisor Class R Gross annual operating expenses reflect the total annual operating expenses paid by each fund. Net operating expenses reflect waivers, reductions, and reimbursements. Gross operating expenses and net operating expenses are sourced from the prospectus dated 8/1/14. The investment advisor has agreed to limit certain Other Expenses incurred by the fund that exceed an annual rate of 0.15% through 7/31/15, and 0.30% from 8/1/15 through 7/31/23 for Class A, B, C, and R shares; 0.15% through 7/31/15, 0.20% from 8/1/15 through 12/31/15, and 0.30% from 1/1/16 through 7/31/23 for Advisor shares. There is no guarantee that the investment advisor will continue to cap expenses after the expiration date. Fund Characteristics Annual Turnover Ratio 1 1% Total Net Assets ($M) 2 $1, Calculated as of 3/31/14 fiscal year-end. 2 Net assets of entire fund, including all share classes. Performance for other share classes may differ. Please see the prospectus for additional information about fees, expenses, and availability. 17

20 PACIFIC FUNDS PORTFOLIO OPTIMIZATION AGGRESSIVE-GROWTH POEAX Class A Class B Class C Advisor Class R 145 POEBX 245 POCEX 345 POEDX 045 JUNE 30, 2015 POERX 545 Fund Overview Investment Goal: Seeks high, long-term capital appreciation. Investment Strategy: The fund is a fund of funds that seeks to achieve its investment goal through a strategy of allocating its assets among other funds of the Trust ( Underlying Funds ). Under normal market conditions, the fund allocates its assets between two major asset classes of debt and equity in the following target amounts: 5% debt and 95% equity. Within the broad asset classes of debt and equity, the fund diversifies its holdings by investing in underlying funds that represent a variety of investment styles and security types, including alternative or non-traditional investment strategies. Why Optimization Funds One-Step Diversification Each Optimization Fund is diversified among multiple asset classes, providing you with a core asset allocation solution to help meet your financial goals. A Dedicated Team that Manages Multi-Asset Class Solutions Pacific Life Fund Advisors investment approach uses three fundamental disciplines: Asset allocation Manager research Investment risk management Target-Risk Funds to Fit Your Needs Optimization Funds range in investment style from conservative to aggressive-growth to help match your risk tolerance and investment goals. Investment Management Managers Howard T. Hirakawa, CFA Manager since 2003 Industry since 1994 of a Hypothetical $10,000 Investment Class A (Without Sales Charge) $20,000 $15,000 $10,000 $5, Total Returns (%) Annualized Total Returns (%) YTD 1-Year 3-Year 5-Year 10-Year Life of Fund 12/31/03 Class A w/o Sales Charge Class A w/ Sales Charge (3.12) (3.63) S&P 500 Index MSCI EAFE Index (4.22) Barclays U.S. Aggr. Bond Index 3 (0.10) Calendar Year-End Returns (%) Class A w/o Sales Charge (40.02) (4.20) Class A w/ Sales Charge (43.30) (9.47) (1.54) S&P 500 Index (37.00) MSCI EAFE Index (43.38) (12.14) (4.90) Barclays U.S. Aggr. Bond Index (2.02) 5.97 Returns reflect reinvestment of dividends and distributions. Class A shares have up-front maximum 5.50% sales charge. Index inception dates existed prior to 12/31/03. of $10,000 returns do not include sales charges. If sales charges were included, returns would be lower. 1 A market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. 2 MSCI EAFE Index (Morgan Stanley Capital International) measures the performance of developed stock markets in Europe, Australasia, and the Far East. 3 Composed of approximately 7,000 asset-based, corporate, government, and mortgage-backed bonds. The index s total return consists of price appreciation/depreciation and income as a percentage of the original investment. Indexes are unmanaged and cannot be invested in directly. For performance data current to the most recent month-end, call Pacific Funds at (800) , option 2, or go to Performance data quoted represents past performance, which does not guarantee future results. Current performance may be lower or higher than the performance quoted. The investment return and principal value of an investment will fluctuate so, when redeemed, may be worth more or less than the original cost. 18 Carleton J. Muench, CFA Manager since 2006 Industry since 1998 Samuel S. Park Manager since 2013 Industry since 1999

21 Broad Asset Class Allocations 25.1% 9.8% 65.1% AG Domestic Equity International Equity Holdings Fund Manager Underlying Fund Allocation (%) Ashmore FIXED INCOMEInternational PF Emerging Markets Domestic Debt 0.8 BlueBay PF Absolute Return 0.5 Eaton Vance PF Global Absolute Return 2.0 PIMCO/Western Asset PF Managed Bond 2.5 UBS/MCG PF Currency Strategies 4.0 DOMESTIC EQUITY AB PF Small-Cap 7.1 AQR PF Equity Long/Short 4.1 BlackRock PF 5.5 ClearBridge PF 9.0 Invesco PF Comstock 7.5 Ivy Funds PF 3.5 Lord Abbett PF Small-Cap 4.1 MFS PF 4.0 Morgan Stanley PF Real Estate 2.9 Oppenheimer PF Main Street Core 9.1 Scout Investments PF Equity 8.3 INTERNATIONAL EQUITY JPMorgan PF International 5.2 MFS PF International 7.6 Oppenheimer PF Emerging Markets 7.3 QS Batterymarch PF International Small-Cap 5.0 Total Each underlying fund has its own investment goal, strategy, and risks, and may not be available for individual purchase. Each underlying fund may include exposure to multiple broad asset classes. The prospectuses for the underlying funds are available at Annual Fund Operating Expenses (%) Gross Net Class A Class B Class C Advisor Class R Gross annual operating expenses reflect the total annual operating expenses paid by each fund. Net operating expenses reflect waivers, reductions, and reimbursements. Gross operating expenses and net operating expenses are sourced from the prospectus dated 8/1/14. The investment advisor has agreed to limit certain Other Expenses incurred by the fund that exceed an annual rate of 0.15% through 7/31/15, and 0.30% from 8/1/15 through 7/31/23 for Class A, B, C, and R shares; 0.15% through 7/31/15, 0.20% from 8/1/15 through 12/31/15, and 0.30% from 1/1/16 through 7/31/23 for Advisor shares. There is no guarantee that the investment advisor will continue to cap expenses after the expiration date. Fund Characteristics Annual Turnover Ratio 1 5% Total Net Assets ($M) 2 $ Calculated as of 3/31/14 fiscal year-end. 2 Net assets of entire fund, including all share classes. Performance for other share classes may differ. Please see the prospectus for additional information about fees, expenses, and availability. 19

22 SHARE CLASS OVERVIEW For more details and restrictions regarding sales charges and other information mentioned below, please see the prospectus. Read the prospectus carefully before investing. You can reduce the initial sales charge of Class A shares by taking advantage of breakpoint opportunities as noted on page 22. Reduced Sales Charges A Shares B Shares C Shares Advisor R Shares Combination privilege Yes N/A Rights of accumulation (ROA) Yes N/A Letter of intent (LOI) Yes N/A Contingent Deferred Sales Charge (CDSC) Waived (if applicable) A Shares B Shares C Shares Advisor R Shares Death (if the redemption of assets is requested within one year of the date of death or for redemptions from an IRA account, as long as re-registration of assets is made within one year of death) Permanent disability (as defined by Section 72(m)(7) of the Internal Revenue Code) Yes Yes N/A N/A Required minimum distributions (RMDs), only if calculated by Pacific Funds Yes N/A For certain amounts taken through systematic withdrawals Yes N/A Excess contributions from a retirement account Yes N/A Other Features A Shares B Shares C Shares Advisor R Shares Shares convert to another class N/A A shares after 8 years N/A Transactions A Shares B Shares C Shares Advisor R Shares Preauthorized investment programs opened directly with Pacific Funds Electronic funds transfer (EFT) Systematic withdrawals Minimum $50 per fund per draft (initial fund minimums must be met). Purchase or redeem through EFT between a financial institution account and Pacific Funds. Minimum $50 monthly, quarterly, semiannually, or annually ($5,000 minimum account value). Both contingent deferred sales charge (CDSC) and CDSC waivers may apply. Check with your financial advisor about availability and transaction charges. N/A N/A N/A Dollar cost averaging (DCA) There is a minimum of $50 monthly, quarterly, semiannually, or annually within the same account (initial fund minimums must be met) for DCA. N/A Dividends and Distributions Automatically reinvest dividends and capital gain distributions into additional shares of other funds within the same account (fund s minimum balance must be met). N/A 20