NUM Nuveen Michigan Quality Municipal Income Fund

 

Life is Complex.

Nuveen makes things e-simple.

It only takes a minute to sign up for e-Reports. Once enrolled, you’ll receive an e-mail as soon as your Nuveen Fund information is ready—no more waiting for delivery by regular mail. Just click on the link within the e-mail to see the report and save it on your computer if you wish.

Free e-Reports
right to your e-mail!


www.investordelivery.com
If you receive your Nuveen Fund
dividends and statements from your
financial professional or brokerage account.


or


www.nuveen.com/client-access
If you receive your Nuveen Fund
dividends and statements directly from
Nuveen.


NOT FDIC INSURED MAY LOSE
VALUE NO BANK GUARANTEE

 

Table of Contents

 

3

Table of Contents

Chair’s Letter
to Shareholders

Dear Shareholders,

The COVID-19 crisis is taking an unprecedented toll on our health, societies, economies and financial markets. Our thoughts are with you during this time of significant disruption caused by the disease and its economic fallout.

A renewed increase in COVID-19 cases in some areas, including an outbreak affecting President Trump and White House staffers and contacts, showed that controlling the spread of the novel coronavirus remains an ongoing public health concern as economies reopen and social activities resume. In the meantime, medical knowledge is improving and some areas have been able to implement much narrower restrictions when infection clusters have recurred. This has helped an economic recovery gain traction, with a significant recovery in jobs, consumer spending, manufacturing and other indicators from their weakest levels. Additionally, progress toward a vaccine and treatments has been promising, while the timeline is unknown. Markets have recently taken an optimistic view, but the path of the economy from here and the upcoming U.S. presidential election are increasingly in the forefront.

While we do not want to understate the dampening effect on the global economy, it is important to differentiate short-term interruptions from the longer-lasting implications to the economy. Prior to the COVID-19 crisis, some areas of the global economy were showing signs of improvement after trade tensions had weighed on economic activity for much of 2019. More recently, countries that have reopened have seen marked improvement in some near-term economic indicators. Central banks and governments around the world have announced economic stimulus measures and pledged to continue doing what it takes to support their economies. In the U.S., the Federal Reserve has cut its benchmark interest rate to near zero and introduced similar programs that helped revive the U.S. economy after the 2008 financial crisis. The U.S. Government has approved three relief packages, including a $2 trillion-dollar package directly supporting businesses and individuals. The Coronavirus Aid, Relief and Economic Security Act, called the CARES Act, has provided direct payments and expanded unemployment benefits to individuals, loans and grants to small businesses, loans and other money to large corporations and funding for hospitals, public health, education and state and local governments. In the European Union, the European Central Bank recently increased the size of its Pandemic Emergency Purchase Program, known as PEPP, to $1.6 trillion from $882 billion and extended its duration to June 2021.

In the meantime, patience and a long-term perspective are key for investors. When market fluctuations are the leading headlines day after day, it’s tempting to “do something.” However, your long-term goals can’t be met with short-term thinking. We encourage you to talk to your financial professional, who can review your time horizon, risk tolerance and investment goals. On behalf of the other members of the Nuveen Fund Board, we look forward to continuing to earn your trust in the months and years ahead.

Sincerely,

Terence J. Toth
Chair of the Board
October 23, 2020

4

 

Portfolio Managers’ Comments


Nuveen Arizona Quality Municipal Income Fund (NAZ)
Nuveen Michigan Quality Municipal Income Fund (NUM)
Nuveen Ohio Quality Municipal Income Fund (NUO)

These Funds feature portfolio management by Nuveen Asset Management, LLC (NAM), an affiliate of Nuveen Fund Advisors, LLC, the Funds’ investment adviser. Portfolio managers Michael S. Hamilton and Daniel J. Close, CFA, review key investment strategies and the six-month reporting period performance of these three Nuveen Funds. Michael assumed portfolio management responsibility for NAZ in 2011, while Dan has managed NUM and NUO since 2007.

Nuveen Michigan Quality Municipal Income Fund (NUM) was approved for merger into Nuveen AMT-Free Quality Municipal Income Fund (NEA) (10/31 FYE) by the Funds’ Board of Trustees during August 2020. The merger is pending shareholder approval.

An Update on COVID-19 Coronavirus and its Impact on the Securities Markets

Slowing COVID-19 coronavirus infection rates around the world encouraged authorities to loosen restrictions on business and social activity in recent months. While economic indicators have improved considerably from the depths of the shutdown, some regions, including the U.S. and Europe, have seen an uptick in infection rates after reopening, which prompted tightening coron-avirus restrictions in some areas. Additionally, certain government programs supporting businesses and workers are expiring with little clarity on extensions or replacement options. Amid these challenges, the pace of recovery appeared to be moderating, and short-term market volatility has picked up again.

The initial market response was severe, but the responses from central banks and governments to ease the strain on financial systems, businesses and individuals, as well as positive vaccine news, have helped markets bounce back from the depths of the crisis. Although the detection of the virus in China was made public in December 2019, markets did not start to fully acknowledge the risks and potential economic impact until the latter portion of February 2020, when outbreaks outside of China were first reported. Global stock markets sold off severely, with the S&P 500® index reaching a bear market (a 20% drop from the previous high) within three weeks, the fastest bear market decline in history. Even certain parts of the bond market suffered; below investment grade municipal and corporate bonds generally dropped the furthest, mostly out of concerns for the continued financial

---

This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her advisors.

Certain statements in this report are forward-looking statements. Discussions of specific investments are for illustration only and are not intended as recommendations of individual investments. The forward-looking statements and other views expressed herein are those of the portfolio managers as of the date of this report. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements, and the views expressed herein are subject to change at any time, due to numerous market and other factors. The Funds disclaim any obligation to update publicly or revise any forward-looking statements or views expressed herein.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group (S&P), Moody’s Investors Service, Inc. (Moody’s) or Fitch, Inc. (Fitch). This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings, while BB, B, CCC, CC, C and D are below investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.

Bond insurance guarantees only the payment of principal and interest on the bond when due, and not the value of the bonds themselves, which will fluctuate with the bond market and the financial success of the issuer and the insurer. Insurance relates specifically to the bonds in the portfolio and not to the share prices of a Fund. No representation is made as to the insurers’ ability to meet their commitments.

Refer to the Glossary of Terms Used in this Report for further definition of the terms used within this section.

5

 

Portfolio Managers’ Comments (continued)

stability of lower quality issuers. Demand for safe-haven assets, along with mounting recession fears, drove the yield on the 10-year U.S. Treasury note to 0.5% in March 2020, an all-time low. Additionally, oil prices collapsed to an 18-year low on supply glut concerns, as shutdowns across the global economy sharply reduced oil demand, although oil prices have recovered to well above those lows.

While most markets have recovered most of their losses, volatility will likely remain elevated until the health crisis itself is under control (via fewer new cases, lower infection rates and/or verified treatments or vaccines). There are still many unknowns and new information is incoming daily, compounding the difficulty of modeling outcomes for epidemiologists and economists alike.

Nuveen, LLC and our portfolio management teams are monitoring the situation carefully and continuously refining our views and approaches to managing the Funds to best pursue investment objectives while mitigating risks through all market environments.

What key strategies were used to manage these Funds during the six-month reporting period ended August 31, 2020?

The Nuveen Arizona Quality Municipal Income Fund’s primary investment objective is current income exempt from both regular federal income taxes and Arizona individual income taxes; its secondary investment objective is the enhancement of portfolio value. The Fund invests in municipal securities that are exempt from federal and Arizona state income taxes. The Fund invests at least 80% of its managed assets in securities rated, at the time of investment, investment grade or, if they are unrated, are judged by the manager to be of comparable quality. The Fund may invest up to 20% of its managed assets in municipal securities rated below investment quality or judged by the manager to be of comparable quality, of which up to 10% of its managed assets may be rated below B-/B3 or of comparable quality. The Fund uses leverage.

The Nuveen Michigan Quality Municipal Income Fund’s primary investment objective is current income exempt from both federal and Michigan income tax, as well as the Michigan intangibles tax. The secondary objective is the enhancement of portfolio value. The Fund invests in municipal securities that are exempt from federal, Michigan state, and local income taxes, including the Michigan intangibles tax. The Fund invests at least 80% of its managed assets in securities rated, at the time of investment, investment grade or, if they are unrated, are judged by the manager to be of comparable quality. The Fund may invest up to 20% of its managed assets in municipal securities rated below investment quality or judged by the manager to be of comparable quality, of which up to 10% of its managed assets may be rated below B-/B3 or of comparable quality. The Fund uses leverage.

The Nuveen Ohio Quality Municipal Income Fund’s primary investment objective is current income exempt from both regular federal income taxes and Ohio personal income taxes. The secondary objective is the enhancement of portfolio value. The Fund invests in municipal securities that are exempt from federal, Ohio state, and local income taxes. The Fund invests at least 80% of its managed assets in securities rated, at the time of investment, investment grade or, if they are unrated, are judged by the manager to be of comparable quality. The Fund may invest up to 20% of its managed assets in municipal securities rated below investment quality or judged by the manager to be of comparable quality, of which up to 10% of its managed assets may be rated below B-/B3 or of comparable quality. The Fund uses leverage.

During the six-month reporting period, the municipal bond market endured a liquidity driven sell-off followed by an uneven recovery across the credit quality spectrum. With the Federal Reserve (Fed) providing financial assistance, the highest credit quality segments of the market snapped back relatively quickly. However, the turnaround in lower rated municipal credits and sectors was slower to materialize amid macroeconomic uncertainty and a broader reevaluation of municipal credit risk.

6

 

As the economic shock caused by the COVID-19 crisis containment measures was becoming apparent in March 2020, financial markets including U.S. municipal bonds responded dramatically. Interest rate volatility spiked, municipal bond prices severely dislocated from Treasury bond prices and municipal credit spreads widened to levels significantly above the long-term average. Quick intervention from the Fed to inject liquidity into the financial system and bolster confidence in the credit markets brought stability, supporting a rebound in the high grade segments of the municipal bond market. Lower rated, higher yielding municipal bonds, however, were slower to rebound, as these credits are more typically found in sectors more affected by the coronavirus, including transportation, lodging, convention centers, hospitals, senior living facilities and higher education.

Despite the elevated volatility in March and April 2020, interest rates ended the six-month reporting period down slightly from the beginning of the period. A sharper fall in short-term rates, driven by the Fed moving its benchmark target rate to zero, steepened the yield curve. Demand for municipal bonds began to recover, with investor inflows resuming a positive trend after the March-April 2020 sell-off, including in high yield municipal bonds. Issuance also approached more normal levels by the end of the reporting period. Notably, taxable municipal bonds’ share of issuance has risen meaningfully over the past year, which has increased the scarcity value of tax-exempt municipal bonds. Supply demand conditions have therefore remained favorable for municipal bonds, helping credit spreads to narrow from the widest levels seen during the COVID-19 crisis volatility. At the state level, the Arizona municipal market performed in line with the national market and the Michigan and Ohio municipal markets outperformed the national market over this reporting period, as measured by their respective state S&P Municipal Bond Indexes.

We continued to take a bottom-up approach to discovering sectors that appeared undervalued as well as individual credits that we believed had the potential to perform well over the long term. Our trading activity continued to focus on pursuing the Funds’ investment objectives. After the market sell-off in March 2020, credit spreads for mid and lower grade bonds widened considerably. Our focus shifted to gauging the economic disruptions to municipal issuers over the nearer and longer terms while still attempting to take advantage of potential opportunities. As is often the case when yields rise, a primary emphasis for the Funds since March 2020 involved selling depreciated bonds with lower embedded yields to buy replacement positions at the higher yields now available in the marketplace. This exchanging strategy allows the Funds to take advantage of tax efficiencies and enhances the Funds’ income earnings capability to support the dividend. Additionally, because closed ends funds do not need to manage cash to meet investor redemptions, we weren’t forced to sell positions during the market turbulence and therefore could reinvest cash from called and maturing bonds, as well as from the selective sale of positions, toward improving the Funds’ yield characteristics and potential total return.

NAZ bought bonds across a diverse group of sectors, including water and sewer, life care, higher education, excise tax revenue and hospitals, all of which were in-state purchases. We also exchanged bonds with lower embedded yields for similar structures offering higher yields, such as the Puerto Rico sales tax revenue bonds known as COFINAs. Also during this reporting period, we reduced exposure to July 2021-dated bonds to help maintain the portfolio’s overall duration at current levels.

NUM added local general obligation (GO) bonds (three school districts), while continuing to emphasize geographic areas outside of southeast Michigan and the city of Detroit, and a public higher education credit for University of Michigan. We took advantage of the higher prevailing yields in March 2020 to sell bonds with lower book yields and buy back the same names with higher book yields. We also established two tender option bond (TOB) trusts, as the low interest rates on offer at the short end and steep slope of the municipal yield curve were favorable for borrowing cheaply to invest in higher yielding, longer duration assets. We used the proceeds from bond maturities and redemptions and sold some pre-refunded bonds to fund NUM’s new purchases.

7

 

Portfolio Managers’ Comments (continued)

NUO was also active with exchanging bonds, especially in March 2020, to enhance the Fund’s income distribution capability and gain tax efficiencies. When prices fell to attractive levels during the COVID-19 crisis sell-off, we opportunistically bought Buckeye Tobacco, a non-rated tax increment district and a BBB rated Hilton Hotel project. As the market stabilized, our buys included a high grade (AAA rated) local GO and two public higher education bonds (Ohio State and Miami University). The new purchases were made with the cash from called and maturing bonds, including proceeds from the Fund’s holdings in legacy Buckeye Tobacco bonds that were refunded earlier in 2019, and the selective sale of pre-refunded bonds.

As of August 31, 2020, NAZ, NUM and NUO continued to use inverse floating rate securities. We employ inverse floaters for a variety of reasons, including duration management, income enhancement and total return enhancement.

How did the Funds perform for the six-month reporting period ended August 31, 2020?

The tables in each Fund’s Performance Overview and Holding Summaries section of this report provide the Funds’ total returns for the six-month, one-year, five-year and ten-year periods ended August 31, 2020. Each Fund’s returns on common share net asset value (NAV) are compared with the performance of a corresponding market index.

For the six months ended August 31, 2020, the total returns on common share NAV for the three Funds underperformed their respective state’s S&P Municipal Bond Index and the national S&P Municipal Bond Index.

The factors driving performance in this reporting period included yield curve and duration positioning, credit ratings exposure and sector allocation. The use of regulatory leverage was also a factor affecting the Funds’ performance. Leverage is discussed in more detail later in the Fund Leverage section of this report.

Duration and yield curve positioning was a positive contributor to NAZ’s performance. Although the broad municipal market saw longer duration bonds generally underperforming shorter duration bonds in this reporting period, the Arizona Fund’s exposure to 8- to 12-year durations was beneficial to relative performance, partly due to the timing of our trades. We assertively bought bonds in this duration range in April 2020, when market prices were near the bottom, and their valuations have since recovered. Additionally, many of the Fund’s 8- to 12-year duration bonds offer higher yields, which contributed to their performance in this reporting period. NUM’s duration and yield curve positioning was a detractor from performance primarily due to its overweight allocation to the intermediate portion of the yield curve, which underperformed in this reporting period. For NUO, the underweight allocations to both the zero to 2-year duration segment and the 10-12 year segment were detrimental.

From a credit quality perspective, performance was led by the highest grade (AAA and AA rated) segments of the market, while mid to lower rated bonds lagged. Most of the underperformance in lower rated bonds occurred in the March-April 2020 sell-off, and while credit spread recovery continued over the subsequent months, spreads were still wide of pre-pandemic levels at the close of this reporting period. For NAZ, credit ratings allocation was the largest detractor from relative performance, as the Fund held underweight allocations to AAA and AA rated bonds and overweight allocations to single A and lower rated bonds, with the position in BBB rated bonds especially weak. NUM’s credit positioning contributed positively to performance and was favorably positioned for the prevailing market environment, with an overweight exposure to AAA rated paper and underweight allocation to BBB rated credits. NUO’s credit ratings allocations had a negative performance impact overall. Although an underweight to BBB rated bonds was beneficial, it was offset by an overweight to AA rated debt, which detracted.

Sector positioning in NAZ contributed positively. Sectors composed of predominantly high grade bonds tended to outperform sectors with lower rated bonds, which includes many of the sectors adversely affected by the COVID-19 crisis. NUM’s aggregate

8

 

sector positioning detracted from performance. In particular, an overweight to public higher education detracted, especially single A rated debt within the sector, which underperformed during the reporting period. NUO was also adversely affected by sector allocations, mainly due to the underweight in tobacco settlement bonds. Given our assessment of the tobacco sector’s risk-reward characteristics, NUO’s maximum exposure to the sector is considerably lower than the Ohio benchmark index’s weighting, which detracts from performance when the sector performs well, as it did during this reporting period.

Individual credit selection was unfavorable for NAZ and NUM in this reporting period. In NUM, mid-grade (single A and lower AA rated) public higher education credits were underperformers, while highly rated, short maturity paper were the best performers. NUO also benefited from our selection in short-dated, high grade bonds. Another top contributor was a Buckeye Tobacco new issue (which was issued just prior to the beginning of the reporting period), which underperformed during the sell-off but rallied over the remainder of the reporting period.

We should also note that NUO owned a position in Energy Harbor, which had negative performance in this reporting period but with minimal impact to the Fund’s overall performance. During this reporting period, NUO received Energy Harbor common stock, after FirstEnergy Solutions emerged from bankruptcy and the restructured company was renamed Energy Harbor. The Fund received Energy Harbor stock when its holding of bonds issued by FirstEnergy Solutions was converted into Energy Harbor equity as part of its debt reorganization and emergence from bankruptcy protection, which was completed in February 2020. The shares performed well in the first few months after they were issued, and due in part to post-emergence price increases, at the end of the reporting period Energy Harbor equity represented 0.3% of the total investments of NUO. In July 2020, the value of Energy Harbor equity fell sharply after federal authorities charged certain Ohio politicians and lobbyists with having accepted large payments from an unnamed company (which was easily identifiable as Energy Harbor’s pre-bankruptcy parent, FirstEnergy Corp.) in what was alleged to be a corrupt scheme to adopt legislation that would benefit that parent company.

9

 

Fund Leverage

IMPACT OF THE FUNDS’ LEVERAGE STRATEGY ON PERFORMANCE

One important factor impacting the returns of the Funds’ common shares relative to their comparative benchmarks was the Funds’ use of leverage through their issuance of preferred shares and/or investments in inverse floating rate securities, which represent leveraged investments in underlying bonds. The Funds use leverage because our research has shown that, over time, leveraging provides opportunities for additional income. The opportunity arises when short-term rates that a Fund pays on its leveraging instruments are lower than the interest the Fund earns on its portfolio of long-term bonds that it has bought with the proceeds of that leverage. This has been particularly true in the recent market environment where short-term rates have been low by historical standards.

However, use of leverage can expose Fund common shares to additional price volatility. When a Fund uses leverage, the Fund’s common shares will experience a greater increase in their net asset value if the municipal bonds acquired through the use of leverage increase in value, but will also experience a correspondingly larger decline in their net asset value if the bonds acquired through leverage decline in value, which will make the shares’ net asset value more volatile, and total return performance more variable, over time.

In addition, common share income in levered funds will typically decrease in comparison to unlevered funds when short-term interest rates increase and increase when short-term interest rates decrease. In recent quarters, fund leverage expenses have generally tracked the overall movement of short-term tax-exempt interest rates. While fund leverage expenses are somewhat higher than their all-time lows after the 2007-2009 financial crisis, which has contributed to a reduction in common share net income and long-term total return potential, leverage nevertheless continues to provide the opportunity for incremental common share income. Management believes that the potential benefits from leverage continue to outweigh the associated increase in risk and volatility previously described.

Leverage from issuance of preferred shares had a negative impact on the total return performance of the Funds over the reporting period. The use of leverage through inverse floating rate securities was negligible to the total return performance of the Funds over the reporting period.

As of August 31, 2020, the Funds’ percentages of leverage are as shown in the accompanying table.

 

 

 

 

Refer to Notes to Financial Statements, Note 5 – Fund Shares, Preferred Shares for further details on preferred shares and each Fund’s respective transactions.

10

 

 

 

Each Fund seeks to pay regular monthly dividends out of its net investment income at a rate that reflects its past and projected net income performance. To permit each Fund to maintain a more stable monthly dividend, the Fund may pay dividends at a rate that may be more or less than the amount of net income actually earned by the Fund during the period. Distributions to common shareholders are determined on a tax basis, which may differ from amounts recorded in the accounting records. In instances where the monthly dividend exceeds the earned net investment income, the Fund would report a negative undistributed net ordinary income. Refer to Note 6 – Income Tax Information for additional information regarding the amounts of undistributed net ordinary income and undistributed net long-term capital gains and the character of the actual distributions paid by the Fund during the period.

All monthly dividends paid by each Fund during the current reporting period were paid from net investment income. If a portion of the Fund’s monthly distributions is sourced or comprised of elements other than net investment income, including capital gains and/or a return of capital, shareholders will be notified of those sources. For financial reporting purposes, the per share amounts of each Fund’s distributions for the reporting period are presented in this report’s Financial Highlights. For income tax purposes, distribution information for each Fund as of its most recent tax year end is presented in Note 6 – Income Tax Information within the Notes to Financial Statements of this report.

11

 

Common Share Information (continued)

NUVEEN CLOSED-END FUND DISTRIBUTION AMOUNTS

The Nuveen Closed-End Funds’ monthly and quarterly periodic distributions to shareholders are posted on www.nuveen.com and can be found on Nuveen’s enhanced closed-end fund resource page, which is at https://www.nuveen.com/resource-center-closed-endfunds, along with other Nuveen closed-end fund product updates. To ensure timely access to the latest information, shareholders may use a subscribe function, which can be activated at this web page (https://www.nuveen.com/subscriptions).

 

During the current reporting period, the Funds did not repurchase any of their outstanding common shares.

 

12

 

Risk Considerations

Risk Considerations

Fund Shares are not guaranteed or endorsed by any bank or other insured depository institution, and are not federally insured by the Federal Deposit Insurance Corporation.

Nuveen Arizona Quality Municipal Income Fund (NAZ)

Nuveen Michigan Quality Municipal Income Fund (NUM)

Nuveen Ohio Quality Municipal Income Fund (NUO)

Investing in closed-end funds involves risk; principal loss is possible. There is no guarantee the Fund’s investment objectives will be achieved. Closed-end fund shares may frequently trade at a discount or premium to their net asset value. Debt or fixed income securities such as those held by the Fund, are subject to market risk, credit risk, interest rate risk, derivatives risk, liquidity risk, and income risk. As interest rates rise, bond prices fall. Leverage increases return volatility and magnifies the Fund’s potential return and its risks; there is no guarantee a fund’s leverage strategy will be successful. State concentration makes the Fund more susceptible to local adverse economic, political, or regulatory changes affecting municipal bond issuers. These and other risk considerations such as inverse floater risk and tax risk are described in more detail on the Fund’s web page at www.nuveen.com/NAZ, www.nuveen.com/NUM and www.nuveen.com/NUO.

13

 

 

 

Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses, and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

14

 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.

 

15

 

 

 

Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses, and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

16

 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.

 

17

 

 

Past performance is not predictive of future results. Current performance may be higher or lower than the data shown. Returns do not reflect the deduction of taxes that shareholders may have to pay on Fund distributions or upon the sale of Fund shares. Returns at NAV are net of Fund expenses, and assume reinvestment of distributions. Comparative index return information is provided for the Fund’s shares at NAV only. Indexes are not available for direct investment.

18

 

This data relates to the securities held in the Fund’s portfolio of investments as of the end of the reporting period. It should not be construed as a measure of performance for the Fund itself. Holdings are subject to change.

For financial reporting purposes, the ratings disclosed are the highest rating given by one of the following national rating agencies: Standard & Poor’s Group, Moody’s Investors Service, Inc. or Fitch, Inc. This treatment of split-rated securities may differ from that used for other purposes, such as for Fund investment policies. Credit ratings are subject to change. AAA, AA, A and BBB are investment grade ratings; BB, B, CCC, CC, C and D are below-investment grade ratings. Holdings designated N/R are not rated by these national rating agencies.

 

19

 

 

20

 

 

21

 

 

22

 

 

23

 

 

24

 

 

25

 

 

26