We hope that investors will find FPA commentaries helpful to understand application of the same investment discipline in various markets, and can refer to particular items that interest them.

You should consider the Fund’s 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 [email protected], toll-free by calling 1-800-982-4372 or by contacting the Fund in writing.

Average Annual Total Returns As of June 30, 2014 Since Fund/Index QTD YTD 1 Year 3 Years 5 Years 10 Years 15 Years 20 Years 7/11/84 FPA New Income 0.59% 1.17% 1.47% 1.55% 2.13% 2.99% 4.35% 5.19% 7.67% Barclays US Agg 2.04% 3.93% 4.37% 3.66% 4.85% 4.93% 5.60% 6.15% 7.95% Bond CPI + 100 1.12% 1.83% 3.06% 2.86% 3.07% 3.35% 3.45% 3.43% NA

Periods over one year are annualized. Inception for FPA Management was July 11, 1984. Performance for CPI+100 is not available since 7/11/84 as the index is only updated monthly. A redemption fee of 2.00% will be imposed on redemptions within 90 days. Expense ratio calculated as of the date of the most recent prospectus is 0.58%. As of June 30, 2014, the 30 day SEC yield was 2.32%.

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 by calling toll-free, 1-800-982-4372.

To view portfolio holdings from the most recent quarter end, please refer to the end of this document or at http://fpafunds.com/docs/funf-holdings/new-income-13-12.pdf?sfvrsn=2.

Portfolio composition will change due to ongoing management of the fund. References to individual securities are for informational purposes only and should not be construed as recommendations by the Funds, Advisor or Distributor. The views expressed and any forward-looking statements are as of the date of the publication and are those of the portfolio managers and/or the Advisor. Future events or results may vary significantly from those expressed and are subject to change at any time in response to changing circumstances and industry developments. This information and data has been prepared from sources believed reliable. The accuracy and completeness of the information cannot be guaranteed and is not a complete summary or statement of all available data.

The Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index, meaning the securities in the index are weighted according to the market size of each bond type. Most U.S. traded investment grade bonds are represented. Municipal bonds and Treasury Inflation-Protected Securities are excluded, due to tax treatment issues. The index includes Treasury securities, Government agency bonds, Mortgage-backed bonds, Corporate bonds, and a small amount of foreign bonds traded in U.S. Barclays U.S. Treasury Index is an unmanaged index of public obligations of the U.S. Treasury with a remaining maturity of one year or more. Barclays MBS Index is an unmanaged index comprising 15- and 30-year fixed-rate securities backed by mortgage pools of Ginnie Mae, Freddie Mac and Fannie Mae. Barclays ABS Index is the ABS component of the U.S. Aggregate index. The index includes pass- through, bullet and controlled amortization structures. Barclays CMBS is the CMBS component of the

1 Barclays U.S. Aggregate Index. Barclays U.S. Corporate High Yield Index measures the market of USD- denominated, non-investment grade, fixed-rate, taxable corporate bonds. Securities are classified as high yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below, excluding emerging market debt. The Barclays U.S. Corporate Investment Grade Index is the corporate component of the U.S. Credit index. The Barclays Corporate “Baa” rated is the “Baa” rated component of the Barclays U.S. Corporate Investment Grade Index. The Barclays Corporate “Ba” rated is the “Ba” rated component of the Barclays U.S. Corporate Investment Grade Index. The Barclays Corporate “B” rated is the “B” rated component of the Barclays U.S. Corporate Investment Grade Index. The Barclays Corporate “Caa” rated is the “Caa” rated component of the Barclays U.S. Corporate Investment Grade Index. Barclays U.S. High Yield Loans Index provides broad and comprehensive total return metrics of the universe of syndicated term loans. To be included in the index, a bank loan must be dollar denominated, have at least $150 million funded loan, a minimum term of one year, and a minimum initial spread of LIBOR+125.

Barclays U.S. Universal Index represents the union of the U.S. Aggregate Index, the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, and the non-ERISA portion of the CMBS Index. Municipal debt, private placements, and non-dollar-denominated issues are excluded from the Universal Index. The only constituent of the index that includes floating-rate debt is the Emerging Markets Index. JP Morgan Leveraged Loan Index is an unmanaged index designed to mirror the investable universe of the U.S. dollar developed leveraged loan market. The performance of the Fund and of the Averages is computed on a total return basis which includes reinvestment of all distributions. CPI + 100 is a measure of the consumer price index (CPI) plus an additional 100 basis points. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. S&P 500 Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. The index focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, but is also considered a proxy for the total market.

Fund Risks

Investments in mutual funds carry risks and investors may lose principal value. Capital markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The Fund can purchase foreign securities, which are subject to interest rate, currency exchange rate, economic and political risks. The securities of smaller, less well-known companies can be more volatile than those of larger companies.

The return of principal in a bond fund is not guaranteed. Bond funds have the same issuer, interest rate, inflation and credit risks that are associated with underlying bonds owned by the fund. Lower rated bonds, convertible securities and other types of debt obligations involve greater risks than higher rated bonds.

Mortgage securities and collateralized mortgage obligations (CMOs) are subject to prepayment risk and the risk of default on the underlying mortgages or other assets; such derivatives may increase volatility. Convertible securities are generally not investment grade and are subject to greater credit risk than higher-rated investments. High yield securities can be volatile and subject to much higher instances of default. The Fund may experience increased costs, losses and delays in liquidating underlying securities should the seller of a repurchase agreement declare bankruptcy or default.

The FPA Funds are distributed by UMB Distribution Services, LLC, 235 W. Galena Street, Milwaukee, WI, 53212.

2 FPA New Income, Inc. Second Quarter 2014 Commentary

Portfolio Commentary

During the past quarter the Fund appreciated 0.59% while the Barclays U.S. Aggregate Bond Index rose 2.04%.

All sectors produced positive performance during the quarter with the exception of Commercial Mortgage Backed Securities (CMBS). Income continues to be a substantial component of performance for the portfolio, even when factoring in the amortization of the premium price paid for many securities and the pay down of principal at par on principal amortizing holdings. Interest rate movements had a negligible impact on performance in the second quarter given the low duration of the portfolio and relatively minor changes in rates. Collateralized mortgage obligation (CMO)1 holdings contributed the most to performance. Corporate credit and asset-backed securities (ABS) continued to make solid contributions to overall portfolio performance.

Portfolio Activity

Since the fourth quarter of 2013, we have reduced holdings of agency-backed mortgage securities and reallocated that capital into ABS, with a heavy emphasis on automobile financing-backed ABS bonds. This derisking activity continued in the second quarter of 2014 with the sale of CMO bonds backed by both agency and non-agency conforming jumbo-sized mortgages. These bonds were sold due to unattractive extension risk in a rising interest rate scenario. We believe that if rates rise, fewer borrowers would be able to refinance, which would extend the average life of the bonds and negatively impact price.

Not every portion of the agency mortgage market is void of value and downside protection. We continue to systematically accumulate very seasoned 15-year agency mortgage pools with coupons in the range of 4.5-6%. These borrowers have been in the money from a refinancing perspective for quite some time, but they are not exhibiting a high propensity to refinance. Instead we think this cohort of borrowers sees an ability to complete their mortgage payments and realizes that over the next approximately five to seven years they will be able to own their homes free and clear. This is the behavior of someone who wants to build wealth through debt reduction.

The investments into the ABS sector have been in bonds with average lives less than two years. While a significant percentage of purchases have been backed by subprime automobile loans, there have been opportunities to buy securities backed by prime rated borrowers on loans and leases such as those issued by Mercedes Benz USA. Away from the automobile financing sector, the portfolio has found some opportunities in business equipment lease transactions and commercial insurance premium financing backed bonds.

Within the corporate credit portion of the portfolio activity continues to be limited and the allocation to this area has remained relatively constant as bonds that are called away or refinanced are replaced with new ideas of a similar bond structure and credit quality. Those additions have been in the consumer products packaging area, through the investment in a short duration first lien callable bond issued by Reynolds Group Holdings, a global industry leader, and a bond with a first lien on an iron ore mine in upstate Minnesota at a very attractive loan-to-value. In addition, we have added to existing high yield corporate bond positions in the second quarter.

1 CMO is Collateralized Mortgage Obligation. It is a mortgage-backed bond that separates mortgage pools into different maturity classes.

3 While these portfolio changes during the quarter have reduced the portfolio’s exposure to rising interest rates, there are other market factors which impact these metrics as well. Spreads on securities outside of the treasury market declined during the quarter as demand for non-treasury fixed income assets remained very strong. From a pure rates perspective, there was a minor flattening of the treasury yield curve as longer maturity treasuries declined in yield compared to those same maturities at the close of the first quarter of this year.

Over the past quarter, the effective duration of the portfolio declined by a small amount to 1.25 years. As one would expect, yield to worst2 declined by a modest amount as well from 1.98% to 1.85%. The portfolio’s exposure to interest rate risk declined as we continue to maintain a very defensive investment posture and remain focused on preservation of capital while we await a better investment environment in the future.

Market Commentary

When you cross the Rubicon the other side of the river may not be an improvement.

July 11th of this year marks the 30th anniversary of our management of FPA New Income. Over that period of time the Fund has achieved a positive absolute return over every rolling 12-month calendar period, which is an unprecedented feat. That in itself is a great achievement. However, the bigger accomplishment is that it was done with a consistent investment philosophy, strategy, and one investment team. Robert Rodriguez was the first portfolio manager of the strategy. Bob hired Thomas Atteberry in 1997 to be an analyst on the strategy and Thomas was promoted to co-portfolio manager in 2004. At that point we added Julian Mann as an analyst. In 2010 Thomas became the sole portfolio manager of the fixed income strategy and added Abhi Patwardhan to the team. Last year we expanded with the hiring of Melinda Newman and Nazanin Pajoom. On July 7th Joseph Choi joined the team as a corporate credit analyst. He comes to us with over ten years of corporate credit research experience. Over this whole 30- year period the team has not lost a member, but has consistently grown with quality professionals as assets under management have expanded. Assets under management were just $4.6 million in July 1984. Assets under management for the strategy are now $6.6 billion, making the Absolute Fixed Income strategy a key component of the overall success FPA has enjoyed over the years. Congratulations to Bob Rodriguez for his investment skill and management acumen. We are grateful for Bob’s vision and leadership, which allowed him to create an enduring investment philosophy and successfully transition stewardship of the strategy to the next generation of fixed income investors at FPA.

We are frequently asked about Bob Rodriguez’s current role on the fixed income investment team. While Bob has no day-to-day portfolio management or analytical responsibilities, he continues to advise us on a wide variety of topics. How does this advisory role manifest itself? This role has taken several forms, and in this letter we show just one of those forms. On March 30, 2008, Bob wrote a commentary entitled “Crossing the Rubicon” that expressed FPA’s views of government intervention in the capital markets and economic activity. We strongly recommend that all our clients read the piece. While it was written a little over six years ago, the subject matter covered is still acutely relevant today. (This commentary is available on our website www.fpafunds.com under the section entitled Special Commentaries)

2 Yield to worst is the lowest possible yield on a callable bond. As of June 30, 2014, the SEC yield was 2.32%. This calculation begins with the Fund’s dividend payments for the last 30 days, subtracts fund expenses and uses this number to estimate your returns for a year. The SEC yield is based on the price of the fund at the beginning of the month. The income yield stated here reflects prospective data and thus assumes payments collected by the fund may fluctuate.

4 On many occasions we have commented on various government policies and regulations and how they may not work as intended. In this letter we will revisit the Federal Reserve’s Quantitative Easing program as well as a new policy idea on the horizon. The Federal Reserve started acquiring assets from private entities in March 2008 with the acquisition of more than $30 billion of toxic assets from Bear Stearns. It has continued to buy private market assets and now has a balance sheet of over $4 trillion. Let’s review the Fed’s stated objective and examine whether that objective has been accomplished. The serial quantitative easing programs were designed to lower the return on non-credit risk assets, thus forcing investors to invest in higher risk assets. The intention was to raise asset prices and make investors feel wealthier. The Fed believed this “wealth effect” would increase consumer spending and drive economic growth higher. The result would be a “virtuous cycle” for investors and for all participants in the economy. Asset prices have clearly risen. The table below shows returns for stocks and bonds from November 4, 2010, the day of Ben Bernanke’s Washington Post editorial, through the end of the second quarter of 2014. Financial Asset Returns (annualized) S&P 500 Index 16.22% Barclays “Caa” Rated Corporate 10.97% Barclays U.S. Corporate High Yield Index 9.15% Barclays “B” Rated Corporate 9.06% Barclays “Ba” Rated Corporate 8.50% Barclays “Baa” Rated Corporate 6.26% Barclays U.S. High Yield Loans Index 5.55% Barclays U.S. Corporate Investment Grade Index 5.25% Barclays CMBS Index 4.81% Barclays Aggregate Index 3.14% Barclays Mortgage Index 2.75% Barclays Treasury Index 2.28% Barclays ABS Index 2.18% Source: Barclays

Assets under management for risker fixed income mutual fund categories have also grown robustly. The table below shows the size of short term, intermediate term, high yield, emerging market, bank loan and non-traditional funds over this same period of time. The more risky funds have exhibited the largest percentage increase in assets.

Fund Category October 2010 May 2014 % Change Bank Loan Fund $35 Bill. $143 Bill. 309% Non Traditional Funds $65 Bill. $149 Bill. 129% Emerging Market Fund $38 Bill. $82 Bill. 116% High Yield Fund $192 Bill. $328 Bill. 71% Short Term Bond Fund $225 bill. $317 Bill. 41% Intermediate Term Bond Fund $811 Bill. $1,009 Bill. 24% Total $1,366 Bill. $2,028 Bill. 48% Source: Morningstar

Note that the riskiest assets have the largest returns, so the Fed accomplished its goal of raising asset prices. The Fed also succeeded in increasing investors’ appetite for risk. However, did rising asset prices and the increase in risk appetite help to stimulate economic growth? The economy grew at a real rate of 3% on a year-over-year basis the quarter preceding the 2010 Quantitative Easing announcement. Since that time, the average real growth of the economy has been 2.3%. While consumer wealth in aggregate has reached new highs, it has not benefited everyone given that only a small percentage of the

5 population owns financial assets. We would conclude that the “virtuous cycle” has not worked yet and overall economic growth has not accelerated.

We review financial market activity since the advent of quantitative easing because we believe the Fed’s intervention in financial markets over the past few years could have an adverse impact on financial stability. Quantitative easing was designed to manipulate investor and consumer behavior. The Fed’s intention was to depress certain interest rates, such as mortgage rates, to facilitate refinancing and reward mortgage borrowers with generational low borrowing rates in the hopes that the extra cash flow would filter into the economy and increase GDP. The Fed forced savers to accept low rates on high quality assets so that investors would purchase lower quality assets at progressively lower returns. If these manipulated investors exit their fixed income investments as the Fed normalizes monetary policy, the resulting market volatility could be significant. We witnessed a small prelude to this potential volatility in May-June 2013. Implied Treasury market volatility today, as measured by the MOVE index below, is reminiscent of 2004-2006 and the months leading up to the mid-2013 sell-off. We believe these low volatility levels are unsustainable for extended periods of time, and note that historically they have been followed by sharp upturns.

MERRILL LYNCH OPTION VOLATILITY ESTIMATE (MOVE) INDEX

May-June 2013 sharp increase in volatility due to mutual fund redemptions

Source: BofA Merrill Lynch

One year following the mid-2013 sell-off, the yield to worst for credit indices has diminished. The table below illustrates this point using data from Barclay’s fixed income indices.

6 TABLE ON INDEX YIELDS Index Yield to Worst Yield to Worst Yield Change 4/30/2013 6/30/2014 (bps) Barclays “Caa” Rated Corporate 7.12% 6.56% -56 Barclays U.S. Corporate High Yield Index 5.21% 4.91% -30 Barclays “B” Rated Corporate 5.00% 4.79% -21 Barclays U.S. High Yield Loans Index 461 bps* 441 bps* -20 Barclays “Ba” Rated Corporate 4.09% 4.12% +3 Barclays ABS Index 0.88% 1.16% +28 Barclays “Baa” Rated Corporate 3.06% 3.36% +30 Barclays U.S. Investment Grade Corporate 2.60% 2.91% +31 Index Barclays CMBS Index 1.62% 2.07% +45 Barclays MBS Index 2.34% 2.79% +45 Barclays US Aggregate Bond Index 1.73% 2.22% +49 Barclays U.S. Treasury Index .80% 1.36% +56 Source: Barclays *The Barclays U.S. High Yield Loans Index data is expressed in a basis point spread over LIBOR. The lower spread versus April 2013 is equivalent to a declining yield.

Now policy makers are concerned that we could experience more drastic volatility than what we witnessed in May-June 2013 when the Fed exits its “Zero Interest Rate Policy” (ZIRP) for short-term rates and eliminates the purchase of longer maturity treasury securities and agency mortgage pools. How do financial regulators control the risk of investors selling fixed income investments, which would drive interest rates higher as prices of bonds decline? The losses investors incur would now reduce asset prices and wealth, risking to unwind the “virtuous cycle” the Fed has aggressively tried to create. For quite some time the SEC has been analyzing and discussing a “gate” fee or exit fee to control a run on money market funds. Regulators are currently contemplating government-mandated exit fees for anyone selling certain yet-undefined bond mutual funds. The Financial Times reported the Federal Reserve Open Market Committee intended to discuss this topic at its June 17-18th meeting.

This discussion could center around two primary concerns. First, investors can withdraw their money from a mutual fund each day, but that money may be invested in longer maturity and lower quality assets. The fear is that a run on a mutual fund would be as disruptive as a traditional run on a bank. Second, the change in banking regulations that resulted in the curtailment of proprietary trading and the increase in trading desk capital requirements has resulted in a 75% decline in bond inventories at banks since 2009. Traditionally, the bank trading desk was the shock absorber to the marketplace, providing liquidity during periods of heavy bond selling much like the stock specialists used to do on the floor of the New York Stock Exchange. Nontraditional monetary policy and new regulations have led to unintended consequences and new risks. When these consequences surface, will new regulation need to be created to try to mitigate the emerging problem? In 2011, Jamie Dimon, Chairman and CEO of JPMorgan Chase, alluded to this problem when he famously inquired of Fed Chairman Ben Bernanke: “Now we’re told there are going to be even higher capital requirements, and we know there are 300 rules coming. Has anyone bothered to study the cumulative effects of these things?” Keep in mind that currently the Federal Reserve does not have regulatory authority over the mutual fund industry, so to implement an exit fee they must go to the Securities and Exchange Commission. The last question Chairwomen Yellen answered at her post-FOMC press conference on June 18th was on this subject. Her answer was she professed to be unaware of any discussion of bond fund exit fees, adding that it was her understanding that the matter "is under the purview" of the SEC.

7 In Bob’s piece “Crossing the Rubicon” he discusses the socialization of risk. When government steps in to control the downside, investors feel free to take more risk because they know the government will protect them from losses. It has been called the Greenspan put or the Bernanke put. Now we have the potential Yellen or SEC put for fixed income mutual fund and ETF investors.

It is our view that implementing ad hoc policies to try and control financial markets is not good for the long-term health of the markets or the economy. We think an exit fee is wrong from both a policy and a free market perspective. We also think that it is a negative for capital deployment and creation. Investors will tend to not participate in a marketplace where free access to one’s capital does not exist. Those that do participate may very well require a higher return on their capital to compensate for the inability to get their capital out due to government intervention. There have been several studies which suggest that an exit fee might accelerate a run on mutual funds as fund shareholders try to redeem their shares before the exit fee is imposed.

However, there are investment institutions that think this is a good idea. Are these large mutual funds managers who advocate exit fees truly interested in protecting investors from volatility? Or, are they trying to protect their own business models as they have taken their clients’ money and invested it in higher risk instruments that will not perform well in a significant market selloff? Perhaps they imprudently invested the money without looking at all the potential downside risks.

While we did not previously contemplate the potential implementation of an exit fee for some types of fixed income mutual funds, we have for some time seriously thought about the considerable market volatility that could ensue should investors choose to exit the bond market in large numbers. That is one reason why we continue to construct a portfolio with an average life of about two years, an effective duration that has been between one and two years, and specific security characteristics that result in a large percentage of the assets having the possibility of returning in the form of a maturity, call, or principal amortization over the next two years. We have acted to truly protect our clients’ capital first and then look to earn a reasonable rate of return, so why should our clients be punished with an exit fee or diminished access to their hard-earned capital because some have taken on imprudent risk in the bond market?

At the end of the quarter Chairwoman Yellen gave a speech to an audience at the International Monetary Fund and made several informative statements:

“I do not presently see a need for monetary policy to deviate from a primary focus on attaining price stability and maximum employment in order to address financial stability concerns.”

“There is evidence of pockets of increased risk taking in the financial system but that the Fed would respond to an acceleration or broadening of these through a robust macro-prudential approach, that would involve using non-monetary policy tools to manage the safety of the financial system as a whole.”

“Because a resilient financial system can withstand unexpected developments identification of bubbles is less critical.”

Chairwoman Yellen was asked about the financial stability concern a year ago. On April 16, 2013, she said, “I don’t see pervasive evidence of rapid credit growth, a marked buildup in leverage, or significant asset bubbles that would threaten financial stability. But there are signs that some parties are reaching for yield, and the Federal Reserve continues to carefully monitor this situation.”

One year later, yields on risk assets are even lower, yet Chairwoman Yellen is still not concerned. While she says the SEC is in charge of exit fees, we believe the imposition of such fees would constitute a

8 macro-prudential approach. The idea is to use regulation to control behaviors and risks in the financial markets, while monetary policy is used to achieve the economic mandates set forth by the central bank. Our view is that both monetary and regulatory policies are now firmly focused on manipulating investor behavior and controlling financial market outcomes.

The past Fed Chairmen failed to see bubbles in the financial system and the result was a very nasty financial calamity in 2008. It appears this time that the regulators feel comfortable that they have all the needed tools, and do not see a need to analyze how their interest rate and regulatory policies may be part of a festering problem. To illustrate this issue further, consider an investor who can buy a closed-end fixed income fund with a yield between 6% and 8% that is levered by 25% to 50%. The investor can then borrow against that closed-end fund up to 50% of the cost of the purchase. So effectively, an investor can create a fixed-income investment and potentially only have put up cash representing 25% of the value of the asset. The cost of the leverage from the broker is about 2%. In a world devoid of yield, this levered approach has the potential to be very enticing. It is even more enticing if volatility were to remain low with minimal fear of rising interest rates. The Fed has created this environment by communicating its intention to keep rates low for an extended period of time, and commenting that the financial system is stable with volatility easily controlled by regulation.

We would urge Chairwoman Yellen to look at the past record of the Federal Reserve, and consider that perhaps the Fed is not particularly adept at controlling financial crises. That is exactly why the Fed should focus on financial stability. Achieving financial system stability is not incompatible with the Fed’s maximum employment and stable price objectives. This is why the Fed has been given the independent duty to take away the “punch bowl” from the party before that party gets out of hand.

Short End of the Stick

Robust liquidity appears to have lulled credit market investors into a false sense of security. Volatility for the Barclays U.S. Corporate High Yield Index, shown below, is hovering near the lows experienced in the 2005-2006 period. This low volatility mirrors the MOVE index (illustrated above), both of which have not seen a significant spike since the May-June 2013 “taper tantrum” sell-off.

Advocates of risk assets – equities, investment grade corporates, and high yield bonds – contend that there is no reason for the party to end. While the Fed may take away the punch bowl, in the bull’s view, quantitative easing has worked. Jefferies’ David Zervos writes in a recent commentary that “the party is now morphing from one that required a continuous flow of excess libation, to one that is organically

9

capable of creating its own real growth based endorphins…a different kind of party is about to develop, a real business cycle upswing….”

Proponents of the high yield market argue that on a relative basis, high yield spreads offer better protection from potentially negative returns should interest rates rise when compared with equities and investment grade bonds. Some investors argue that the Fed will continue to intervene in financial markets ad infinitum, fostering a continued insatiable appetite for risk, because the economy is simply not strong enough to sustain sufficient economic growth in the absence of quantitative easing and an accommodative interest rate policy.

Investors who choose to remain exposed can find any number of justifications for why the high yield bond market is still a decent place to invest one’s hard-earned cash. By many measures, the market has not yet resumed some of the more frothy habits we witnessed prior to the financial crisis. As the chart below from J. P. Morgan illustrates, proceeds for high yield deals are still largely being used for refinancing, with far less going towards leveraging acquisitions than in 2005-2008. Payment-in-kind coupon bonds (PIK and PIK toggle notes) comprised only 2% of overall high yield new issuance in the first half of 2014, far below the 11-12% reached in the bubble years of 2007 and 2008.

Use of Proceeds for High Yield New Issuance 100% 90% Other 80% 70% Dividend 60% Refinancing 50% General Corporate

40% Acquisition finance/LBO 30% 20% 10% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1H14

Source: J.P. Morgan

Another broad credit metric is the ratio of a company’s earnings before interest, taxes, depreciation and amortization to its interest expense. The bar chart below from Morgan Stanley shows that this metric remains at relatively healthy high levels, which implies companies can easily handle the cost of their debt service.

10

At FPA, we are more sanguine about prospects for the overall high yield market. New issue ratings have deteriorated, with 22% of new issues in 2Q14 rated Split B, CCC, or non-rated. This is up from 17-18% from 2010 through 1Q14, and implies the market has lost some of the discipline gained after 2008. The coupon for new high yield bonds issued by U.S. companies has declined to a paltry 6.2% in the first half of 2014.

Average Coupon for High Yield New Issuance 12.0%

11.1% 11.0%

9.9% 10.0% 10.0% 9.5% 9.5% 9.2% 9.0% 9.0% 8.5% 8.6% 8.0% 8.0% 7.7% 7.7% 7.4% 7.3% 7.2% 7.0% 6.5% 6.2% 6.0%

Source: Bloomberg

Private equity firms are exiting more investments relative to new capital deployed than they have in quite some time. Reticence of private equity firms to commit capital despite the availability of cheap financing might signal that business valuations are too high.

11

Private Equity Firm Exits as % of Capital Deployed

90% 80% 77%

70% 67%

60%

50% 43% 40% 33% 33% 32% 29% 30% 30% 26% 18% 20% 20%

10%

0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q14 2Q14

Source: PitchBook

The low coupons, deteriorating ratings, and high pace of private equity exits beg the question: if CFOs and corporate treasurers find refinancing rates so attractive, are the investors purchasing newly issued bonds getting the short end of the stick? In our 2014 Investor Day presentation we explained why we found the risk-reward tradeoff for the high yield market unattractive. An investor in a newly issued 6.2% high yield bond might lose 1% each year for three years if interest rates and spreads normalize over that timeframe. That scenario is not unlikely, in our view, as the Fed might exit its unprecedented monetary intervention as the economy approaches previously stated inflation and unemployment targets, and concerns rise over the risk of financial instability. If the status quo is maintained, and we remain in a low interest rate, low credit spread environment, the investor in the newly issued high yield bond can expect an annualized total return of around 5%. We view a potential 5% return as too paltry to justify exposure to the overall high yield market. Therefore we continue to invest in both short duration and secured corporate bonds with more palatable risk-reward profiles. Our goal is to preserve capital until the high yield market provides us with the appropriate level of return for the risk we assume.

Still Playing Defense

Not much changed during the second quarter with respect to securitized products markets. These markets continue to be expensive both in terms of yield and the amount of compensation which investors receive for duration and credit risk. We discussed last quarter that the clamor for short duration bonds has pushed pricing on 15-year agency mortgages to unattractive levels. This trend has continued. Below are the yield and duration and the ratio of yield to duration for the 3.5% 15-year agency mortgages which we discussed last quarter. As shown in the charts below, over the past three months, 3.5% 15-year agency mortgages have continued to become riskier as evidenced by the decreasing ratio of yield to duration.

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3.5% 15-Year Mortgage Yield and Duration

2.40% 4.4

2.30% 4.2

2.20% 4 2.10% Yield

3.8 Duration Yield 2.00% Duration 3.6 1.90%

1.80% 3.4 Apr-14 May-14 Jun-14

Source: Bloomberg

3.5% 15-Year Mortgage Ratio of Yield to Duration

0.7

0.65

0.6

0.55

0.5 Ratio of Yield to Duration 0.45

0.4 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14

Source: Bloomberg

As a reminder, the ratio of yield to duration measures the amount of yield which investors receive per unit of interest rate risk. This ratio serves as a barometer for the amount of interest rate movement that a bond can withstand while still generating a positive 12 month total return. All things being equal, a ratio greater than one is better.

This increasing expensiveness of 15-year mortgages is not limited to 3.5% coupon mortgages. The chart below shows the ratio of yield to duration for other coupons within the 15 year agency mortgage space. Since May 2013 when the notion of the Federal Reserve’s tapering program first appeared, 15-year mortgages in general have become more expensive as indicated by the declining ratio of yield to duration. Similar to the 3.5% 15-year mortgages discussed above, all of the other coupons have also become more expensive over the past quarter (i.e., the ratio of yield to duration has declined).

13

15-Year Agency Mortgage Ratio of Yield to Duration

1.20 FNCI 2.5 FNCI 3 FNCI 3.5 1.00 FNCI 4 FNCI 4.5

0.80

0.60

0.40

Ratio of Yield to Duration 0.20

0.00

Source: Bloomberg Not shown in the chart above are the 5%, 5.5% and 6% 15-year mortgages. These mortgages are not included because they tend to be very seasoned and, with a declining balance, do not trade often. As such, the data regarding these mortgages is not meaningful. Having said that, as alluded to earlier in this letter, we have been actively buying these seasoned, high coupon 15-year mortgages. These mortgages are attractive for two reasons. First, because these mortgages are seasoned, having been issued around a decade ago, they have a very short remaining term to maturity and thus have limited extension risk. Secondly, the high coupon coupled with the seasoned collateral results in less variability in prepayment speed as interest rates move. As such, the duration of these mortgages moves within a more narrowly defined band. In general, we have been able to acquire these mortgages at much more attractive yields versus duration in comparison to the mortgages shown in the chart above.

Outside of agency mortgages the market has also seen more of the same. As a proxy for the overall securitized products market, the chart below shows yields for the securitized products portion of the Barclays Aggregate Index. Overall, this segment of the market also continues to be expensive and has become more expensive since the end of the first quarter, as measured by the yield on the index:

Barclays Aggregate Securitized Index Yield

3.2%

3.1%

3.0%

2.9%

2.8%

2.7% Yield to Worst 2.6%

2.5%

2.4% April-14 May-14 June-14

Source: Barclays

14

On a more granular level, the chart below shows historical yields for the Barclays ABS Index and the Barclays CMBS Index. As demonstrated in the chart, the ABS market and CMBS market continue to trade at or near historically low yields:

Barclays Aggregate CMBS and ABS Yield

20% Barclays Aggregate - CMBS Barclays Aggregate - ABS 15%

10% Yield to Worst 5%

0%

Source: Barclays

Measured relative to duration, the ABS and CMBS markets would exhibit similar patterns to the yield charts above – in other words, compensation per unit of interest rate risk is also at or near historically low levels.

Less easily captured by index data is the increasing levels of credit risk that market participants have been accepting in exchange for these historically low yields. Similar to trends seen in the corporate high yield and bank debt markets, the ABS and CMBS markets have been characterized by increasing leverage, both at the asset level and within the securitization structure. For example, we have noted previously that subprime auto loan ABS transactions have shown increasing amounts of leverage in the form of larger loan sizes, higher loan-to-value ratios and longer payment maturities. In the CMBS market, lenders have been offering borrowers more debt and additional layers of debt in the form of B-tranches and mezzanine loans. Even in lesser known areas of the securitized products market, increasing leverage has been symptomatic of investors’ fervor for yield. Anecdotally, over the past quarter, we have seen multiple bond offerings secured by non-performing and re-performing, non-agency residential mortgages where the ratio of the bond balance to the appraised value of the underlying homes has set new highs but there has been no concomitant increase in yield.

This combination of decreasing yields and increasing risks brings to mind a paradox whereby the financial system looks the strongest when it is most vulnerable. Investors have taken the view today that everything (the economy, the outlook for interest rates and inflation, etc.) feels “just right”, thereby lulling them into a sense of stability. This sense of stability leads many investors to take on even greater risk. However, in taking on greater risk, financial markets have the potential to become increasingly destabilized and more sensitive to negative events.

During our Investor Day on June 2, 2014, the Absolute Fixed Income investment team gave a presentation where the dominant theme was opportunity cost. As we have discussed in the past, in an environment such as today where yields remain at historically low levels and risk is increasing, the opportunity cost of holding safer investments or cash versus owning a riskier investment is very small. We

15 strongly believe that our investors are best served by preserving capital so that it is available for redeployment at a time when there is adequate compensation for risk.

Conclusion

Whether it is in the high yield corporate portion of the market, the securitized portion of the bond market or others areas in the domestic fixed income market, as a general observation, we find valuations at less than attractive levels. There are many reasons for these valuations and low yields; however, we know that the current Federal Reserve Bank ZIRP and QE policies are contributors. A result of these policies is an increase in downside risk for fixed income investors. A bond is an asymmetric investment with limited upside and far greater downside risk. For this reason we feel it is appropriate to maintain our defensive posture in the portfolio’s exposure to both interest rate risk and credit risk. We find this is the best approach if we wish to continue to achieve a positive total return in a rolling twelve month period and obtain a return of the consumer price index (CPI) plus 100 basis points over a five year period. In the past we have called this “winning by not losing.”

Thank you for your continued support.

Respectfully submitted,

Thomas H. Atteberry Chief Executive Officer and Portfolio Manager

Melinda J. Newman Senior Vice President, Head of Corporate Credit Research

Abhijeet Patwardhan Senior Vice President, Head of Structured Product Credit Research

July 2014

16 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE

MONEY MARKET ASSET-BACKED ALLY Auto Receivables Trust Lease 02006GAD6 2012-SN1 A4 0.7000 12/21/2015 $ 22,500,000 $ 100.13 $ 22,530,080.25 0.40% 02006KAC9 2012-SN1 A3 0.7200 8/20/2015 7,277,000 100.15 7,288,166.56 0.13% Carmax Auto Owner Trust 14313QAA3 2014-1 A1 0.1900 2/17/2015 7,517,208 99.99 7,516,611.48 0.13% 14313KAC2 2012-3 A3 0.5200 7/17/2017 22,177,688 100.06 22,190,145.21 0.40% 31679JAA1 Fifth Third Auto Trust 2014-1 A1 0.2000 3/16/2015 9,386,911 99.99 9,385,537.69 0.17% Honda Auto Receivables Owner Trust 43813JAA3 2014-1 A1 0.1900 3/23/2015 17,382,725 99.98 17,378,478.40 0.31% 43814GAB6 2014-2 A2 0.3900 9/19/2016 25,376,000 99.99 25,374,213.53 0.45% 43814AAD5 2011-2 A4 1.5500 8/18/2017 4,487,245 100.14 4,493,551.37 0.08% Hyundai Auto Receivables Trust 44890UAA2 2014-B A1 0.1800 2/17/2015 6,740,222 99.97 6,738,289.58 0.12% 65477PAA9 2014-A CL A1 0.1900 2/17/2015 7,253,873 99.99 7,253,113.52 0.13% 65477MAA6 2013-C CL A1 0.2300 12/15/2014 625,731 100.00 625,719.36 0.01% 44890RAA9 2014-A A1 0.2400 2/17/2015 5,162,327 99.99 5,161,868.59 0.09% Santander Drive Auto Receivables Trust 80283NAA7 2014-1 1 A1 0.2700 1/15/2015 3,392,306 100.00 3,392,288.02 0.06% 80283DAC5 2013-2 A3 0.7000 9/15/2017 68,138,000 100.08 68,191,372.50 1.22% 92867QAA9 Volkswagen Auto Lease Trust 2014-A A1 0.2000 2/20/2015 5,955,679 99.99 5,955,088.79 0.11% 213,474,524.84 3.81% U.S. TREASURY NOTES 912828D31 U.S Treasury Note 0.0940 4/30/2016 100,000,000 100.00 99,996,460.00 1.78% 912828TU4 U.S Treasury Note 0.2500 10/31/2014 78,000,000 100.05 78,040,755.00 1.39% 912828LK4 U.S Treasury Note 2.3750 8/31/2014 43,000,000 100.38 43,162,931.30 0.77% 912828LQ1 U.S Treasury Note 2.3750 9/30/2014 38,000,000 100.57 38,216,717.80 0.68% 912828LC2 U.S Treasury Note 2.6250 7/31/2014 48,000,000 100.21 48,101,486.40 0.86% TOTAL U.S. TREASURY NOTES 307,518,350.50 5.48%

ASSET-BACKED - AUTO 02005YAA4 Ally Auto Receivables Trust 2012-1 B 1.8400 11/15/2016 8,666,000 100.85 8,739,275.36 0.16% American Credit Acceptance Receivables 02528XAA4 2014-1 A 1.1400 3/12/2018 4,564,257 100.02 4,565,362.52 0.08% 02528WAA6 2013-2 A 1.3200 2/15/2017 959,833 100.17 961,462.86 0.02% 02528YAA2 2014-2 A 1.3900 10/10/2017 11,371,477 99.95 11,365,230.43 0.20% AmeriCredit Automobile Receivables Trust 03064LAA8 2014-1 A1 0.2100 3/9/2015 12,307,373 100.00 12,306,821.63 0.22% 03064JAB1 2013-2 A2 0.5300 11/8/2016 19,078,670 100.03 19,083,740.78 0.34% 03064LAB6 2014-1 A2 0.5700 6/8/2017 47,951,000 100.02 47,960,038.76 0.86% 03064YAC6 2013-1 A3 0.6100 10/10/2017 1,588,000 99.97 1,587,466.75 0.03% 03064XAC8 2012-5 A3 0.6200 6/8/2017 1,100,000 100.06 1,100,644.53 0.02% 03064YAB8 2013-1 A2 0.6300 6/8/2016 8,138,143 99.99 8,137,727.14 0.15% 03064JAC9 2013-2 A3 0.6500 12/8/2017 5,843,000 99.92 5,838,438.37 0.10% 03063XAD7 2012-4 A3 0.6700 6/8/2017 53,580,000 100.01 53,582,775.44 0.96% 03065CAB5 2013-4 A2 0.7400 11/8/2016 34,978,567 100.05 34,996,535.49 0.62% 03064RAD9 2011-4 B 2.2600 9/8/2016 7,952,000 100.48 7,989,806.19 0.14% 03064NAF3 2011-2 C 3.1900 10/8/2016 8,580,000 101.06 8,670,776.40 0.15% 03063PAE2 2010-3 C 3.3400 4/8/2016 3,614,569 100.93 3,648,328.35 0.07% 03063PAF9 2010-3 D 4.9800 1/8/2018 13,735,000 104.71 14,381,506.45 0.26% 03064EAF3 2010-2 D 6.2400 6/8/2016 6,772,523 102.90 6,969,197.07 0.12% 05579UAB9 BMW Vehicle Lease Trust 2014-1 A2 0.4500 3/21/2016 21,453,000 99.98 21,447,804.08 0.38% 22532VAC6 Credit Acceptance Auto Loan Trust 2012-1A B 3.1200 3/16/2020 4,500,000 101.66 4,574,503.80 0.08% Carmax Auto Owner Trust 14313QAB1 2014-1 A2 0.4700 2/15/2017 40,000,000 100.04 40,017,336.00 0.71%

17 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 14313RAB9 2014-2 A2 0.7400 4/17/2017 40,571,000 100.02 40,577,540.05 0.72% DT Auto Owner Trust 23339YAA7 2014-2A A1 0.8300 8/15/2017 13,234,752 99.98 13,231,541.25 0.24% 23339UAB3 2014-1A B 1.4300 3/15/2018 5,730,000 100.29 5,746,585.49 0.10% 23339YAB5 2014-2A B 1.6400 4/16/2018 8,474,000 100.06 8,479,144.57 0.15% 23339XAB7 2013-2A B 1.7800 6/15/2017 9,548,000 100.62 9,607,059.15 0.17% 23336TAB9 2012-2A B 1.8500 4/17/2017 1,820,108 100.05 1,820,989.48 0.03% Exeter Automobile Receivables Trust 2013-2A A 0.00% 30165RAA6 2014-2A A 1.0600 8/15/2018 10,174,000 99.83 10,157,109.13 0.18% 30165QAA8 2014-1A A 1.2900 5/15/2018 36,778,372 100.26 36,874,837.99 0.66% 30165PAA0 2013-2A A 1.4960 11/15/2017 19,317,795 100.32 19,378,761.96 0.35% 31679JAB9 Fifth Third Auto Trust 2014-1 A2 0.4600 8/15/2016 42,380,000 100.04 42,398,922.67 0.76% First Investors Auto Owner Trust 32058BAB5 2013-3A A2 0.8900 9/15/2017 5,844,630 100.10 5,850,444.24 0.10% 32058FAE0 2014-1A A3 1.4900 8/15/2017 9,500,000 100.28 9,526,143.05 0.17% 34530CAC5 Ford Credit Auto Lease Trust 2013-A A3 0.6000 3/15/2016 42,344,000 100.08 42,379,272.55 0.76% 36162NAC1 GE Equipment Transportation LLC 2012-1 A3 0.9900 11/23/2015 216,461 100.07 216,614.95 0.00% Honda Auto Receivables Owner Trust 43813JAB1 2014-1 A2 0.4100 8/22/2016 42,000,000 99.99 41,997,459.00 0.75% 44890UAB0 2014-B A2 0.4400 2/15/2017 44,090,000 99.96 44,072,844.58 0.79% Mercedes-Benz Auto Lease 0.00% 58768EAC3 2014-A A2A 0.4800 6/15/2016 47,197,000 100.00 47,198,028.89 0.84% 58768VAC5 2013 A A3 0.5900 2/15/2016 37,803,000 100.12 37,847,758.75 0.68% Nissan Auto Lease Trust 65476VAB5 2013-A A2A 0.4500 9/15/2015 126,681 100.03 126,724.34 0.00% 65476VAC3 2013-A A3 0.6100 4/15/2016 64,363,000 100.13 64,449,651.91 1.15% Prestige Automobile Receivables Trust 74113AAC0 2014-1A A2 0.9700 3/15/2018 16,390,000 99.91 16,375,203.11 0.29% 74112WAC3 2013-1A A2 1.0900 2/15/2018 12,973,226 100.17 12,994,804.37 0.23% 74113AAE6 2014-1A A3 1.5200 4/15/2020 17,250,000 100.08 17,264,467.58 0.31% 73328YAB3 Porsche Financial Auto Securitization 2014-1 A2 0.3800 9/23/2016 40,666,000 99.97 40,653,966.93 0.73% Santander Drive Auto Receivables Trust 80283XAB3 2014-3 A2A 0.5400 8/15/2017 17,167,000 99.98 17,162,874.77 0.31% 80283GAB0 2013-3 A2 0.5500 9/15/2016 12,436,029 100.03 12,439,376.00 0.22% 80283FAC0 2013-1 A3 0.6200 6/15/2017 38,015,602 100.03 38,027,622.53 0.68% 80281CAB1 2013-5 A2A 0.6400 4/17/2017 22,522,501 100.08 22,540,055.20 0.40% 80283NAB5 2014-1 A2A 0.6600 7/17/2017 24,276,000 100.05 24,288,482.72 0.43% 80283WAB5 2014-2 A2A 0.7500 8/15/2017 24,680,000 99.96 24,669,834.31 0.44% 80283NAD1 2014-1 A3 0.8700 1/16/2018 19,425,000 100.18 19,460,196.16 0.35% 80283HAB8 2013-4 A2 0.8900 9/15/2016 1,652,004 100.09 1,653,555.89 0.03% 80282XAC2 2012-4 A3 1.0400 8/15/2016 2,947,831 100.08 2,950,251.76 0.05% 80282WAC4 2012-3 A3 1.0800 4/15/2016 3,039,816 100.05 3,041,226.73 0.05% 80283BAD7 2012-AA B 1.2100 10/16/2017 13,183,000 100.42 13,238,847.14 0.24% 80283CAD5 2012-6 B 1.3300 5/15/2017 21,788,000 100.42 21,880,084.80 0.39% 80281CAE5 2013-5 B 1.5500 10/15/2018 13,190,000 100.42 13,245,866.25 0.24% 80282WAD2 2012-3 B 1.9400 12/15/2016 3,892,000 100.60 3,915,347.72 0.07% Wheels SPV LLC 96328DAA2 2014-1A A1 0.2400 5/20/2015 12,334,220 100.00 12,334,311.27 0.22% 96328DAC8 2014-1A A2 0.8700 3/20/2023 11,860,000 99.81 11,837,522.93 0.21% Westlake Automobile Receivables Trust 96041QAB7 2014-1A A2 1.2000 5/15/2017 2,000,000 99.99 1,999,897.20 0.04% 96041QAC5 2014-1A B 1.2400 11/15/2019 4,500,000 100.00 4,499,959.50 0.08% 96041QAD3 2014-1A C 2.2100 11/15/2019 500,000 99.99 499,940.50 0.01% TOTAL ASSET-BACKED - AUTO 1,136,835,907.76 20.29%

ASSET-BACKED - OTHER

18 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 14161GBE9 CARDS II TR 2012-4A A 0.6018 9/15/2017 75,000,000 100.04 75,027,330.00 1.34% 073568AA5 BEACON 2012-1A A 3.720% Due 09-20-27 3.7200 9/20/2027 516,951 102.82 531,515.16 0.01% CCG Receivables Trust 12505NAA2 2014-1 A1 0.2700 5/14/2015 3,678,290 100.00 3,678,320.90 0.07% 12505NAB0 2014-1 A2 1.4400 11/14/2021 8,476,000 99.95 8,471,388.21 0.15% 126802BM8 Cabela's Master Credit Card Trust 2010-2A A1 2.2900 9/17/2018 7,560,000 102.07 7,716,298.46 0.14% 125634AE5 CLI Funding LLC 2012 1A 4.2100 12/18/2022 39,348,910 100.38 39,496,861.90 0.70% 165182BM7 Chesapeake Funding LLC 0.5710 3/7/2026 29,025,000 100.00 29,025,580.50 0.52% 36159JBW0 GE Capital Credit Card Master Note Trust 2010-1 A 3.6900 3/15/2018 63,545,000 102.20 64,944,159.23 1.16% 36246MAR0 Global Tower Partners Acquisition Partners 4.7040 5/15/2018 15,981,000 101.81 16,269,457.05 0.29% 40417WAG7 HFG HEALTHCO-4 LLC 2011-1A A 2.4009 6/2/2017 16,552,000 101.54 16,806,685.62 0.30% HLSS Servicer Advance Receivables Back 404225BH6 2013-T4 AT4 1.1830 8/15/2044 1,095,000 100.00 1,095,021.90 0.02% 404225CB8 2014-T1 AT1 1.3104 1/17/2045 19,425,000 100.21 19,464,998.02 0.35% 404225AN4 2013-T1 A2 1.4953 1/16/2046 24,512,000 100.04 24,520,961.59 0.44% 404225BA1 2013-T2 B2 1.4953 5/16/2044 8,050,000 99.89 8,040,851.18 0.14% 404225AQ7 2013-T1 B2 1.7436 1/16/2046 5,750,000 99.76 5,735,927.45 0.10% 404225BN3 2013-T5 BT5 2.2761 8/15/2046 9,300,000 100.17 9,315,484.50 0.17% 404225AG9 2012-T2 B2 2.4800 10/15/2045 14,078,000 101.07 14,228,141.87 0.25% 45780KAC0 Insite Issuer LLC 8.5950 8/15/2043 11,613,000 107.99 12,540,929.55 0.22% 50116PAB6 Kubota Credit Owner Trust 2014-1A 0.9100 2/15/2017 6,269,000 99.94 6,265,225.44 0.11% MMAF Equipment Finance LLC 60689LAB1 2013-AA A2 0.6900 5/9/2016 28,743,012 100.06 28,759,915.77 0.51% 55314QAC1 2012-AA A3 0.9400 8/10/2016 20,777,486 100.16 20,809,782.52 0.37% PFS Financing Corpation 69335PBR5 2013-B A 0.6518 4/17/2017 4,000,000 100.04 4,001,584.40 0.07% 69335PBT1 2014-AA A 0.7518 2/15/2019 26,000,000 100.03 26,008,902.40 0.46% 69335PBM6 2012-BA B 0.8518 10/17/2016 19,945,000 100.12 19,968,026.50 0.36% 69335PBF1 2011-BA A 1.6518 10/17/2016 9,010,000 100.26 9,033,615.21 0.16% 69335PBG9 2011-BA B 2.4018 10/17/2016 4,000,000 100.20 4,008,071.60 0.07% 69847RAB8 Panhandle-Plains Student Finance Corp 2001-1 CL A2 1.4990 12/1/2031 5,900,000 98.50 5,811,500.00 0.10% Progresso Receivables Funding I LLC 74326BAA5 2014-A CL A 3.5000 7/8/2019 10,139,000 100.00 10,139,000.00 0.18% 74325QAA3 2013-A CL A 4.0000 7/9/2018 14,984,000 100.75 15,096,380.00 0.27% 37952UAA1 Global SC Finance SRL 2012-1A CL A 4.1100 7/17/2027 8,677,459 101.36 8,795,212.12 0.16% 86212TAA7 Store Master Funding LLC 2012-1A CLA 5.7700 8/20/2042 16,803,243 108.33 18,203,457.24 0.32% 874073AA7 TAL Advantage LLC 2006-1A 0.3430 4/20/2021 8,433,336 98.51 8,307,341.96 0.15% 90919WAB6 Unison Ground Lease Fund 5.7800 3/16/2020 10,932,000 102.83 11,241,638.47 0.20% 90919WAD2 Unison Ground Lease Fund 6.2680 3/16/2020 3,768,000 98.25 3,702,097.68 0.07% 90919UAC8 Unison Ground Lease Fund 9.5220 4/15/2020 19,600,000 112.87 22,123,108.00 0.39% 92937WAB0 WCP Issuer LLC 2013-1 CL B 6.6570 8/15/2020 15,347,000 107.37 16,478,567.67 0.29% TOTAL ASSET-BACKED - OTHER 595,663,340.07 10.61%

COMMERCIAL MORTGAGE-BACKED SECURITIES AGENCY Government National Mortgage Association 38378BDP1 2012-22 CL AB 1.6610 2/1/2026 5,732,167 100.07 5,736,337.72 0.10% 38376GP53 2011-49 CL AB 2.8000 4/16/2034 23,488,329 101.51 23,841,828.35 0.43% 38373M7V6 2009-49 CL B 3.4360 6/16/2034 213 100.00 213.00 0.00% 38376G5A4 2011-120 CL A 3.9089 8/16/2033 36,296,161 102.64 37,255,831.50 0.66% 38376G5Y2 2011-143 CL AB 3.9739 3/16/2033 40,127,291 102.72 41,219,957.13 0.74% TOTAL CMBS - AGENCY 108,054,167.71 1.93%

COMMERCIAL MORTGAGE-BACKED SECURITIES AGENCY STRIPPED Government National Mortgage Association 38373MKW9 2004-10 0.0207 1/16/2044 21,066,974 0.01 1,053.35 0.00% 38373MFY1 2002-56 0.0425 6/16/2042 216,423 0.16 341.95 0.00%

19 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 38376GDD9 2010-18 0.1160 1/16/2050 56,603,706 2.45 1,385,092.69 0.02% 38376GQU7 2010-63 0.1756 5/16/2050 42,695,957 2.21 942,299.77 0.02% 38376GA59 2011-10 0.1806 12/16/2045 71,634,172 2.77 1,984,982.91 0.04% 38376GCM0 2009-119 0.1889 12/16/2049 100,172,352 2.51 2,515,327.76 0.04% 38373MT67 2008-24 0.3025 11/16/2047 13,773,050 2.21 304,797.60 0.01% 38373MQ86 2008-8 0.3072 11/16/2047 30,047,104 2.16 648,716.98 0.01% 38373MV80 2008-45 0.3409 2/16/2048 24,012,951 2.24 538,610.49 0.01% 38373MP87 2007-77 0.3929 11/16/2047 51,946,774 3.26 1,694,503.77 0.03% 38373MNX4 2005-9 0.4429 1/16/2045 5,425,346 2.18 118,109.78 0.00% 38376GAL4 2009-71 0.4431 7/16/2049 61,310,502 2.83 1,736,926.52 0.03% 38374NP43 2006-55 0.4837 8/16/2046 28,341,710 3.12 883,977.93 0.02% 38376GBG4 2009-105 0.4964 11/16/2049 35,821,444 3.84 1,376,618.09 0.02% 38373MY87 2008-48 0.5265 4/16/2048 15,514,167 3.78 585,659.80 0.01% 38378KQR3 2013-72 0.5268 11/16/2047 538,408,042 5.93 31,915,375.03 0.57% 38376GB82 2011-6 0.5279 10/16/2052 181,311,002 2.92 5,292,468.15 0.09% 38374G5M0 2004-43 0.5380 6/16/2044 41,065,813 2.45 1,004,880.44 0.02% 38376GAS9 2009-86 0.5478 9/16/2049 68,020,643 2.86 1,946,070.60 0.03% 38376GHR4 2010-49 0.5520 2/16/2050 75,356,107 2.57 1,939,666.19 0.03% 38376GT59 2011-64 IX 0.5825 10/16/2044 61,740,226 4.94 3,051,201.97 0.05% 38373M7Z7 2009-49 0.6298 6/16/2049 52,553,901 3.53 1,853,050.55 0.03% 38373MMM9 2004-108 0.6366 12/16/2044 15,261,213 2.63 400,759.45 0.01% 38376GAE0 2009-60 0.6425 7/16/2049 61,922,402 3.09 1,912,783.00 0.03% 38378KEJ4 2013-35 0.6553 1/16/2053 360,315,461 6.16 22,194,027.17 0.40% 38373M4T4 2008-92 0.6693 10/16/2048 42,105,145 4.37 1,841,679.04 0.03% 38376GZE3 2010-161 IA 0.6710 12/16/2050 238,342,378 3.33 7,943,951.46 0.14% 38373MVL1 2006-30 0.6969 5/16/2046 6,000,768 5.94 356,265.60 0.01% 38376GF70 2011-16 0.7057 9/16/2046 99,798,553 4.36 4,353,212.88 0.08% 38376GXZ8 2010-148 IX 0.7168 10/16/2052 55,822,335 3.78 2,107,293.15 0.04% 38376GFQ8 2010-28 0.7237 3/16/2050 83,007,907 3.35 2,779,104.73 0.05% 38378B4P1 2013-7 0.7426 5/16/2053 130,550,210 6.98 9,107,260.98 0.16% 38373M4A5 2008-78 0.7516 7/16/2048 11,805,048 5.08 599,696.44 0.01% 38373M5R7 2009-4 0.7728 1/16/2049 34,575,506 4.28 1,478,102.88 0.03% 38376GVH0 2010-123 0.8056 9/16/2050 61,013,384 4.54 2,767,567.10 0.05% 38378KAH2 2013-29 0.8302 5/16/2053 126,620,149 6.86 8,689,978.81 0.16% 38378BRG6 2012-35 0.9020 11/16/2052 133,242,725 6.19 8,253,001.09 0.15% 38378B5H8 2013-1 0.9119 2/16/2054 139,124,471 8.13 11,310,833.40 0.20% 38374XSK2 2009-30 0.9169 3/16/2049 14,137,356 4.65 657,528.43 0.01% 38378KSD2 2013-80 0.9203 3/16/2052 64,525,515 8.24 5,314,037.50 0.09% 38378BW70 2012-131 0.9305 2/16/2053 111,766,426 8.03 8,974,844.01 0.16% 38378B6S3 2013-13 0.9460 7/16/2047 106,855,889 6.85 7,321,883.06 0.13% 38378KQ69 2013-125 0.9471 10/16/2054 26,750,531 5.80 1,551,961.48 0.03% 38378BBH1 2012-9 0.9519 11/16/2052 170,466,270 9.48 16,160,202.40 0.29% 38378B2X6 2012-150 0.9522 11/16/2052 98,968,452 7.67 7,595,036.94 0.14% 38376GQ29 2011-49 0.9609 4/16/2045 72,463,162 4.89 3,543,448.62 0.06% 38378KBK4 2013-30 0.9812 9/16/2053 230,371,261 7.44 17,130,844.67 0.31% 38378BSK6 2012-45 0.9846 4/16/2053 34,374,215 7.39 2,539,591.07 0.05% 38378BAF6 2011-165 0.9855 10/16/2051 231,337,484 5.16 11,930,074.05 0.21% 38378BA33 2012-95 1.0012 2/16/2053 142,252,834 8.07 11,479,149.34 0.20% 38378BVA4 2012-58 1.0153 1/16/2055 231,615,321 7.64 17,702,358.98 0.32% 38378BWM7 2012-79 1.0334 3/16/2053 144,729,293 7.33 10,601,420.71 0.19% 38378KGE3 2013-61 1.0457 5/16/2053 157,824,805 7.60 11,991,386.64 0.21% 38378BED7 2012-25 1.0631 8/16/2052 118,815,954 6.66 7,918,204.10 0.14% 38378BYY9 2012-85 1.0663 9/16/2052 121,648,972 7.83 9,525,686.26 0.17% 38378KEX3 2013-45 1.0744 12/16/2040 124,877,141 6.56 8,196,298.66 0.15% 38376G6C9 2011-143 1.0874 4/16/2053 94,618,159 13.18 12,469,727.17 0.22% 38376G5G1 2011-120 1.0964 12/16/2043 113,334,918 10.67 12,089,435.70 0.22%

20 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 38376GV64 2011-78 IX 1.1203 8/16/2046 141,416,290 5.65 7,995,677.04 0.14% 38376G2K5 2011-92 IX 1.1494 11/16/2044 32,247,148 6.61 2,131,214.01 0.04% 38378BAQ2 2011-164 1.1673 4/16/2046 166,684,368 6.28 10,462,777.78 0.19% 38378NZK2 2014-28 1.1970 10/16/2054 113,661,940 8.85 10,060,854.82 0.18% 38376G7M6 2011-149 1.2256 10/16/2046 105,219,615 7.36 7,742,059.27 0.14% 38378NN74 2014-49 1.3594 8/16/2054 174,391,995 9.37 16,342,430.80 0.29% 38378BBQ1 2012-4 1.4677 5/16/2052 249,002,791 6.08 15,145,943.37 0.27% TOTAL AGENCY STRIPPED 402,389,326.37 7.18%

CMBS - NON-AGENCY 002123AA5 A10 Securitization 2013-2 A 2.6000 11/15/2027 11,610,000 100.34 11,649,089.71 0.21% Citigroup Commercial Mortgage Trust 17311JAE6 2007-FL3A B 0.3218 4/15/2022 440,933 99.42 438,363.38 0.01% 17311JAF3 2007-FL3A C 0.3618 4/15/2022 546,612 99.25 542,534.27 0.01% 17311JAG1 2007-FL3A D 0.4018 4/15/2022 361,447 99.25 358,749.85 0.01% 17311JAH9 2007-FL3A E 0.4518 4/15/2022 413,082 98.88 408,449.20 0.01% 17322GAA7 Citigroup Mortgage Loan Trust Inc. 2014-A A 4.0000 1/1/2035 28,496,338 103.77 29,571,399.40 0.53% 74978NAC6 COMM Mortgage Trust 2013-RIA4 A2 6.0000 6/25/2028 12,099,500 97.14 11,753,253.93 0.21% Credit Suisse Mortgage Trust 225451CS0 2007-TF2A A3 0.4218 4/15/2022 33,812,949 98.69 33,371,230.25 0.60% 225451AJ2 2007-TF2A B 0.5018 4/15/2022 401,000 97.58 391,282.01 0.01% 245067AA1 Del Coronado Trust 2013-HDMZ CL M 5.1511 3/15/2018 9,299,000 100.63 9,357,977.98 0.17% 52524NAU1 Lehman Brothers Floating Rate Commercial 2007-LLFA F 1.1518 6/15/2022 9,540,766 96.81 9,236,415.56 0.16% 50218JAA9 LSTAR Commercial Mortgage Trust 2011-1 A 3.9129 7/25/2017 93,680 100.50 94,151.21 0.00% Monty Parent Issuer LLC 61530TAA5 2013-LTR1 A 3.4700 11/20/2028 8,148,496 100.12 8,158,274.20 0.15% 61530TAB3 2013-LTR1 B 4.2500 11/20/2028 17,543,227 100.20 17,578,313.45 0.31% Motel 6 Trust 61974PAJ7 2012-MTL6 D 3.7812 10/5/2017 37,033,000 101.69 37,659,576.14 0.67% 61974PAL2 2012-MTL6 E 4.2743 10/5/2017 10,061,000 97.95 9,855,184.14 0.18% Ores NPL LLC 686134AA5 2014-LV3 CL A 3.0000 3/27/2024 16,958,024 100.03 16,963,280.99 0.30% 67105YAA6 2013-LV2 CL A 3.0810 9/25/2025 19,922,707 100.06 19,935,258.31 0.36% 686134AC1 2014-LV3 CL B 6.0000 3/27/2024 47,419,000 99.75 47,300,452.50 0.84% Rialto Real Estate Fund LP 74978HAA3 2013-LV2 CL A 2.8331 5/22/2028 8,708,822 100.00 8,708,822.00 0.16% 74966JAA3 2014-LT5 CL A 2.8500 5/15/2024 10,928,588 100.03 10,931,975.86 0.20% 78485AAE7 Starwood Commercial Mortgage Trust 2013-FV1 CL B 2.1520 8/11/2028 18,051,000 100.06 18,061,108.56 0.32% TOTAL CMBS - NON-AGENCY 302,325,142.88 5.42%

CORPORATE BANK DEBT 48562RAF6 Kar Auction Services Term Loan BL1252123 2.7500 9/28/2017 14,972,000 100.10 14,987,271.44 0.27% 50307MAB2 La Frontera Generation Term Loan B 4.5000 9/30/2020 29,955,645 99.99 29,953,847.66 0.53% 67081YAG1 OCI Beaumont LLC Term Loan B1 5.0000 8/20/2019 17,767,944 101.39 18,015,273.54 0.32% 89236UAB8 Toys R Us Property Term Loan 6.0000 8/21/2019 25,348,620 96.70 24,511,608.57 0.44% TOTAL CORPORATE BANK DEBT 87,468,001.21 1.56%

CORPORATE BONDS AND NOTES 09664PAC6 Boart Longyear Management Pty Ltd 10.0000 10/1/2018 21,104,000 104.50 22,053,680.00 0.39% 19416QDW7 Colgate Palmolive Co. 0.6000 11/15/2014 4,968,000 100.13 4,974,647.68 0.09% Continental Airlines Company 210805BD8 1997-1 1A 7.4610 4/1/2015 219,034 104.00 227,795.36 0.00% 210805DA2 2000-1 8.3880 11/1/2020 5,597,620 107.75 6,031,435.22 0.11% 62942WAA8 Delta Airlines N671US 7.5000 9/15/2020 17,133,950 100.50 17,219,619.96 0.31% 29668GAA4 Essar Steel Minnesota 11.5000 5/15/2020 15,668,000 100.75 15,785,510.00 0.28% 29977HAD2 Everest ACQ LLC / Finance 6.8750 5/1/2019 19,015,000 106.50 20,250,975.00 0.36%

21 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 34530BAC7 Ford Credit Auto TR 2013-A A3 0.5500 7/15/2017 57,790,000 100.04 57,810,336.30 1.03% 31620MAD8 Fidelity National Information Services 7.8750 7/15/2020 14,162,000 105.91 14,999,556.26 0.27% 40415RAF2 HD Supply Inc. 8.1250 4/15/2019 45,225,000 109.88 49,693,230.00 0.89% 40415RAH8 HD Supply Inc. 11.0000 4/15/2020 18,371,000 117.88 21,654,816.25 0.39% 65409QAY8 Nielsen Finance LLC Co. 7.7500 10/15/2018 38,081,000 105.27 40,087,868.70 0.72% Northwest Airlines 667294AT9 2000-1 G 7.1500 10/1/2020 16,611,844 110.17 18,301,268.46 0.33% 667294AN2 1999-2 B 7.9500 9/1/2016 2,557,426 106.00 2,710,871.11 0.05% 667294AP7 1999-2 C 8.3040 9/1/2019 8,254,799 77.00 6,356,195.15 0.11% 742718DU0 Procter & Gamble Co. 0.7000 8/15/2014 22,968,000 100.04 22,978,025.53 0.41% 742718DM8 Procter & Gamble Co. 3.5000 2/15/2015 38,230,000 101.93 38,968,248.06 0.70% 742718DA4 Procter & Gamble Co. 4.9500 8/15/2014 4,009,000 100.55 4,030,966.11 0.07% 761735AG4 Reynolds Group Issuer LLC 7.8750 8/15/2019 29,044,000 109.00 31,657,960.00 0.56% 884768AF9 Thompson Creek Metals Co Inc. 9.7500 12/1/2017 33,913,000 113.25 38,406,472.50 0.69% US Airways PT Trust 90332UAD5 1998-1C 6.8200 1/30/2016 17,414,053 98.75 17,196,376.86 0.31% 90332UAB9 1998-1B 7.3500 7/30/2019 6,946,240 108.25 7,519,304.55 0.13% 90332UAR4 1999-1C 7.9600 1/20/2018 5,038,051 99.69 5,022,432.58 0.09% 931142CR2 Walmart Stores Inc. 2.8750 4/1/2015 1,875,000 101.94 1,911,345.00 0.03% 978699AC0 Woodbine Acquisition LLC 12.0000 5/15/2016 28,002,000 106.25 29,752,125.00 0.53% TOTAL CORPORATE BONDS AND NOTES 495,601,061.66 8.85%

RMBS AGENCY POOL ADJUSTABLE RATE MORTGAGES 31409BB89 Federal National Mortgage Association 865963 2.2980 3/1/2036 2,069,484 105.75 2,188,375.86 0.04%

RMBS AGENCY POOL FIXED RATE MORTGAGES Federal Home Loan Mortgage Corporation 3128PTK87 J13919 3.5000 12/1/2020 19,163,856 105.73 20,261,285.71 0.36% 3138EM7G0 E01653 4.5000 6/1/2019 468,351 105.97 496,322.03 0.01% 3128PQKR1 J11204 4.5000 11/1/2019 4,966,040 106.14 5,270,805.87 0.09% 3128CHB46 P60959 4.5000 9/1/2020 2,802,317 105.37 2,952,745.38 0.05% 31294KPF6 E01322 5.0000 3/1/2018 4,130,472 106.44 4,396,474.40 0.08% 31294KQ73 E01378 5.0000 5/1/2018 164,929 105.89 174,644.84 0.00% 3128MBUQ8 G13091 5.0000 6/1/2018 1,970,790 106.44 2,097,708.88 0.04% 3138EM7G0 B12315 5.0000 2/1/2019 335,773 106.81 358,647.97 0.01% 31294KZF5 E01642 5.0000 5/1/2019 3,208,645 106.44 3,415,345.91 0.06% 3128MDXQ1 G14987 5.0000 1/1/2020 3,928,624 107.25 4,213,255.56 0.08% 3128MCN50 G13812 5.0000 12/1/2020 6,852,939 106.45 7,294,747.98 0.13% 3128M1JE0 G12161 5.0000 5/1/2021 713,392 108.06 770,908.77 0.01% 3128M1RP6 G12394 5.0000 5/1/2021 191,985 107.81 206,984.01 0.00% 3128M1PC7 G12319 5.0000 6/1/2021 279,935 107.97 302,242.62 0.01% 3128MDY98 G15036 5.0000 6/1/2024 28,337,291 106.31 30,125,521.42 0.54% 3128M1RV3 G12400 5.5000 11/1/2016 184,729 103.94 191,999.21 0.00% 3128MDXG3 G14979 5.5000 12/1/2018 1,646,160 108.11 1,779,695.35 0.03% 3128MCMX0 G13774 5.5000 12/1/2020 564,945 107.16 605,386.78 0.01% 3128MC2U8 G14187 5.5000 12/1/2020 12,133,651 107.34 13,024,746.33 0.23% 3128PCMT6 J01270 5.5000 2/1/2021 187,437 108.30 202,989.55 0.00% 3128MB5N3 G13353 5.5000 3/1/2021 1,601,922 107.51 1,722,180.21 0.03% 3128MDZA4 G15037 5.5000 12/1/2024 11,121,746 107.65 11,972,745.30 0.21% 3128M1HQ5 G12139 6.5000 9/1/2019 840,702 103.99 874,229.20 0.02% 31297EWB8 A26942 6.5000 9/1/2034 619,855 113.49 703,454.84 0.01% 3128MJDM9 G08107 6.5000 1/1/2036 1,831,208 113.43 2,077,175.86 0.04% 31288LS85 P50543 6.5000 4/1/2037 142,395 110.11 156,788.29 0.00% Federal National Mortgage Association 31416JAF8 AA0905 4.5000 1/1/2021 2,854,945 106.33 3,035,663.02 0.05% 31416CE51 995756 5.0000 12/1/2018 7,196,534 106.32 7,651,642.81 0.14%

22 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 31403X6W0 761485 5.0000 10/1/2019 907,861 107.00 971,379.91 0.02% 31402RBW8 735453 5.0000 12/1/2019 4,035,865 106.40 4,294,241.08 0.08% 31406ADC3 803899 5.0000 12/1/2019 578,023 107.22 619,732.14 0.01% 31419AD87 AE0126 5.0000 6/1/2020 10,064,018 106.36 10,703,586.34 0.19% 31374CNN2 310097 5.0000 10/1/2020 2,491,215 105.63 2,631,539.91 0.05% 31416CJE7 995861 5.0000 1/1/2021 7,913,976 106.33 8,414,693.26 0.15% 31419AK48 AE0314 5.0000 8/1/2021 41,670,612 106.42 44,346,144.48 0.79% 31410K4F8 890122 5.0000 11/1/2021 3,591,361 105.88 3,802,353.46 0.07% 31410K2Q6 890083 5.0000 12/1/2021 4,034,221 106.33 4,289,587.19 0.08% 3138EM7G0 AL5394 5.0000 10/1/2024 1,110,243 107.29 1,191,227.79 0.02% 31419A3A3 AE0792 5.0000 1/1/2026 7,709,549 106.45 8,206,892.01 0.15% 3138ELQJ5 AL4056 5.0000 6/1/2026 23,012,131 107.52 24,742,790.53 0.44% 31371NRV9 257100 5.5000 1/1/2018 708,592 106.30 753,233.30 0.01% 31403DGH6 745500 5.5000 12/1/2018 5,105,476 106.24 5,423,904.54 0.10% 31416BVU9 995327 5.5000 12/1/2019 1,917,177 106.69 2,045,359.45 0.04% 31402RD22 735521 5.5000 3/1/2020 3,381,610 106.59 3,604,525.73 0.06% 31416BUH9 995284 5.5000 3/1/2020 6,116,111 106.24 6,497,572.84 0.12% 31410KAT1 889318 5.5000 7/1/2020 6,758,148 106.57 7,202,023.16 0.13% 31410GW66 889069 5.5000 1/1/2021 7,918,302 106.55 8,436,871.60 0.15% 31419AC96 AE0095 5.5000 9/1/2021 1,837,109 105.58 1,939,612.18 0.03% 31419AHP5 AE0237 5.5000 11/1/2023 7,242,455 106.53 7,715,459.74 0.14% 31419AM46 AE0378 5.5000 5/1/2025 757,869 106.40 806,386.56 0.01% 3138EL4T7 AL4433 5.5000 9/1/2025 5,547,964 108.20 6,002,712.86 0.11% 3138EMNT4 AL4901 5.5000 9/1/2025 10,255,607 107.29 11,002,828.47 0.20% 31402RBG3 735439 6.0000 9/1/2019 1,330,441 106.10 1,411,650.99 0.03% 31403DSV2 745832 6.0000 4/1/2021 12,734,735 106.99 13,624,383.59 0.24% 31418NBV1 AD0951 6.0000 4/1/2021 6,878,415 107.45 7,390,994.49 0.13% 31410LA28 890225 6.0000 5/1/2023 6,447,065 107.34 6,920,086.16 0.12% 31374TCT4 323282 7.5000 7/1/2028 338,088 113.62 384,132.20 0.01% Government National Mortgage Association 36241KRA8 782281 6.0000 3/15/2023 3,542,708 109.45 3,877,637.03 0.07% TOTAL RMBS Agency Pool Fixed 335,589,881.06 5.99%

RMBS AGENCY COLLATERALIZED MORTGAGE OBLIGATION Federal Home Loan Bank 3133XLU43 00-0986 5.7390 7/20/2014 9,432,856 100.25 9,456,438.14 0.17% Federal Home Loan Mortgage Corporation 3137AXKG7 4151 CL YU 2.0000 1/15/2043 23,310,719 83.70 19,510,083.43 0.35% 3137AWQA6 4125 CL NA 2.5000 4/15/2042 26,396,148 89.99 23,754,308.00 0.42% 3137AWZ57 4141 CL CK 2.5000 12/15/2042 3,673,963 87.79 3,225,239.86 0.06% 3137AWSK2 4144 CL BY 2.5000 12/15/2042 23,217,334 89.79 20,846,688.64 0.37% 3137AXSM6 4153 CL KP 2.5000 1/15/2043 21,156,173 90.75 19,198,247.47 0.34% 31393VFN6 2634 CL CI 3.0000 2/15/2023 60,854 101.69 61,881.63 0.00% 3137A8G28 3829 CL CD 3.0000 8/15/2024 2,182,889 102.15 2,229,733.80 0.04% 3137A6X98 3806 CL AB 4.0000 2/15/2023 1,677,357 100.57 1,686,901.16 0.03% 31398LZ50 3625 CL AJ 4.0000 3/15/2023 115,566 100.88 116,576.92 0.00% 3137AKDQ1 3992 CL H 4.0000 6/15/2036 179,953 102.50 184,442.83 0.00% 3137ACDN6 3877 CL EL 4.0000 8/15/2038 780,786 100.15 781,920.17 0.01% 3137AKBR1 3986 CL P 4.0000 3/15/2039 479,747 102.56 492,040.93 0.01% 3137ASQ72 4088 CL LE 4.0000 10/15/2040 13,139,343 104.36 13,712,377.34 0.24% 31395HNK2 2877 CL WA 4.2500 10/15/2034 1,132,693 100.63 1,139,772.63 0.02% 31398JVS9 3578 CL AM 4.5000 9/15/2016 2,021,182 102.97 2,081,190.89 0.04% 31395KJE4 2900 CL PC 4.5000 12/15/2019 6,318,232 106.16 6,707,685.93 0.12% 31395VM71 2995 CL JK 4.5000 6/15/2020 2,294,689 105.53 2,421,608.54 0.04% 31397TA69 3439 CL AC 4.5000 4/15/2022 623,593 100.19 624,771.59 0.01% 3137AK2K6 3969 CL MP 4.5000 4/15/2039 167,010 104.94 175,263.97 0.00%

23 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 3137AGEK2 3939 CL D 4.5000 9/15/2041 2,814,530 106.23 2,989,755.04 0.05% 31392WKF6 2509 CL CB 5.0000 10/15/2017 2,262,922 104.80 2,371,632.77 0.04% 31393KL86 2568 CL XD 5.0000 2/15/2018 540,379 105.66 570,937.40 0.01% 31394PL27 2747 CL DX 5.0000 2/15/2019 4,552,364 107.07 4,874,261.66 0.09% 3137AB7E5 3852 CL HA 5.0000 12/15/2021 8,301,711 107.28 8,906,241.60 0.16% 3138ENB40 AL5458 5.0000 5/1/2024 6,317,186 107.08 6,764,164.18 0.12% 31392V2R2 2494 CL CF 5.5000 9/15/2017 2,349,033 106.20 2,494,602.58 0.04% 31392ULK8 2503 CL B 5.5000 9/15/2017 2,320,378 105.17 2,440,411.15 0.04% 3137A6UM2 3808 CL BQ 5.5000 8/15/2025 8,726,112 106.25 9,271,843.04 0.17% 3137A6YP1 3806 CL JB 5.5000 2/15/2026 4,416,147 109.63 4,841,466.12 0.09% 3137AB2S9 3855 CL HQ 5.5000 2/15/2026 4,602,853 107.19 4,933,890.19 0.09% 3137AFBS0 3926 CL GP 6.0000 8/15/2025 4,973,457 105.01 5,222,826.13 0.09% 31398LK56 3614 CL DY 6.0000 1/15/2032 9,454,083 111.34 10,526,081.47 0.19% Federal National Mortgage Association 3136AEXQ5 2013-64 CL TZ 1.5000 3/25/2042 1,888,087 99.24 1,873,794.18 0.03% 3136ADMZ9 2013-30 CL JA 1.5000 4/25/2043 19,205,114 96.71 18,572,326.62 0.33% 3136ADMQ9 2013-30 CL CA 1.5000 4/25/2043 27,048,432 97.01 26,239,129.39 0.47% 3136AFVX9 2013-66 CL JA 2.2500 7/25/2043 76,379,516 101.42 77,460,973.57 1.38% 3136A2SA2 2011-125 GE 2.5000 12/25/2041 54,156,956 99.62 53,950,915.86 0.96% 31398SG64 2010-135 DI 3.5000 4/25/2024 10,483,456 6.43 674,256.05 0.01% 3136A65G5 2012-73 CL JB 3.5000 1/25/2042 38,477,770 105.29 40,514,048.22 0.72% 3136A34J7 2012-8 CL LE 3.5000 2/25/2042 36,171,538 105.29 38,084,791.71 0.68% 3136A37B1 2012-26 CL ME 3.5000 3/25/2042 47,723,876 105.29 50,248,173.15 0.90% 3136A4R50 2012-41 CL LB 3.5000 4/25/2042 46,444,828 105.29 48,902,010.20 0.87% 3136A47F0 2012-48 CL MB 3.5000 5/25/2042 45,607,223 105.29 48,018,787.01 0.86% 3136A8N71 2012-117 CL AD 3.5000 10/25/2042 67,816,414 104.31 70,737,300.86 1.26% 3136AG5N8 2013-112 CL WA 3.5000 2/25/2043 54,455,546 103.38 56,295,528.11 1.00% 31396YYY2 2008-15 CL JM 4.0000 2/25/2019 99,806 101.70 101,501.64 0.00% 31396YXY3 2008-18 CL MD 4.0000 3/25/2019 898,541 105.07 944,065.76 0.02% 31397U3V9 2011-67 CL EA 4.0000 7/25/2021 17,608,133 105.57 18,588,553.85 0.33% 3136A73Q3 2012-95 CL AB 4.0000 11/25/2040 7,741,433 102.31 7,920,207.46 0.14% 3136AKMY6 2014-39 CL MA 4.0000 8/25/2042 15,636,549 103.88 16,242,465.27 0.29% 3136AJAD8 2014-1 CL DA 4.0000 6/25/2043 13,603,472 104.63 14,233,860.86 0.25% 31396QZX0 2009-70 CL NU 4.2500 8/25/2019 5,933,298 105.02 6,230,912.23 0.11% 31394BVF8 2004-90 -CL GA 4.3500 3/25/2034 1,444,547 101.58 1,467,370.84 0.03% 31393AXB8 2003-30 CL HW 4.5000 4/25/2018 738,285 105.28 777,266.33 0.01% 31397LML0 2008-40 CL KA 4.5000 10/25/2018 1,372,613 104.38 1,432,665.08 0.03% 3136A7HX3 2012-67 CL PB 4.5000 6/1/2027 10,167,387 104.34 10,608,346.57 0.19% 31398S6Z1 2011-7 CL PA 4.5000 10/25/2039 547,820 103.73 568,253.03 0.01% 3136A5BH8 2012-40 CL GC 4.5000 12/25/2040 6,653,048 102.98 6,851,078.63 0.12% 3136A3EP2 2011-148 CL PB 4.5000 12/25/2041 8,213,556 107.50 8,829,169.41 0.16% 31393AK97 2003-24 -CL PD 5.0000 4/25/2018 2,743,884 105.79 2,902,700.01 0.05% 31397MWG8 2008-77 CL DA 5.0000 4/25/2023 2,496,761 103.65 2,587,817.87 0.05% 31394CF49 2005-26 CL G 5.0000 6/25/2032 130,121 100.81 131,178.13 0.00% 31398PT33 2010-39 CL PL 5.0000 10/25/2032 2,221,168 101.79 2,260,904.70 0.04% 31394AWY8 2004-60 CL LB 5.0000 4/25/2034 8,225,547 109.09 8,973,413.73 0.16% 3136AJCF1 2014-2 CL MC 5.0000 3/25/2042 7,490,087 106.61 7,985,235.68 0.14% 31393UAH6 2003-W17 CL 1A5 5.3500 8/25/2033 1,745,708 100.58 1,755,833.11 0.03% 31397QN38 2011-19 CL WB 5.5000 10/25/2018 6,566,732 107.34 7,048,861.46 0.13% 31398GLX5 2009-116 CL PA 5.5000 4/25/2024 3,715,074 103.83 3,857,249.88 0.07% 31392BL20 2002-9 CL PC 6.0000 3/25/2017 2,247,087 105.58 2,372,496.93 0.04% TOTAL RMBS AGENCY COLLATERALIZED MORTGAGE OBLIGATION 860,858,730.59 15.32%

RMBS Agency Stripped PRINCIPAL ONLY SECURITIES

24 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 3128CVSX3 Federal Home Loan Mortgage Corporation 217 0.00 1/1/2032 457,085 92.57 423,142.87 0.01% INTEREST ONLY SECURITIES Federal Home Loan Mortgage Corporation 3137A0XG5 3714 TI 2.2500 8/15/2015 38,302,290 2.10 804,761.75 0.01% 3137AGSH4 3935 LI 3.0000 10/15/2021 6,464,664 7.88 509,231.28 0.01% 3137AG5F3 3948 AI 3.0000 10/15/2021 8,150,380 8.27 673,791.91 0.01% 3137AHG93 3956 KI 3.0000 11/15/2021 17,388,020 8.22 1,429,140.49 0.03% 3137AJUY8 3968 AI 3.0000 12/15/2021 6,692,253 8.32 556,790.77 0.01% 3137AKDU2 3992 OI 3.0000 1/15/2022 5,239,899 8.02 420,220.51 0.01% 3137ALKW8 3994 EI 3.0000 2/15/2022 12,024,491 8.54 1,026,673.89 0.02% 3137ALHN2 3998 KI 3.0000 11/15/2026 20,856,099 11.53 2,405,715.56 0.04% 3137ALJJ9 3994 AI 3.0000 2/1/2027 12,475,566 8.51 1,061,129.23 0.02% 3137ASY40 4100 EI 3.0000 8/15/2027 95,979,805 11.20 10,747,501.83 0.19% 3137A1AA1 3706 AI 3.5000 7/15/2020 9,050,538 4.99 451,721.40 0.01% 3137A1QW6 3722 AI 3.5000 9/15/2020 11,359,965 7.89 895,760.50 0.02% 3137GAMM6 3735 AI 3.5000 10/15/2020 5,483,318 8.23 451,132.31 0.01% 3137ABH46 3874 DI 3.5000 10/15/2020 9,482,951 5.97 566,050.62 0.01% 3137AD2U0 3893 DI 3.5000 10/15/2020 6,937,387 6.05 419,863.15 0.01% 3137A3KC2 3753 CI 3.5000 11/15/2020 2,537,084 8.44 214,167.44 0.00% 3137A2EH0 3755 AI 3.5000 11/15/2020 10,295,807 8.23 847,632.17 0.02% 3137A2RX1 3760 KI 3.5000 11/15/2020 8,054,304 7.67 618,027.69 0.01% 3137A52J2 3784 BI 3.5000 1/15/2021 6,948,981 8.47 588,710.03 0.01% 3137ABGK1 3874 BI 3.5000 6/15/2021 5,795,043 8.83 511,610.16 0.01% 3137AD2C0 3893 BI 3.5000 7/15/2021 4,918,007 8.95 440,166.54 0.01% 3137AEHM0 3909 KI 3.5000 7/15/2021 4,276,082 8.89 379,932.45 0.01% 3137AFT85 3938 IO 3.5000 10/15/2021 29,508,340 9.21 2,718,281.72 0.05% 3137A46L6 3778 GI 3.5000 6/15/2024 5,367,051 7.28 390,496.97 0.01% 3137AA5L3 3854 GI 3.5000 11/15/2024 3,993,706 5.11 204,158.25 0.00% 3137ABBH3 3852 YI 3.5000 3/15/2025 13,428,029 7.11 954,124.57 0.02% 3137A2ZQ7 3763 NI 3.5000 5/15/2025 4,492,207 9.19 412,694.12 0.01% 3137AEA96 3904 QI 3.5000 5/15/2025 4,959,142 8.36 414,539.64 0.01% 3137AEHX6 3909 UI 3.5000 8/15/2025 7,825,052 7.67 600,003.08 0.01% 3137AE7D1 3904 NI 3.5000 8/15/2026 10,483,180 13.02 1,364,423.62 0.02% 3137AFB27 3930 AI 3.5000 9/15/2026 13,429,490 13.83 1,857,412.62 0.03% 3137AMVN4 4018 AI 3.5000 3/15/2027 23,234,241 12.69 2,949,164.03 0.05% 31398QJX6 3684 CI 4.5000 8/15/2024 26,678,476 9.18 2,449,092.10 0.04% 3137AEGV1 3917 AI 4.5000 7/15/2026 37,960,244 13.65 5,182,791.83 0.09% 31282YDA4 217 6.5000 1/1/2032 440,125 20.91 92,013.63 0.00% Federal National Mortgage Association 3136A0E60 2011-88 BI 3.0000 11/25/2020 4,212,909 5.31 223,673.45 0.00% 3136A25G4 2011-141 EI 3.0000 7/25/2021 17,755,898 7.00 1,243,014.07 0.02% 3136A34G3 2012-8 TI 3.0000 10/25/2021 8,270,148 7.79 644,230.47 0.01% 3136A2FR9 2011-113 GI 3.0000 11/25/2021 7,948,914 7.80 619,774.44 0.01% 3136A2NR0 2011-129 AI 3.0000 12/25/2021 10,812,780 8.06 872,009.62 0.02% 3136A34E8 2012-8 UI 3.0000 12/25/2021 26,636,452 8.18 2,180,063.08 0.04% 3136A3GG0 2011-137 AI 3.0000 1/25/2022 14,032,826 7.91 1,110,623.80 0.02% 3136A26F5 2011-138 IG 3.0000 1/25/2022 17,060,597 8.30 1,416,868.93 0.03% 3136A3AX9 2011-145 IO 3.0000 1/25/2022 21,990,847 8.40 1,848,194.35 0.03% 3136A7KD3 2012-78 AI 3.0000 2/25/2022 13,337,384 7.19 958,568.46 0.02% 3136A4EE5 2012-23 IA 3.0000 3/25/2022 10,034,443 8.23 825,531.62 0.01% 3136A4S59 2012-32 AI 3.0000 4/25/2022 16,316,200 8.38 1,367,388.93 0.02% 3136A5N69 2012-53 CI 3.0000 5/25/2022 25,104,138 8.47 2,127,495.36 0.04% 3136ABCA9 2012-147 AI 3.0000 10/25/2027 35,449,193 12.58 4,459,203.62 0.08% 3136AAX91 2012-145 DI 3.0000 1/25/2028 19,286,441 12.72 2,452,681.77 0.04% 3136AA2Y0 2012-149 CI 3.0000 1/25/2028 51,661,590 12.58 6,499,513.64 0.12% 31398SJJ3 2010-128 LI 3.5000 11/25/2020 13,031,016 7.68 1,000,494.04 0.02%

25 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 3136A0GX9 2011-75 BI 3.5000 11/25/2020 7,062,697 5.99 422,951.73 0.01% 3136A0TP2 2011-78 LI 3.5000 11/25/2020 18,462,554 5.62 1,038,086.64 0.02% 31398SVF7 2010-145 BI 3.5000 12/25/2020 6,590,046 8.48 558,864.24 0.01% 31397UXD6 2011-61 BI 3.5000 7/25/2021 5,662,059 9.04 511,882.97 0.01% 31397UT33 2011-66 QI 3.5000 7/25/2021 10,021,348 8.96 898,032.03 0.02% 3136A1CW3 2010-104 CI 3.5000 10/25/2021 16,918,284 8.95 1,513,655.18 0.03% 3136A1DT9 2011-104 DI 3.5000 10/25/2021 28,338,617 8.74 2,476,004.48 0.04% 3136A2CD3 2011-110 AI 3.5000 11/25/2021 11,904,729 8.65 1,029,991.20 0.02% 3136A13J2 2011-118 IC 3.5000 11/25/2021 31,303,052 8.96 2,805,038.32 0.05% 3136A2RG0 2011-125 DI 3.5000 12/25/2021 21,896,500 9.21 2,017,171.27 0.04% 3136A3EH0 2011-143 MI 3.5000 1/25/2022 9,125,274 8.46 772,303.88 0.01% 3136A3XN6 2012-2 MI 3.5000 2/25/2022 13,492,868 9.57 1,291,600.74 0.02% 31398SQA4 2010-137 BI 3.5000 2/25/2024 4,953,697 5.29 261,805.36 0.00% 3136A0HA8 2011-75 AI 3.5000 1/25/2025 19,503,990 7.15 1,394,182.26 0.02% 31397UU64 2011-66 BI 3.5000 3/25/2025 2,417,470 6.05 146,146.94 0.00% 3136A0SB4 2011-80 KI 3.5000 4/25/2025 10,086,273 8.06 813,003.03 0.01% 31397U3Y3 2011-67 CI 3.5000 8/25/2025 4,940,948 9.32 460,435.09 0.01% 31397SDL5 2011-22 IC 3.5000 12/25/2025 9,646,405 11.00 1,061,146.99 0.02% 3136A1ZF5 2011-101 EI 3.5000 10/25/2026 21,418,591 12.87 2,755,900.12 0.05% 3136A0CH8 2011-69 TI 4.0000 5/25/2020 6,548,072 6.32 414,030.01 0.01% 31398TPD7 2010-89 LI 4.0000 8/25/2020 10,322,568 8.15 841,290.32 0.02% 31398T2D2 2010-104 CI 4.0000 9/25/2020 4,576,912 8.10 370,925.31 0.01% 31397U4T3 2011-67 EI 4.0000 7/25/2021 11,480,739 7.74 888,781.41 0.02% 31398NP32 2010-110 IH 4.5000 10/25/2018 12,476,735 7.33 915,053.73 0.02% 31396QZY8 2009-70 IN 4.5000 8/25/2019 17,767,071 6.43 1,142,079.76 0.02% 31396YB50 2008-15 JI 4.5000 6/25/2022 3,382,392 3.18 107,521.17 0.00% 31398NML5 2010-114 CI 5.0000 4/25/2018 15,880,915 7.09 1,125,810.77 0.02% 31398M5W2 2010-30 5.0000 5/25/2018 6,518,871 7.36 480,007.94 0.01% 31393DJR3 2003-64 XI 5.0000 7/25/2033 1,265,315 15.65 197,964.48 0.00% TOTAL RMBS Agency Stripped 104,593,067.75 1.88%

RMBS NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATION Bayview Opportunity Master Fund Trust 07325UAA4 2013-2RPL CL A 3.4721 3/28/2016 4,105,994 100.46 4,124,723.49 0.07% 07328PAA2 2013-13NP CL A 3.7210 6/28/2033 10,248,287 100.73 10,322,659.84 0.18% 07328HAC6 2012-4NR2 CL A 3.9496 1/28/2034 7,779,259 100.16 7,791,626.47 0.14% 07328UAA1 2013-14NP CL A 4.2130 8/28/2033 25,018,242 100.69 25,190,259.93 0.45% 07326WAA9 2013-4RPL CL A 4.4583 7/28/2018 11,311,788 100.90 11,413,941.36 0.20% 1729732B4 Citicorp Mortgage Securities Inc. 2005-5 CL 2A3 5.0000 8/25/2020 162,359 103.11 167,408.36 0.00% 12647MAM7 Credit Suisse Mortgage Trust 2013-6 1A1 2.5000 8/25/2043 89,253,073 99.60 88,894,132.84 1.59% 46639GAU0 JP Morgan Mortgage Trust 2013-1 CL 2A2 2.5000 3/1/2043 36,625,338 99.41 36,409,398.67 0.65% 65619AAA1 Normandy Mortgage Loan Trust 2013-NPL3 A 4.9486 9/16/2043 34,561,274 99.85 34,509,432.09 0.62% 769422AA4 Riverview HECM Trust 2007-1 CL A 0.5900 5/25/2047 34,831,205 89.97 31,337,286.83 0.56% 81744TAA5 Sequoia Mortgage Trust 2012-1 1A1 2.8650 1/25/2042 6,783,793 99.36 6,740,314.99 0.12% Stanwich Mortgage Loan Trust Series 854864AA3 2009-2 A 2.1892 2/15/2049 386,071 44.72 172,650.95 0.00% 85486AAA9 2010-1 A 1.2897 9/15/2047 682,185 50.58 345,049.17 0.01% 85486BAA7 2010-2 A 7.5851 2/28/2057 3,517,546 50.42 1,773,546.69 0.03% 85486TAA8 2010-3 A 1.3103 7/31/2038 2,290,729 50.03 1,146,051.72 0.02% 85486WAA1 2010-4 A 1.0254 8/31/2049 2,988,759 50.50 1,509,323.30 0.03% 85486XAA9 2011-1 A 3.8944 6/30/2039 4,519,648 52.74 2,383,793.42 0.04% 85486UAA5 2011-2 A 2.8890 9/15/2050 3,080,209 53.52 1,648,540.18 0.03% 85487QAA3 2012-NPL4 CL A 2.9814 10/15/2042 4,492,839 100.15 4,499,740.45 0.08% 85488AAA7 2012-NPL5 CL A 2.9814 10/16/2042 66,857 100.00 66,857.00 0.00% 85488NAA9 2013-NPL1 CL A 2.9814 2/16/2043 17,908,846 100.43 17,985,128.73 0.32% 85489CAA2 2013-NPL2 CL A 3.2282 4/16/2059 35,752,883 100.00 35,752,847.25 0.64%

26 FPA New Income, Inc. 6/30/14 Portfolio Holdings

COUPON RATE MATURITY MKT PRICE % OF NET ASSET CUSIP/SEDOL BONDS & DEBENTURES (%) DATE PRINCIPAL ($) MKT VALUE ($) VALUE 90349MAA0 US Residential Opportunity Fund Trust 2014-4A 3.4656 3/25/1934 11,183,262 100.44 11,232,782.60 0.20% Vericrest Opportunity Loan Transferee 91830LAA6 2014-NPL4 A1 3.1250 4/24/2054 43,863,000 100.51 44,086,701.30 0.79% 91830JAA1 2014-NPL3 A1 3.2500 11/25/2053 16,915,803 100.45 16,992,756.37 0.30% 91827AAA5 2014-NPL1 A1 3.6250 10/27/2053 10,359,537 100.84 10,446,406.90 0.19% 91827BAA3 2014-NPL2 A1 3.6250 11/25/2053 12,857,248 100.84 12,965,103.60 0.23% 94983XAH4 Wells Fargo Mortgage-Backed Securities Trust 2006-5 2A1 5.2500 4/25/2021 5,573,059 104.45 5,821,060.13 0.10% TOTAL RMBS NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATION 425,729,524.63 7.59%

TOTAL MARKET VALUE: 5,378,289,402.88 95.95%

CASH & EQUIVALENTS (NET OF LIABILITIES): 227,152,184.26 4.05%

TOTAL NET ASSETS: 5,605,441,587.14 100.00%

NO. OF FIXED INCOME SECURITIES: 480

Portfolio Holding Submission Disclosure

Except for certain publicly available information incorporated herein, the information contained in these materials is our confidential and proprietary information and is being submitted to you for your confidential use with the express understanding that, without our prior written permission, you will not release these materials or discuss the information contained herein or make reproductions of or use these materials for any purpose other than evaluating a potential advisory relationship with First Pacific Advisors.

You should consider the Fund’s investment objectives, risks, and charges and expenses carefully before you invest. The Prospectus details the Fund's objective and policies, sales charges, 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 [email protected], toll-free by calling 1-800-982-4372 or by contacting the Fund in writing.

Investments in mutual funds carry risks and investors may lose principal value.Capital markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The Fund may purchase foreign securities which are subject to interest rate, currency exchange rate, economic and political risks. The securities of smaller, less well-known companies can be more volatile than those of larger companies.

The return of principal in a bond fund is not guaranteed. Bond funds have the same issuer, interest rate, inflation and credit risks that are associated with underlying bonds owned by the fund. Lower rated bonds, convertible securities and other types of debt obligations involve greater risks than higher rated bonds. Mortgage securities and collateralized mortgage obligations (CMOs) are subject to prepayment risk and the risk of default on the underlying mortgages or other assets; such derivatives may increase volatility. Convertible securities are generally not investment grade and are subject to greater credit risk than higher-rated investments. High yield securities can be volatile and subject to much higher instances of default. The Fund may experience increased costs, losses and delays in liquidating underlying securities should the seller of a repurchase agreement declare bankruptcy or default.

Portfolio composition will change due to ongoing management of the fund. References to individual securities are for informational purposes only and should not be construed as recommendations by the Funds, Advisor or Distributor.

The FPA Funds are distributed by UMB Distribution Services, LLC, 235 W. Galena Street, Milwaukee, WI, 53212.

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