Municipal Bond Market Review

The U.S. economy has shown strong growth over the last twelve months due to the economic reopening, unprecedented fiscal spending, and the rollout of the Coronavirus vaccine. In the three-month period ending December 31, 2020, real gross domestic product (“GDP”) rose at an annual rate of 4.1%, it increased by 6.4% in the first quarter of 2021, and grew by 6.6% during the second quarter, according to the Bureau of Economic Analysis. At the

time of publication, early estimates for third quarter GDP growth came in at 5.7%. However, as a result of supply chain constraints, potentially slowing fiscal spending, and the resurgence of the Coronavirus through the Delta variant, GDP forecasts have experienced downward revisions in recent months. Over the past year, the economy has made significant progress towards the Federal Reserve Board’s (the “Fed”) dual mandate of maximum employment and longer run inflation at 2%. September’s unemployment rate

fell to 4.8%, the lowest reading since the start of the pandemic, versus the 6.9% reading in October of 2020, according to the Bureau of Labor Statistics. Similarly, inflation measures have been steady and running well above the Fed’s goal of 2% since March of 2021. Accordingly, the Federal Reserve has indicated that it will begin to start tapering the monthly bond purchase program, which has been in effect since the onset of the pandemic, by the close of 2021.

The municipal market, as represented by the Bloomberg Municipal Bond Index¹, returned 2.63% over the last twelve months. Throughout the year, revenue bonds outperformed General Obligation bonds with the Transportation, Hospital and Leasing sectors leading. In terms of rates, the short to intermediate section of the municipal yield curve steepened, while the longer end of the yield curve remained largely unchanged. As a result, longer-dated bonds outperformed bonds at the shorter end of the curve given their incremental carry. Regarding credit quality, the lower tiers of the investment grade range significantly outperformed higher quality tiers. The high yield segment of the municipal bond market, as represented by the Bloomberg High Yield Municipal Index², returned 11.33% throughout the year, continuing its impressive rebound from the market sell-off 18 months prior.

Municipal bond issuance for the calendar year-to-date period ended September 30, 2021 totaled $348 billion, according to Barclays, a slight increase compared with the prior calendar year-to-date period, ended September 30, 2020. In the 12-month period ending September 30, 2021, municipal bond funds experienced $96.3 billion in net flows, according to the Investment Company Institute, compared to $42.7 billion in net flows in the 12-month period a year prior.

In the first three months of the fiscal year, the municipal market performed favorably returning 1.82%, as positive coronavirus vaccine developments along with the culmination of the U.S. presidential election boosted investor sentiment. The bullish narrative continued into the second quarter of the Funds’ fiscal year, as the economy continued to reopen, daily vaccination rates grew steadily, further fiscal stimulus was announced by the Biden Administration, and Fed’s policies remained accommodative. However, the burst of economic activity, unprecedented federal spending, and dovish central bank policies brought inflation concerns to the forefront of the investment community. Due to supply chain constraints that carried over from a year prior, a tightening labor market and surging commodity prices, inflation expectations rose to levels not seen in years. Consequently, intermediate and longer-

term municipal yields rose significantly, creating performance headwinds and resulting in a -0.35% market return from January through March.

In April, anxieties of price increases were somewhat quelled by the Fed’s communications that inflation would be transitory and resulting mainly from rising prices in sectors of the economy most sensitive to reopening, such as tourism, travel, and auto manufacturers. The credit quality of the municipal market continued to strengthen throughout first half of 2021, buoyed by further reopening and unprecedented federal spending. Around $1 trillion in government aid was earmarked for state and local governments throughout the pandemic, equating to approximately one quarter of the total amount outstanding in municipal debt. By the close of June, municipal yields fell from their intra-year highs and the curve flattened, resulting in a 1.42% market return for the quarter.

Throughout July and into August, the market narrative was focused on the central bank liquidity tailwind, continued vaccine progress, momentum surrounding the reopening of the economy and record net flows into the municipal market. Of note, at the start of July, the ratio of AAA-rated Municipal to Treasury yields was modestly above historic lows. However, by mid-August, daily Coronavirus case numbers reached levels not seen since the last upsurge at

the beginning of 2021. By the start of September, the case curve began to flatten and disruption due to the Delta-fueled wave was limited. Throughout the final month of the period, market volatility ramped up due to inflation concerns and fears that shocks within the Chinese Real Estate market would have a contagion effect on the global economy. Net inflows into municipal bond funds decreased meaningfully, and municipals began to cheapen relative to treasuries. The final week of the fiscal year saw yields rise significantly on intermediate and long-term key rates, resulting in a steepening of the yield curve and a -0.27% market return from July through September.

In terms of fiscal developments, the House was debating the Infrastructure Investment and Jobs Act, which was passed in the Senate in August. The bill includes funding for roads and bridges, ports, airports, electrical infrastructure, water systems, and rail networks, among other initiatives. The investment community was disappointed by the omission of advanced refunding in the Senate’s version of the legislation, as the reinstatement of tax-exempt refunding would save municipal issuers on interest expense and spur billions in issuance for years to come. There have been talks of this measure being included in the House’s final version of the Bill, but the situation was still uncertain at the close of September.

Also hanging in the balance in the House of Representatives were talks of potential tax increases. The House Ways and Means Committee has drafted legislation that, among other measures, would increase the rate on the top individual tax bracket from 37% to 39.6% for individuals earning more than $400,000 and households earning more than $450,000. Since tax free municipal bonds generate interest that is exempt from federal income tax, the upward adjustment to the top individual tax bracket rate could potentially allow high earners an even better tax-equivalent yield. We believe this may potentially lead to a higher demand for tax-exempt municipal bonds should the drafted legislation be written into law.

Short Duration Tax Free Fund

The Short Duration Tax Free Fund returned 1.20%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2021. The Fund’s benchmark, the Bloomberg Municipal Bond Short 1-5 Year Index³, returned 0.75% during the same period. The primary driver of relative performance over the last year was the Fund’s credit quality allocation. The Fund’s overweight to bonds rated ‘BBB’ and below was the main contributor to relative performance as lower rated bonds outperformed higher rated bonds.

Security selection within the Transportation and Hospital sectors also contributed to relative performance. With respect to Hospitals, the sector has performed relatively well throughout the pandemic as Federal stimulus has been significant, volumes have recovered throughout the year, and balance sheets have improved due to strong investment returns, lower capital spending, and positive operating cash flow. In terms of sector allocation, the Fund’s underweight allocation to the General Obligation State sector resulted in relative underperformance. The Fund’s underweight to the Pre-refunded sector, which is composed of higher quality credits, benefitted performance and offset some of the aforementioned detraction, as lower rated bonds outperformed higher rated bonds.

The sudden and notable rise in yields in the months of February and September had a negative impact on relative performance. However, some of this negative impact due to yield curve positioning was offset by the Fund’s greater carry relative to the benchmark. Of note, the Fund’s exposure to Variable Rate Demand Notes detracted from relative performance as well.

Intermediate Tax Free Fund

The Intermediate Tax Free Fund returned 4.19%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending

September 30, 2021. The Fund’s benchmark, the Bloomberg 1-15 Year Municipal Bond Index⁴, returned 1.82% during the same period. The primary driver of relative performance over the last year was the Fund’s credit quality allocation. The Fund’s overweight to bonds rated ‘BBB’ and below was the main contributor to relative performance, as lower rated bonds outperformed higher rated bonds.

Security selection within the Transportation and General Obligation sectors was also a contributor to relative returns. Within the Transportation sector, Toll Roads have benefitted from increased volume throughout 2021, as individuals have preferred travel by car as opposed to mass transit options. Furthermore, the uptick in ecommerce throughout the country has driven growth in commercial traffic, favoring turnpikes and long-distance toll routes. In terms of sector allocation, the Fund’s overweight to the Hospital sector led to a negative impact on relative performance. However, this was mostly negated by tailwinds resulting from the Fund’s underweight to the high quality Pre-refunded sector, as lower rated bonds outperformed higher rated bonds.

The sudden and notable rise in yields in the months of February and September had a negative impact on relative performance. More specifically, the Fund’s exposure to intermediate maturity bonds detracted as this part of

the yield curve steepened over the period. However, some of this negative impact due to yield curve positioning was offset by the Fund’s greater carry relative to the benchmark.

National Tax Free Fund

The National Tax Free Fund returned 5.77%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2021. The Fund’s benchmark, the Bloomberg Municipal Bond Index¹, returned 2.63% during the same period. The primary driver of relative performance over the last year was the Fund’s credit quality allocation. The Fund’s overweight to bonds rated ‘BBB’ and below was the main contributor to relative performance, as lower rated bonds outperformed higher rated bonds.

Security selection within the Transportation, Leasing, and Industrial Development sectors contributed to relative performance as well. Regarding the Industrial Development sector, strong government support, increased demand for commodities, and the economic recovery throughout the year has benefitted certain Industrial Development issuers. With respect to sector allocation, the Fund’s overweight allocation to the Hospital and Tobacco sectors detracted from relative performance.

The sudden and notable rise in yields in the months of February and September had a negative impact on

relative performance. More specifically, the Fund’s exposure to intermediate maturity bonds detracted as this part of the yield curve steepened over the period. However, much of the detraction due to yield curve positioning was offset by the Fund’s greater carry relative to the benchmark.

High Income Municipal Bond Fund

The High Income Municipal Bond Fund returned 9.81%, reflecting performance at the net asset value (NAV) of Class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2021. The Fund’s benchmark, the Bloomberg High Yield Municipal Bond Index², returned 11.33% during the same period. The Fund has a higher quality positioning relative to the benchmark to provide diversification and enhance liquidity. Therefore, as below investment grade credit quality tiers outperformed credit quality tiers within the investment grade range, the Fund’s overweight to investment grade bonds relative to the benchmark detracted from relative performance.

The sudden and notable rise in yields in the months of February and September also had a negative impact on relative performance. More specifically, the Fund’s exposure to intermediate maturity bonds detracted as this part of the yield curve steepened over the period. Of note, much of this detraction from yield curve positioning was

mitigated by the Fund’s greater carry relative to the benchmark.

Over the last 12 months, security selection within the Special Tax, Water/Sewer, and IDR sectors were the most notable contributors to relative returns. However, bond selection within the Hospital and Tobacco sectors detracted from relative performance, offsetting some of the aforementioned contributions. In terms of sector allocation, the Fund’s exposure to the Leasing and General Obligation sectors led to a positive impact on performance; however, most of this positive impact was offset due to the Fund’s exposure to the Transportation, Hospital and Power sectors.

Short Duration High Income Municipal Bond Fund

The Short Duration High Income Municipal Bond Fund returned 6.74%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2021. The Fund’s benchmark, a 50%/50% blend of the Bloomberg Municipal 1-8 Year Index and the Bloomberg High Yield Municipal 1-8 Year Index⁵, returned 4.40% during the same period. In terms of quality allocation, the Fund’s underweight to higher quality tiers of ‘AAA’ and ‘AA’ rated bonds was the main contributor to performance, as lower rated bonds outperformed higher rated bonds. Similarly, the Fund’s overweight

allocation to bonds rated ‘BBB’ and below contributed to excess returns as well.

Security selection, mainly within the Industrial Development, Special Tax, Transportation and General Obligation sectors, also led to positive impacts on relative performance. The strong economic reopening and recovery along with the unprecedented aid distributed by the Federal government supported certain Industrial Development issuers throughout the year. While security selection was a contributor in most sectors, security selection within the Hospital sector was a detractor from relative performance.

The sudden and notable rise in yields in the months of February and September had a negative impact on relative performance. However, some of this detraction from yield curve positioning was mitigated by the Fund’s greater carry relative to the benchmark. Additionally, the Fund’s underweight exposure to the Transportation sector detracted from relative performance. However, this was offset by the Fund’s underweight allocations to the General Obligation, Pre-refunded and Special Tax sectors. The benefit to performance from the Fund’s underweight allocation to the Pre-refunded sector was driven by lower quality bonds outperforming higher quality bonds.

California Tax Free Fund

The California Tax Free Fund returned 4.16%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2021. The Fund’s benchmark, the Bloomberg Municipal Bond Index¹, returned 2.63% during the same period. The primary driver of relative performance over the last year was the Fund’s credit quality allocation. As lower rated bonds outperformed higher rated bonds, the Fund’s overweight to bonds rated ‘BBB’ and below was the main contributor to relative performance.

Positive security selection within the General Obligation, Hospital, Power, and Education sectors also resulted in tailwinds to relative performance. The Education sector has remained relatively stable throughout the pandemic as a result of robust fiscal and state support, prudent expense control, and strong balance sheets prior to the emergence of the Coronavirus. Additionally, within the Education sector, endowment investment returns have been strong and international student enrollment in colleges and universities has increased, resulting in further support to fundamentals. In terms of sector allocation, the Fund’s overweight allocation to, as well as security selection within, the Transportation sector resulted in underperformance. Additionally, the Fund’s underweight allocation to the

Leasing sector led to a negative impact on relative performance as well.

The sudden and notable rise in yields in the months of February and September had a negative impact on relative performance. More specifically, the Fund’s exposure to intermediate maturity bonds detracted as this part of the yield curve steepened over the period. However, due to the Fund’s greater carry relative to the benchmark, most of the detraction stemming from curve positioning was negated.

New Jersey Tax Free Fund

The New Jersey Tax Free Fund returned 5.58%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2021. The Fund’s benchmark, the Bloomberg Municipal Bond Index¹, returned 2.63% during the same period. The primary driver of relative performance over the last year was the Fund’s credit quality allocation. As lower rated bonds outperformed higher rated bonds, the Fund’s overweight to bonds rated ‘BBB’ and below was the main contributor to relative performance.

An overweight allocation to, as well as security selection within, the Leasing and Transportation sectors also led to a positive impact on relative performance. Additionally, security selection within the General Obligation and Education sectors as well as an underweight allocation to

the Pre-refunded sector resulted in performance tailwinds. Of note, the Fund’s overweight exposure to the IDR and Tobacco sectors resulted in modest detraction throughout the period, offsetting some of the sector-related tailwinds.

The sudden and notable rise in yields in the months of February and September had a negative impact on relative performance. More specifically, the Fund’s exposure to intermediate maturity bonds detracted as this part of the yield curve steepened over the period. However, due to the Fund’s greater carry relative to the benchmark, all of the detraction stemming from curve positioning was negated.

New York Tax Free Fund

The New York Tax Free Fund returned 5.90%, reflecting performance at the net asset value (NAV) of class A Shares with all distributions reinvested, for the 12-month period ending September 30, 2021. The Fund’s benchmark, the Bloomberg Municipal Bond Index¹, returned 2.63% during the same period. The primary driver of relative performance over the last year was the Fund’s credit quality allocation. As lower rated bonds outperformed higher rated bonds, the Fund’s overweight to bonds rated ‘BBB’ and below was the main contributor to relative performance.

Security selection was also a significant driver of outperformance over the period. More specifically, bond

selection within the Special Tax, Transportation, Hospital and Education sectors led to excess returns. Historically, issuers within the Education sector have possessed strong balance sheets, aided by years of low interest rates and healthy liquidity, resulting in a cushion to weather broad economic downturns. Furthermore, within the Education sector, Public Universities continue to receive increasing support from state governments, which we believe further improves fundamentals. In regard to sector allocation, the Fund’s overweight to the IDR sector resulted in headwinds during the period. However, much of this detraction was offset by tailwinds as a result of the Fund’s underweight to the

General Obligation sector.

The sudden and notable rise in yields in the months of February and September had a negative impact on relative performance. More specifically, the Fund’s exposure to intermediate maturity bonds detracted as this part of the yield curve steepened over the period. However, due to the Fund’s greater carry relative to the benchmark, most of the detraction stemming from curve positioning was negated.

Each Fund’s portfolio is actively managed and, therefore, its 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   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.

²   The Bloomberg High Yield Municipal Bond Index is an unmanaged index consisting of noninvestment-grade, unrated or below Ba1 bonds.

³   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.

⁴   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.

⁵   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. The Bloomberg 1-8 Year High Yield Municipal Bond Index is the 1-8 year component of the High Yield Municipal Bond index. The Bloomberg High Yield Municipal Bond Index is an unmanaged index consisting of noninvestment-grade, unrated or below Ba1 bonds.

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 waivers and expense reimbursements, the Funds’ 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, 2021. 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’ portfolio is 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, 2021, 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, 2021, 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, 2021, 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.