Our investment strategy utilizes a bottom-up value discipline. Risk management is an integral part of the investment process. This is important given our primary objective of preservation of capital. In addition to security selection, risk management is employed through portfolio diversification, liquidity and constant monitoring of individual credits. Liquidity and safety are enhanced by investing only in bonds with an initial issue size generally in excess of $100,000,000. In efforts to mitigate risk, our targeted maximum industry group exposure is approximately 15%. Targeted sector exposure is capped at approximately 20%, with an exception of up to 30% in Financial Institutions due to sector size within the Investment Grade Corporate Universe.Individual credits are monitored continuously; a deterioration of 10%, relative to the index, from initial purchase triggers a mandatory credit review in which appropriate action is promptly determined.

Within High Yield and the High Yield portion of Broad Market:
Portfolios are constructed with a maximum exposure of approximately 12% per industry. Additionally, any sector may represent approximately 5% of the HY portion of the portfolio value or approximately 125% of the Barclays High Yield Index industry sector weighting (whichever is greater), except the consumer cyclicals and non-cyclicals which can be weighted up to approximately 150% of the Barclays industry sector weighting.

For High Yield securities across all programs:
Individual credits are monitored continuously; a security price decline of approximately 15% relative to broader benchmarks triggers a mandatory Credit Committee review. This action will result in a hold or sell decision. Should a price decline by approximately 25% or more, relative to broader benchmarks, that position will be sold.

1 Sector is defined as Barclays Level 3 classification and industry group is defined as Barclays Level 4 classification.