AXIOS ADVISORS, LLC

Axios Research Success Stories

Over the last two years, our subscribers have benefited from the following Axios recommendations, among others:

Miami Mt Sinai Medical Center Bonds

We initiated coverage of this credit on 9/16/02 with a "buy" recommendation on the 6 1/8% due 11/15/11 (cusip 593211bf1). At the time, the bonds were trading at 89.45 to yield 7.76% to maturity (+443). This credit fell on hard times in the fall of 2001, when serious financial problems came to light only months after the hospital brought a new issue to market. After a new management team was brought in, we performed an in-depth analysis of the situation and saw enough evidence of a turnaround to recommend the name as a "BB-" credit.

On 6/17/03, only nine months after our initial recommendation, the 6 1/8% of 2011 traded at 100.025 to yield 6.12% (+343). Spreads have tightened by an impressive 100 basis points and the total return on the investment came to +16.35%, including 4.59% in tax-exempt coupon interest. Market participants now widely believe that this institution has turned the corner and is on the way to financial recovery.

State of California G.O. Bonds

In a report dated 7/15/02, we assigned an "A" rating to the State's bonds, one notch below the official agency ratings. It was not until December (after the State forecasted an eye-popping $35 Billion deficit) that Moody's, S&P and Fitch belatedly followed our lead and downgraded the State to "A" also.

Since the downgrade, the yield premium on California G.O. bonds has more than tripled from about 20 basis points to 75 basis points (as of 7/15/03).

TXU Energy Bonds

In the 08/20/02 issue of The Axios Income Investor, we picked the Brazos Co., TX Pollution Control bonds guaranteed by TXU Energy as the worst relative value in the marketplace. At the time, TXU was a darling of Wall Street and its bonds were trading at a very narrow yield spread of +136 basis points off AAA (about 102 dollar price).

In October, TXU made public the financial difficulties incurred by its European operations. TXU stock plunged 75% and the bonds were bid down by 20 points.

On 10/10/02, after re-examining TXU's creditworthiness in the wake of the new disclosure, we concluded that TXU was still an investment-grade, weak "BBB" name. With TXU bonds trading at a dollar price of 80, we believed the market had over-reacted to the news and issued a "Speculative Buy" recommendation on TXU Energy unsecured debt.

As of 1/10/2003, TXU bonds have recovered most of their value to trade at about 97.

The total return on our trading recommendation from 8/20/02 through 1/10/03: +38.30%.

Pocahontas Parkway Association, VA Toll Road Bonds

On 10/18/02, we released a report on this new toll road in the Richmond, VA area, warning our subscribers about the potential shortfall in toll revenues versus projections. We assigned a "BB" (below investment-grade rating) to the bonds, in contrast to the full investment grade ratings from all the public rating agencies. The bonds traded on 10/31/02 at about 73 to yield 7.75%.

On 11/12/02, the rating agencies caught on to the Parkway's potential revenue shortfalls and put it on credit watch notice. The issue was subsequently downgraded in January by all the agencies to below-investment grade.

Pocahontas bonds last traded in size on 01/08/03 at 61.16 to yield 9.60%..

United Airlines Special Facilities Bonds versus Houston Continental Air Bonds

The bankruptcy filing of UAL Corp. was one of the most widely anticipated events of the fourth quarter 2002. Yet trading on UAL bonds was extremely volatile as the market reacted to daily news regarding potential bailouts and labor union agreements.

On 11/08/02, we recommended swapping out of UAL unsecured special facilities debt at about 31 (cents on the dollar) and buying Houston, TX Continental Airlines bonds at around 50. The trade was based solely on relative value and thus was not dependent on UAL's bankruptcy filing. If UAL avoided Chapter 11, the investor would still have enjoyed a rally in Continental Airlines (CAL) bonds. As it turned out, UAL did file, and CAL-backed bonds actually traded up on the news.

As of 12/31/02, the UAL bonds were trading at 14 and the Houston bonds at 60. The total return on our swap recommendation from 11/08/02 through year-end 2002 was +37.40%.

Disclaimer: It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities mentioned above.

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