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AMT Free Municipal Bond Fund

Summary

Summary

What is the AMT Free Municipal Bond Fund?

The Fund seeks to deliver a high level of income exempt from federal taxation, including the alternative minimum tax, by investing primarily in municipal bonds.

Yield

Dividend Yield 1 as of 02/23/2017  

  Subsidized3 Un-Subsidized4
w/o sales charge 3.29% 3.02%
w/ sales charge 3.21% 2.95%

30-Day Standardized Yield 2 as of 01/31/2017  

  Subsidized5 Un-Subsidized6
w/o sales charge 3.63% 3.35%

Fund Basicsas of 01/31/2017

Total Net Assets
$214.26 M
Inception Date
10/29/2010
Dividend Frequency
Monthly (Daily Accrual)
Number of Holdings
384
CUSIP
543902720
Minimum Initial Investment
$1,000+

Expense Ratioas of 01/31/2017

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

YTD 1-YR 3-YR 5-YR 10-YR Since Inception 10/29/2010
w/o sales charge 0.85% -0.04% 4.58% 3.34% - 4.50%
Lipper Category Avg. General & Insured Municipal Debt Funds 0.44% -0.45% 3.69% 2.94% - -
Bloomberg Barclays Municipal Bond Index 0.66% -0.28% 3.70% 2.94% - 3.74%
w/ sales charge -1.42% -2.27% 3.79% 2.88% - 4.12%

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

YTD 1-YR 3-YR 5-YR 10-YR Since Inception 10/29/2010
w/o sales charge 0.31% 0.31% 5.08% 4.03% - 4.42%
Lipper Category Avg. General & Insured Municipal Debt Funds 0.04% 0.04% 4.29% 3.48% - -
Bloomberg Barclays Municipal Bond Index 0.25% 0.25% 4.14% 3.28% - 3.68%
w/ sales charge -1.95% -1.95% 4.28% 3.56% - 4.03%

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

RELATED CONTENT

Muni Matters: Seven Key Lessons Learned During 2016
February 3, 2017

Here are the important takeaways for investors from the municipal bond market’s recent selloff—and subsequent return to stability.

Muni Bonds: Off to a Good Start in 2017
January 30, 2017

Following a challenging fourth quarter in 2016, muni performance and mutual fund flows have been improving.

Muni Bonds: Making Sense of the Post-Trump Slump
December 12, 2016

Concerns about the president-elect’s tax and fiscal policies have pressured the muni market in recent weeks. But investor assessments appear overly pessimistic.

Sector Assets
Transportation
Healthcare/Hospital
Education
IDR/PCR
GO Local
Special Tax
Water & Sewer
Lease
Power
GO State
Pre-Refunded
Insured
VRDN
Housing
Resource Recovery
Other
Maturity Assets
<1 Year
1-4.99 Years
5-9.99 Years
10-19.99 Years
20-29.99 Years
>30 Years

Credit Quality Distribution as of 01/31/2017 View Portfolio

Rating Assets
A-2/MIG2
AAA
AA
A
BBB
< BBB
Not Rated

Investment Team

Daniel S. Solender
Daniel S. Solender, CFA

Partner & Director

30 Years of Industry Experience

Supported By 14 Investment Professionals and 11 Years Avg. Industry Experience

Contact a Representative

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Performance

Performance

Dividend Yield 1 as of 02/23/2017  

  Subsidized3 Un-Subsidized4
w/o sales charge 3.29% 3.02%
w/ sales charge 3.21% 2.95%

30-Day Standardized Yield 2 as of 01/31/2017  

  Subsidized5 Un-Subsidized6
w/o sales charge 3.63% 3.35%

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

YTD 1-YR 3-YR 5-YR 10-YR Since Inception 10/29/2010
w/o sales charge 0.85% -0.04% 4.58% 3.34% - 4.50%
Lipper Category Avg. General & Insured Municipal Debt Funds 0.44% -0.45% 3.69% 2.94% - -
Bloomberg Barclays Municipal Bond Index 0.66% -0.28% 3.70% 2.94% - 3.74%
w/ sales charge -1.42% -2.27% 3.79% 2.88% - 4.12%

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

YTD 1-YR 3-YR 5-YR 10-YR Since Inception 10/29/2010
w/o sales charge 0.31% 0.31% 5.08% 4.03% - 4.42%
Lipper Category Avg. General & Insured Municipal Debt Funds 0.04% 0.04% 4.29% 3.48% - -
Bloomberg Barclays Municipal Bond Index 0.25% 0.25% 4.14% 3.28% - 3.68%
w/ sales charge -1.95% -1.95% 4.28% 3.56% - 4.03%

Fund Expense Ratio :

Gross 0.87%

Net 0.60%

Best returns

Durations Fund Returns Blended Index
3-Mo 7.01 4.36
1-Yr 19.16 14.1

Worst returns

Durations Fund Returns Blended Index
3-Mo -9.17 -5.06
1-Yr -7.34 -3.51
Year Fund Returns Bloomberg Barclays Municipal Bond Index
2016 0.31% 0.25%
2015 3.22% 3.30%
2014 12.04% 9.05%
2013 -6.74% -2.55%
2012 12.61% 6.78%
2011 12.91% 10.70%
2010 -5.04% 2.38%
Year Q1 Q2 Q3 Q4 Yearly Returns
2017 - - - - 1.21%
2016 2.01% 3.58% 0.02% -5.08% 0.31%
2015 1.26% -1.36% 1.35% 1.97% 3.22%
2014 4.31% 2.84% 2.61% 1.79% 12.04%
2013 0.44% -4.83% -2.16% -0.28% -6.74%
2012 4.43% 2.34% 3.60% 1.71% 12.61%
2011 0.58% 5.67% 3.94% 2.20% 12.91%
2010 - - - - -5.04%

Growth of $10,000 as of 01/31/2017

NAV Historical Prices

Date Net Asset Value

Portfolio

Portfolio

Type Assets
Transportation
Healthcare/Hospital
Education
IDR/PCR
GO Local
Special Tax
Water & Sewer
Lease
Power
GO State
Pre-Refunded
Insured
VRDN
Housing
Resource Recovery
Other
Maturity Assets
<1 Year
1-4.99 Years
5-9.99 Years
10-19.99 Years
20-29.99 Years
>30 Years
State Assets
CA
IL
NY
PA
TX
FL
MD
GA
NJ
OH
AL
MA
Puerto Rico
CO
LA
CT
MI
IN
VA
KY
MN
WA
DC
AZ
WI
SC
NC
DE
NE
ME
MO
TN
VT
HI
MS
NH
OK

Credit Quality Distribution as of 01/31/2017 View Portfolio

Rating Assets
A-2/MIG2
AAA
AA
A
BBB
< BBB
Not Rated

Portfolio Positioning as of 12/31/2016

  • Relative to its benchmark, the Bloomberg Barclays Municipal Bond Index, the portfolio is overweight the 22- to 30-year maturity range, as longer bonds exhibit more attractive relative value given the impact of new issue supply.
  • The portfolio continues to maintain an overweight in revenue bonds, specifically in the health care and education sectors, given their dedicated income streams and favorable return prospects.
  • The portfolio continues to maintain an overweight in lower rated investment grade bonds due to attractive credit spreads and solid credit quality.
  • The portfolio is overweight high-tax states due to attractive liquidity and total return potential.
  • The portfolio is overweight to premium-priced bonds due to their attractive yields and lower sensitivity to changes in interest rates versus lower coupon bonds. 

Portfolio Details as of 01/31/2017

Total Net Assets
$214.26 M
Number of Issues
384
Average Coupon
5.1%
Average Effective Maturity
17.4 Years
Average Effective Duration
7.73 Years

Dividends & Cap Gains

Dividends & Cap Gains

Dividend Payments

For
YTD Dividends Paidas of 02/23/2017
$0.042
Dividend Frequency
Monthly (Daily Accrual)
Record Date Ex-Dividend Date Reinvest & Payable Date Dividend Reinvest Price
Daily Daily 01/31/2017 $0.04296 $15.67

Upcoming Dividend Payment Dates

This section lists all anticipated income and Capital Gain distribution dates and any actual distributions are subject to adequacy of earnings and must be approved by the Board of Directors/Trustees. Please note that dates are subject to change.

Record Date Ex-Dividend Date Reinvest & Payable Date
Daily Daily 02/28/2017
Daily Daily 03/31/2017
Daily Daily 04/30/2017
Daily Daily 05/31/2017
Daily Daily 06/30/2017
Daily Daily 07/31/2017
Daily Daily 08/31/2017
Daily Daily 09/30/2017
Daily Daily 10/31/2017
Daily Daily 11/30/2017
Daily Daily 12/31/2017

Fees & Expenses

Fees & Expenses

Sales Charge Schedule as of 02/23/2017

  Sales Charge Dealer's Concession Prices at Breakpoint
Less than $100,000 2.25% 2.00% $16.05
$100,000 to $249,999 1.75% 1.50% $15.97
$250,000 to $499,999 1.25% 1.00% $15.89
$500,000 to $999,999 0.00% 1.00% $15.69
$1,000,000 to $5,000,000 0.00% 1.00% $15.69

Expense Ratioas of 01/31/2017

Fund Review

Fund Review

Market Review as of 12/31/2016

Following a strong run during much of 2016, the U.S. municipal bond market (as represented by the Bloomberg Barclays Municipal Bond Index1) experienced a decline during the three-month period ended on December 31, 2016. Investor confidence in the asset class began to shift in October, as municipal funds’ 54-week streak of positive inflows ended. Following the election of Donald Trump in November, flows turned sharply negative. Municipal bond yields were sent higher as a result of concerns over Trump’s campaign-cornerstone policies of lower tax rates and increased infrastructure spending, as well as the 25 basis point increase in the federal funds rate announced on December 14th.

Total issuance was 24% ahead of the fourth quarter of the prior year. For the second consecutive year, approximately 60% of the proceeds from new issuances were used for refunding purposes, as borrowers took advantage of low interest rates prior to the Federal Reserve (Fed) meeting. As a result of the heavy issuance that was coupled with declining demand during the quarter, the tax-free market experienced considerable softness in pricing, leading to an increase in longer-term municipal-to-treasury yield ratios. Unsurprisingly, municipal fund flows for 2016 were reduced to $35.3 billion, from a high point of $60.2 billion in October, following consistent outflows during the fourth quarter. For the past few quarters, the demand for incremental yield has led to lower quality bonds generally outperforming higher quality bonds. However, the fourth quarter deviated from this trend as higher credit qualities outperformed other segments of the municipal market. Additionally, shorter-term bonds outperformed those farther out on the yield curve as investor demand shifted towards less interest-rate-sensitive holdings.

Troubled credits continue to make headlines in the fourth quarter as a handful of municipalities, including New Jersey, Illinois, and Pennsylvania, face high debt, underfunded pension obligations and other post-employment benefits. Most notably, however, Puerto Rico continues to be front and center in the conversation around whether creditors or pension holders will be paid before the other. A new governor was elected in the U.S. territory and will be tasked with bolstering a very weak economy and working alongside a federally-appointed financial control board to restructure the island’s debt. Aside from the few issuers that seem to be perpetually distressed, overall creditworthiness continues to improve. As of September 30, total state and local tax revenues have grown for 20 consecutive quarters, according to data from the United States Census Bureau. Local governments had benefitted from the recovery in home prices and the corresponding increase in property tax revenues.

Fund Review as of 12/31/2016

The Fund* underperformed its benchmark, the Bloomberg Barclays Municipal Bond Index,1 with all distributions reinvested, for the three-month period ended December 31, 2016.

Within the Fund, bonds with maturities shorter than five years outperformed. The Fund was underweight this range, leading to a negative impact on performance. Conversely, bonds with maturities longer than twenty years underperformed due to their sensitivity to rising rates. An overweight to this range led to a negative impact on performance.

In terms of credit quality, ‘AAA’-rated bonds outperformed due to increased demand for high quality bonds with higher yields. An underweight in this tier resulted in a negative impact on performance. Bonds rated ‘BBB’ and lower underperformed due to higher liquidity costs in response to heavy selling by municipal bond mutual funds. An overweight in this credit quality tier led to a negative impact on performance.

Airport and government lease appropriation bonds were the strongest performers in the Fund, primarily due to the shorter duration of the credits versus those in the benchmark. An overweight allocation in these sectors resulted in a positive impact on performance. Conversely, state general obligation (GO) and pre-paid gas bonds were the weakest performers. Both sectors underperformed due to their longer than average durations. The Fund’s underweight to state GO bonds and overweight to pre-paid gas bonds resulted in a neutral impact on performance.

Please refer to www.lordabbett.com under the “Portfolio” tab for a complete list of holdings of the Fund, including the securities discussed above.

Municipal Market Outlook

All eyes will be on the Trump administration for the first quarter of 2017 as investors gear up for potential changes to tax rates or the tax-exempt status of municipal bond interest, as well as the method of financing for new infrastructure projects. Additionally, investors will be keeping a watchful eye on the Federal Reserve and whether or not they decide to raise rates over the next year.

Since the White House and Congress are both controlled by the Republican Party, it is likely we will see an adjustment to tax rates where the highest individual tax bracket is lowered from 39.6% to 33%. However, most municipal bond investors may remain unaffected by this adjustment. Data from the Internal Revenue Service suggests less than 20% of the municipal bond income declared on tax returns was received by individuals in tax brackets above 33%. Additionally, taxable bonds would have difficulty matching the tax-equivalent yields of high grade municipal bonds, considering yields are at all-time lows.

Conversations regarding the elimination of the tax-exempt status of municipal income have never gained traction and are unlikely to do so under the new administration. This exemption allows issuers to borrow capital at a low cost. A policy limiting this benefit may lead to governments and other entities utilizing higher-cost alternatives to finance infrastructure needs, potentially leading to a pass-through of the increased costs to consumers.

As it stands, there is little clarity regarding the method of financing the Trump administration will use for infrastructure projects. The new President has discussed many forms of financing including public/private partnerships, tax credits, and grants. A large increase in municipal bond supply, however, may lead to softness in pricing.

Two more themes that will play major roles in the performance of the municipal market are the potential for, and magnitude of, additional rate hikes during 2017, and issues regarding the creditworthiness of municipalities with high debt and underfunded pension obligations. Although there are a few outliers, most states have ample reserves and strong procedures in place to successfully manage their budgets. It is also important to note that once investors have more clarity around the new administration’s policies, we may see a pick-up in demand for tax-free bonds, as investors seek out attractive taxable equivalent yields.

*Class A Share at net asset value (NAV). For the latest NAV, including maximum sales charges (MOP) performance information, visit us at lordabbett.com. Past performance is not indicative of future results. Current performance may be higher or lower than the performance quoted.

 If applicable, “Modestly” is defined as any under or outperformance within 100 basis points (bps) for equity funds and 50 basis points (bps) for fixed income funds as compared to the Fund's benchmark.

Fund Documents

Fund Documents

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Summary Prospectus
Publish Date:11/03/2015
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Statutory Prospectus
Publish Date:11/03/2015
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Prospectus (XBRL)
Publish Date:11/03/2015
SAI
Publish Date:11/03/2015
Annual Report
Publish Date:11/03/2015
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Publish Date:11/03/2015
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Publish Date:11/03/2015

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Class A  Except as noted below, returns with sales charges reflect a maximum sales charge of 5.75% for equity funds, 2.25% for all tax-free income funds, fixed income funds and multi-asset class funds. There are also ongoing 12b-1 service fees (and, in certain cases, distribution fees).

Class A Shares purchased subject to a front-end sales charge have no contingent deferred sales charge (CDSC). However, certain purchases of Class A shares made without a front-end sales charge may be subject to a CDSC of 1% if the shares are redeemed before the first day of the month in which the one year anniversary of the purchase falls. The CDSC is not reflected in the performance with maximum sales charge.

The Bloomberg Barclays Municipal Bond Index 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.

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