SSGA Active Trust N-CSRCertified annual shareholder report (management investment company)

The performance chart of a Fund’s total return at net asset value (“NAV”), the total return based on market price and its benchmark index is provided for comparative purposes only and represents the periods noted. A Fund’s per share NAV is the value of one share of a Fund and is calculated by dividing the value of total assets less total liabilities by the number of shares outstanding. The NAV return is based on the NAV of a Fund and the market return is based on the market price per share of a Fund. The market price used to calculate the market return is determined by using the midpoint between the highest bid and the lowest offer on the exchange on which the shares of a Fund are listed for trading, as of the time that a Fund’s NAV is calculated. NAV and market returns assume that dividends and capital gain distributions have been reinvested in a Fund at NAV. Market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included market returns would be lower.

An index is a statistical measure of a specified financial market or sector. An index does not actually hold a portfolio of securities and therefore does not reflect deductions for fees or expenses. In comparison, a Fund’s performance is negatively impacted by these deductions. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.

The Bloomberg U.S. Government Inflation-Linked Bond Index includes publicly issued, U.S. Treasury inflation protected securities that have at least 1 year remaining to maturity on index rebalancing date, with an issue size equal to or in excess of $500 million. Bonds must be capital-indexed and linked to an eligible inflation index. The securities must be denominated in U.S. Dollars and pay coupon and principal in U.S. Dollars. The notional coupon of a bond must be fixed or zero. Bonds must settle on or before the index rebalancing date.

The DBIQ Optimum Yield Diversified Commodity Index Excess Return employs a rule based approach when it rolls from one futures contract to another for each commodity in the index. DBLCI Diversified Index represents 14 commodities drawn from the Energy, Precious Metals, Industrial Metals and Agriculture sectors.

The Bloomberg U.S. Long Government/Credit Index measures the investment return of all medium and larger public issues of U.S. Treasury, agency, investment-grade corporate, and investment-grade international dollar-denominated bonds with maturities longer than 10 years. The average maturity is approximately 20 years.

The Bloomberg U.S. Aggregate Bond Index is designed to measure the performance of the U.S. dollar denominated investment grade bond market, which includes investment grade (must be Baa3/BBB- or higher using the middle rating of Moody’s Investor Service, Inc., Standard & Poor’s, and Fitch Inc.) government bonds, investment grade corporate bonds, mortgage pass through securities, commercial mortgage backed securities and other asset backed securities that are publicly for sale in the United States.

The SPDR Loomis Sayles Opportunistic Bond Composite Index is a composite benchmark comprising 50% investment grade corporate bonds, 25% high yield corporate bonds, and 25% senior loans. The investment grade corporate bond portion of the composite benchmark is represented by the Bloomberg U.S. Corporate Bond Index, the high yield corporate bond portion is represented by the Bloomberg U.S. High Yield 2% Issuer Capped Index, and the senior loan portion is represented by the Morningstar LSTA U.S. Leveraged Loan Index.

The Bloomberg 3-15 Year Blend (2-17) Municipal Bond Index is designed to track the U.S. fully tax-exempt bond market. The index includes state and local general obligation bonds, revenue bonds, pre-refunded bonds, insured bonds and municipal lease obligations. The index is comprised of tax-exempt municipal securities issued by states, cities, counties, districts and their respective agencies, authorities and instrumentalities.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 0.78%, and the Index was –1.33%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

The performance of financial markets during the Reporting Period continued to be heavily influenced by inflation trends and the related impact on monetary policy and messaging from central banks. While equity markets got off to a good start in mid-2022 from lows reached in June, supported by overly depressed sentiment, stocks would turn lower amidst hawkish central bank messaging and turmoil in long-end UK bonds brought forth by the announcement of that country’s “mini-budget.” The outlook for commodities deteriorated as the U.S. dollar rose and demand destruction fears gripped investors, sending oil and other broad commodities tumbling. Further, real estate came under pressure against the backdrop of higher interest rates and weaker economic growth. The portfolio reduced the overweight to commodities and natural resource equities, moved to a further underweight in real estate, and started building a cash position, By the turn to the fourth quarter of 2022 equity markets began a steady recovery with resilient earnings for the rest of the Reporting Period as longer-term interest rates stabilized. At the close of 2022, the cash was allocated to natural resource equities, both core and energy, and infrastructure. Additionally, the underweight to inflation-linked bonds was reduced as real yields fell and inflation expectations, as measured by break-evens, rose by the end of the year. This recovery progressed in the first half of 2023, despite meaningful risk events including the regional bank crisis in the United States at the end of the first quarter. The inflationary environment shifted from a high and rising regime to a moderating one that might be higher for longer. Commodities faced headwinds and struggled to find a bottom with a short-lived metals rally on hopes of a Chinas recovery and Europe’s uncharacteristically mild winter that sent natural gas priced plummeting. The overweight position to global infrastructure equities, underweight to real estate, cash holdings, and the addition of gold in March helped to buffer the portfolio. Throughout this period, real estate has ranked poorly in our quantitative framework but followed the broader surge in equities and prospects for the successful execution of a soft landing in the US. The underweight to real estate proved to be a drag, compounding the lackluster support from commodity and natural resources. Again, the defensive overweight holdings in global infrastructure equity and cash help to soften the impact. The Reporting Period closed with the portfolio positioned with larger weights in global infrastructure equity, gold, and cash along with holdings in global natural resource equities based on what we believe is a structurally bullish fundamental backdrop that may be unfolding in the second half of 2023 and 2024 for the energy and metals assets.

On an individual security level, the top positive contributors to the Fund’s performance on an absolute basis during the Reporting Period were the SPDR S&P Global Natural Resources ETF (GNR), S&P Energy Select Sector SPDR Fund and SPDR S&P Global Infrastructure ETF (GII). The top negative contributor to the Fund’s performance on an absolute basis during the Reporting Period were the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC), SPDR Dow Jones US REIT ETF (RWR) and SPDR Bloomberg 1-10 Year TIPS ETF (TIPX).

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 3.79%, and the Index was 18.51%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

Broad diversification across global asset classes, allocations to several high dividend equity markets as well as underlying ETF performance were primary drivers of Fund performance during the Reporting Period relative to the Index. The performance of financial markets during the Reporting Period continued to be heavily influenced by inflation trends and the related impact on monetary policy and messaging from central banks. While equity markets got off to a good start in mid-2022, likely supported by overly depressed sentiment, stocks would turn lower amidst hawkish central bank messaging and turmoil in long-end UK bonds brought forth by the announcement of that country’s “mini-budget.” But by the turn to the fourth quarter of 2022 equity markets began a steady recovery for the remainder of the Reporting Period as longer-term interest rates stabilized. This recovery progressed despite meaningful risk events including the regional bank crisis in the United States in early 2023. With that context, the multi-asset exposure and broad diversification of the Fund was the primary driver of underperformance relative to the Index (which represents the global developed equity market). Additionally, given the Fund’s focus on both income and total return, its emphasis on dividend paying equity ETFs led to underperformance as dividend equities did not rise as sharply as other equity market strategies – particularly those with more exposure to the technology sector. 

On an individual security level, the top positive contributors to the Fund’s performance on an absolute basis during the Reporting Period were investments in the SPDR Bloomberg Emerging Markets Local Bond ETF, the SPDR Blackstone Senior Loan ETF and the SPDR S&P International Dividend ETF. The top negative contributors to the Fund’s performance on an absolute basis during the Reporting Period were the SPDR Portfolio Long Term Treasury ETF, the Invesco KBW Premium Yield Equity REIT ETF and the Schwab U.S. Dividend Equity ETF.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 9.15%, and the Index was 16.14%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

Broad diversification across global asset classes, asset allocation positioning as well as underlying ETF performance were primary drivers of Fund performance during the Reporting Period relative to the Index. The performance of financial markets during the Reporting Period continued to be heavily influenced by inflation trends and the related impact on monetary policy and messaging from central banks. While equity markets got off to a good start in mid-2022, likely supported by overly depressed sentiment, stocks would turn lower amidst hawkish central bank messaging and turmoil in long-end UK bonds brought forth by the announcement of that country’s “mini-budget.” But by the turn to the fourth quarter of 2022 equity markets began a steady recovery for the remainder of the Reporting Period as longer-term interest rates stabilized. This recovery progressed despite meaningful risk events including the regional bank crisis in the United States in early 2023. Directionally, our preference for equities relative to bonds aided performance. Additionally, positioning within equity, a preference for Europe and Pacific with funding from REITs, proved beneficial. After rolling over in October 2022, equities have marched higher on better risk appetite, helped by optimism of peak inflation and near peak interest rates. The resilient consumer and strong labor market have contributed to the positive risk sentiment. REITs have recovered YTD, but rising yields and growth concerns weighed on the asset class in 2022 which lead to underperformance relative to traditional equities. Offsetting some positive performance was our targeted allocations to gold, cash and long government bonds. The speed and magnitude of rate hikes in 2022 along with the repricing of Federal Reserve monetary policy expectations in 2023 have weighed on bonds, including our allocation to long government bonds. Cash offers an attractive yield and provided some downside protection given the numerous risks overhanging markets, but the equity rally has left cash to underperform despite providing a positive absolute return. 

On an individual security level, the top positive contributors to the Fund’s performance on an absolute basis during the Reporting Period were the SPDR S&P 500 ETF, the SPDR Portfolio Developed World ex-US ETF and the SPDR Portfolio Europe ETF. The top negative contributors to the Fund’s performance on an absolute basis during the Reporting Period were the SPDR Portfolio Long Term Treasury ETF, the Invesco Optimum Yield Diversified Commodity ETF and the Invesco DB Gold ETF.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 4.24%, and the Index was 3.74%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

The Fund’s over-weight allocation to investment grade corporate credit and commercial mortgage-backed securities were primary drivers of Fund outperformance during the Reporting Period relative to the Index, whereas the Fund’s over-weight allocation to duration detracted from performance. During the Reporting Period, continued strength in the labor market and the economy, in the context of supply-chain disruptions, led to inflation well-above the U.S. Federal Reserve (the “Fed”) inflation target of 2%. During the Reporting Period, the Fed increased the Fed Funds rate from a range of (1.50% - 1.75%) to (5.00% - 5.25%). Also, during the Reporting Period, the Fed’s balance sheet declined from $8.9 trillion to $8.4 trillion. The labor market and the economy’s continued strength in the context of an accelerated pace of monetary policy tightening are the key drivers to the significant increase in short-term interest rates and tightening of investment grade corporate credit spreads observed during the Reporting Period. The Fund maintained a duration profile in the range of 0.25 – 0.65 during the Reporting Period.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the net total return for the Fund was 3.58%, and the Index was –0.94%. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

During the Reporting Period, the Fund used index credit default swaps (“CDX”), forwards, and interest rate future/swap exposures for hedging credit beta, hedging currency exposure, duration/interest rate positioning respectively. On an absolute basis, the Fund’s net use of both interest rate futures and swaps detracted from performance. Our use of forwards slightly contributed, while CDX use detracted from Fund performance.

On an individual security level, the top positive contributors to the Fund’s performance on an absolute basis during the Reporting Period were Unicredit SPA 144A RTS 7.296 USD 4/2/2034, HSBC Holdings PLC 8.113 USD 11/3/2033, and CHG Healthcare TLB L+325 FL50 8.443 USD 9/29/2028. The top negative contributors to the Fund’s performance on an absolute basis during the Reporting Period were Lloyds Banking Group PLC 8.0 USD 6/27/2172, Apple Inc 3.95 USD 8/8/2052 and Kohl’s Corporation 4.625 USD 5/1/2031.

The SPDR Nuveen Municipal Bond ETF (the ”Fund”) seeks to provide current income that is exempt from regular federal income taxes. Capital appreciation is a secondary objective when consistent with the Fund’s primary objective. The Fund’s benchmark is the Bloomberg 3-15 Year Blend (2-17) Municipal Bond Index (the “Index”).

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 2.10%, and the Index was 2.97%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

Overall, longer positioned bonds outperformed as interest expectations stabilized and additional income was additive to returns. The Fund was hurt from an overweight in bonds maturing in less than two years and underweight in 8 to 17 years. This was somewhat offset by an underweight in bonds maturing in 2 to 4 years and an overweight to bonds maturing in 17 to 22 years.

On an individual security level, the top contributors to the Fund’s performance during the Reporting Period were New Jersey Economic Development Authority School Facility Construction, Medford HFA Asante Health and New York City General Obligation bonds. The largest detractors from the Fund’s performance during the Reporting Period were New Hope Sanctuary Long Term Care, New York State Personal Income Tax, and Idaho Housing & Sales Tax bonds.

The SPDR Nuveen Municipal Bond ESG ETF (the “Fund”) seeks to provide current income that is exempt from regular federal income taxes by investing in municipal bonds that exhibit certain environmental, social and governance (“ESG”) characteristics. Capital appreciation is a secondary objective when consistent with the Fund’s primary objective. The Fund’s benchmark is the Bloomberg 3-15 Year Blend (2-17) Municipal Bond Index (the “Index”).

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 2.53%, and the Index was 2.97%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

Curve positioning was the primary driver of fund performance during the Reporting Period. The Reporting Period consists of widely different market environments, with the first four months continuing the historic sell off before a considerable rally and remaining volatility throughout the  remainder of the Reporting Period.

Overall, longer positioned bonds outperformed as interest expectations stabilized and additional income was additive to returns. The portfolio did benefit from an overweight allocation to bonds maturing in 17 to 22 years and an underweight to 4 to 6 years, however was more than offset by the overweight to bonds maturing in less than 2 years, and the underweight to bonds maturing in 8 to 12 years. Curve positioning was the largest detractor from performance. Rating allocation and sector allocation were both positive contributors to performance. An overweight to bonds rated single-A and underweight in bonds rated triple-A aided performance. An underweight in state general obligation and industrial development revenue bonds aided performance. An underweight in local general obligation bonds hurt performance.

On an individual security level, the top contributors to the Fund’s performance during the Reporting Period Connecticut Special Tax Transportation, Medford HFA Asante Health and New York City general obligation bonds. The largest detractors from the Fund’s performance during the Reporting Period were Raleigh Durham Airport Revenue, Idaho Housing & Finance Association Sales Tax, and Bexar County Refunding bonds.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was –2.12%, and the Index was –0.94%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

The performance of financial markets during the Reporting Period continued to be heavily influenced by inflation trends and the related impact on monetary policy and messaging from central banks. The U.S. Federal Reserve (the “Fed”) raised rates at the fastest pace in recent history pushing treasury yields steadily higher throughout much of 2002 pausing their climb as the fiscal year came to a close. While rates were moving higher the yield curve was flattening and high yield spreads were volatile moving sharply tighter to start the third quarter of 2022 before widening back out to end it. The regional bank crisis in the United States in early 2023 provided one last bout of instability pushing treasury yields lower and spreads wider before the Fed stepped in to prevent further contagion.

The Fund finished lower and underperformed its benchmark largely due to an overweight to long duration U.S. Treasury bonds. While the curve did flatten significantly over the period, the overall move higher in rates across the curve proved detrimental to the Fund’s results. The Fund’s allocation to intermediate-term corporate and high-yield bonds also benefited from tightening of credit spreads over the full Reporting Period as risk appetite gradually improved and the corporate sector continued to demonstrate resilient earnings. As headline inflation abated in the first half of 2023, the market reassessed and lowered the Fed terminal rate. The FX market reacted accordingly and the Fund’s position in the international treasury bond had positive contribution to the relative performance on the backdrop of a weakening U.S. Dollar.

On an individual security level, the top positive contributors to the Fund’s performance on an absolute basis during the Reporting Period were SPDR Portfolio Intermediate Term Corporate Bond ETF, SPDR Bloomberg International Treasury Bond ETF and SPDR Bloomberg 1-3 Month T-Bill ETF. The top negative contributors to the Fund’s performance on an absolute basis during the Reporting Period were SPDR Portfolio Long Term Treasury ETF, SPDR Portfolio Intermediate Term Treasury ETF and SPDR Portfolio Mortgage Backed Bond ETF.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 15.91%, and the Index was 19.59%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

Active allocation across U.S. sectors was the primary driver of Fund performance during the Reporting Period relative to the Index. The performance of financial markets during the Reporting Period continued to be heavily influenced by inflation trends and the related impact on monetary policy and messaging from central banks. While equity markets got off to a good start in mid-2022, likely supported by overly depressed sentiment, stocks would turn lower amidst hawkish central bank messaging and turmoil in long-end UK bonds brought forth by the announcement of that country’s “mini-budget.” But by the turn to the fourth quarter of 2022 equity markets began a steady recovery for the remainder of the Reporting Period as longer-term interest rates stabilized. This recovery progressed despite meaningful risk events including the regional bank crisis in the United States in early 2023. The Fund got off to a good start and outperformed its Index during the second half of 2022 in large part due to an overweight allocation to the energy sector and an underweight allocation to the communication services sector. The energy sector rallied as oil prices recovered and energy firms delivered strong third quarter (2022) earnings results. Meanwhile, heavyweight firms in the communications services meaningfully underperformed amidst weaker than expected earnings. However, the Fund underperformed during the first half of 2023 due to overweight positions in the consumer staples, materials and industrial sectors. Our investment research favored consumer staples due to compelling quality and sentiment characteristics, but the relatively defensive sector was not able to keep pace during the swift technology-led rally. Similarly, materials and industrials exhibited a variety of attractive attributes but lagged the large technology sector and weighed on Fund performance overall.

On an individual security level, the top positive contributors to the Fund’s performance on an absolute basis during the Reporting Period were the Technology Select Sector SPDR Fund, the Industrial Select Sector SPDR Fund and the Financial Select Sector SPDR Fund. The top negative contributors to the Fund’s performance on an absolute basis during the Reporting Period were the Consumer Staples Select Sector SPDR Fund, the Utilities Select Sector SPDR Fund and the Materials Select Sector SPDR Fund.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the total return for the Fund was 3.63%, and the Index was 5.66%. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

The primary drivers of Fund performance during the Reporting Period were duration positioning and asset allocation. In terms of duration positioning, the Fund consistently maintained a longer duration than the Index, which hurt relative performance as U.S. Treasury yields continued to rise. Over the period, U.S. Treasury yields increased across the curve, with 2-year yields higher by 194 bps and 10-year yields higher by 82 bps. In terms of asset allocation, the Fund was hurt by its underweight allocation to Europe. Europe was the best performing region in the Index after experiencing a rebound off the Q1 2022, lows following Russia's invasion of Ukraine and Russia's exclusion from the Index early last year. Additionally, the Fund maintained a large overweight to investment grade credits over the period, which significantly underperformed its high yield counterparts. In contrast, the Fund's overweight to Latin America, the second strongest region in the Index, and overweight Emerging Markets sovereigns contributed to relative performance.

On a sector level, the top contributor to the Fund’s performance during the Reporting Period was Emerging Market sovereign credit, which delivered a strong return and outperformed the Index. In contract, the largest detractor of the Fund’s performance on an absolute basis during the Reporting Period was Emerging Market Corporate credit.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the Fund outperformed the Index by 272 basis points(bps) with a total return of 3.24% versus the 0.52% returned by the Index. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

The primary driver of outperformance was asset allocation as the portfolio maintained a higher credit allocation than the Index, with a roughly sixty-five percent weighting to credit risk sectors compared to approximately thirty percent in the Index. This contributed positively to performance as credit spreads tightened materially during the Reporting Period. The Fund maintained a slightly shorter duration position than the Index.

The Fund’s best-performing sectors were collateralized loan obligations (CLOs) and bank loans as spreads tightened and the floating-rate nature of these sectors insulated them from rising rates. The shorter duration structured credit sectors commercial MBS, non-Agency MBS, and asset backed securities also outperformed the Index as they were less negatively impacted by the rise in U.S. Treasury yields. Agency MBS naturally experienced some duration-related price declines during the period and was subsequently the worst performing sector in the portfolio.

For the 12-month period ended June 30, 2023 (the “Reporting Period”), the Fund outperformed the Index by 143 basis points(bps), with a total return 0.49% versus the  –0.94% returned by the Index. The Fund and Index returns reflect the reinvestment of dividends and other income. The Fund’s performance reflects the expenses of managing the Fund, including brokerage and advisory expenses. The Index is unmanaged and Index returns do not reflect fees and expenses of any kind, which would have a negative impact on returns.

The primary drivers of Fund performance were asset allocation and duration positioning. The Fund maintained a roughly forty-eight percent weighting to credit risk sectors compared to approximately thirty percent in the Index, which contributed positively to outperformance as credit spreads tightened materially over the Reporting Period. In terms of duration positioning, the Fund maintained a slightly shorter duration than the Index, which bolstered relative performance as U.S. Treasury yields rose significantly during the Reporting Period.

Speaking broadly, shorter duration credit sectors tended to outperform longer duration sectors due to the sharp rise in U.S. Treasury yields. The Fund’s best-performing sector was high-yield corporates as the perceived risk of defaults fell during the period and equity markets rallied, causing spread tightening. Collateralized loan obligations (CLOs) and bank loans also performed well as spreads tightened and the floating-rate nature of these sectors insulated them from rising rates. The Agency MBS and U.S. Treasurys in the Fund naturally experienced some duration-related price declines and were subsequently the worst performing sectors over the period.

Every credit sector in the portfolio generated a positive return. The top contributors to the Fund’s outperformance during the Reporting Period were the shorter duration credit sectors non-Agency MBS, high yield corporates, and bank loans. The only detractors from the Fund’s performance during the Reporting Period were U.S. Treasurys and Agency MBS.