The municipal bond market continued to post positive returns during most of the period. However, the municipal market lost some ground at the end of the quarter, as investors reacted negatively to the government of Puerto Ricos passage of an act allowing the territory to restructure some of its public corporation debt. As a result, investment-grade municipals outperformed high-yield municipals. Flows into municipal mutual funds remained positive, albeit at a lower level.
The Fund outperformed its benchmark during the quarter with a return of 3.87%. In particular, the Funds concentration in health care and securities rated BBB contributed to performance. In the first two months of the quarter, performance lagged the overall high-yield municipal market as current coupon and discount issues outperformed the Funds generally higher coupon holdings. However, relative performance rebounded in the last month of the period in response to the Funds underweight in tobacco and at quarter end the Fund had no Puerto Rico holdings.
Holdings are subject to change and current and future portfolio holdings are subject to risk.
If you are an aggressive investor seeking a high level of current income that is largely free from federal income tax, you may find this Fund provides an attractive complement to a well-diversified portfolio. The Fund is best suited for long-term higher income investors willing to assume the additional risks associated with investing in high yield securities including above-average share price fluctuations. Income from the Fund may be subject to federal alternative minimum tax (AMT), state and local taxes.
- Concentrate primarily on municipalities that issue medium (rated A and BBB) and lower-quality debt (rated BBB and below). Lower-quality debt or high-yield securities are also commonly referred to as "non-investment grade" or "junk bonds."
- Manage to a benchmark index of 65% investment grade and 35% non-investment grade bonds.
- Select investments on the basis of their relative value with a focus on total return.