Multi-Strategy Income Fund

Overview

Focus on Non-Agency Residential Mortgage-Backed Securities

The Fund seeks the best risk-adjusted opportunities in fixed income that offer the potential for both stable, monthly dividends and price appreciation.  The Fund employs a top-down strategy to identify relative valuation opportunities within the structured credit markets and a bottom-up credit selection process to selecting individual issues. The managers will invest opportunistically across a wide range of credits and issuer types based on relative value within fixed income. Specifically, the Fund targets opportunities in:

  • Non-Agency Residential Mortgage-Backed Securities (NA RMBS)
  • Commercial Mortgage-Backed Securities (CMBS)
  • Collateralized Loan Obligations (CLO)
  • Asset-Backed Securities (ABS)
  • Agency Residential Mortgage-Backed Securities (RMBS)

Currently, the Fund has a bias towards credit and low duration assets to manage interest rate risk. This bias is not set for the long-term and may change over time as the managers’ view on the global economy, interest rates and capital market conditions change. The team does not manage the portfolio’s asset allocation to resemble the Fund’s benchmark in a relative sense, but instead positions the portfolio with a focus on absolute return.

Performance

Total Returns (as of 8/18/2017) NAV NAV Change Dollars NAV Daily Change (%) YTD (%)
Class I NAV $11.30 $0.00 0.00% 4.33%
Class A NAV $11.32 ($0.01) -0.09% 4.13%
MOP $11.58 ($0.01) -0.09% 1.78%
Class C NAV $11.24 $0.00 0.00% 3.68%
MOP $11.24 $0.00 0.00% 2.68%
Bloomberg Barclays Aggregate Bond Index n/a n/a 0.00% 3.21%

Total Returns (as of 7/31/2017) Prior Mo. YTD 1 Year 3 Years 5 Years Since Inception1
Class I NAV 0.46% 3.97% 7.42% 3.67% 5.65% 7.98%
Class A NAV 0.53% 3.88% 7.18% 3.42% 5.41% 7.78%
MOP -1.73% 1.53% 4.74% 2.64% 4.94% 7.38%
Class C NAV 0.38% 3.37% 6.36% 2.63% 4.61% 6.97%
MOP -0.62% 2.37% 5.36% 2.63% 4.61% 6.97%
Bloomberg Barclays Aggregate Bond Index 0.43% 2.71% -0.51% 2.71% 2.02% 3.06%

Total Returns (as of 6/30/2017) Prior Qtr. YTD 1 Year 3 Years 5 Years Since Inception1
Class I NAV 1.66% 3.50% 8.97% 3.80% 6.14% 8.01%
Class A NAV 1.59% 3.33% 8.73% 3.52% 5.89% 7.80%
MOP -0.70% 1.00% 6.31% 2.74% 5.41% 7.39%
Class C NAV 1.41% 2.98% 7.86% 2.75% 5.11% 7.00%
MOP 0.41% 1.98% 6.86% 2.75% 5.11% 7.00%
Bloomberg Barclays Aggregate Bond Index 1.45% 2.27% -0.31% 2.48% 2.21% 3.03%

Expense Ratios

  Class A Class I Class C
Gross 1.35% 1.10% 2.09%
Net 1.24% 0.99% 1.99%

Performance data quoted represents past performance. Past performance is no guarantee of future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated.

1  The inception date of the Angel Oak Multi-Strategy Income Fund A Class (ANGLX) was June 28, 2011, while the inception date of the Institutional Class (ANGIX) was August 16, 2012, and inception date of the C Class (ANGCX) was August 4, 2015. The returns of ANGIX and ANGCX shown for periods prior to the inception date include the returns of ANGLX and are adjusted to reflect the operating expenses of ANGIX and ANGCX. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Bloomberg Barclays U.S. Aggregate Bond Index: Calculated from inception date of Class A.

NAV represents annualized returns without a sales charge. MOP represents annualized returns with the maximum sales charge. Class A has a maximum sales charge of 2.25%. Maximum Contingent Deferred Sales Charge (load) as a % of amount redeemed: Class A & I: None. Class C shares are subject to a CDSC of 1.00% if you redeem your shares within twelve (12) months of purchase, based on the lower of the shares’ cost or current net asset value.

*Gross expense ratios are reported as of the 5/31/17 prospectus. The net expense ratios are reported as of the 1/31/17 Annual Report and are referenced in the 5/31/17 prospectus. The Adviser has contractually agreed to waive fees through 5/31/18.

 

Growth of $10,000 Since Inception as of 6/30/17

anglx-growth-10k-6-30-17

This chart illustrates the performance of a hypothetical $10,000 investment made in Angel Oak Multi-Strategy Income Fund (ANGIX), A Shares since inception on 6/28/11. It assumes reinvestment of capital gains and dividends. This chart is not intended to imply any future performance.

1Bloomberg Barclays U.S. Aggregate Bond Index: An unmanaged index that measures the performance of the investment-grade universe of bonds issued in the United States. The index includes institutionally traded U.S. Treasury, government sponsored, mortgage and corporate securities. Please note that an investor cannot invest directly in the index; therefore its performance does not reflect a reduction for fees or expenses incurred in managing a portfolio.

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/30/2017 1/31/2017 11.30 0.04062  –  –
2/27/2017 2/28/2017 11.29 0.04686  –  –
3/30/2017 3/31/2017 11.28 0.05460  –  –
4/27/2017 4/28/2017 11.28 0.05087  –  –
5/30/2017 5/31/2017 11.31 0.05037  –  –
6/29/2017 6/30/2017 11.31 0.04762  –  –
7/30/2017 7/31/2017 11.32 0.04951  –  –
Total 2017     0.34045    

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/29/2016 1/30/2016 11.28 0.05422  –  –
2/26/2016 2/29/2016 10.92 0.05736  –  –
3/30/2016 3/31/2016 11.04 0.05938  –  –
4/28/2016 4/29/2016 11.09 0.06169  –  –
5/27/2016 5/31/2016 11.05 0.06279  –  –
6/29/2016 6/30/2016 11.02 0.05701  –  –
7/28/2016 7/29/2016 11.18 0.05797  –  –
8/30/2016 8/31/2016 11.17 0.05800  –  –
9/29/2016 9/30/2016 11.22 0.04994  –  –
10/30/2016 10/31/2016 11.24 0.06032  –  –
11/29/2016 11/30/2016 11.21 0.06855  –  –
12/27/2016* 12/28/2016* 11.21 0.00799  –  –
12/29/2016 12/30/2016 11.23 0.05672  –  –
Total 2016     0.71194    

*Due to our annual tax review, there was additional earned income that was required to be paid out prior to the calendar year end.

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/29/2015 1/30/2015 12.08 0.05513  –  –
2/26/2015 2/27/2015 12.15 0.04561  –  –
3/30/2015 3/31/2015 12.13 0.05361
4/29/2015 4/30/2015 12.15 0.04939  –  –
5/28/2015 5/29/2015 12.18 0.05503  –  –
6/29/2015 6/30/2015 12.09 0.05388  –  –
7/30/2015 7/31/2015 12.06 0.06699  –  –
8/28/2015 8/31/2015 11.96 0.05989  –  –
9/29/2015 9/30/2015 11.82 0.06242  –  –
10/29/2015 10/30/2015 11.75 0.06502  –  –
11/27/2015 11/30/2015 11.70 0.05995  –  –
12/29/2015* 12/30/2015* 11.50 0.14782  –  –
Total 2015     0.77474    

*Due to our annual tax review, there was additional earned income that was required to be paid out prior to the calendar year end.

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/30/2014 1/31/2014 12.17 0.04757  –  –
2/27/2014 2/28/2014 12.16 0.04407  –  –
3/28/2014 3/31/2014 12.15 0.04928  –  –
4/29/2014 4/30/2014 12.17 0.04867  –  –
5/29/2014 5/30/2014 12.18 0.05226  –  –
6/27/2014 6/30/2014 12.21 0.05111  –  –
7/30/2014 7/31/2014 12.26 0.04965  –  –
8/28/2014 8/29/2014 12.20 0.05215  –  –
9/29/2014 9/30/2014 12.17 0.04897  –  –
10/30/2014 10/31/2014 12.09 0.05226  –
11/26/2014 11/28/2014 12.09 0.05664  –
12/29/2014 12/30/2014 12.07 0.05583  –
Total 2014     0.60846    
Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
2/4/2013 2/5/2013 12.32 0.03780  –  –
3/4/2013 3/5/2013 12.31 0.05180  –  –
4/4/2013 4/5/2013 12.34 0.03700  –  –
5/3/2013 5/6/2013 12.47 0.04510  –  –
6/4/2013 6/5/2013 12.43 0.04210  –  –
7/3/2013 7/5/2013 11.90 0.05100  –  –
8/2/2013 8/5/2013 11.81 0.05150  –  –
9/4/2013 9/5/2013 11.79 0.05170  –  –
10/4/2013 10/7/2013 11.89 0.04680  –  –
11/4/2013 11/5/2013 12.02 0.04090  –  –
12/4/2013 12/5/2013 12.05 0.04138 0.01233 0.00088
12/30/2013 12/31/2013 12.02 0.03994  –  –
Total 2013     0.53702 0.01233 0.00088
Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/31/2012 2/1/2012 12.32 0.05520  –  –
2/29/2012 3/1/2012 12.31 0.06400  –  –
3/30/2012 4/2/2012 12.34 0.06740  –  –
4/30/2012 5/1/2012 12.47 0.04670  –  –
6/4/2012 6/5/2012 12.43 0.05500  –  –
7/3/2012 7/5/2012 11.90 0.05890  –  –
8/3/2012 8/6/2012 11.81 0.05280  –  –
9/4/2012 9/5/2012 11.79 0.03900  –  –
10/4/2012 10/5/2012 11.89 0.03470  –  –
11/2/2012 11/5/2012 12.02 0.03750  –  –
12/4/2012 12/5/2012 12.05 0.04800  –  –
12/4/2012 12/5/2012 12.06 0.04730 0.00220
12/28/2012 12/31/2012 12.05 0.04810
Total 2012     0.60730 0.04730 0.00220
Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
8/31/2011 9/1/2011 10.62 0.01000
9/30/2011 10/3/2011 10.58 0.04700
10/31/2011 11/1/2011 10.50 0.05750
11/30/2011 12/1/2011 10.34 0.04820  –  –
12/29/2011 12/30/2011 10.45 0.05660  –  –
Total 2011     0.21930    

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/30/2017 1/31/2017 11.28 0.04412  –
2/27/2017 2/28/2017 11.27 0.04989  –
3/30/2017 3/31/2017 11.26 0.05741  –
4/27/2017 4/28/2017 11.26 0.05372  –
5/30/2017 5/31/2017 11.29 0.05268  –
6/29/2017 6/30/2017 11.29 0.05011  –  –
7/30/2017 7/31/2017 11.29 0.05183  –  –
Total 2017     0.35976    

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/29/2016 1/30/2016 11.27 0.05645  –  –
2/26/2016 2/29/2016 10.91 0.05937  –  –
3/30/2016 3/31/2016 11.03 0.06186  –  –
4/28/2016 4/29/2016 11.08 0.06415  –  –
5/27/2016 5/31/2016 11.04 0.06500  –  –
6/29/2016 6/30/2016 11.02 0.05923  –  –
7/28/2016 7/29/2016 11.17 0.06063  –  –
8/30/2016 8/31/2016 11.17 0.06079  –  –
9/29/2016 9/30/2016 11.20 0.06047  –  –
10/30/2016 10/31/2016 11.23 0.06478  –  –
11/29/2016 11/30/2016 11.19 0.07145  –  –
12/27/2016* 12/28/2016* 11.19 0.00860  –  –
12/29/2016 12/30/2016 11.21 0.06016  –  –
Total 2016     0.75294    

*Due to our annual tax review, there was additional earned income that was required to be paid out prior to the calendar year end.

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/29/2015 1/30/2015 12.07 0.05775  –  –
2/26/2015 2/27/2015 12.14 0.04759  –  –
3/30/2015 3/31/2015 12.12 0.05600    
4/29/2015 4/30/2015 12.14 0.05210  –  –
5/28/2015 5/29/2015 12.17 0.05751  –  –
6/29/2015 6/30/2015 12.08 0.05650  –  –
7/30/2015 7/31/2015 12.05 0.06950  –  –
8/28/2015 8/31/2015 11.95 0.06222  –  –
9/29/2015 9/30/2015 11.81 0.06505  –  –
10/29/2015 10/30/2015 11.74 0.06750    
11/27/2015 11/30/2015 11.69 0.06231  –  –
12/29/2015* 12/30/2015* 11.49 0.15035  –  –
Total 2015     0.80438    

*Due to our annual tax review, there was additional earned income that was required to be paid out prior to the calendar year end.

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/30/2014 1/31/2014 12.17 0.05022  –  –
2/27/2014 2/28/2014 12.16 0.04613  –  –
3/28/2014 3/31/2014 12.14 0.05155  –  –
4/29/2014 4/30/2014 12.16 0.05109  –  –
5/29/2014 5/30/2014 12.18 0.05500  –  –
6/27/2014 6/30/2014 12.20 0.05350  –  –
7/30/2014 7/31/2014 12.25 0.05338  –  –
8/28/2014 8/29/2014 12.19 0.05566  –  –
9/29/2014 9/30/2014 12.16 0.05154  –  –
10/30/2014 10/31/2014 12.08 0.05500  –  –
11/26/2014 11/28/2014 12.08 0.05900  –  –
12/29/2014 12/30/2014 12.06 0.05817  –  –
Total 2014     0.64023    
Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
2/4/2013 2/5/2013 12.31 0.04010  –  –
3/4/2013 3/5/2013 12.30 0.05400  –  –
4/4/2013 4/5/2013 12.33 0.03950  –  –
5/3/2013 5/6/2013 12.47 0.04760  –  –
6/4/2013 6/5/2013 12.42 0.04460  –  –
7/3/2013 7/5/2013 11.89 0.05390  –  –
8/2/2013 8/5/2013 11.80 0.05410  –  –
9/4/2013 9/5/2013 11.79 0.05420  –  –
10/4/2013 10/7/2013 11.88 0.04920  –  –
11/4/2013 11/5/2013 12.01 0.04330  –  –
12/4/2013 12/5/2013 12.05 0.04385  –  –
12/4/2013 12/5/2013 12.05 0.01233 0.00088
12/30/2013 12/31/2013 12.01 0.04205  –  –
Total 2013     0.56639 0.01233 0.00088
Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
9/4/2012 9/5/2012 11.73 0.04100  –  –
10/4/2012 10/5/2012 12.02 0.03710  –  –
11/2/2012 11/5/2012 12.04 0.03980  –  –
12/4/2012 12/5/2012 12.06 0.05020  –  –
12/4/2012 12/5/2012 12.06 0.04730 0.00220
12/28/2012 12/31/2012 12.10 0.05040  –  –
Total 2012     0.21850 0.04730 0.00220

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/30/2017 1/31/2017 11.22 0.04062  –  –
2/27/2017 2/28/2017 11.21 0.04686  –  –
3/30/2017 3/31/2017 11.20 0.05460  –  –
4/27/2017 4/28/2017 11.20 0.04393  –  –
5/30/2017 5/31/2017 11.18 0.04365  –  –
6/29/2017 6/30/2017 11.22 0.03961  –  –
7/30/2017 7/31/2017 11.23 0.04279  –  –
Total 2017     0.31206    

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
1/29/2016 1/30/2016 11.26 0.04811
2/26/2016 2/29/2016 10.90 0.05189
3/30/2016 3/31/2016 11.02 0.05238
4/28/2016 2/29/2016 11.07 0.05502
5/27/2016 5/31/2016 11.03 0.05668
6/29/2016 6/30/2016 11.01 0.05091
7/28/2016 7/29/2016 11.15 0.05797
8/30/2016 8/31/2016 11.14 0.05800
9/29/2016 9/30/2016 11.18 0.04994
10/30/2016 10/31/2016 11.20 0.06032
11/29/2016 11/30/2016 11.15 0.06855
12/27/2016* 12/28/2016* 11.15 0.00618
12/29/2016 12/30/2016 11.17 0.05672
Total 2016     0.67267    

*Due to our annual tax review, there was additional earned income that was required to be paid out prior to the calendar year end.

Record Date  Payable Date Reinvestment Price ($/share) Ordinary Income ($/share) ST Cap Gains ($/share) LT Cap Gains ($/share)
8/28/2015 8/31/2015 11.95 0.05892  –  –
9/29/2015 9/30/2015 11.81 0.05782
10/29/2015 10/30/2015 11.74 0.05993    
11/27/2015 11/30/2015 11.68 0.05477
12/29/2015* 12/30/2015* 11.49 0.14155
Total 2015     0.37299    

*Due to our annual tax review, there was additional earned income that was required to be paid out prior to the calendar year end.

(Since Inception) Fund Index*
Std. Deviation (%) 3.5 3.9
Sharpe Ratio 3.3 1.1
% Positive Months 81.9 63.9
% Negative Months 18.1 36.1

As of 6/30/2017

*Bloomberg Barclays U.S. Aggregate Bond Index

Standard Deviation: A statistical measure of portfolio risk used to measure variability of total return around an average, over a specified period of time.  The greater the standard deviation over the period, the wider the variability or range of returns and hence, the greater the fund’s volatility. The standard deviation has been calculated since inception.

Sharpe Ratio: A statistical measure that uses standard deviation and excess return to determine reward per unit of risk. A higher Sharpe ratio implies a better historical risk-adjusted performance. The Sharpe ratio has been calculated since inception using the 3-month LIBOR for the risk-free rate of return.

Bloomberg Barclays U.S. Aggregate Bond Index: An unmanaged index that measures the performance of the investment-grade universe of bonds issued in the United States. The index includes institutionally traded U.S. Treasury, government sponsored, mortgage and corporate securities. Please note that an investor cannot invest directly in the index; therefore its performance does not reflect a reduction for fees or expenses incurred in managing a portfolio.

Portfolio

Screen Shot 2017-04-17 at 1.06.08 PM

 
Non-Agency RMBS1 59.9%
 
CMBS1 14.8%
 
ABS1 5.6%
 
CLO1 9.2%
 
Corporates 5.6%
 
Cash 4.9%

As of 6/30/2017

1RMBS: Residential Mortgage-Backed Securities, CMBS: Commercial Mortgage-Backed Securities, CLO: Collateralized Loan Obligations,  ABS: Asset-Backed Securities

The portfolio is actively managed. Holdings and weightings are subject to change daily and are provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned. Fund composition is based on net assets. Please scroll down to see important information about the Fund. 

Screen Shot 2017-04-17 at 1.27.44 PM

 
Mortgage Credit 74.7%
 
Corporate Credit 14.8%
 
Cash + Other 10.5%

As of 6/30/2017

RMBS: Residential Mortgage-Backed Securities

The portfolio is actively managed. Holdings and weightings are subject to change daily and are provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned. Fund composition is based on net assets.

  Fund Characteristics
Average Price – Portfolio $89.4
Average Price – Non-Agency $84.7
Effective Duration 2.2 years
Daily Correlation with Index  0.1

As of 6/30/2017

Average Coupon: The weighted average annual coupon for the securities in the Fund. Average Life: The length of time the principal of a debt issue is expected to be outstanding. Average life is an average period before a debt is repaid through amortization or sinking fund payments.

Average Price: The weighted average of the prices of the Fund’s portfolio holdings.

Effective Duration: Measures a portfolio’s sensitivity to changes in interest rates. Generally, the longer the effective duration, the greater the price change relative to interest rate movements

Correlation: A statistical measure of how two securities move in relation to another. Index used for comparison is the Barclays Aggregate Bond Index

Management Team

Brad Friedlander

Brad Friedlander

Head Portfolio Manager

Investment industry since 1999
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Sreeni Prabhu

Sreeni Prabhu

Chief Investment Officer

Investment industry since 1998
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Berkin Kologlu

Berkin Kologlu

Portfolio Manager

Investment industry since 2002
Read Bio

 
Sam Dunlap

Sam Dunlap

Portfolio Manager

Investment industry since 2002
Read Bio

 
Kin Lee

Kin Lee

Portfolio Manager

Read Bio

 
Colin McBurnette

Colin McBurnette

Portfolio Manager

Read Bio

 
 

Fund Facts

Share Class Ticker CUSIP Inception Gross Expense
Ratio
Net Expense
Ratio
Class A ANGLX 03463K307 6/28/2011  1.35% 1.24%
Class I ANGIX 03463K406 8/16/2012 1.10% 0.99%
Class C ANGCX 03463K505 8/4/2015 2.09% 1.99%

*Gross expense ratios are reported as of the 5/31/17 prospectus. The net expense ratios are reported as of the 1/31/17 Annual Report and are referenced in the 5/31/17 prospectus. The Adviser has contractually agreed to waive fees through 5/31/18.

Fund Commentary

 

The Fund may make short sales of securities, which involve the risk that losses in securities may exceed the original amount invested. The fund may use leverage, which may exaggerate the effect of any increase or decrease in the value of securities in the Fund’s portfolio on the Fund’s Net Asset Value and therefore may increase the volatility of the Fund. Derivatives involve risks different from, and in certain cases, greater than the risks presented by more traditional investments. Investments in debt securities typically decrease when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in lower rated and non-rated securities present a greater risk of loss to principal and interest than higher rated securities. Investments in asset-backed and mortgage-backed securities include additional risks that investors should be aware of including credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. The Fund will incur higher and duplicative expenses when it invests in mutual funds, ETFs, and other investment companies. For more information on these risks and other risks of the Fund, please see the Prospectus. 

**As of 7/31/17, the Angel Oak Multi-Strategy Income Fund (ANGLX) received a Morningstar rating based on risk-adjusted returns of 4 stars overall, 3 stars for the three-year period & 4 stars for the five-year period among 241, 241, and 191 multisector bond funds, respectively. The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating™ for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating™ metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

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Bloomberg Barclays U.S. Aggregate Bond Index: An unmanaged index that measures the performance of the investment-grade universe of bonds issued in the United States. The index includes institutionally traded U.S. Treasury, government sponsored, mortgage and corporate securities. Please note that an investor cannot invest directly in the index; therefore its performance does not reflect a reduction for fees or expenses incurred in managing a portfolio.

30-Day SEC Yield: The SEC yield is an annualized yield based on the most recent 30-day period. Subsidized yields reflect fee waivers in effect. Without such waivers, yields would be reduced. Unsubsidized yields do not reflect fee waivers in effect. The SEC yield does not include prepayment income, which could be a significant contribution to yield.

Duration: An approximate measure of a bond’s price sensitivity to changes in interest rates.