Pacificor

RMBS Carve-Out

Fund Investment Objectives

The Pacificor RMBS Carve-Out invests in high yield corporate securities. The investment process employs six steps; 1) Funnel with the purpose of generating investment ideas. Traditional YTM and current yield analysis based on information from B/D's. Industry analysis via contrarian philosophy. Insider equity purchases screening. Macro themes. 2) Research list with the purpose of organizing and prioritizing new projects. The list is adjusted weekly and provides key statistics on new projects. 3) Preliminary screen with the purpose to narrow and prioritize the research list. 3 year financial spreadsheet analysis. Briefly analyze financials and credit statistics. Pass on to file creation or eliminate from research list. 4) File creation - developing comprehensive information to begin research. Latest 10-K, 10-Q, annual report, prospectus and proxy. Latest Bloomberg news headlines and relevant stories. All street research available. Comprehensive financial spreadsheet creation. 5) Preliminary review summarizing key issues. Read all recent SEC filings, news releases, and third party research reports. Prepare summary on industry and business. Refine the list of candidate securities. The field of targeted securities is reduced to those with the most attractive risk/reward profiles. The overriding focus is on downside protection. There must be a portfolio fit with respect to diversification of risk factors, such as geographies, type of collateral, servicers, originators, year of origination, and liquidity. A credit committee reviews and, as appropriate, approves buy or sell decisions. The committee meets weekly at a minimum. New research projects are discussed, with input from all members. Purchase decisions are approved by unanimous agreement. Otherwise, either additional analysis is performed or the security is dismissed from consideration. A buy price maximum is set - a price limit up to which the security will be purchased. 6) Trade approval. Positions are monitored for relative-value swap trades. Exit criteria are established for all securities acquired. Risk is monitored based on current data and trends. Actual fund Inception date is March, 2000. Quarterly performance from March -December 2000 is available upon request. This is a managed account. AUM is the Senior RMBS Strategy AUM.