Q:  What is the history of the fund and how is it different than a money market fund? A : The fund was designed to deliver tax-exempt returns that are better than the average money market fund while trying to have a stable net asset value. Ten years ago when we designed the fund we wanted to focus on creating an income stream investors can enjoy while making sure that the net asset value fluctuated minimally. Our goal always has been to deliver a yield that is between 50 and 350 basis points higher than the average money market fund. Our core focus is to maximize income and minimize Net Asset Valuation fluctuation. We run the fund with two key strategies in mind. First, take advantage of the inefficiencies and secondarily, aberrations that can be found in the marketplace. We maintain liquidity in the fund to take advantage of the volatility the market may offer. The portfolio composition was always designed to change over time based upon what we saw going on in the marketplace. Q:  How fund has evolved in the last ten years? A : For the first six years we had a hard time finding an audience. It was not until the market started to crash in 2008 that financial advisors began looking for a product that was cranking out income but not decimating their clients on the NAV. All of a sudden our fund popped up on everyone’s radar screen. The fund was a top performing muni-fund that year and put the fund on the map. We went from $60 million in the fund to $1 billion in the next year. This is not a total return type of fund. It is more focused on income. Our thinking behind that is that fixed income funds should be more about income and less about the total return aspect, because the markets, over the course of several years, have gone up, down, and sideways. While you can make a lot of money one year, you can obviously lose a lot of money the next year. We look at every type of product out there in the marketplace that is tax-exempt, variable rate demand notes, tax-exempt commercial paper, general market notes, tax-exempt coupons, tax-exempt auction rate securities, or average tax-exempt funds that everybody has in a portfolio. The composition of those securities will change daily, weekly, monthly, yearly, based upon how they trade in the marketplace and how they trade off one another. The municipal bond marketplace is highly inefficient and prices can vary dramatically for similar securities. We have found opportunities where the variable rate demand notes are trading significantly cheaper than three-year bonds, or general market notes are trading cheaper than tax-exempt commercial paper, with the same maturity and the same ratings. Historically, we have always had the low average maturity and low duration amongst our peers. Our feeling for the last year has been that despite the euphoria in the market, it has really been more of a supply and demand issue. We have always made a conscious decision not to chase markets and if that means sitting on the sidelines for a period of time then we will do so. It is our feeling that we are already in a historically low interest rate environment. We have already seen a huge compression in the spreads of yields in relation to credit quality. We feel for the most part, that municipal bond funds are going to have an incredibly difficult time replicating the same type of total return numbers they had in 2012. This may bode well for investors to take a more conservative approach when investing in municipal bond funds. Even though we have flexibility as to where we can be on the yield curve, we are choosing to take a more conservative approach in this environment. Q:  What is your investment process? A :The first thing we do is we look at all the different types of tax-exempt investment products in the marketplace that are available to us, including variable rate demand notes, tax-exempt commercial paper, general market notes, put bonds, auction rate securities, and your general municipal bond. The market is highly inefficient. For example, in the variable rate demand note market place most buyers and sellers manage tax-free money market type portfolios. We have found there may be opportunities for ultra short portfolios that have more flexibility in maturity, duration or credit quality when issues come under stress. Money market managers may be limited on what they can hold and for how long. This presents an opportunity for us, as an investor, to get an attractive yield with limited downside risk. In the past we have seen issues fall out of favor and yield anywhere from 25 to 225 basis points higher. The downside to a security like that is not having much upside potential. You sacrifice price appreciation for income. But that is okay because you are trying to focus more on income in a fund like ours. We try to find the types of securities that are really trading out of sync with a comparable quality security and a comparable maturing security. I have some VRDNs in my portfolios that are out yielding 10-year municipal bonds. Our securities have seven-day put features at par. That is a perfect example of how we approach the market to find those so-called needles in the haystack. Then we will take a look at what else is out of favor with the marketplace. Is it in healthcare or housing? Is there a specific company or corporation that has been issuing municipal debt? Maybe they are going through a merger like several years ago we were buying Dow Chemical tax-exempt commercial paper at 10% because they were in merger process with Rohm and Haas or BP Amoco when they had the spill in the Gulf of Mexico. We were probably one of the biggest buyers of their tax-exempt variable rate demand notes, because everybody was avoiding the oil explorer. These securities were huge performers for us and it gives us an opportunity to find something that is a little bit different, off the beaten track, and differentiates us. We also look at states. Is there a particular state that seems to be really trading out of sync relative to the credit quality? We see that with Illinois and with Puerto Rico. We see if there are opportunities in any one of these sectors. The composition of the portfolio can change dramatically, depending on what is going on in the marketplace at any given time. I would not be able to tell you what the portfolio will look like six months or a year from now. Q:  How do you go about portfolio allocation? A : The allocation is based on trade offs between types of securities, sectors, income potential and downside risk. Most of our allocation decisions are based on the specific issues we uncover or individual bond attributes and less on the macro picture. For example, looking at the healthcare sector, there are so many different degrees of healthcare securities out there. Just because the healthcare industry per se might not be doing well, it does not mean that all securities are doing poorly. There is good, bad, and indifferent in all sectors. We do not take the approach of dumping all healthcare or all general obligations. Our approach is more granular. We look for specific situations, specific names in an industry, that are really trading out of place with comparable types of securities. Our focus is on opportunities the markets presents at any given time. If we are not finding the right opportunities from an income and risk perspective we will probably stay on the sidelines in very short-term securities or keep it in a seven-day security until I can find something that really makes sense. This allows us to be diligent in the positions we do take while providing liquidity when fear comes back into the market. Q:  What was your stance when the commercial paper market was nearly frozen in 2008 and 2009? A : That for us was probably the greatest buying opportunity that I have seen in my 25 years of managing money. The variable rate demand note marketplace securities were yielding anywhere from 8% to 11% with no NAV fluctuation. The credit behind these securities was rock solid. In addition, we were able to go out and buy paper in the marketplace that everybody was selling, we were able to bid on at extraordinarily cheap levels. While everybody was selling, we were buying. We had so much cash, or cash equivalent type of securities. A rising or rapidly rising rate environment provides opportunities for a portfolio like this. We try to generate income and not generate capital gains, it is really more important for us to find the right yielding securities. Q:  Why this fund? A : Money market funds are becoming dead business. This fund, just by coincidence, has historically mimicked the characteristics of a money market fund, even though it is not one. By that I mean the stability in the NAV. My fund basically came out at $10 a share and it has never been below $10 a share. I have the lowest NAV volatility of any tax-free municipal fund, at least for the last three years, if not the last five years. We are at a historical low as to what the spread over money market funds are. A year ago we were probably 125 basis points over tax-free money market funds. Right now we are 50 basis points. Like everything, the spreads have compressed so much, interest rates are at historic lows, and money market funds are at zero to one basis point. Volatility for us is not a bad thing. It creates opportunity. Just because rates are low it does not mean there are not pockets of volatility in the marketplace. We try to find the specific situations out there that are just real aberrations in the marketplace. It could be a specific corporation, it could be a specific credit, it could be because one sector of the marketplace is dumping that type of security and the supply has increased significantly because of a downgrade. The biggest difference we have seen when it comes to that is that in the past people were a little slower to react to it. In summary, investors have utilized this fund because if offers an attractive federally tax free income and price stability. Market volatility has reminded investors of the importance of risk management and that ultra short funds may deliver compelling characteristics on the shorter end of the yield curve. Q:  How do you manage such a large fund? A : The fund is well diversified with holdings in the neighborhood of 300 to 350. That can change based upon what we see going on in the marketplace. We are not averse to taking bigger positions in certain securities. If we see a special situation, for example, there might be a bond that is getting called and everybody is selling it in the marketplace. They are trying to take advantage of whatever premium they can before the bond gets called. We will go out and buy as much of it as we can, hopefully at above market rates. We are not averse to having pockets of concentration in the fund if there is a specific reason to do so. While we try to be well diversified, it might not be unusual for us to have a specific situation where we have five percent in one security, providing that we know there is a real reason for doing so. Q:  How critical is credit research in your process? A : The credit research side for us is really important. We rely on the filings if we have to. The one nice thing is we are very deep in research on the corporate side. We have a lot of analysts that are exploring the companies that we invest in, and with the banks on the credit enhancement side. This is a perfect example of where a negative can turn into a positive. For example, we had owned municipal bonds in California that went bankrupt, but our securities had a direct pay letter of credit on them from a very highly rated, reputable bank in California. Despite the fact that the underlying credit was bankrupt, our securities were rock solid because of the letter of credit. We were getting paid a significantly higher yield as a result of the tarnished name, but the fact is our interest payments, and our principal payments, were solid. Subsequently we had those bonds called away from us, because the issuer had basically told the letter of credit provider that we can pay Alpine a really high rate and let you continue making the interest payments for us, or we can work out a deal amongst ourselves and you will eventually get paid back. That is an example of a bad situation turning good. We are in an environment where we never predicted any type of catastrophic fallout in bankruptcies in municipalities. But the fact remains that there are underfunded pension programs, exorbitant healthcare costs, declining tax revenues, declining real estate taxes, and these are all issues that states and municipalities have to deal with and that is one of the things that concerns us. We see rates falling despite the fact that credit quality has not really improved, and in fact it has somewhat deteriorated. We take that into consideration when we are bidding on our securities.