333 South Grand Avenue, Los Angeles, CA 90071800 5-PAYDEN | payden.com

Multi-Sector Credit Strategy:LOOKING AT CREDIT ACROSS THE SPECTRUMPayden Solutions

We can implement a multi-sector credit portfolio through:

March 2009

333 South Grand Avenue, Los Angeles, CA 90071

Separate Account Strategies

Payden & Rygel manages these portfolios on a separate account basis, customized to meet specific client »needs and risk profiles.

We adjust overall portfolio allocations to specific credit sectors as we see value in the marketplace. »

Mutual Fund Strategies

We can also manage this strategy through our family of Paydenfunds: »

Payden Corporate Bond Fund (PYACX) »

Payden Core Bond Fund (PYCBX) »

Payden High Income Fund (PYHRX) »

Payden Emerging Market Bond Fund (PYEMX) »

Payden Multi-Sector Credit Strategy: Implementation

Investment Grade Corporate Debt Emerging Market Debt

There are now compelling opportunities in the high »yield bond market.High Yield spreads and yields are at levels not seen »in over the past 25 years, including the 1990-1991 financial recession.We believe there is significant value in the upper- »quality BB and single B rated end of the market.

Rationale The repricing of risk in financial markets has created »pockets of value in the investment grade corporate bond market.Corporate bonds spreads have not been this wide »since the inception of indices in the early 1970s.We see value in global investment grade debt; »including corporate bonds in Europe, the UK and the US.

Sovereign emerging market bonds are a diversifier to »corporate risk.The recent sell-off has brought spreads back to late »1990s levels, although the asset class has improved considerably since that time.Most EM countries are in a stronger position to »weather a global slowdown than in the past.

High Yield Debt

Asset Class The corporate market is well diversified globally with »the majority of issuance from companies domiciled in Europe, the United Kingdom and the United States.Market diversity offers ability to purchase bonds »issued in Pounds, Euros or Dollars and capture relative value across currencies.Tradable Corporate market totals over £250 billion, »€1.2 trillion and $2.4 trillion.

Emerging market debt is a high quality asset class, as »almost 50% of the sovereign universe is investment- grade rated.In addition to dollar-pay instruments, local markets »have developed significantly in recent years and provide a wider universe of liquid investment opportunities.Tradable domestic debt markets in emerging »countries total almost US$ 3 trillion.

The global High Yield market has grown significantly »since 1999 and is approaching $1 trillion in size. The market is still dominated by the U.S. market »but the European high yield market has grown to approximately $100 billion in size.The market is comprised of numerous quality »companies, with equity market capitalizations greater than $2.5 billion.

Valuations Corporate yields for quality companies average 5.5% »to 6.5%, roughly 4% above treasuries.Valuations are attractive throughout the A to BBB »rating categories.The banking sector is currently offering some of the »highest yields, reflecting regulatory uncertainty.

U.S. dollar-pay spreads on the broad EM index yield »700 basis points above treasuries. (A Basis Point is 0.01%)Local markets in Brazil and Indonesia trade at 12% »yield, and Turkey at 16%, but are subject to currency risk.

Broad high yield indices are yielding in excess of »1,700 basis points above Treasuries (A Basis Point is 0.01%). Yield on the broad indices is over 19%.Even the higher-quality segment of the market (BB »and single B bonds, excluding CCC rated bonds) is yielding in excess of 1,300 basis points above Treasuries.

Outlook While the global economic outlook is still uncertain, »we think the investment grade market is over-sold.However, the current economic downturn could »continue beyond our current forecast and interest rates could rise from inflationary concerns. Current and future portfolio holdings are subject to these risks.We focus on companies and industries that can »withstand a protracted slower global economy.

As U.S. credit markets stabilize in 2009 we »expect EM spreads to follow, but with much more differentiation according to impact from a global slowdown.The main risks to current and future holdings include »a significant delay in economic recovery in emerging market economies and a potential increase in investor risk aversion.

We believe the High Yield market is over-sold from »a technical perspective (selling pressure) but that the fundamentals (cash flow and earnings) for many issuers are still relatively healthy. High Yield bonds can be volatile and default rates »may be higher than expected. Current and future portfolio holdings are subject to these risks.

Payden Philosophy

We invest in major corporations with strong balance »sheets and good free cash flow.In the current environment, we favor utilities and »defensive industrial companies, while limiting exposure to financials.Our analysts look globally in their respective »sectors for strong companies and relative value opportunities.

Our focus is primarily on sovereign debt, the most »liquid segment of the EM asset class.Our average portfolio quality is BBB-, higher than »the index and most peers. We take opportunistic exposure to local markets, a »growing part of the asset class. EM local markets provide opportunities for higher yields and diversification.

We are overweight the “defensive” sectors such as »healthcare, telecommunications and utilities and under-weight the cyclical sectors: automotives, chemicals, homebuilders, retail and restaurants. We are focusing on the higher-quality BB and »single B rated end of the High Yield market and are significantly under-weight the more risky CCC rated segment of the market.

We can optimize the mix opportunistically as we see relative value in the marketplace

Opportunities Across the Broad Credit Spectrum

333 South Grand Avenue, Los Angeles, CA 90071800 5-PAYDEN | payden.com

Multi-Sector Credit Strategy:LOOKING AT CREDIT ACROSS THE SPECTRUMPayden Solutions

We can implement a multi-sector credit portfolio through:

March 2009

333 South Grand Avenue, Los Angeles, CA 90071

Separate Account Strategies

Payden & Rygel manages these portfolios on a separate account basis, customized to meet specific client »needs and risk profiles.

We adjust overall portfolio allocations to specific credit sectors as we see value in the marketplace. »

Mutual Fund Strategies

We can also manage this strategy through our family of Paydenfunds: »

Payden Corporate Bond Fund (PYACX) »

Payden Core Bond Fund (PYCBX) »

Payden High Income Fund (PYHRX) »

Payden Emerging Market Bond Fund (PYEMX) »

Payden Multi-Sector Credit Strategy: Implementation