Midway through the quarter, we reduced portfolio duration to prepare for upcoming transactions and the potential for increased market volatility. We also maintained a high quality profile, as well as ample liquidity for what we believe will be increased municipal issuance during the second quarter. In addition, we altered the Funds broad maturity structure, selling a minor percentage of longer-term and very short-term holdings, and purchasing bonds with seven- to 10-year maturities. We felt that the intermediate-maturity range offered opportunities due to its attractive risk/return characteristics and the potential for rising demand from nontraditional buyers, given that yields of intermediate-term bonds exceeded those of U.S. Treasuries with similar maturities on a pre-tax basis.
Going forward, we may use the second quarter as an opportunity to position the Fund for a potentially positive technical summer period for the municipal bond market.
If you are an investor who favors current income exempt from regular federal 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. Income from the Fund may be subject to federal alternative minimum tax (AMT), state and local taxes.