Summary

• The fourth-quarter reporting season topped expectations and finished strong with year-over-year earnings growth nearing 14% for the S&P 500® Index.
• Sector performance for the ICE BofA U.S. Convertible Index was mixed with energy, technology, and utilities outperforming, while financials, media, and consumer discretionary underperformed.
• Lumentum Holdings, Inc. reported a strong beat-and-raise quarter on significant AI-related demand.
• Johnson & Johnson rallied after reporting better-than-expected top- and bottom-line results and boosting guidance on the back of several drug pipeline catalysts.
• The portfolio's cash levels rose through February and remained elevated in March when some cyclical exposure was reduced in favor of companies with higher operating performance visibility.

General Market Environment

Major indices were mixed in the first quarter of 2026 with convertible securities advancing while equities and high yield bonds declined. Escalating geopolitical tensions were the dominant macro-overhang with the Iran conflict disrupting