Convertible Arbitrage Strategy: Sage Capital's philosophy has always centered on providing investors with attractive risk-adjusted returns regardless of broad market direction. We do this by specializing in the convertible securities market, a historically inefficient sector of the fixed income markets and an attractive venue for raising new capital for industries, big and small. Convertible arbitrage involves the purchase of convertible debentures or convertible preferred shares and the short sale of a strategic percentage of the underlying common stock. It may also involve trading in call and put options. A convertible security's price may be affected by a wide range of factors relating to securities markets and the economy as a whole including issuer credit quality, security liquidity and market support, the price and volatility of the underlying common stock as well as changes in prevailing interest rates and credit spreads. Our portfolio is focused on issues from the small to mid capitalization sector of the convertible market which generally carry higher coupons and lower conversion premiums with elevated stock price volatility. These issues tend to trade less efficiently and are more apt to be ignored by larger multi-strategy hedge funds. We then select convertible arbitrage positions employing a bottom-up approach using our proprietary, statistical evaluation criteria while maintaining diversification with respect to industries, individual holdings and security profiles. Portfolio interest rate risk is also managed through an active hedging program.