For the quarter, the Fund posted a total return of 3.23%. We reduced the Funds overall duration and corresponding interest rate sensitivity while maintaining interest rate exposure neutral to the benchmark. Our longer-dated holdings helped performance as the Arizona yield curve flattened. With respect to structure, we continue to favor higher coupons to enhance the Funds liquidity. Given tight credit spreads, we are maintaining a bias toward high quality. As of quarter end, the Fund had no holdings of BBB-rated bonds and no exposure to Puerto Rico.
We will continue to closely follow any impact on interest rates from changes in Fed policy and actions. In addition, we will monitor any debate at the federal level concerning the tax-exempt status of municipal debt. At the state level, we will focus on in-state demand as Arizona residents feel the impact of higher taxes.
Holdings are subject to change and current and future portfolio holdings are subject to risk.
If you are an investor who favors high current income exempt from federal income tax and who is looking for an investment intended to be exempt from Arizona state personal income tax, this Fund may be ideal for you. It is particularly well suited for income-oriented investors in higher tax brackets willing to assume some risk of principal in exchange for higher yield potential. Income from the Fund may be subject to federal alternative minimum tax (AMT), state and local taxes.
- Concentrate on investments in Arizona state-specific, investment-grade municipal bonds which are exempt from federal income tax and Arizona state personal income tax while maintaining an average maturity, under normal circumstances, between 10 and 30 years.
- Invest in high-quality securities, primarily investment-grade debt.
- Select investments on the basis of their relative value with a focus on total return.