Market Sector Update

• At the June meeting of the Federal Open Market Committee (Fed), the central bank raised its target base rate by 25 basis points and set out details to normalize its balance sheet. Longer-dated Treasury yields remained fixed resulting in continued flattening of the U.S. yield curve.
• Consumer spending data remained strong, adding to hopes that the U.S. economy would bounce back, following GDP growth of 1.4% in the first quarter.
• U.S. corporate bond spreads tightened throughout the second quarter in anticipation that Trump’s policies would improve the U.S. credit outlook.
• Subdued inflation helped support bond prices, along with continued investor demand for both high quality and speculative grade corporate bonds.

Portfolio Strategy

• The Fund had a positive return for the quarter before the effect of sales charges and benefitted from continued spread tightening, despite the Fed’s actions to raise rates.
• As the Treasury curve flattened throughout the quarter, longer maturity bonds outperformed shorter-dated bonds.
• Every sector contributed to the positive performance for the quarter. Top performers included telecommunication services, health care, utilities and consumer discretionary.
• Returns were fairly consistent across the credit profile. Single “A” bonds slightly lagged both higher quality and lower “BBB” credits.
• Total par value increased throughout the quarter, reflecting the accommodative environment for corporate bond issuances.

Outlook

• U.S. corporations continue to issue debt while rates are low and spreads continue to tighten.
• Fixed-income markets will be focused on the Fed’s intention to normalize its balance sheet. Questions remain over how quickly they will be able to do so and the potential effects it could have on the bond market.
• Concern continues over U.S. domestic policy and the administration’s ability to change health care, taxes and spending.

The opinions expressed are those of the Fund’s managers and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through June 30, 2017, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

Risk factors: The value of the Fund's shares will change, and you could lose money on your investment. While the Fund attempts to track the performance of its stated index, there is no guarantee or assurance that the methodology used to create the index will result in the Fund achieving high, or even positive, returns. The Index may underperform, and the Fund could lose value, while other indices or measures of market performance increase in value. Fixed-income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in below investment grade securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. As of June 30, 2017, the index was concentrated in the financial industry group; therefore, the Fund is subject to the same risks faced by companies in the financials industry to the same extent as the index is so concentrated. Such risks include extensive government regulation, fluctuation of profitability, and credit losses resulting from financial difficulties of borrowers. A number of factors may affect the Fund's ability to achieve a high degree of correlation with the Index, and there is no guarantee that the Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent the Fund from achieving its investment objective. An investment in the Fund is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. These and other risks are more fully described in the Fund's prospectus. Not all funds or fund classes may be offered at all broker/dealers.