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2017-04-15 PIP Quarterly Update

Dear Mr. and Mrs. Smith,

At the risk of sounding like a broken record, the Preferred Income Portfolio (PIP) had an excellent first quarter of 2017. We continue to enjoy between 6% and 7% annual income and this quarter our security values rose over 1% as 30-year US Treasury rates fell modestly in the quarter.

PIP remains key to our Bridge to Higher Interest Rates (Bridge) strategy. We focus on high coupon preferreds issued by larger ($5+ billion) companies and hold them through their guaranteed income period (5 to 10 years) at which point we either sell them or allow them to be called, whichever value is greater. This strategy has served us for over eight years and continues to work well. In 2017 we are in the process of selling three issues at a premium and allowing two others to be called which will provide cash for reinvestment. This process refreshes PIP on an ongoing basis allowing usto keep up with changing interest rates and prices.

PIP's diversification provides value stability to our investors. At any given time, one sector or another of the stock market will be outperforming the others. PIP has exposure to nine different sectors to balance out security valuations.

TIA has over 30 years' experience selecting individual investment securities. This experience serves us well as we evaluate preferred securities for their inclusion in PIP. Our investment rules are designed to minimize the credit risk that is inherent in fixed income investing.

At TIA we are aware of our investors' concerns over rising interest rates. We constantly examine all alternatives and evaluate different products for our fixed income investments. We believe interest rates will normalize eventually, but this process will take years, not months. Even in an uncertain interest rate environment, TIA's Bridge strategy will ensure that PIP will remain a viable investment product for the foreseeable future.

We welcome your inquiries regarding your Preferred Income Portfolio.

J. Ron Delay
Senior Vice President
Manager, Preferred Securities

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