Pacific Funds Floating Rate Income - Class I (PLFRX) N-CSRCertified annual shareholder report (management investment company)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT

COMPANIES

Investment Company Act file number     811-10385                    

                         Pacific Funds Series Trust                    

(Exact name of registrant as specified in charter)

700 Newport Center Drive, P.O. Box 7500

                                         Newport Beach, CA 92660                                    

(Address of principal executive offices) (Zip code)

Mark Karpe, Esq.

Pacific Life Insurance Company

700 Newport Center Drive

                                     Newport Beach, CA 92660                                        

(Name and address of agent for service)

Copies to:

Anthony H. Zacharski, Esq.

Dechert LLP

1095 Avenue of the Americas

New York, NY 10036

Registrant’s telephone number, including area code: 949-219-3224

Date of fiscal year end: March 31

Date of reporting period: April 1, 2021 - March 31, 2022

Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

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Item 1. Reports to Stockholders.

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ANNUAL REPORT

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PACIFIC FUNDS

ANNUAL REPORT

AS OF MARCH 31, 2022

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PACIFIC FUNDS

Dear Shareholders:

We are pleased to share with you the Pacific Funds Series Trust (“Pacific Funds” or the “Trust”) Annual Report for the fiscal year ended March 31, 2022, including performance data, management’s discussion of fund performance, and a complete list of investments as of the close of this reporting period. Pacific Funds is comprised of twenty-nine funds (each individually, a “Fund” and collectively, the “Funds”), fifteen of which are available for direct investment. Pacific Life Fund Advisors LLC (PLFA) is the Adviser to the Trust and supervises the management of all of the Trust’s Funds. PLFA directly manages Pacific Funds^SM Portfolio Optimization Conservative, Pacific Funds^SM Portfolio Optimization Moderate-Conservative, Pacific Funds^SM Portfolio Optimization Moderate, Pacific Funds^SM Portfolio Optimization Growth and Pacific Funds^SM Portfolio Optimization Aggressive-Growth (together, the “Portfolio Optimization Funds”) as well as the PF Multi-Asset Fund.

Each of the Portfolio Optimization Funds is an asset allocation “Fund of Funds” that invests in Class P shares of certain other Funds of the Trust (the “PF Underlying Funds”). PLFA supervises the management of those PF Underlying Funds which are only available for investment by the Portfolio Optimization Funds. The Portfolio Optimization Funds also invest in Class P shares of Pacific Funds^SM Core Income, Pacific Funds^SM High Income and Pacific Funds^SM Floating Rate Income.

The Adviser has retained other firms to serve as sub-advisers under its supervision. The sub-advisers, the Adviser and the Funds of the Trust that they manage as of March 31, 2022 are listed below:

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Each of the sub-advisers and the Adviser has prepared a discussion regarding the performance of the Funds of the Trust that they manage, including commentary discussing positive and negative factors affecting performance for the past twelve months.

We appreciate your confidence in Pacific Funds and look forward to serving your financial needs in the years to come.

Sincerely,

Adrian S. Griggs President and Chief Executive Officer
Pacific Funds Series Trust

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This Annual Report is provided for the general information of investors with beneficial interests in the Trust. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current Trust prospectus, as supplemented, which contains information about the Trust and each of its Funds, including their investment objectives, risks, charges and expenses. You should read the prospectus carefully before investing. There is no assurance that a Fund will achieve its investment objective. Each Fund is subject to market risk. The value of a Fund changes as its asset values go up or down. The value of a Fund’s shares will fluctuate, and when redeemed, may be worth more or less than their original cost. The total return for each share class of each Fund is net of fees and includes reinvestment of all dividends and capital gain distributions, if any, and does not include deductions of any applicable share class sales charges. Past performance is not predictive of future performance. This report shows you the performance of each Fund compared to its benchmark index. Index performance is provided for illustrative and comparative purposes only and does not predict or depict the performance of the Funds. Indices are unmanaged, do not incur transaction costs, do not include fees and expenses, and cannot be purchased directly by investors. Index returns include reinvested dividends.

The composite benchmarks for the Portfolio Optimization Funds are composed of up to four broad-based indices. The percentage amounts of each broad-based index within each composite benchmark are based on each Fund’s target asset class allocations in effect during the reporting period. The percentages attributed to a broad-based index within a composite benchmark will change if a Fund’s target asset class allocations change.

PLFA supervises the management of the Funds contained in this report, subject to the oversight of the Trust’s Board of Trustees (Board). PLFA directly manages the Portfolio Optimization Funds as well as the PF Multi-Asset Fund. PLFA has written the general market conditions commentary which expresses PLFA’s opinions and views on how the market generally performed for the fiscal year ended March 31, 2022 (the reporting period) as well as separate commentary specific to those Funds that it directly manages that is based on its opinion of how these Funds performed during this reporting period.

For the other Funds, PLFA has retained other firms to serve as sub-advisers under its supervision. Each of these sub-advisers has written a separate commentary specific to the Fund(s) that they manage that is based on their opinions of how their Fund(s) performed during the reporting period. The views expressed in those commentaries reflect those of the respective sub-advisers for the fiscal year ended March 31, 2022.

All views and opinions expressed in the management discussion of fund performance are subject to change at any time based upon market, economic or other conditions, and the Trust, its Adviser and the sub-advisers disclaim any responsibility to update such views. These views and options may not be relied upon as investment advice or recommendations, or as an offer for any particular security. Any references to “we”, “I”, or “ours” are references to the sub-adviser or Adviser, as applicable. Any sectors referenced are provided by the applicable sub-adviser and could be different from the sectors listed in the Schedules of Investments if obtained from another source. The Adviser and sub-advisers may include statements that constitute “forward-looking statements” under the United States (U.S.) securities laws. Forward-looking statements include information concerning possible or assumed future results of the Trust’s investment operations, asset levels, earnings, expenses, industry or market conditions, regulatory developments and other aspects of the Trust’s operations or general economic conditions. In addition, when used in this report, words such as “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates”, “projects” and future or conditional verbs such as “will”, “may”, “could”, “should”, and “would”, or any other statement that necessarily depends on future events, are intended to identify forward- looking statements. Forward-looking statements are not guarantees of performance or economic results. They involve risks, uncertainties and assumptions. Although such statements are based on expectations that the Adviser or a sub-adviser believes to be reasonable, actual results may differ materially from expectations. Investors must not rely on any forward-looking statements. Statements of facts and performance data are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy.

In connection with any forward-looking statements and any investment in the Trust, investors should carefully consider the investment objectives, policies and risks described in the Trust’s current prospectuses, as supplemented, and Statement of Additional Information, as supplemented, as filed with the United States (U.S.) Securities and Exchange Commission (SEC), which may be obtained from the SEC or by contacting the Trust as noted in the Where to Go for More Information section of this Annual Report.

Market Conditions (for the fiscal year ended March 31, 2022)

The first quarter of 2022 saw a retreat from 2021’s positive market performance with the S&P 500 Index down 4.6% and volatility returning to the market. Small-capitalization growth experienced the largest quarterly loss, while large-capitalization value faced the least amount of damages among domestic equities. Rising interest rates particularly hurt growth, as valuations on information technology reached elevated levels.

Within fixed income, longer-duration bonds faced headwinds, but short-duration bonds, including bank loans, were generally flat.

Outlook

Inflation has been running at its fastest pace in four decades and it’s become a multi-factor problem that will require multiple solutions – a herculean job that threatens to overwhelm the Federal Reserve (Fed). The sticky inflation has been a result of many fundamental and geopolitical disruptions, including supply-chain woes, elevated oil prices, shifting consumer demands and now the Ukraine-Russia war.

The question everyone has been asking is how to properly knock down inflation, especially in a pandemic-driven world. The pandemic led to business slowdowns and shutdowns, leading to a shortage of goods that people want to buy. Next, transporting those goods turned out to be complicated by the lack of infrastructure investments. This underinvestment has been evident by the slow progress in the supply-chain recovery, which has been a major reason for this stubborn inflation that few had predicted.

Energy and gas prices have also fueled price increases. Even before the Ukraine-Russia war, energy and gas prices were on the rise and becoming a global economic threat. Now, sanctions on Russia have further driven up prices on oil prices and other commodities, including wheat.

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Finally, China’s heavy-handed COVID-19 strategies have been an important additional factor to global inflation.

So, what has kept the economy stable? Low unemployment, which suggests people still have money to spend. But again, this has led to more inflation since the consumers have had only a few places to spend their savings.

With so many factors pushing prices higher, there is no simple solution to fix today’s rising inflation. The Fed has started its interest-rate hike regime, and the use of balance-sheet quantitative tightening is expected to be not far behind.

Raising rates would make borrowing more expensive, which means less spending and less demand for large ticket items such as houses and cars. The problem with addressing inflation with rate hikes is that it takes time before these hikes are felt through the broader economy.

Recently, more Fed members have spoken with a hawkish tone to, in part, dampen fear of continued increases in inflation. When everyone anticipates a rise in inflation, businesses and workers tend to charge more via prices and wages, self-perpetuating the cycle. The idea is to reduce this expectation of future inflation before it spirals out of control as it did in the 1970s.

But a danger in this hawkish strategy is that it could lead to the Fed moving too aggressively on rates, which could risk the chances of a soft-landing where the economy and inflation are slowed to a manageable pace.

While the Fed tries to adjust inflation expectations, there is very little it or the White House can do about price increases caused by supply-chain disruptions, COVID variants and a war in Ukraine. As we said, today’s inflation has been caused by multiple factors and will require a multi-pronged and potentially painful solution, which will likely include raising interest rates, quantitative tightening, fixing supply chains, getting COVID under better control, and, hopefully, ending the Russia-Ukraine War.

Those are a lot of moving parts. In the coming months, it will be interesting to see if they will work together to bring down inflation while keeping the economy healthy.

Performance of the Portfolio Optimization Funds

Since the performance of each Portfolio Optimization Fund is a composite of the performance of each of the Underlying Funds in which it invests (which may include bonds and domestic and/or international equities), there is no one broad-based industry index to use as a meaningful comparison to a Portfolio Optimization Fund’s performance. Therefore, we at PLFA have provided information regarding four broad-based indices to use as a comparison to each Portfolio Optimization Fund’s performance. In addition, to assist in performance comparisons, composite benchmarks were constructed for each Portfolio Optimization Fund each of which is comprised of up to four broad-based indices shown below.

The composition of the composite benchmark reflects the target broad asset class allocations described in the Portfolio Optimization Fund’s prospectus. However, the actual allocation of a Portfolio Optimization Fund could vary because of factors such as market performance and adjustments to allocations within each Funds’ target allocation bands. The one-year performance for these broad-based indices for the year ended March 31, 2022 is shown in the following table:

It should be noted that the benchmark indices for the Underlying Funds may differ from the Portfolio Optimization Funds’ broad-based indices. The following investments comprise the Underlying Funds for the Portfolio Optimization Funds. Not all of the Underlying Funds were represented in each of the Portfolio Optimization Fund models during the reporting period, and the allocation of each of the Underlying Funds within the Portfolio Optimization Fund models did vary.

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Pacific Funds Portfolio Optimization Conservative (managed by Pacific Life Fund Advisors LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Portfolio Optimization Conservative’s Class A (without sales charge) returned -2.13%, compared to a return of -4.15% for the Bloomberg US Aggregate Bond Index, a return of 15.65% for the S&P 500 Index, and a return of -0.33% for the Pacific Funds Portfolio Optimization Conservative Composite Benchmark.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class A underperformed the Pacific Funds Portfolio Optimization Conservative Composite Benchmark. To seek current income and preservation of capital, under normal market conditions, the Fund targets the following approximate exposure to the two broad asset classes of debt (fixed income) and equity, respectively: 70% - 85% and 15% - 30%.

The Fund was primarily invested in various fixed income strategies, with a smaller allocation to equity, during the reporting period. Fixed income investments included allocations to intermediate-term bond, short duration bond, inflation-indexed bond, emerging markets bond, and floating rate strategies. The equity segment consisted mainly of allocations to domestic and foreign large-capitalization strategies.

Among the fixed income lineup, high yield and Treasury Inflation Protected Securities (TIPS) contributed to performance over the reporting period as inflationary pressures continued to build. However, the PF Managed Bond Fund, which represented the largest weight in the Fund, underperformed the Bloomberg US Aggregate Bond Index and detracted from performance over the reporting period.

Among domestic equities, exposures to large-capitalization, particularly growth-oriented, stocks contributed to performance over the reporting period as buyback activity remained robust throughout the period. On the other hand, the exposure to small-cap growth detracted from performance as biotech companies struggled over the reporting period. In terms of manager performance, the PF Large-Cap Value Fund

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outperformed its benchmark, while the PF Growth Fund underperformed its benchmark. International equities as a group underperformed the MSCI EAFE Index over the reporting period. An overweight to emerging markets had a negative impact on performance.

Pacific Funds Portfolio Optimization Moderate-Conservative (managed by Pacific Life Fund Advisors LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Portfolio Optimization Moderate-Conservative’s Class A (without sales charge) returned -0.83%, compared to a return of -4.15% for the Bloomberg US Aggregate Bond Index, a return of 15.65% for the S&P 500 Index, and a return of 2.38% for the Pacific Funds Portfolio Optimization Moderate-Conservative Composite Benchmark.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class A underperformed the Pacific Funds Portfolio Optimization Moderate-Conservative Composite Benchmark. To seek current income and moderate growth of capital, under normal market conditions, the Fund targets the following approximate exposure to the two broad asset classes of debt (fixed income) and equity, respectively: 50% - 70% and 30% - 50%.

The Fund had a diversified allocation mix that was modestly tilted to fixed income during the reporting period. Fixed income investments included intermediate-term bond strategies as well as short duration bond, inflation-indexed bond, high yield bond, emerging markets bond, and floating rate strategies. The Fund’s equity exposure was diversified across style (growth and value), market capitalization and region (including an allocation to foreign small-capitalization and emerging markets strategies).

Among the fixed income lineup, high yield and TIPS contributed to performance over the reporting period as inflationary pressures continued to build. However, the PF Managed Bond Fund, which represented the largest weight in the Fund, underperformed the Bloomberg US Aggregate Bond Index and detracted from performance over the reporting period.

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Among domestic equities, exposures to large-capitalization, particularly growth-oriented, stocks contributed to performance over the reporting period as buyback activity remained robust throughout the period. On the other hand, the exposure to small-cap growth detracted from performance as biotech companies struggled over the reporting period. In terms of manager performance, the PF Large-Cap Value Fund outperformed its benchmark, while the PF Growth Fund underperformed its benchmark. International equities as a group underperformed the MSCI EAFE Index over the reporting period. An overweight to emerging markets had a negative impact on performance.

Pacific Funds Portfolio Optimization Moderate (managed by Pacific Life Fund Advisors LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Portfolio Optimization Moderate’s Class A (without sales charge) returned 0.92%, compared to a return of 15.65% for the S&P 500 Index, a return of -4.15% for the Bloomberg US Aggregate Bond Index, and a return of 5.46% for the Pacific Funds Portfolio Optimization Moderate Composite Benchmark.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class A underperformed the Pacific Funds Portfolio Optimization Moderate Composite Benchmark. To seek long-term growth of capital and low to moderate income, under normal market conditions, the Fund targets the following approximate exposure to the two broad asset classes of debt (fixed income) and equity, respectively: 30% - 50% and 50% - 70%.

The Fund allocated to a mix of equity and fixed income strategies during the reporting period, with a larger allocation toward equity investments. The equity exposure was diversified across style (growth and value), market capitalization and region (including allocations to

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foreign small-capitalization and emerging markets stocks). The Fund also maintained exposure to select market sectors such as publicly-traded real estate investment trusts (REITs). Fixed income investments included intermediate-term bond, short duration bond, inflation-indexed bond, emerging markets bond, and floating rate loan strategies.

Among domestic equities, exposures to large-capitalization, particularly growth-oriented, stocks contributed to performance over the reporting period as buyback activity remained robust throughout the period. On the other hand, the exposure to small-cap growth detracted from performance as biotech companies struggled over the reporting period. In terms of manager performance, the PF Large-Cap Value Fund outperformed its benchmark, while the PF Growth Fund underperformed its benchmark. International equities as a group underperformed the MSCI EAFE Index over the reporting period. An overweight to emerging markets had a negative impact on performance.

Among the fixed income lineup, high yield and TIPS contributed to performance over the reporting period as inflationary pressures continued to build. However, the PF Managed Bond Fund underperformed the Bloomberg US Aggregate Bond Index and detracted from performance over the reporting period.

Pacific Funds Portfolio Optimization Growth (managed by Pacific Life Fund Advisors LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Portfolio Optimization Growth’s Class A (without sales charge) returned 2.22%, compared to a return of 15.65% for the S&P 500 Index, a return of -4.15% for the Bloomberg US Aggregate Bond Index, and a return of 8.17% for the Pacific Funds Portfolio Optimization Growth Composite Benchmark.

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Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class A underperformed the Pacific Funds Portfolio Optimization Growth Composite Benchmark. To seek moderately high, long-term capital appreciation with low, current income, under normal market conditions, the Fund targets the following approximate exposure to the two broad asset classes of debt (fixed income) and equity, respectively: 15% - 30% and 70% - 85%.

The Fund had a diversified allocation mix during the reporting period with the majority allocated to equity. The equity exposure was diversified across style (growth and value), market capitalization and region (including allocations to foreign small capitalization and emerging markets stocks). The Fund also maintained exposure to select market sectors such as publicly-traded REITs. Fixed income investments included intermediate-term bond strategies as well as specific strategies such as short duration bond, inflation-indexed bond and emerging markets bond strategies.

Among domestic equities, exposures to large-capitalization, particularly growth-oriented, stocks contributed to performance over the reporting period as buyback activity remained robust throughout the period. On the other hand, the exposure to small-cap growth detracted from performance as biotech companies struggled over the reporting period. In terms of manager performance, the PF Large-Cap Value Fund outperformed its benchmark, while the PF Growth Fund underperformed its benchmark. International equities as a group underperformed the MSCI EAFE Index over the reporting period. An overweight to emerging markets had a negative impact on performance.

Among the fixed income lineup, high yield contributed to performance over the reporting period. However, the PF Managed Bond Fund underperformed the Bloomberg US Aggregate Bond Index and detracted from performance over the reporting period.

Pacific Funds Portfolio Optimization Aggressive-Growth (managed by Pacific Life Fund Advisors LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Portfolio Optimization Aggressive-Growth’s Class A (without sales charge) returned 2.80%, compared to a return of 15.65% for the S&P 500 Index, a return of -4.15% for the Bloomberg US Aggregate Bond Index, and a return of 10.76% for the Pacific Funds Portfolio Optimization Aggressive-Growth Composite Benchmark.

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Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class A underperformed the Pacific Funds Portfolio Optimization Aggressive-Growth Composite Benchmark. To seek high, long-term capital appreciation, under normal market conditions, the Fund targets the following approximate exposure to the two broad asset classes of debt (fixed income) and equity, respectively: 0% - 15% and 85% - 100%.

The Fund primarily allocated to domestic and international equity funds that are diversified across style (growth and value), market capitalization and region (which included allocations to foreign small-capitalization and emerging markets stocks) during the reporting period. The Fund also maintained exposure to select sectors, such as publicly-traded REITs, as well as a small allocation to intermediate-term fixed income securities.

Among domestic equities, exposures to large-capitalization, particularly growth-oriented, stocks contributed to performance over the reporting period as buyback activity remained robust throughout the period. On the other hand, the exposure to small-cap growth detracted from performance as biotech companies struggled over the reporting period. In terms of manager performance, the PF Large-Cap Value Fund outperformed its benchmark, while the PF Growth Fund underperformed its benchmark. International equities as a group underperformed the MSCI EAFE Index over the reporting period. An overweight to emerging markets had a negative impact on performance.

Among the fixed income lineup, high yield contributed to performance over the reporting period. However, the PF Managed Bond Fund underperformed the Bloomberg US Aggregate Bond Index and detracted from performance over the reporting period.

Pacific Funds Ultra Short Income (managed by Pacific Asset Management LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Ultra-Short Income’s Class I returned -0.42%, compared to a return of -0.13% for its benchmark, the Bloomberg Short Treasury Total Return Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period the Fund’s Class I underperformed the benchmark. The Fund primarily invests in investment grade short-term fixed and floating rate debt securities. Using a fundamental approach with a top-down overlay, Pacific Asset Management’s team of portfolio managers and research analysts look at the relative value of each security and assess the macro environment and marketplace for tailwinds and catalysts in the process of individual investment selection.

The Fund’s exposure to securities that have longer maturities than the benchmark detracted from performance. The Fund’s overweight relative to the benchmark to corporate bonds, notably BBB rated corporate bonds, was the primary contributor to performance. The Fund’s

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overweight to the non-investment grade bank loans and the high yield bonds benefited performance. At the sector level, overweights to banking, consumer cyclicals, and transportation benefited performance while an overweight to student loan asset backed securities, electric utilities and consumer non-cyclicals detracted.

Pacific Funds Short Duration Income (managed by Pacific Asset Management LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Short Duration Income’s Class I returned -1.69%, compared to a return of -2.91% for its benchmark, the Bloomberg US 1-3 Year Government/Credit Bond Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class I outperformed the benchmark. The Fund uses a short maturity corporate debt focused strategy. Using a fundamental approach with a top-down overlay, Pacific Asset Management’s team of portfolio managers and research analysts look at the relative value of each security and assess the macro environment and marketplace for tailwinds and catalysts in the process of individual investment selection.

The Fund’s asset allocation and focus on corporate debt were the primary contributors to relative performance. The Fund’s reporting period saw the continuation of a post-Covid recovery, leading to credit related risk assets outperformance. The Fund’s overweight relative to the benchmark to corporate bonds, notably BBB rated corporate bonds, contributed to performance. The Fund’s overweight to the non-investment grade bank loan sector and the high yield bond sector also contributed to performance. While the Fund’s overall duration was below benchmark, which contributed to performance, the overweight to the intermediate portion of the yield curve was a detractor. The Fund’s overweight to Consumer Cyclicals and Electric Utilities benefited performance while the Fund’s overweight to Basic Industry and exposure to Student Loan Asset Backed Securities detracted. At the issuer level, Aircastle (Finance Companies), PetVet Care Centers (Consumer Non-Cyclical) and Mavis Tire (Consumer Non-Cyclical) were the top contributors while Hyundai (Auto), Bank of America (Banking) and Goldman Sachs (Banking) were the top detractors.

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Pacific Funds Core Income (managed by Pacific Asset Management LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Core Income’s Class I returned -2.81%, compared to a return of -4.15% for its benchmark, the Bloomberg US Aggregate Bond Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class I outperformed the benchmark. The Fund uses an intermediate term corporate debt focused strategy. Using a fundamental approach with a top-down overlay, Pacific Asset Management’s team of portfolio managers and research analysts look at the relative value of each security and assess the macro environment and marketplace for tailwinds and catalysts in the process of individual investment selection.

The Fund benefited from asset allocation and the focus on corporate debt versus government securities as the primary contributors to relative performance. The Fund’s overweight (relative to its benchmark) to corporate bonds, notably BBB rated corporate bonds, benefited performance. The Fund’s overweight to the non-investment grade bank loan sector and the high yield bond sector benefited performance. While the Fund’s overall duration was below benchmark, which contributed to performance, the overweight to the long-end of the yield curve was a detractor. The Fund’s overweight to Consumer Cyclicals, Consumer Non-Cyclicals, Transportation, Capital Goods, and Energy benefited performance while the Fund’s overweight to Insurance, Technology and Banking detracted. At the Issuer level, General Motors (Automotive), Tencent (Technology), and T-Mobile/Sprint (Telecommunications) were the top contributors while Bank of America (Banking), Morgan Stanley (Banking), and Goldman Sachs (Banking) were the top detractors.

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Pacific Funds ESG Core Bond (managed by Pacific Asset Management LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds ESG Core Bond’s Class I returned -4.37% compared to a return of -4.15% for its benchmark, the Bloomberg US Aggregate Bond Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class I underperformed the benchmark. The Fund uses an intermediate term corporate debt focused strategy. Using a fundamental approach with a top-down overlay, Pacific Asset Management’s team of portfolio managers and research analysts look at the relative value of each security and assess the macro environment and marketplace for tailwinds and catalysts in the process of individual investment selection. The Fund also incorporates sustainable investment goals into the investment process by use of environmental, social and governance (“ESG”) Exclusions and ESG metrics. The sub-adviser created the following ESG Exclusions to seek to screen out investment in issuers with direct involvement in: (i) the production, distribution, sale or use of thermal coal exceeding the sub-adviser’s revenue threshold; (ii) the production of tobacco; (iii) the production or sale of controversial military weapons; and (iv) serious human rights violations, severe environmental damage or gross corruption. Individual investment selection was also based on the sub-adviser’s analysis of ESG metrics provided by independent third-party ESG service providers. That is, the sub-adviser relies on ESG ratings and other information provided by various independent third-party ESG service providers to help construct a portfolio that rates highly on ESG factors.

The Fund benefited from asset allocation, security selection, and the underweight to duration during the reporting period. The Fund’s overweight to Student Loan Asset-Backed Securities, Banking and Energy detracted from performance, while the Fund’s overweight to Consumer Cyclicals, Consumer Non-Cyclicals, Transportation, Capital Goods, and Communications benefited performance. At the issuer level, Enel Finance (Electric Utility), Bank of America (Banking), and Ford Motors (Auto) detracted from performance while Lowe’s Company (Retailers), UBS Group (Banking), and Exelon Corporation (Electric Utility) contributed to performance.

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Pacific Funds Strategic Income (managed by Pacific Asset Management LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Strategic Income’s Class I returned -1.02%, compared to a return of -4.15% for its benchmark, the Bloomberg US Aggregate Bond Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class I outperformed the benchmark. The Fund focuses on USD credit focused fixed income asset classes, notably non-investment grade securities. Using a fundamental approach with a top-down overlay, Pacific Asset Management’s team of portfolio managers and research analysts look at the relative value of each security and assess the macro environment and marketplace for tailwinds and catalysts in the process of individual investment selection.

The Fund’s asset allocation and focus on credit related fixed income sectors including corporate bonds, bank loans, and high yield securities were the primary contributors to performance. The Fund’s reporting period saw the continuation of a post-Covid recovery, leading to credit risk assets outperformance . The Fund’s overweight (relative to its benchmark) in corporate bonds, notably BBB rated corporate bonds, benefited performance. The Fund’s overweight to the non-investment grade bank loan sector and the high yield bond sector contributed to performance. While the Fund’s overall duration was below benchmark, which contributed to performance, the overweight to the long-end of the yield curve was a detractor. At the sector level, overweights to Energy, Consumer Cyclical, Consumer Non-Cyclical, Transportation and Capital Goods benefited performance while positioning in REITS and Banking detracted. At the issuer level, Ahern Rentals (Capital Goods), Occidental Petroleum (Energy) and Chesapeake Energy (Energy) were the top contributors while Bank of America (Banking), Goldman Sachs (Banking) and JP Morgan Chase (Banking) were the top detractors.

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Pacific Funds Floating Rate Income (managed by Pacific Asset Management LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Floating Rate Income’s Class I returned 3.29%, compared to a return of 3.22% for its benchmark, the Credit Suisse Leveraged Loan Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class I outperformed the benchmark. Using a fundamental approach with a top down overlay, Pacific Asset Management’s team of portfolio managers and research analysts look for investment opportunities in floating rate loans and floating rate debt securities.

For the reporting period, the Fund outperformed the benchmark primarily due to credit quality allocations and overweight to second-lien loans. During the reporting period, B rated loans outperformed both BB rated loans and distressed loans (loans rated CC and below). The Fund’s overweights (relative to its benchmark) to issuers in the Energy, Gaming/Leisure and Aerospace sectors benefited performance while underweights to Metals/Minerals, Consumer Non-Durables and Transportation sectors detracted from performance. The Fund’s overweight to second lien CCC rated issuers contributed to performance during the reporting period. The Fund’s focus on larger and more liquid issuers, generally those with facility sizes greater than $1 billion detracted from performance as smaller issuers outperformed.

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Pacific Funds High Income (managed by Pacific Asset Management LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds High Income’s Class I returned -0.20%, compared to a return of -0.66% for its benchmark, the Bloomberg US High-Yield 2% Issuer Capped Bond Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Class I outperformed the benchmark. The Fund seeks a high level of current income by investing in non-investment grade debt instruments or in instruments with characteristics of non-investment grade instruments. Using a fundamental approach with a top-down overlay, Pacific Asset Management’s team of portfolio managers and research analysts look at the relative value of each security and assess the macro environment and marketplace for tailwinds and catalysts.

For the reporting period, the Fund outperformed the benchmark primarily due to security selection within corporate credit and an underweight (relative to the benchmark) to duration. The Fund’s underweight to BB rated securities and overweight to CCC rated securities benefited performance given the rally in lower quality issuers. The Fund’s exposure to select equity holdings contributed to performance. At the sector level, underweights to Communications and Banking benefited performance. The Fund’s underweight to Independent Energy and selection within Technology and Electric Utilities detracted from performance. At the issuer level, Ahern Rentals (Capital Goods), Occidental Petroleum (Energy) and Diamond Sports (Communications) were the top contributors while Talen Energy (Electric Utility), Bausch Health (Consumer Non-Cyclical) and Charter Communications (Communications) were the top detractors.

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Pacific Funds Small/Mid-Cap (managed by Rothschild & Co Asset Management US Inc.)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Small/Mid-Cap’s Advisor Class returned -2.52%, compared to a return of 0.34% for its benchmark, the Russell 2500 Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Advisor Class underperformed the benchmark. We at Rothschild & Co Asset Management US implement the Fund’s strategy by investing in common stocks and other equity securities of small and medium capitalization U.S. companies. We analyze a variety of quantitative and fundamental inputs in making stock decisions and seek to build a portfolio that is well diversified at the issuer level and by economic sector. Our focus remains on identifying stocks with attractive relative valuations and the ability to exceed investors’ expectations.

Leading sectors contributing to the Fund’s performance included energy, real estate, and financials. Conversely, the consumer discretionary, healthcare, and information technology sectors were the least impactful to the Fund’s absolute performance. Sector allocation was negative, with the main detractors coming from consumer discretionary, financials, and real estate, partially offset by positive attribution from energy, consumer staples, and information technology. Stock selection was the primary driver of the Fund’s relative underperformance, with the effects of contributors in the real estate, industrials, and financials sectors falling short of those of the detractors in the consumer discretionary, materials, and energy sectors.

Turning to individual stocks, a top detractor from the Fund’s performance included Avaya Holdings Corp., a communication technology provider, which posted mixed results throughout the year as the company continued its migration to a subscription and cloud business model. We still believe in this transition toward a fully cloud communications company as the more flexible “work from anywhere” trends appear to have changed the demand for digitization and movement to the cloud for communications. With this as a backdrop along with a broader and deeper set of cloud and subscription service offerings, the company appears well-positioned to benefit in the long-term. Another detractor from the Fund’s performance was AdaptHealth Corp, a distributor of home medical equipment, which was pressured after its co-CEO Luke Magee was charged by Denmark of tax fraud on past private activities unassociated with AdaptHealth. After an independent investigation commissioned by the Board, Magee resigned and the company’s other co-CEO, Steve Griggs, was named sole CEO. Subsequently, the stock is fundamentally positioned to benefit from the migration of administered healthcare toward lower-cost out-patient locations like the home, however the company was impacted by the COVID-19 Omicron variant disruption to patient admissions and discharges to the home. More recently, management also lowered company sales guidance due to an extended product recall of its distributed CPAP machine (sleep apnea) that’s manufactured by Phillips. Lastly, Heron Therapeutics Inc, a biotechnology company with a best-in-class injectable drug to treat post-surgical pain, whose drug launched in the third quarter of 2021 and early commercial results in consecutive quarters missed analyst revenue estimates, and raised the risk of a dilutive equity capital raise to fund operations to profitability (where there is low visibility).

Top individual stock contributors to the Fund’s performance included Diamondback Energy, Inc., an exploration & production company focused on the Permian Basin in Texas, which rose with the strength in oil prices in 2021. The company divested Williston Basin assets in North Dakota for a price above most broker expectations. It outperformed again in early 2022, as oil prices spiked due to concerns over the sanction

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of Russian supply, and as Organization of the Petroleum Exporting Countries and countries loosely affiliated with the cartel (OPEC+) failed to produce up to the cartel-mandated quotas. Another contributor to the Fund’s performance, Evoqua Water Technologies Corp, a water treatment equipment & services company, was strong on the news that proposed new U.S. infrastructure spending would include $56 billion to upgrade and modernize America’s wastewater, stormwater, and drinking systems. More specific to Evoqua, the proposal included a $10 billion allocation to the monitoring and remediation of Per- and polyfluoroalkyl substances (PFAS-chemicals linked to cancer) in drinking water; Evoqua holds a large market share in this growing niche and would likely be a direct beneficiary of such spending.

Pacific Funds Small-Cap (managed by Rothschild & Co Asset Management US Inc.)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Small-Cap’s Advisor Class returned -3.13%, compared to a return of -5.79% for its benchmark, the Russell 2000 Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Advisor Class outperformed the benchmark. We at Rothschild & Co Asset Management US implement the Fund’s strategy by investing in common stocks and other equity securities of small capitalization U.S. companies. We analyze a variety of quantitative and fundamental inputs in making stock decisions and seek to build a portfolio that is well diversified at the issuer level and by economic sector. Our focus remains on identifying stocks with attractive relative valuations and the ability to exceed investors’ expectations.

Leading sectors contributing to the Fund’s performance included energy, real estate, and industrials. Conversely, the consumer discretionary, healthcare, and information technology sectors detracted from the Fund’s absolute performance. Sector allocation was negative, with the main detractors coming from consumer discretionary, energy, and real estate, partially offset by positive relative performance from healthcare, communication services, and information technology. Stock selection was the primary driver of the Fund’s relative outperformance, with the effects of contributors in the healthcare, industrials, and financials sectors outshining detractors in the consumer discretionary, information technology, and utilities sectors.

Turning to individual stocks, top individual stock contributors to the Fund’s performance included Magnolia Oil & Gas Corp., an exploration & production (E&P) company operating in Texas, which revealed continued improvement in well results at its developing Giddings asset. As an unhedged E&P company, Magnolia was a direct beneficiary of higher oil and natural gas prices in 2021. The company continued to outperform in early 2022, as oil prices spiked due to concerns over the sanction of Russian supply, and as Organization of the Petroleum Exporting Countries and countries loosely affiliated with the cartel (OPEC+) failed to produce up to the cartel-mandated quotas. The company’s management continues to aggressively repurchase shares, reducing a previous private equity overhang on the stock. Another contributor to the Fund’s performance was NexPoint Residential Trust, Inc, a real estate investment trust that owns and operates middle-income multi-family residential real estate in southern markets in the United States, which reported better-than-expected earnings and accelerating rent growth with increased occupancy. Its renovated apartment rents remain at a discount to other housing options and thus the company’s value proposition to tenants remains intact. In addition, private market transactions provided a supportive valuation marker. Lastly, Brigham Minerals, Inc. , an oil mineral royalty company, benefited from stronger oil prices early in 2021, which drove increased drilling activity by private operators, and the company’s valuation subsequently increased. Like Magnolia (as noted above), Brigham outperformed again in early 2022, as oil prices spiked

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due to concerns over the sanction of Russian supply, and as OPEC+ countries failed to produce up to the cartel-mandated quotas. The company also made a key asset acquisition in Colorado that created value for its shareholders.

Detractors from the Fund’s performance included Avaya Holdings Corp., a communication technology provider, which posted mixed results throughout the year as the company continued its migration to a subscription and cloud business model. We still believe in this transition toward a fully cloud communications company as the more flexible “work from anywhere” trends appear to have changed the demand for digitization and movement to the cloud for communications. With this as a backdrop along with a broader and deeper set of cloud and subscription service offerings, the company appears well-positioned to benefit in the long-term. Another detractor from the Fund’s performance was Heron Therapeutics Inc, a biotechnology company with a best-in-class injectable drug to treat post-surgical pain, whose drug launched in the third quarter of 2021 and early commercial results in consecutive quarters missed analyst revenue estimates, and raised the risk of a dilutive equity capital raise to fund operations to profitability (where there is low visibility).

Pacific Funds Small-Cap Value (managed by Rothschild & Co Asset Management US Inc.)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, Pacific Funds Small-Cap Value’s Advisor Class returned 7.38%, compared to a return of 3.32% for its benchmark, the Russell 2000 Value Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund’s Advisor Class outperformed the benchmark. We at Rothschild & Co Asset Management US implement the Fund’s strategy by investing in common stocks and other equity securities of small capitalization U.S. companies. We analyze a variety of quantitative and fundamental inputs in making stock decisions and seek to build a portfolio that is well diversified at the issuer level and by economic sector. Our focus remains on identifying stocks with attractive relative valuations and the ability to exceed investors’ expectations.

Leading sectors contributing to the Fund’s performance included energy, materials, and real estate. Conversely, the consumer discretionary, healthcare, and information technology sectors were the least impactful to the Fund’s absolute performance, with the consumer discretionary sector partially detracting from overall returns. Sector allocation was negative, with the main detractors coming from energy, utilities, and real estate, partially offset by positive attribution from healthcare, consumer staples, and communication services. Stock selection was the primary driver of the Fund’s relative outperformance, with the effects of contributors in the materials, healthcare, and financials sectors outshining detractors in the consumer discretionary, information technology, and utilities sectors.

Turning to individual stocks, top individual stock contributors to the Fund’s performance included Magnolia Oil & Gas Corp. , an exploration & production (E&P) company operating in Texas, which revealed continued improvement in well results at its developing Giddings asset. As an unhedged E&P company, Magnolia was a direct beneficiary of higher oil and natural gas prices in 2021. The company continued to outperform in early 2022, as oil prices spiked due to concerns over the sanction of Russian supply, and as Organization of the Petroleum Exporting Countries and the countries loosely affiliated with the cartel (OPEC+) failed to produce up to the cartel-mandated quotas. The company’s management continues to aggressively repurchase shares, reducing a previous private equity overhang on the stock. Another contributor to the Fund’s performance was Alcoa Corporation, an aluminum producer, which benefited from strong demand for aluminum across consumers, auto, industrial, and aerospace end markets. Supply has also tightened as China continues to reign in supply on concerns about elevated energy costs

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and the environmental impact of highly polluting aluminum smelters. The net effect is strong positive revisions to Alcoa’s expected earnings power and free cash flow reflected in consensus estimates. It subsequently benefitted from higher global aluminum prices as concerns about sanctions on Russian aluminum supply mounted, following Russia’s invasion of Ukraine. Continued prudent capital allocation and a significantly de-levered balance sheet have been received well by the market. Management confirmed that major greenfield investments will not be a near-term priority, reinforcing a strong capital-return story at current high aluminum prices. Lastly, Brigham Minerals, Inc., an oil mineral royalty company, benefited from stronger oil prices in 2021, which drove increased drilling activity by private operators, and the company’s valuation subsequently increased. Like Magnolia (as noted above), Brigham outperformed again in early 2022, as oil prices spiked due to concerns over the sanction of Russian supply. The company also made a key asset acquisition in Colorado that created value for its shareholders.

A top detractor from the Fund’s performance was BJ’s Restaurants, Inc., a casual dining restaurant, which was under pressure in 2021 due to the combination of profit taking following strong stock performance along with concerns over sustainability of improving trends. It was also negatively impacted during periods of rising COVID-19 cases. Another detractor from the Fund’s performance was Avaya Holdings Corp., a communication technology provider, which posted mixed results throughout the year as the company continued its migration to a subscription and cloud business model. We still believe in this transition toward a fully cloud communications company as the more flexible “work from anywhere” trends appear to have changed the demand for digitization and movement to the cloud for communications. With this as a backdrop along with a broader and deeper set of cloud and subscription service offerings, the company appears well-positioned to benefit in the long-term.

PF Inflation Managed Fund (sub-advised by Pacific Investment Management Company LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, the PF Inflation Managed Fund returned 3.97%, compared to a return of 4.29% for its benchmark, the Bloomberg US TIPS Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund underperformed the benchmark. We at PIMCO implement the Fund’s investment strategies by investing in bonds and derivative instruments, focusing on inflation-indexed debt securities.

The Fund’s short position to core United Kingdom (U.K.) Retail Price Index detracted from performance. U.S. interest rate strategies detracted from performance as the yield curve flattened (front end rates rose more than long end rates). An overweight to U.S. and European breakeven inflation, the difference between nominal and real interest rates, contributed to performance.

During the reporting period, the Fund entered into interest rate swaps to manage nominal or real interest rate exposure in various global markets and as a substitute for cash bond exposure. The Fund entered into futures contracts to manage interest rate exposure, as a substitute for cash bond exposure, and for purposes of liquidity. Interest rate swaps and futures allow the portfolio manager to effectively manage risk and gain or reduce exposure by targeting specific markets and areas of the yield curve that may not otherwise be accessible through the use of cash bonds. The Fund sold/wrote and purchased options and swaptions on futures, bond indices, and swaps as a means of capitalizing on anticipated changes in market volatility and to generate income. The Fund purchased and sold foreign currency contracts in connection with settling planned purchases or sales of securities, to hedge the currency exposure associated with some of the Fund’s securities, or as a part of a tactical investment strategy. The Fund also held inflation caps to hedge duration.

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PF Managed Bond Fund (co-sub-advised by J.P.Morgan Investment Management Inc., Pacific Investment Management Company LLC and Western Asset Management Company, LLC)

Q. How did the Fund perform for the year ended March 31, 2022?

A. For the year ended March 31, 2022, the PF Managed Bond Fund returned -5.01%, compared to a return of -4.15% for its benchmark, the Bloomberg US Aggregate Bond Index.

Q. Discuss both positive and negative factors that materially affected the Fund’s performance during the year, including relevant market conditions, investment strategies and techniques, and particular sectors or securities.

A. For the reporting period, the Fund underperformed the benchmark. The Fund is co-sub-advised by JP Morgan, PIMCO and Western Asset. The following are separate discussions from each co-sub-adviser.

JP Morgan

For the reporting period, the portion of the Fund managed by JP Morgan underperformed the benchmark. In seeking the Fund’s goal of maximizing total return, we at JP Morgan invest our portion of the Fund assets in debt securities that focused on investment grade intermediate-term debt securities (five to ten years to maturity) in order for the Fund to maintain a dollar-weighted average maturity between three and ten years. Taking a long-term approach, we look for individual fixed income investments that we believe will perform well over a market cycle. We are value oriented and make decisions to purchase and sell individual securities and instruments after performing a risk/reward analysis that includes an evaluation of interest rate risk, credit risk, duration, liquidity, legal provisions in offering documents (like term to maturity) of the debt security or instrument and the legal structure (such as priority of payments in a multi-class structure) of the debt security.

During the reporting period, the Treasury yield curve flattened (front end rates rose more than long end rates) by 1.58% between two- and ten-year market indicators. Two-year yields ended 2.18% higher to finish the reporting period at 2.34%, while the ten-year was 0.60% higher to finish at 2.34%.

For our portion of the Fund, the Fund’s yield curve posture was a detractor from performance, while the Fund’s duration positioning was a positive contributor to the performance of our portion of the Fund. When interest rates rise across the maturity spectrum, those issues with a longer time to maturity decline in price more than those with shorter maturities, all else being equal. We had focused on securities with a shorter maturity and emphasized what is called the belly of the curve, which is more specifically securities with maturities in the next five to ten-years. In addition, we had a lower weighting of securities that mature farther out, which was negative for performance. For the portion of the Fund we managed, the Fund duration, which is an effective measure of how long it will take to have the investments returned either through principal paydowns, interest coupon payments or maturities, was lower than that of the benchmark. In a rising rate period, which was the case during the reporting period, this contributed to the Fund’s performance relative to the benchmark.

For our portion of the Fund, security selection in agency mortgage-backed securities was a positive contributor, as the Fund’s mortgages outperformed benchmark mortgage pass-throughs. From a sector allocation perspective, the Fund’s underweight to the mortgage-backed securities sector was also positive.

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For our portion of the Fund, the Fund’s underweight to corporate bonds was a detracted from performance relative to the benchmark, while sector allocation in securitized credit (non-agency mortgage-backed securities, commercial mortgage-backed securities, and asset-backed securities) was positive for performance relative to the benchmark.

PIMCO

For the reporting period, the portion of the Fund managed by PIMCO outperformed the benchmark. We at PIMCO implement the Fund’s investment strategies by investing in bonds and derivative instruments with the characteristics of debt instruments.

For our portion of the Fund, tactical U.S. duration positioning and short exposure to U.K. interest rates contributed to performance, while interest rate strategies within emerging markets, particularly a preference for Latin American debt, detracted from performance.

For our portion of the Fund, an underweight to Agency mortgage backed securities (MBS) and an overweight to non-Agency MBS both contributed to relative performance. Underweight positioning within investment grade credit and out of benchmark exposure to high yield credit also contributed to performance. Exposure to USD denominated Israeli Government debt detracted from performance. Within currencies, exposure to the Japanese Yen detracted from performance.

During the reporting period, our portion of the Fund bought and sold credit protection through credit default swaps to increase and decrease exposure to the credit risk of individual securities and to the broader investment grade, high yield, mortgage, and emerging market sectors, and to take advantage of the basis between the credit default swap and cash bond market. Our portion of the Fund entered into interest rate swaps to manage nominal or real interest rate exposure in various global markets and as a substitute for cash bond exposure. Our portion of the Fund entered into futures contracts to manage interest rate exposure, as a substitute for cash bond exposure, and for purposes of liquidity. Our portion of the Fund sold/wrote options on futures, bond indices, and also purchased options on futures, bond indices, and to-be-announced (TBAs) as a means of capitalizing on anticipated changes in market volatility and to generate income. Our portion of the Fund purchased and sold foreign currency contracts in connection with settling planned purchases or sales of securities, to hedge the currency exposure associated with some of the Fund’s securities, and to express certain views on currency markets.

Western Asset

For the reporting period, the portion of the Fund managed by Western Asset underperformed the benchmark. For our portion of the Fund, we at Western Asset seek to maximize total return consistent with prudent investment management. We utilize a long-term, fundamental value philosophy in conjunction with a global investment platform to build a diversified portfolio of investment grade bonds with opportunistic allocations to high yield, emerging markets and non-U.S. dollar securities to enhance returns. Value is added through sector rotation, yield curve positioning, issue selection and duration management.

During the reporting period, in our portion of the Fund, interest rate exposure (which includes both duration and yield curve positioning) and spread sectors detracted from performance. The Fund’s duration positioning was a detractor to performance, while yield curve positioning contributed to performance. Our portion of the Fund held a long duration position relative to the benchmark that served as a diversification strategy for spread sector exposure as well as a hedge against potential challenges to global growth. At the start of the reporting period, we believed that interest rates would stay relatively low and range-bound and that inflation would prove to be transitory, but ultimately, interest rates significantly increased during the reporting period, which detracted from performance. Additionally, in terms of the yield curve, our portion of the Fund was generally positioned for a flatter yield curve as we believed that the Federal Reserve would keep the front and intermediate parts of the yield curve anchored. Ultimately, during the reporting period, the yield curve flattened, which contributed to performance.

For our portion of the Fund, exposure to Emerging Markets (EM) was another detractor to performance during the reporting period. This was mainly due to the selloff in Russian local-currency assets with the imposition of sanctions after Russia’s invasion of Ukraine. Additionally, U.S. dollar-denominated bond spreads widened over the reporting period and EM currency performance was mixed. Finally, Non-U.S. Developed Market positions detracted from performance as we held long positions to certain foreign currencies and most foreign currencies ultimately weakened versus the U.S. dollar during the reporting period.

For our portion of the Fund, corporate credit exposures, including both investment grade and high-yield/high risk or non-investment grade debt, were positive contributors to performance as these sectors generated positive excess returns despite modestly wider spreads. Our portion of the Fund began the reporting period with overweights to both sectors, and tactically added to investment-grade bonds later in the reporting period as spreads widened with the emergence of the Omicron COVID-19 variant. We believed that investment-grade corporate bonds remained attractive relative to U.S. Treasuries and that certain subsectors and issuers still had further upside. In non-investment grade bonds, we held an out-of-benchmark exposure with a preference for higher-quality, shorter-duration issues, as we believed that select high-yield subsectors and individual issuers would present compelling value opportunities.

Other contributors to our portion of the Fund’s performance during the reporting period include exposures to structured products, namely non-agency mortgage backed securities (MBS) and commercial MBS. Structured products, in aggregate, contributed to performance as the sector generated positive excess returns. We believed that fundamentals in the structured product market were sound and improving as the economy reopens, and valuations were attractive relative to historical levels. Finally, an underweight position in agency MBS also contributed to performance as the sector underperformed. Although mortgage valuations were generally fair, we maintained an underweight position as we felt certain coupons appeared expensive and saw more attractive return opportunities in select spread sectors relative to agency MBS.