Investment Approach

The Fund will seek to achieve its investment objectives through exposure to an actively managed portfolio consisting primarily of Investment Grade Build America Bonds. Build America Bonds are bonds issued by US state and local governments to finance capital projects that meet essential needs such as public schools, roads, water and transportation infrastructure, bridges, ports and public buildings, among others, pursuant to the American Recovery and Reinvestment Act of 2009 or other related, similar or successor legislation. Many Build America Bonds are general obligation bonds, which are backed by the full faith and taxing power of the governments issuing them. Most issuers of Build America Bonds receive a subsidy from the US federal government equal to 35% of the interest paid to investors, which allows such issuers to issue bonds that pay interest rates that are competitive with the rates typically paid by private bond issuers. This form of government bond, with the credit going to the issuer, makes the bonds attractive to entities that pay no US income tax, such as pension plans and non-US investors, as well as to investors seeking potential high rates of interest income.

The Portfolio will be actively managed by the Sub-Advisor with respect to the selection, composition, purchase and sale of Build America Bonds and other Permissible Securities. The Sub-Advisor uses a value-oriented strategy and looks for higher-yielding and undervalued long-term securities that offer potentially above-average total return. The Sub-Advisor may choose to sell securities with deteriorating credit or limited upside potential compared to other available bonds. The Sub-Advisor believes that a value-oriented investment strategy that seeks to identify underrated and undervalued securities and sectors is positioned to capture the opportunities inherent in the Build America Bond market and potentially outperform the general municipal securities market over time.

The Sub-Advisor’s approach includes attention to the following factors:

Managing Multi-Faceted Risks. Risk in the Build America Bond market is derived from multiple sources, including credit risk at the issuer and sector levels, structural risks such as call risk, yield curve risk, and other risks. The Sub-Advisor believes that managing these risks at both the individual security and portfolio levels is an important element of realizing the income and total return potential of the asset class.

Opportunities to Identify Underrated and Undervalued Build America Bonds. Within the state and national Build America Bond markets, there are issuers with a wide array of financing purposes, security terms, offering structures and credit quality. The Sub-Advisor believes that the size, depth and other characteristics of the state and national Build America Bond markets offer a broad opportunity set of individual issuers in securities that may be underrated and undervalued relative to the general market.

Market Inefficiencies. The Sub-Advisor believes that the scale and intricacy of the Build America Bond market often results in pricing anomalies and other inefficiencies that can be identified and capitalized on through trading strategies.