The process is similar to that of conservative equity value managers. It is driven by the search for inexpensive assets.

First, we identify those industry groups and corporations that are trading cheap relative to the market and their historical relationship
to the market.

Second, through fundamental credit research, we select those issuers who exhibit asset strength and an appropriate capital structure.

Third, we narrow the candidates by selecting those with the stronger potential to increase revenues and cash flow.

Fourth, we further narrow the list through a preference for those remaining candidates that have a better competitive position in their industry group.

These remaining companies form our “focus list.” The portfolios are constructed and managed through our proprietary analytical discipline that measures the yield of a security to our assessment of that security’s quality. Selections to buy and sell are made on the basis of the constant comparison of the bond issues of companies on our “focus list.” In this discipline, we are looking for a higher yield relative to our quality assessment. The constant objective is to improve the quality, increase the yield and shorten the maturity.