Municipal Bond Market Review

 

The U.S. economy showed strength at the start of the fiscal year on the back of a better-than-expected recovery from

the pandemic. In the three-month period ending December 31, 2021, real gross domestic product (“GDP”) rose at an annual rate of 6.9%. However, momentum slowed in the new calendar

year with the economy contracting in two consecutive quarters, decreasing by 1.6% on an annual basis in the first quarter of 2022 and by 0.6% during the second quarter, according to the Bureau of Economic Analysis. The economy reverted back to growth by the third quarter of 2022 with GDP rising by 2.6%¹. The labor market continued to strengthen throughout much of the 12-month period, as the unemployment rate in September of 2022 ticked down to 3.5%, matching the 50-year record low, versus the 4.6% reading in October of 2021, according to the Bureau of Labor Statistics. Inflation readings, as represented by the 12-month percentage change of the Consumer Price Index, continued to increase throughout much of the fiscal year. The period started with a 6.2% reading in October, peaked at 9.1% in June and September showed annual growth of 8.2%.²

The municipal market, as represented by the Bloomberg Municipal Bond Index³, returned -11.50% for the 12-month period ending 9/30/2022. The primary driver of performance over the year was the significant rise in rates across the curve, as AAA-rated general obligation (“GO”) municipal yields⁴ rose 287 basis points (“bps”) at the 2-year, 258 bps at the 5-year, 213 bps at the 10-year and 222 bps at the 30-year key rate. Given this extreme upward shift in yields, shorter-maturity bonds outperformed longer maturities. Regarding sector performance, the more defensive Electric and Water/Sewer sectors

led over the quarter, with longer duration sectors such as Health Care and Housing underperforming with the continued overall rise in interest rates. In regard to Health Care, the sector has also experienced some fundamental headwinds over the period due to rising cost pressures and labor shortages. In terms of credit quality, lower-quality bonds underperformed, partly as a function of their longer duration along with spread widening, as BBB-rated bonds trailed, and AAA-rated bonds led within the investment grade range. The high yield segment of the municipal bond market, as represented by the Bloomberg High Yield Municipal Bond Index⁵, returned -15.05% throughout the 12-month period.

For the calendar year-to-date period ended September 30, 2022, municipal bond issuance totaled roughly $301 billion, a decrease compared with the prior calendar year-to-date period, which totaled approximately $359 billion, according to JP Morgan. In the 12-month period ending September 30, 2022, municipal bond funds experienced -$86.9 billion in net outflows, according to the Investment Company Institute, compared to $96.3 billion in net inflows in the previous 12-month period.

The municipal market experienced volatility at the start of the fiscal year with tax exempt yields rising across the curve, following increasing Treasury yields as investors grappled with uncertainties around inflation. Adding to the volatility was some political

uncertainty as the Infrastructure Investment and Jobs Act (“Infrastructure Bill”) remained tied up in the House of Representatives.

Markets rebounded in November as the Infrastructure Bill was signed into law by President Biden. The legislation provided for over $1 trillion in total spending (with $550 billion in new spending) for roads and bridges, ports, airports, power grids, water systems, and rail networks, among other initiatives. While market participants were disappointed by the omission of federally subsidized interest payments and tax exempt refunding, the passage of the Infrastructure Bill brought the potential for improvement of the already strong balance sheets of many municipal issuers along with the potential to spur economic growth across the country.

Municipals had a strong finish to 2021, generally outperforming Treasuries as the markets experienced bouts of volatility driven by the discovery and transmission of the Omicron variant and continuing uncertainty regarding inflation. Municipal funds were in demand, closing the year with record inflows of $101.7 billion in 2021 and a streak of positive inflows in 84 of the previous 85 weeks.

The new year marked a clear shift from the low volatility and generally strong environment of 2021, with the first half of 2022 bringing one of the worst performances for the municipal

market on record as measured by total return. Numerous headwinds emerged as inflation expectations began accelerating in tandem with an increasingly hawkish posture by the Federal Reserve while an unexpected geopolitical crisis in Ukraine further heightened inflationary fears and dampened global growth prospects. Throughout the early months of 2022, inflation readings continued to come in higher than anticipated while the market’s expectation of 75 bps of interest rate hikes by the Fed for 2022 was quickly repriced to 225 bps of rate hikes throughout the year and the 10-year U.S. Treasury yield rose to levels not seen since prior to the pandemic. Along the same lines, the demand trend for municipal bonds seen in 2021 reversed and outflows ensued for much of 2022.

While the rates and inflation narrative underpinned most of 2022, the market experienced two brief respites in the back half of May and throughout July in which the municipal market rebounded temporarily and Treasury yields declined. In the latter month, the market experienced its best monthly performance since 2020, longer-dated bonds outperformed and there was positive, but fleeting flows into municipal bond funds. However, markets retreated once again in the last months of the period.

As such, rising rates were the primary headwind for municipal bonds

throughout much of 2022, and longer-duration bonds significantly underperformed. While municipal bonds’ price declines were meaningful, they were driven by higher Treasury yields rather than concerns over credit fundamentals. The credit backdrop continued to strengthen throughout 2022 due to above-average, year-over-year tax revenue growth, as numerous states experienced fiscal surpluses, increased pension contributions and returned money to taxpayers for the first time in years. Similarly, upgrades continued to significantly outpace downgrades throughout the year and the par value of defaulted municipal bonds through September decreased meaningfully compared to the same period in 2021.

 

Short Duration Tax Free

 

The Short Duration Tax Free Fund returned -5.68%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2022. The Fund’s benchmark, the Bloomberg Municipal Bond Short 1-5 Year Index⁶, returned -5.11% during the same period. The primary driver of underperformance was the Fund’s credit quality allocation. Over the period, lower-rated bonds underperformed higher-rated bonds, particularly in the latter half of the fiscal year. Therefore, the Fund’s overweight allocation to the lower quality,

investment grade credit tiers of ‘BBB’ and ‘A’ detracted from relative performance.

The Fund’s yield curve positioning led to a positive impact on relative performance. As the curve flattened over the period with short-term rates rising more than intermediate and longer-term rates, the Fund’s duration underweight to the 2-year key rate and modest overweight to the intermediate part of the curve contributed to relative returns.

In terms of sector positioning, the Fund’s overweight to the Housing and Industrial Development (IDR) sectors as well as its underweight to pre-refunded bonds detracted from relative performance. Generally, we prefer the higher degree of liquidity of the IDR sector, as buyers outside the tax exempt universe typically actively trade bonds within the segment. However, the Fund’s underperformance within the sector was mainly due to technical pressures as outflows from municipal bond funds ensued throughout much of the year and many IDR bonds experienced notable selling pressure. All of this detraction was offset by security selection within Housing, as holdings of higher quality credits within the sector benefitted relative performance.

 

Intermediate Tax Free

 

The Intermediate Tax Free Fund returned -12.36%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending

September 30, 2022. The Fund’s benchmark, the Bloomberg 1-15 Year Municipal Bond Index⁷, returned -8.86% during the same period. The primary driver of relative underperformance over the period was the Fund’s duration positioning. Due to uncertainties around monetary policy and inflation, the municipal yield curve shifted upwards significantly over the period. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark was the most notable detractor over the one-year period.

The Fund’s overweight to bonds rated ‘BBB’ and below also detracted from relative returns. Over the one-year period, lower-rated bonds underperformed higher-rated bonds, particularly in the latter half of the fiscal year.

Security selection and the Fund’s sector allocation dragged on relative performance over the period. The primary driver of underperformance from a sector perspective was the Fund’s overweight to, as well as security selection, within the Industrial Development (IDR) and Transportation sectors. Generally, we prefer the higher degree of liquidity of the IDR sector, as buyers outside the tax exempt universe typically actively trade bonds within the segment. However, the Fund’s underperformance within the sector was mainly due to technical pressures as outflows from municipal bond funds ensued throughout much of the year and many IDR bonds experienced

notable selling pressure. Additionally, the heavy supply of New York bonds was a headwind within the Transportation sector. While the Fund’s sector allocation and selection within several areas led to a positive impact on relative performance, the themes described above more than offset these factors and led to an overall negative impact on relative performance.

 

National Tax Free

 

The National Tax Free Fund returned -16.27%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2022. The Fund’s benchmark, the Bloomberg Municipal Bond Index³, returned -11.50% during the same period. The primary driver of relative underperformance over the fiscal year was the Fund’s duration positioning. Due to uncertainties around monetary policy and inflation, the municipal yield curve shifted upwards significantly. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark was the most notable detractor over the one-year period and significantly drove the relative underperformance of the Fund.

The Fund’s credit quality allocation also detracted from relative returns. Over the one-year period, lower-rated bonds underperformed higher-rated bonds, particularly in the latter half of the fiscal year. Therefore, the Fund’s overweight to bonds rated ‘BBB’ as well as its exposure

to non-investment grade bonds led to a negative impact on performance.

Security selection and the Fund’s sector allocation also dragged on relative performance over the period. The primary driver of relative underperformance from a sector perspective was the Fund’s overweight to, as well as security selection within the Industrial Development (IDR) sector. Generally, we prefer the higher degree of liquidity of the IDR sector, as buyers outside the tax exempt universe typically actively trade bonds within the segment. However, the Fund’s underperformance within the sector was mainly due to technical pressures as outflows from municipal bond funds ensued throughout much of the year and many IDR bonds experienced notable selling pressure. While the Fund’s sector allocation and selection within several areas led to a positive impact on relative performance, the aforementioned detraction more than offset these factors and led to an overall negative impact on relative performance.

 

High Income Municipal Bond

 

The High Income Municipal Bond Fund returned -18.19%, reflecting performance at the net asset value (NAV) of Class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2022. The Fund’s benchmark, the Bloomberg High Yield Municipal Bond

Index⁵, returned -15.05% during the same period. The primary driver of relative underperformance over the fiscal year was the Fund’s duration positioning. Due to uncertainties around monetary policy and inflation, the municipal yield curve shifted upwards significantly. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark was the most notable detractor over the one-year period.

Security selection and the Fund’s sector allocation also detracted from relative performance, particularly within the Health Care segment. Over the fiscal year, various Hospital systems experienced cost pressures and labor shortages leading to spreads widening within the sector. The Fund’s exposure to the Industrial Development (IDR) sector also detracted from relative performance. Generally, we prefer the higher degree of liquidity of the IDR sector, as buyers outside the tax exempt universe typically actively trade bonds within the segment. However, the Fund’s underperformance within the sector was mainly due to technical pressures as outflows from municipal bond funds ensued throughout much of the year and many IDR bonds experienced notable selling pressure. While the Fund’s sector allocation and selection within several areas led to a positive impact on relative performance, the themes described above more than offset these factors and led to an overall negative impact on relative performance.

While the Fund’s quality allocation dragged on relative performance over the period, the impact on performance was relatively minor in relation to the effects of duration and security selection positioning.

 

Short Duration High Income Municipal Bond

 

The Short Duration High Income Municipal Bond Fund returned -10.85%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2022. The Fund’s benchmark, the Bloomberg Municipal Bond 1-8 Year Index⁸, returned -6.47% during the same period. The primary driver of relative underperformance was the Fund’s quality positioning. Over the one-year period, lower-rated bonds underperformed higher-quality bonds, particularly in the latter half of the fiscal year. Therefore, the Fund’s lower quality bias relative to the benchmark and exposure to non-investment grade bonds was the most meaningful detractor from relative performance over the one-year period.

The Fund’s duration positioning also detracted from relative returns. Due to uncertainties around monetary policy and inflation, the municipal yield curve shifted upwards significantly. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark led to a negative impact on performance.

Security selection and the Fund’s sector allocation also detracted from relative performance, mainly stemming from the Fund’s exposure to the Industrial Development (IDR) sector. Generally, we prefer the higher degree of liquidity of the IDR sector, as buyers outside the tax exempt universe typically actively trade bonds within the segment. However, the Fund’s underperformance within the sector was mainly due to technical pressures as outflows from municipal bond funds ensued throughout much of the year and many IDR bonds experienced notable selling pressure. While the Fund’s sector allocation and selection within several areas led to a positive impact on relative performance, the aforementioned detraction more than offset these factors and led to an overall negative impact on relative performance.

 

Sustainable Municipal Bond Fund

 

The Sustainable Municipal Bond Fund returned -10.85%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the period starting January 20, 2022, at the Fund’s performance inception, and ending September 30, 2022. The Fund’s benchmark, the Bloomberg 1-15 Year Municipal Bond Index⁷, returned -8.12% during the same period. The primary driver of relative underperformance over the period was the Fund’s duration positioning. Due to uncertainties around

monetary policy and inflation, the municipal yield curve shifted upwards significantly. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark was the most notable detractor since inception.

The Fund’s credit quality allocation also detracted from relative returns. Over the period, lower rated bonds underperformed higher rated bonds, particularly in the latter half of the fiscal year. Therefore, the Fund’s overweight to bonds rated ‘BBB’ as well as its exposure to non-investment grade bonds led to a negative impact on performance.

Security selection contributed to relative performance over the period, mainly driven by selection within the Housing sector as well as the Leasing, Water/Sewer and Transportation sectors. The positive impact across many of these sectors was tied to selection of credits with favorable bond structure, including coupon, call protection and convexity profile.

The Fund’s sector allocation dragged modestly on relative performance over the period, primarily due to an overweight to the Health Care and Housing sectors. Over the period, various Hospital systems experienced cost pressures and labor shortages leading to spreads widening within the sector.

 

California Tax Free

 

The California Tax Free Fund returned -16.10%, reflecting performance at the net asset value (NAV) of class A Shares

with all distributions reinvested, for the 12-month period ending September 30, 2022. The Fund’s benchmark, the Bloomberg Municipal Bond Index³, returned -11.50% during the same period. The primary driver of relative underperformance over the fiscal year was the Fund’s duration positioning. Due to uncertainties around monetary policy and inflation, the municipal yield curve shifted upwards significantly. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark was the most notable detractor over the one-year period and significantly drove the relative underperformance of the Fund.

The Fund’s credit quality allocation also detracted from relative returns. Over the one-year period, lower-rated bonds underperformed higher-rated bonds, particularly in the latter half of the fiscal year. Therefore, the Fund’s overweight to bonds rated ‘BBB’ as well as its exposure to non-investment grade bonds led to a negative impact on performance.

Security selection and the Fund’s sector allocation also dragged on performance over the period. The primary detractor was the Fund’s overweight to, as well as selection within, the Tobacco sector. Within the sector, the Fund’s holdings of select zero coupon and longer maturity bonds, which are more sensitive to rising rates, dragged on performance with the upward shift of the yield curve. Additionally, the Fund’s overweight to, as well as security selection within, the

Industrial Development (IDR) sector detracted from relative performance. Generally, we prefer the higher degree of liquidity of the IDR sector, as buyers outside the tax exempt universe typically actively trade bonds within the segment. However, the Fund’s underperformance within the sector was mainly due to technical pressures as outflows from municipal bond funds ensued throughout much of the year and many IDR bonds experienced notable selling pressure. While the Fund’s sector allocation and selection within several areas led to a positive impact on relative performance, the themes described above more than offset these factors and led to an overall negative impact on relative performance.

 

New Jersey Tax Free

 

The New Jersey Tax Free Fund returned -15.36%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2022. The Fund’s benchmark, the Bloomberg Municipal Bond Index³, returned -11.50% during the same period. The primary driver of relative underperformance over the fiscal year was the Fund’s duration positioning. Due to uncertainties around monetary policy and inflation, the municipal yield curve shifted upwards significantly. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark was the most notable detractor over the one-year period.

The Fund’s credit quality allocation also detracted from relative returns. Over the one-year period, lower-rated bonds underperformed higher-rated bonds, particularly in the latter half of the fiscal year. Therefore, the Fund’s overweight to bonds rated ‘BBB’ as well as its exposure to non-investment grade bonds led to a negative impact on performance.

Security selection and the Fund’s sector allocation also dragged on performance over the period. The primary detractor was security selection within the Education sector. Within the Education sector, holdings of select non-investment grade bonds underperformed over the period and detracted from relative returns. Additionally, the Fund’s overweight to non-investment grade bonds within the Special Tax sector led to a negative impact on performance given the underperformance of lower quality bonds throughout the fiscal year. While the Fund’s sector allocation and selection within several areas led to a positive impact on relative performance, the themes described above more than offset these factors and led to an overall negative impact on relative performance.

 

New York Tax Free

 

The New York Tax Free Fund returned -15.91%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2022. The Fund’s benchmark, the

Bloomberg Municipal Bond Index³, returned -11.50% during the same period. The primary driver of relative underperformance over the fiscal year was the Fund’s duration positioning. Due to uncertainties around monetary policy and inflation, the municipal yield curve shifted upwards significantly. Given this dramatic rise in yields, the strategy’s longer duration relative to the benchmark was the most notable detractor over the one-year period.

The Fund’s credit quality allocation also detracted from relative returns. Over the one-year period, lower-rated bonds underperformed higher-rated bonds, particularly in the latter half of the fiscal year. Therefore, the Fund’s overweight to bonds rated ‘BBB’ as well as its exposure to non-investment grade bonds led to a negative impact on performance.

The Fund’s sector allocation dragged on relative returns, primarily driven by an

underweight to the general obligation (“GO”) State and Power sectors as well as an overweight to the Tobacco sector. Within Power in particular, the Fund’s lower quality slant within the sector detracted from relative performance given the underperformance of non-investment grade bonds over the fiscal year.

Security selection led to a positive impact on relative performance. More specifically, selection within the Special Tax, Water/Sewer, and GO Local sectors contributed to performance. Generally, within most of these sectors, holdings of higher quality, investment-grade bonds outperformed and contributed to relative performance.

Each Fund’s portfolio is actively managed and, therefore, holdings and the weightings of a particular issuer or particular sector as a percentage of portfolio assets are subject to change. Sectors may include many industries.

¹   U.S. Bureau of Economic Analysis

²   U.S. Bureau of Labor Statistics

³  The Bloomberg Municipal Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. Bonds must be rated investment-grade (Baa3/BBB- or higher) by at least two ratings agencies. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date.

⁴   Bloomberg BVAL AAA GO Municipal Yield Curve

⁵   The Bloomberg High Yield Municipal Bond Index is an unmanaged index consisting of noninvestment-grade, unrated or below Ba1 bonds.

⁶   The Bloomberg Municipal Bond Short 1-5 Year Index is the Muni Short 1-5 year component of the Municipal Bond index. The Bloomberg Municipal

Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. The index is a broad measure of the municipal bond market with maturities of at least one year. To be included in the index, bonds must be rated investment-grade (Baa3/BBB- or higher) by at least two of the following ratings agencies: Moody’s, S&P, Fitch. If only two of the three agencies rate the security, the lower rating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment grade. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date.

⁷  The Bloomberg 1-15 Year Municipal Bond index is the 1-15 year component of the Municipal Bond index. The Bloomberg Municipal Bond Index is a rules-

based, market-value-weighted index engineered for the long-term tax-exempt bond market. The index is a broad measure of the municipal bond market with maturities of at least one year. To be included in the index, bonds must be rated investment-grade (Baa3/BBB- or higher) by at least two of the following ratings agencies: Moody’s, S&P, Fitch. If only two of the three agencies rate the security, the lower rating is used to determine index eligibility. If only one of the three agencies rates a security, the rating must be investment-grade. They must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. The bonds must be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date.

⁸   The Bloomberg 1-8 Year Municipal Bond Index is the 1-8 year component of the Municipal Bond index. The Bloomberg Municipal Bond Index is a rules-based, market-value-weighted index engineered for the long-term tax-exempt bond market. The index is a broad measure of the municipal bond market with maturities of at least one year. Bonds must have an outstanding par value of at least $7 million and be issued as part of a transaction of at least $75 million. Unless otherwise specified, indexes reflect total return, with all dividends reinvested. Indexes are unmanaged, do not reflect the deduction of fees or expenses, and are not available for direct investment.

 

Important Performance and Other Information

Performance data quoted in the following pages reflect past performance and are no guarantee of future results. Current performance may be higher or lower than the performance quoted. The investment return and principal value of an investment in the Funds will fluctuate so that shares, on any given day or when redeemed, may be worth more or less than their original cost. You can obtain performance data current to the most recent month end by calling Lord Abbett at 888-522-2388 or referring to www.lordabbett.com.

Except where noted, comparative Fund performance does not account for the deduction of sales charges and would be different if sales charges were included. Each Fund offers classes of shares with distinct pricing options. For a full description of the differences in pricing alternatives, please see each Fund’s prospectus.

 

During certain periods shown, expense waivers and reimbursements were in place. Without such expense waivers and reimbursements, each Fund’s returns would have been lower.

 

The annual commentary above discusses the views of the Funds’ management and various portfolio holdings of the Funds as of September 30, 2022. These views and portfolio holdings may have changed after this date. Information provided in the commentary is not a recommendation to buy or sell securities. Because the Funds’ portfolios are actively managed and may change significantly, the Funds may no longer own the securities described above or may have otherwise changed their positions in the securities. For more recent information about the Funds’ portfolio holdings, please visit www.lordabbett.com.

 

A Note about Risk: See Notes to Financial Statements for a discussion of investment risks. For a more detailed discussion of the risks associated with each Fund, please see each Fund’s prospectus.

 

Mutual funds are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by, banks, and are subject to investment risks including possible loss of principal amount invested.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   Source: Lipper Inc. The performance of the average is not necessarily representative of the Fund’s performance.

⁴   Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions

reinvested for period shown ended September 30, 2022, is calculated using the SEC required uniform method to compute such return.

⁵   The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁶   Performance is at net asset value.

⁷   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions reinvested for periods shown ended September 30, 2022, is calculated using the SEC required uniform method to compute such return.

⁴   The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁵   Performance is at net asset value.

⁶   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   Source: Lipper Inc. The performance of the average is not necessarily representative of the Fund’s performance.

⁴   Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions reinvested for periods shown ended September 30, 2022, is calculated using the SEC required uniform method to compute such return.

⁵   The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁶   Performance is at net asset value.

⁷   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   Source: Lipper Inc. The performance of the average is not necessarily representative of the Fund’s performance.

⁴   Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions reinvested for

periods shown ended September 30, 2022, is calculated using SEC required uniform method to compute such return.

⁵   The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁶   Performance is at net asset value.

⁷   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   Class A shares commenced operations on June 1, 2015 and performance for the Class began on June 15, 2015. Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions reinvested for periods shown ended September 30, 2022, is calculated using SEC required uniform method to compute such return.

⁴   Class C shares commenced operations on June 1, 2015 and performance for the Class began on June 15, 2015. The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁵   Class F and Class I shares commenced operations on June 1, 2015 and performance for each class began on June 15, 2015. Performance is at net asset value.

⁶   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   Class A shares commenced operations on January 5, 2022 and performance for the Class began on January 20, 2022. Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions reinvested for periods

shown ended September 30, 2022, is calculated using SEC required uniform method to compute such return.

⁴   Class C shares commenced operations on January 5, 2022 and performance for the Class began on January 20, 2022. The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁵   Commenced operations on January 5, 2022 and performance for the Classes began on January 20, 2022. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   The Index is composed of municipal bonds from many states while the Fund is a single-state municipal bond portfolio.

⁴   Source: Lipper Inc. The performance of the average is not necessarily representative of the Fund’s performance.

⁵   Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions

reinvested for periods shown ended September 30, 2022, is calculated using the SEC required uniform method to compute such return.

⁶   The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁷   Performance is at net asset value.

⁸   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   The Index is composed of municipal bonds from many states while the Fund is a single-state municipal bond portfolio.

⁴   Source: Lipper Inc. The performance of the average is not necessarily representative of the Fund’s performance.

⁵   Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25%

applicable to Class A shares, with all dividends and distributions reinvested for periods shown ended September 30, 2022, is calculated using the SEC required uniform method to compute such return.

⁶   Performance is at net asset value.

⁷   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

¹   Reflects the deduction of the maximum initial sales charge of 2.25%.

²   Performance for the unmanaged index does not reflect any fees or expenses. The performance of the index is not necessarily representative of the Fund’s performance.

³   The Index is composed of municipal bonds from many states while the Fund is a single-state municipal bond portfolio.

⁴   Source: Lipper Inc. The performance of the average is not necessarily representative of the Fund’s performance.

⁵   Total return, which is the percent change in value, after deduction of the maximum initial sales charge of 2.25% applicable to Class A shares, with all dividends and distributions

reinvested for periods shown ended September 30, 2022, is calculated using the SEC required uniform method to compute such return.

⁶   The 1% CDSC for Class C shares normally applies before the first anniversary of the purchase date. Performance for other periods is at net asset value.

⁷   Performance is at net asset value.

⁸   Class F3 shares commenced operations and performance for the class began on April 4, 2017. Performance is at net asset value.

Credit Rating: S&P or Moody’s(a)	%*
AAA	2.89	%
AA+	5.58	%
AA	11.49	%
AA-	11.18	%
A+	10.67	%
A	15.58	%
A-	11.27	%
BBB+	7.82	%

Credit Rating: S&P or Moody’s(a)	%*
BBB	3.33	%
BBB-	4.02	%
BB+	0.21	%
BB	1.60	%
BB-	0.58	%
B+	0.08	%
NR	13.70	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AAA	2.07	%
AA+	3.00	%
AA	11.51	%
AA-	11.33	%
A+	10.45	%
A	10.63	%
A-	12.13	%
BBB+	11.47	%
BBB	3.93	%
BBB-	6.82	%

Credit Rating: S&P or Moody’s(a)	%*
BB+	1.21	%
BB	2.55	%
BB-	1.58	%
B+	0.70	%
B	0.37	%
B-	0.40	%
D	0.16	%
NR	9.69	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AAA	1.55	%
AA+	5.03	%
AA	10.95	%
AA-	6.29	%
A+	11.69	%
A	10.55	%
A-	14.32	%
BBB+	11.88	%
BBB	7.90	%
BBB-	9.47	%

Credit Rating: S&P or Moody’s(a)	%*
BB+	0.44	%
BB	1.16	%
BB-	1.62	%
B+	0.53	%
B	0.48	%
B-	0.50	%
D	0.10	%
NR	5.54	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AAA	0.78	%
AA+	0.46	%
AA	1.77	%
AA-	0.82	%
A+	1.82	%
A	2.75	%
A-	5.54	%
BBB+	6.23	%
BBB	4.72	%
BBB-	8.16	%
BB+	5.91	%

Credit Rating: S&P or Moody’s(a)	%*
BB	7.31	%
BB-	8.58	%
B+	2.49	%
B	1.33	%
B-	2.72	%
CCC+	0.37	%
CCC	0.07	%
CCC-	0.95	%
D	0.40	%
NR	36.82	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AA+	0.66	%
AA	2.44	%
AA-	0.56	%
A+	2.92	%
A	5.31	%
A-	8.29	%
BBB+	8.62	%
BBB	3.62	%
BBB-	9.11	%

Credit Rating: S&P or Moody’s(a)	%*
BB+	3.72	%
BB	5.25	%
BB-	10.27	%
B+	5.19	%
B	4.65	%
B-	1.39	%
CCC+	0.15	%
NR	27.85	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AA+	2.95	%
AA	3.88	%
AA-	6.41	%
A+	16.78	%
A	25.18	%
A-	10.36	%

Credit Rating: S&P or Moody’s(a)	%*
BBB+	13.08	%
BBB-	7.50	%
BB+	2.32	%
BB	9.55	%
NR	1.99	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AAA	0.57	%
AA+	1.58	%
AA	26.97	%
AA-	8.52	%
A+	9.46	%
A	9.67	%
A-	8.39	%
BBB+	10.96	%
BBB	4.13	%
BBB-	5.76	%

Credit Rating: S&P or Moody’s(a)	%*
BB+	0.73	%
BB	0.23	%
BB-	1.76	%
B+	0.95	%
CCC	0.03	%
CCC-	0.08	%
D	0.14	%
NR	10.07	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AAA	3.01	%
AA+	2.91	%
AA	17.37	%
AA-	21.16	%
A+	8.39	%
A	6.69	%
A-	17.40	%
BBB+	8.55	%

Credit Rating: S&P or Moody’s(a)	%*
BBB	3.03	%
BBB-	2.31	%
BB+	2.35	%
BB-	2.28	%
D	0.16	%
NR	4.39	%
Total	100.00	%

Credit Rating: S&P or Moody’s(a)	%*
AAA	6.55	%
AA+	13.51	%
AA	13.93	%
AA-	9.53	%
A+	3.55	%
A	5.82	%
A-	12.84	%
BBB+	7.18	%
BBB	7.34	%
BBB-	7.42	%

Credit Rating: S&P or Moody’s(a)	%*
BB+	2.09	%
BB	0.47	%
BB-	0.43	%
B+	0.35	%
B	0.65	%
B-	0.57	%
CCC+	0.43	%
NR	7.34	%
Total	100.00	%