FPA New Income, Inc.

Objective:

FPA New Income, Inc. (FPNIX) aims to generate a positive absolute return through a combination of income and capital appreciation. To achieve this goal, we employ a total return strategy using investments in fixed income securities that focus on income, appreciation and capital preservation. Market opportunity will dictate emphasis across these three areas.

Philosophy:

We do not like to lose money!

In order to do this we adhere to the following principles:

Absolute value investors. We seek genuine bargains rather than relatively attractive securities.

Absolute Return. We are absolute return investors and each investment must meet our strict fundamental research and macroeconomic criteria, not just offer opportunity relative to other alternatives.

Long-term Focus. Our investment time horizon is usually three to five years. We expect to hold our investments to maturity unless fundamental valuation parameters change. We are not speculators and adhere to a strict investment discipline.

Alignment of Interest. We invest alongside you as partners in our process. As managers we have significant amounts of our own capital invested in this strategy.

Strict Risk/Reward Parameters. We like to invest when there is a target rich environment. Risk of loss is a critical element in our thinking and thus, each investment must compensate for its unique risks, combined with a margin of safety.

Independent Decision Making. We do not follow the crowd. As we are independent in our decision making, we are often viewed as contrarian in our strategy and execution.

Flexible Mandate. We do not bind ourselves to any one benchmark or index. We believe this flexibility provides a competitive advantage over those who do not have this capability. This has been a critical element in achieving our goal.

For additional information, please reference the Absolute Fixed Income Policy Statement.