What disclosures will the fund provide to investors regarding the lawsuit and its impact on performance?

Disclosures the fund is expected to provide

• Existence of the action and material‑risk warning – The fund’s prospectus and periodic reports will contain a clear statement that a securities‑fraud class‑action lawsuit has been filed against the fund (formerly Principal Street High‑Income Municipal Fund). The filing will be identified as a “material event” that could have a significant impact on the fund’s net asset value (NAV) and total‑return performance.

• Potential financial impact – The fund will disclose that, if the lawsuit results in a judgment, settlement, or other liability, the out‑of‑pocket costs (legal fees, possible damages, and any remedial expenses) could be deducted from the fund’s assets. Consequently, the fund may experience a drag on returns, especially in the near‑term, and could be forced to adjust its portfolio to meet cash‑flow or liquidity requirements.

• Effect on investment strategy and holdings – The fund will note that the litigation may compel a review of the underlying municipal securities that gave rise to the alleged fraud. This could lead to the sale of certain positions, a shift toward higher‑quality or lower‑duration securities, or a temporary reduction in the fund’s exposure to the affected issuers—any of which would affect yield, duration, and credit‑quality metrics.

• Ongoing reporting and updates – Investors will be told that the fund will provide periodic updates on the status of the case (e.g., motions, settlements, or judgments) through 10‑K, 10‑Q, and shareholder letters. The updates will include any material changes to the fund’s projected cash‑flow, expense ratio, or ability to meet its stated investment objective.

• Risk‑management and redemption considerations – The disclosure will caution that adverse outcomes could trigger higher redemption activity or liquidity strain, and that the fund may impose temporary redemption gates or fees to protect remaining shareholders.

Trading implications

Because the lawsuit introduces a contingent liability and potential portfolio‑rebalancing, the fund’s risk profile is elevated. Market participants should:

1. Re‑price the fund’s yield and credit‑risk premium – Anticipate a modest discount to the fund’s price relative to comparable high‑income muni funds until the legal risk is resolved.
2. Monitor NAV volatility and redemption flows – A spike in redemptions or a sudden NAV dip could create short‑term trading opportunities (e.g., buying on a dip if the fund’s fundamentals remain sound) or signal a need to reduce exposure.
3. Assess credit‑quality exposure – If the fund is forced to sell lower‑rated securities, its average credit rating may improve, potentially offsetting some performance drag; however, the sell‑off could also compress yields.

In short, the fund will disclose the lawsuit’s existence, the possible cost and portfolio‑impact, and will commit to regular updates. Traders should treat the fund as a higher‑risk, “event‑driven” muni vehicle and adjust position sizing, stop‑loss levels, and risk‑management protocols accordingly.